Alto Ingredients(US:ALTO)2021-11-10 03:58Financial Data and Key Metrics Changes - For Q3 2021, net sales were $306 million, an increase from $298 million in Q2 2021, driven by an increase in third-party gallons sold and higher average prices per gallon [15][20] - The company reported a net loss available to common shareholders of $3.5 million or $0.05 per share, compared to income of $8.1 million or $0.11 per diluted share in Q2 2021 [20] - Gross loss was $3.4 million, down from a gross profit of $15.2 million in the previous quarter, primarily due to the wet mill outage and high corn prices [18][20] Business Line Data and Key Metrics Changes - Alcohol sales totaled $253 million, with $53 million in revenue from essential ingredients [15] - Specialty alcohol production was 20 million gallons, down 4 million gallons sequentially, attributed to the wet mill shutdown [16] - The company expects the yeast facility and Pekin dryer upgrades to contribute approximately $5 million in EBITDA annually starting in 2022 [8][24] Market Data and Key Metrics Changes - The average price per gallon of fuel-grade ethanol reflects a high correlation with elevated corn prices [15] - The company anticipates continued volatility in sanitizer and disinfectant demand, with expectations for a more stable demand-supply equilibrium as COVID-19 impacts dissipate [18] - Co-product prices have lagged behind rising corn prices, leading to declining co-product returns [18] Company Strategy and Development Direction - The company is focusing on expanding its essential ingredients business and investing in infrastructure improvements [6] - Plans to enhance protein production at dry mills aim to diversify revenue sources and improve earnings quality [7][24] - The company is exploring opportunities for vertical integration and carbon capture and sequestration programs [13][32] Management's Comments on Operating Environment and Future Outlook - Management noted that the wet mill outage and volatile market conditions negatively impacted revenues and increased operational expenses [9] - The company expects to contract for more gallons in 2022 than in 2021, despite current uncertainties in the market [11] - Management expressed optimism about future EBITDA growth from various projects, estimating an additional $18.5 million in EBITDA in 2022 from completed improvements [24][25] Other Important Information - The company completed the sale of its fuel-grade ethanol production facility for $24 million, which will help retire approximately $150 million in term debt [12][20] - The company has secured utility costs and other variable input costs for the next 12 months to mitigate risks associated with commodity price volatility [22][23] Q&A Session Summary Question: Can you elaborate on the supply-demand imbalance and its normalization? - Management indicated that the supply-demand imbalance is driven by export markets and logistical constraints, with expectations for normalization over the next few quarters [28][30] Question: What is the update on carbon capture opportunities? - Management discussed the potential benefits from the recent infrastructure bill, including increased tax credits for carbon capture, and ongoing discussions with multiple parties regarding carbon sequestration [34][36] Question: How much higher could the gross profit guidance be if things move forward positively? - Management expressed optimism about the $40 million gross profit guidance but noted challenges in the market that could affect upside potential [40][42] Question: Is there potential for acquisitions to diversify the product portfolio? - Management confirmed that they are exploring both acquisitions and internal development to enhance their specialty alcohol portfolio and improve operational capabilities [45][46]