Ethanol-Maker’s Sales Slump Shows Why It Wants to Ditch Biofuel

Source: By Kim Chipman, Bloomberg • Posted: Tuesday, May 4, 2021

Green Plains Inc.’s first-quarter revenue trailed analysts’ estimates after declines in its ethanol business, highlighting volatility that’s prompting the company to shift away from the biofuel.

Revenue fell 13% from a year earlier to $553.6 million, compared with the $625.3 million average of estimates compiled by Bloomberg. Ethanol sales volumes slid 26% from the year-earlier period, in part due to winter weather woes that slowed output throughout the industry.

The slump comes after U.S. ethanol producers struggled with lower demand as the virus pandemic limited car travel and fuel use. While corn-based ethanol consumption is rebounding with economies reopening and gasoline demand nationwide on the rise, Green Plains Chief Executive Officer Todd Becker has already decided to reduce the company’s reliance on corn-based biofuel as its main product.

Green Plains shares have surged this year as the company moves away from ethanol focus

“Green Plains 2.0 is in sight,” Becker told analysts on an earnings conference call Monday.

Becker seeks to reinvent the company into a maker of high-protein and sugar ingredients made from corn for use in products ranging from pet food to candy, with ethanol merely a byproduct. The plan has drawn backing from Wall Street. The stock has more than doubled since the beginning of the year. Shares slipped 0.7% at 12:27 p.m. in New York.

First-quarter ethanol crush margins, which includes extracting “ultra-high protein” ingredients from corn, swung to profitability after posting a loss in the same period last year.

Key Insights

  • The Omaha, Nebraska-based company’s adjusted Ebitda of $15.4 million. Analysts had forecast $16.1 million in ebitda.
  • Company posted a first-quarter loss per share of 17 cents, smaller than the 46-cent loss analysts expected.
  • Lower production volumes of ethanol were likely due to impacts of the February cold snap throughout the central U.S. and plant upgrades and maintenance, Truist Securities analyst Jordan Levy wrote in a note; he has a “buy” rating on the stock.

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