Green Plains Soars On Profit From More Ethanol Sales
Bloomberg Business Week : February 22 2010
By Mario Parker
Green Plains Renewable Energy Inc., the fourth-largest U.S. ethanol producer, surged after reporting a fourth-quarter profit of $23.1 million as sales more than doubled.
Green Plains advanced $2.85, or 20 percent, to $16.99 in Nasdaq Stock Market composite trading, the highest price since Sept. 4, 2007. The shares have risen from $1.55 a year ago.
Net income was 91 cents a share compared with a loss of $1.85 million, or 8 cents, a year earlier, Green Plains said today in a statement. Revenue grew to $436.7 million from $183.2 million.
“We generated significantly higher operating income during the quarter primarily due to a strong performance from our ethanol production segment,” Chief Executive Officer Todd Becker said in the statement. “In the fourth quarter we produced 122 million gallons of ethanol, which exceeds our expected capacity.”
The company’s ethanol sales climbed 80 percent from a year earlier to $235.9 million as the amount sold almost doubled to 121.8 million gallons.
‘Outstanding Game Plan’
“It was just flat-out a good quarter,” said Paul Resnik, an analyst at Olympia Capital Markets Group in New York. “Fundamentally, the industry looks excellent and Green Plains seems to have an outstanding game plan here.”
Ethanol prices during the quarter on the Chicago Board of Trade averaged $1.949 a gallon, 15 percent higher than a year ago. Corn prices were unchanged at about $3.85 a bushel. Farmers harvested a record 13.151 billion bushels this year. One bushel of the grain distills into about 2.75 gallons of the fuel.
That has improved the industry fundamentals, Becker said today on a conference call with analysts and investors.
Demand for ethanol has been supported by the fuel’s discount to gasoline. Refiners receive a 45-cent tax credit for each gallon of ethanol blended into gasoline, plus the difference between the two fuels, Steve Bleyl, the company’s executive vice president of marketing, said on the call.
‘Looking for Plants’
Becker said that he’s exploring opportunities to buy more ethanol plants. Last year the company bought mills in Central City and Ord, Nebraska,that have combined capacity to produce 150 million gallons.
“We’re looking for plants in the right location with the right technology,” Becker said. “We do have a pretty full set of deals that we’re looking at.”
The company would use a combination of stock and cash to fund acquisitions, he said. Green Plains would be more attractive to private companies selling their plants because it is more leveraged to ethanol than large petroleum or agribusiness companies, he said.
Green Plains has six ethanol plants with capacity to produce about 480 million gallons annually.
Poet LLC, based in Sioux Falls, South Dakota, is the largest ethanol producer, followed by Archer Daniels Midland Co., in Decatur, Illinois. Valero Energy Corp., the San Antonio- based oil refinery owner, is the third-biggest ethanol producer.