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Coal Is Hot, Ethanol Is Not
By Mr Ethanol | August 11, 2008
24/7 Wall St.:
Pacific Ethanol led off its second quarter financial report with higher sales number. Unfortunately, the company also had to report earnings, or the lack of earnings. For the quarter, Pacific reported a net loss of $8.3 million (-$0.23 EPS). That was nearly double analysts’ average estimate of a -$0.12 EPS loss. Even the net sales figure of $198 million (up 74% year-over-year) fell short of estimates of $206.16 million. Sales volume and average sales price both increased. So what happened?
Corn prices rose 67% y-o-y, leading to a gross margin of just 0.2%, compared with 9.8% a year ago. Pacific had to raise $32.4 million through sales of stock and warrants even to reach this level of failure. The company’s CEO and President said that despite a “challenging commodity environment” in the quarter, Pacific “continued to increase our sales.” Selling more gallons at a loss for each gallon only adds up to a bigger loss. Without the federal subsidy of $0.51/gallon, Pacific would have lost another $64 million.
The stock is down more than 10% in early trading.
On the other side of the energy coin, coal-producer Natural Resources Partners LP reported record earnings, production, and revenues. EPS increased to $0.47/common unit from $0.28/unit for the same period a year ago. Production topped 16 million tons, and total revenues jumped to more than $75 million, up 33% from the same period a year ago and more than 15% sequentially.
Analysts expecte EPS of $0.42 and revenues of $69 million.
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