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Green Plains reports second quarter loss

Green Plains, a Nebraska-based, US, ethanol producer, has reported a second-quarter loss for the three months ended 30 June, 2017, after profit margins collapsed amid abundant supplies.

The company announced that it had a loss of $16.4 million (€13.83 million) for the second quarter compared with a net income of $8.2 million for the same period in 2016.

Revenue was at $886.3 million for the second quarter of 2017 compared with $887.7 million for the same period last year.

"While ethanol margins were weak, our food and ingredients and ag and energy segments generated over $17 million in quarterly  earnings before interest, taxes, depreciation, and amortisation (EBITDA) led by strong performance from Fleischmann's Vinegar and our cattle operations, further validating the strategy we put in place," said Todd Becker, president and CEO of Green Plains.

Diversification

In a media report by Reuters, the news agency maintained that fuel-grade ethanol producers including Green Plains and Archer Daniels Midland were pursuing other markets and idling excess capacity in an effort to rebuild low margins.

ADM and Green Plains both said earlier this week that they are converting fuel-ethanol capacity into beverage and industrial alcohol production, as well as idling some mills.

Becker said: "We proactively took action against the weakened ethanol margin environment by idling approximately 50 million gallons, or 40%, of production capacity in June. While we have returned to full production, we will remain disciplined in our response to supply/demand imbalances. Although volumes were lower this quarter, the partnership segment contribution was strong with over $16 million of EBITDA.

"Both US and global demand remain strong for ethanol. US ethanol exports are 48% ahead of last year through May, putting us on pace to export between 1.1 to 1.3 billion gallons this year.

"We are encouraged by the recent change allowing 10% ethanol blends in a large portion of Mexico and the momentum we are seeing with E15 station adoption, which has increased demand for higher blends in the US."

Ethanol production

During the second quarter, Green Plains produced 275.5 million gallons of ethanol compared with 274.3 million gallons for the same period in 2016. The consolidated ethanol crush margin was $18.9 million, or $0.07 per gallon, for the second quarter of 2017 compared with $42.3 million, or $0.15 per gallon, for the same period in 2016.

The consolidated ethanol crush margin is the ethanol production segment's operating income before depreciation and amortisation, which includes corn oil production, plus intercompany storage, transportation and other fees, net of related expenses.

"Our segment EBITDA, excluding ethanol production and corporate activities, was approximately $71 million for the first half of 2017 and we expect these segments will generate approximately $150 million of EBITDA this year, including our stake in Green Plains Partners, which remains a significant driver of value for our shareholders," said Becker.

"Our strategy to diversify our revenue and income streams and provide more predictable cash flows for Green Plains' shareholders remains a key focus of our growth objectives."

Six-month period ended 30 June, 2017

Revenues attributable to the company were $1.8 billion for the six-month period ended 30 June, 2017, compared with $1.6 billion for the same period in 2016. Net loss for the six-month period ended June 30, 2017, was $20.0 million, or $(0.51) per diluted share, compared with net loss of $15.9 million, or $(0.42) per diluted share, for the same period in 2016.

“During the quarter, the platform generated free cash flow and we continue to maintain ample liquidity,” said Becker.

"We invested $51 million of growth capital during the quarter to acquire two cattle feed yards, expand vinegar production capacity and continue constructing our new export terminal in Beaumont.

“We used $8.5 million of cash, along with 2.8 million shares of common stock, to extinguish $56.3 million of convertible debt, paid $4.7 million in dividends and ended the quarter with $225 million of total cash on the balance sheet and $171 million of available liquidity.

“While we're not happy with the bottom line results this quarter, our balance sheet remains strong and we will continue to focus on growing and diversifying our business going forward. Based on current markets, we expect better performance in the third and fourth quarters and will move quickly to reduce volatility and lock away margins as they expand from here.”

This story was written by Liz Gyekye, editor of Biofuels International.

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