Green Plains reports expected loss for Q3 due to weak ethanol margins
US ethanol producer Green Plains has recorded a net loss of $39.0 million (€35.3 million) for the third quarter of 2019, due in large part to a ‘continued weak ethanol margin environment’.
The company reported revenues of $632.4 million (€572.5 million) for the three-month period, down from the $789.0 million (€714.3 million) recorded in the third quarter of 2018.
Commenting on the results, president and CEO Todd Becker said: “As expected, our third quarter results were attributable to a continued weak ethanol margin environment that began to show improvement in late September. Based on the current environment, we have seen ethanol margins turn positive for our platform, which should result in a positive outlook for cash flow from operations for the fourth quarter. While margins remain volatile, we have seen some industry rationalisation taking place and our balance sheet strength and strategic initiatives have put us in a very good position to take advantage of the recent expansion in ethanol margins.”
“During the quarter we made significant strides both strategically and operationally. We were successful in selling a 50% share of our cattle feeding business to a group of strategic investors enabling us to take the business off balance sheet and provide investors better clarity of our financial strength. More importantly, our operating expense per gallon continues to decline as we move into the expanded construction phase of our project 24 and operate at higher utilisation rates. Finally, consistent with our previous messaging, we supported our share value by investing in substantial open market share repurchases during the third quarter and the beginning of the fourth quarter totalling approximately $21.8 million [€19.7 million] for 2.2 million shares.”
Green Plains also announced its intention to sell its 50% joint venture interest in JGP Energy Partners to Jefferson Energy Holdings, a subsidiary of Fortress Transportation and Infrastructure Investors for $29 million (€26.3 million).
Operational updates
The company expects commissioning of its protein project in Shenandoah, Iowa by the end of the year, with full production rates around 60 days thereafter. It has also completed the first Project 24 upgrade of the company’s ethanol facility in Wood River, Nebraska, with the plant now ramping up to operating capacity.
“This upgrade is transformational in terms of operating cost per gallon related to the base technology of the plant,” explained Becker. “This location will now be one of our lowest operating costs plants per gallon and clearly puts this plant in the top 10% of all plants in the industry. This investment in Wood River, more importantly, reduces its carbon intensity score in order to take advantage of markets that pay premiums for low carbon fuels. We continue on our path to 24 cents a gallon by the middle of 2020 and believe we might achieve lower costs based on the preliminary results of the first project.”
In offering an outlook for the year ahead, Becker concluded: “We are encouraged that the recent announcements by the EPA [Environmental Protection Agency] and the potential trade deal with China will turn what we believe could be tail winds for the ethanol industry. With that said, for the first time in over a year, we are experiencing positive ethanol margins in the current period. While cautious in our guidance, it is nice to see our projects over the last two years have put the company in the position to have these discussions.”
The company reported revenues of $632.4 million (€572.5 million) for the three-month period, down from the $789.0 million (€714.3 million) recorded in the third quarter of 2018.
Commenting on the results, president and CEO Todd Becker said: “As expected, our third quarter results were attributable to a continued weak ethanol margin environment that began to show improvement in late September. Based on the current environment, we have seen ethanol margins turn positive for our platform, which should result in a positive outlook for cash flow from operations for the fourth quarter. While margins remain volatile, we have seen some industry rationalisation taking place and our balance sheet strength and strategic initiatives have put us in a very good position to take advantage of the recent expansion in ethanol margins.”
“During the quarter we made significant strides both strategically and operationally. We were successful in selling a 50% share of our cattle feeding business to a group of strategic investors enabling us to take the business off balance sheet and provide investors better clarity of our financial strength. More importantly, our operating expense per gallon continues to decline as we move into the expanded construction phase of our project 24 and operate at higher utilisation rates. Finally, consistent with our previous messaging, we supported our share value by investing in substantial open market share repurchases during the third quarter and the beginning of the fourth quarter totalling approximately $21.8 million [€19.7 million] for 2.2 million shares.”
Green Plains also announced its intention to sell its 50% joint venture interest in JGP Energy Partners to Jefferson Energy Holdings, a subsidiary of Fortress Transportation and Infrastructure Investors for $29 million (€26.3 million).
Operational updates
The company expects commissioning of its protein project in Shenandoah, Iowa by the end of the year, with full production rates around 60 days thereafter. It has also completed the first Project 24 upgrade of the company’s ethanol facility in Wood River, Nebraska, with the plant now ramping up to operating capacity.
“This upgrade is transformational in terms of operating cost per gallon related to the base technology of the plant,” explained Becker. “This location will now be one of our lowest operating costs plants per gallon and clearly puts this plant in the top 10% of all plants in the industry. This investment in Wood River, more importantly, reduces its carbon intensity score in order to take advantage of markets that pay premiums for low carbon fuels. We continue on our path to 24 cents a gallon by the middle of 2020 and believe we might achieve lower costs based on the preliminary results of the first project.”
In offering an outlook for the year ahead, Becker concluded: “We are encouraged that the recent announcements by the EPA [Environmental Protection Agency] and the potential trade deal with China will turn what we believe could be tail winds for the ethanol industry. With that said, for the first time in over a year, we are experiencing positive ethanol margins in the current period. While cautious in our guidance, it is nice to see our projects over the last two years have put the company in the position to have these discussions.”
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