Alto Ingredients(US:ALTO)2025-11-07 21:16Production Capacity and Sales - The company operates five alcohol production facilities with an annual production capacity of 350 million gallons, including up to 110 million gallons of specialty alcohols [77]. - In 2024, the company marketed and distributed approximately 386 million gallons of alcohols and over 1.4 million tons of essential ingredients [77]. - Alcohol sales from the Pekin Campus production segment increased by $2.8 million, or 3%, to $109.3 million for the three months ended September 30, 2025 [118]. - The total volume of production gallons sold from the Pekin Campus increased by 0.5 million gallons, or 1%, to 53.3 million gallons for the three months ended September 30, 2025 [118]. - Total renewable fuel gallons sold decreased by 10.1% to 66.8 million gallons for the three months ended September 30, 2025, compared to 74.3 million gallons in 2024 [113]. - The company experienced a 55.0% decline in renewable fuel gallons sold from Western production, dropping to 8.1 million gallons for the three months ended September 30, 2025 [113]. - Net sales of alcohol from the marketing and distribution segment increased by $4.1 million, or 8%, to $58.7 million for the three months ended September 30, 2025 [120]. - The volume of third-party alcohol sold increased by 1.9 million gallons, or 8%, to 27.1 million gallons for the three months ended September 30, 2025 [121]. - Net sales of alcohol from the Western production segment declined by $19.0 million, or 52%, to $17.4 million for the three months ended September 30, 2025 [122]. - The total volume of alcohol sold in the Western production segment decreased by 9.9 million gallons, or 55%, to 8.1 million gallons for the three months ended September 30, 2025 [122]. Financial Performance - Gross profit increased nearly $18 million and net income improved nearly $17 million in the third quarter compared to the same period in 2024 [92]. - Adjusted EBITDA grew by over $9 million in the third quarter, driven by higher-margin renewable fuel export sales and strong demand for liquid CO2 [92]. - For the three months ended September 30, 2025, the company reported a net income of $14,208,000 compared to a net loss of $(2,441,000) for the same period in 2024 [109]. - Adjusted EBITDA for the three months ended September 30, 2025, was $21,368,000, significantly up from $12,164,000 in 2024, reflecting a strong performance [109]. - Total net sales decreased by $10,828,000, or 4.3%, to $240,986,000 for the three months ended September 30, 2025, compared to $251,814,000 in 2024 [116]. - Gross profit for the three months ended September 30, 2025, was $23,494,000, representing a gross profit margin of 9.7%, compared to 2.4% in the same period of 2024 [116]. - Consolidated gross profit improved to $23.5 million for the three months ended September 30, 2025, from $6.0 million for the same period in 2024, representing a gross margin of 9.7% [125]. - The consolidated gross profit for the nine months ended September 30, 2025, increased to $19.8 million from $11.1 million for the same period in 2024, representing a gross margin of 2.9% [138]. - Net income attributable to common stockholders improved by $16.6 million for the three months ended September 30, 2025, reaching $13.9 million, and by $8.8 million for the nine months, resulting in a net loss of $9.4 million [146][147]. Operational Challenges and Developments - The dock at the Pekin Campus, damaged in April, resulted in $0.8 million in business interruption, and the company is working on repairs and a second dock to improve loadout capacity [104]. - The company is evaluating options for its cold-idled Magic Valley facility, including potential CO2 utilization and restarting operations [98]. - California Assembly Bill 30 could add over 600 million additional gallons per year for E15 fuel sales, creating significant demand for domestically produced ethanol [100]. Cash Flow and Financial Position - Cash generated from operations was $22.8 million for the three months ended September 30, 2025, and $3.7 million for the nine months, down from $6.3 million in the same period in 2024 [148][155]. - As of September 30, 2025, the company had $33.1 million in cash and cash equivalents, with $20.3 million available for borrowing under Kinergy's operating line of credit [148]. - Working capital improved to $108.5 million at September 30, 2025, from $95.3 million at December 31, 2024, due to a decrease of $15.4 million in current liabilities [150][152]. - The fixed-charge coverage ratio was 3.73 for the three months ended September 30, 2025, significantly exceeding the required ratio of 1.10 [160]. - The company used $12.2 million in cash for investing activities, including acquisitions and capital expenditures, during the nine months ended September 30, 2025 [156]. Market Risks - The company is exposed to market risks related to ethanol and corn pricing, which can fluctuate due to various factors including supply and demand dynamics [166][169]. - A sensitivity analysis estimated that a hypothetical 10% adverse change in ethanol prices could result in a decrease of approximately $20.8 million in pre-tax income, while a similar change in corn prices could lead to a decrease of approximately $18.6 million [173]. - The company managed a physical corn volume of 42.1 million bushels and ethanol volume of 199.0 million gallons as part of its risk management strategy [173]. - The company recognized net gains of $10.2 million and $9.0 million related to changes in the fair values of derivative contracts for the nine months ended September 30, 2025 and 2024, respectively [172]. Tax Credits and Future Expectations - The company expects to earn $0.10 per gallon in Section 45Z tax credits at its Columbia plant for 2025, with potential total credits of up to $18 million for 2025 and 2026 [95]. - The company has started the process to forward sell Section 45Z tax credits to monetize them for 2026 through 2029 [95]. - The company began exporting renewable fuel to Europe in Q4 2024, capturing more demand and locking in favorable premiums to domestic renewable fuel [99].