Ethanol Producers Rise Sharply
The Wall Street Journal : February 22 2010
By DAVID BENOIT
Shares of ethanol producers rose sharply after one of the larger producers, Green Plains Renewable Energy Inc., reported a bullish fourth quarter and said industry trends looked positive for 2010.
Green Plains shares shot up 17% to $16.61 in recent trading, after earlier rising to $16.79, the highest the stock has traded since September 2007. More than a million shares had changed hands roughly midway through the trading day, more than 10 times the typical volume for the stock.
Competitors Pacific Ethanol Inc. and BioFuel Energy Corp. rose on higher-than-average volume as well. Pacific Ethanol gained 11% to $2.12, while BioFuel gained 5% to $2.92. Smaller New Generation Biofuels Holdings Inc. rose 12% to 74 cents.
Green Plains said its ethanol production segment had been able to improve margins, and, along with the whole industry, “is on solid footing for the coming years.”
“Overall we are very optimistic on our future,” Chief Executive Todd Becker said on a conference call with analysts, adding, “We like what we are seeing from the federal government.”
Boosted by a merger in the prior year’s October, Green Plains swung to a profit of $23.1 million, or 91 cents a share, compared with a loss of $1.8 million, or eight cents a share, a year earlier. Revenue more than doubled to $436.7 million, while gross margin leapt to 10.1% from 8.4%
Ethanol-production revenue climbed 80% to $235.9 million, as volume rose 98% as measured in gallons, more than the company said it predicted. Revenue at its marketing and distribution segment, which helps market third-party ethanol, more than quadruped to $368.6 million.
The company credited much of that growth to the addition of the merger with VBV LLC, which was completed in October 2008. The company also in the past year has opened three additional ethanol plants, which helped the volumes exceed expectations.
Green Plains said it expects to continue boosting production and would also continue spending on acquisitions as a way to grow more.
“Green Plains is particularly well positioned within the industry,” Mr. Becker said. “We believe we can continue to achieve positive results as these margins.”
Earlier this month, the U.S. Department of Agriculture said it expected the industry to buy more corn than expected to match the rising levels of production by the end of August. That came after the Environmental Protection Agency appeared to soften concerns about the harmful effects of the biofuel’s production and will allow ethanol into its mandate for increasing renewable fuels.