Best stock to invest in – The BioEconomy Earnings Season Roundup: REGI, GPRE, BIOA, ADM



Best stock to invest in

Jim Lane

Q1 earnings season for the advanced bioeconomy kicked off this
week, with reporting from Green Plains, ADM, REG, and BioAmber.
That’s an ag giant, an ethanol monster, a biomass-based diesel
dominator and a fast-upcoming renewable chemicals maker. Between
the four, we have a good opportunity to check the sector’s health.

Overall, markets were unhappy today, knocking down BioAmber 10
percent, while Green Plans took a 6 percent tumble, and REG and
ADM were both down, though by lesser amounts. The oil price
environment, not pretty today, provided most of that shareholder
joy.

The Digest’s Take

Ethanol, challenging times. Biodiesel is looking strong with
gallons up, prices not far off and margins improving. Renewable
chemicals look good in terms of pricing, production is ramping up
at BioAmber and sales jumped 31% QonQ.

Green Plains (GPRE):
Ethanol margins weak, cash position strong, 2016 looking better.

Green Plains reported a net loss of $24.1 million, compared with
net loss of $3.3 million for Q1 2015 — this, on revenues of $749.2
million for Q1 2016 compared with $738.4 million for Q1 2015.


Production. Green Plains produced 247.0 million gallons
of ethanol compared with 232.5 million gallons for Q1 2015.

EBITDA: Q1 earnings before interest, income taxes,
depreciation and amortization for Q1 was 2016 was -$5.8 million
compared to $19.2 million for Q1 2015.

Cash and debt: As of March 31, Green Plains had $400.7
million in cash and cash equivalents, and $146.6 million available
under revolving credit agreements. Total debt outstanding was
$776.6 million.

Crush margin. The consolidated ethanol crush margin was
$0.5 million, or $0.00 per gallon, for Q1 2016 compared with $14.9
million, or $0.06 per gallon, for Q1 2015. The consolidated
ethanol crush margin is the ethanol production segment’s operating
income before depreciation and amortization, which includes corn
oil production, plus inter-company storage, transportation and
other fees.

Navigating rough waters. “The margin environment remained
weak, providing little opportunity to generate a profit in the
first quarter,” said Green Plains CEO Todd Becker. “We focused on
maintaining our strong liquidity position to remain
well-positioned, not only during this cyclical downturn, but also
for future growth opportunities within our supply chain.

Marketing & distribution guidance remains intact.
Green Plains noted: “Our marketing and distribution segment
reported an operating loss for the quarter which was primarily
related to the valuation of inventories held for forward business
that is fully hedged. We anticipate the profits on these positions
will be realized over the remainder of this year and operating
income for the marketing and distribution segment will remain in
the $25 to $30 million range for fiscal 2016.”

2016 environment improving. “The forward ethanol margin
environment has improved since the beginning of the second quarter
and we have hedged a portion of our future production,” said
Becker. “We believe the ongoing growth in global and domestic
ethanol blending will continue to drive better market fundamentals
for the industry and are optimistic the margin environment will
improve during the balance of 2016.”

Over at Green Plains Partners, “Our business model, which
includes minimum volume commitments, insulated the partnership
from challenging market conditions and provided cash flow
stability that enabled us to increase our distributions for the
second consecutive quarter,” said Becker. “We expect a recovery in
volumes during the remainder of the year as our sponsor continues
to ramp production back up at its ethanol plants.”

GPP income and cash. First quarter 2016 net income for
GPP was $12.2 million on adjusted EBITDA of $13.9 million and
distributable cash flow of $13.3 million. GPP had $5.6 million in
cash and cash equivalents, and $49.0 million available under the
partnership’s revolving credit facility. On January 1, 2016, the
partnership acquired certain ethanol storage and leased railcar
assets located in Hereford, Texas and Hopewell, Virginia from
Green Plains Inc. for $62.3 million. The transaction was financed
using the partnership’s revolving credit facility and cash on
hand.

ADM (ADM):
“Challenging market conditions,” sees “opportunities in 2nd Half”

In Illinois, Archer Daniels Midland reported operating profit was
$573 million, down 36 percent from $892 million for Q1 2015. Net
earnings for the quarter were $230 million.

Agricultural Services decreased $118 million compared to
a strong quarter last year amid lower North American export
volumes and margins, fewer global merchandising and transportation
opportunities, as well as unfavorable Global Trade Desk
merchandising positions.

Corn Processing increased $2 million as strong results
for sweeteners and starches were offset by weaker lysine results
and lower ethanol margins. Sweeteners and starches results
improved $56 million to $141 million as the business continued to
perform well, with an improved cost environment driven by strong
capacity utilization. Bioproducts results were down from $42
million to a loss of $12 million, due primarily to the continued
challenging conditions in the global lysine market. In addition,
ethanol margins continue to be impacted by high industry
production levels that caused inventories to build throughout the
quarter.

Oilseeds Processing decreased $231 million compared to a
very strong year-ago period, as higher Argentine crush run rates
weakened global margins. Crushing and origination operating profit
of $120 million declined $214 million from last year’s high
levels. Global soybean crush and origination results were down
significantly due to lower global margins resulting from increased
Argentine soy meal exports and significantly reduced U.S. meal
exports. In addition, lower softseed crush volumes and weaker
Brazilian commercialization, which slowed throughout the quarter,
negatively impacted results.

WILD Flavors and Specialty Ingredients earned $70 million
on solid performance from WILD Flavors and higher results from
specialty ingredients.

South America on the mend? ““Challenging market conditions
continued in the first quarter, particularly affecting Ag
Services. The first half of the year continues to present a
challenging environment,” said CEO Juan Luciano. “However, we are
cautiously optimistic that reduced South American soybean and corn
production could bring improved soybean crush margins and
merchandising opportunities in the second half of the year.”

Acquisitions. ADM acquired a controlling stake in Harvest
Innovations — enhancing ADM’s plant protein, gluten-free
ingredient portfolio. The company also purchased a corn wet mill
in Morocco to expand the global sweeteners footprint.

Divestments. ADM reached an agreement to sell our
Brazilian sugarcane ethanol operations.

BioAmber (BIOA):
“February problem” now overcome; 31% QonQ uptick in sales, and
“ASP unchanged despite lower oil prices.”

In Canada, BioAmber
announced Q1 revenues of $1.5 million
, an increase of 297%
over Q1 2015 and up 31% over Q4 2015. The increase in revenue was
driven by volume growth in product sales. Gross loss for the
quarter ended March 31, 2016 was $1.6 million , compared to a
gross profit of $57,000 for the same period last year. The loss
was due to higher cost of goods sold resulting from Sarnia fixed
costs and off-spec product reprocessing costs that were allocated
to the cost of goods sold.

The Company recorded a net Q1 loss of $10.9 million compared to a
net Q4 2015 loss of $8.4 million.

Production. Plant up-time averaging 70% in the last three
weeks of the quarter; fermentation continued to meet targets for
productivity, sugar yield and final concentration. The company
disclosed “a production problem in February,” but said that “plant
uptime and percentage of off-spec product improved significantly,
reaching target levels in recent weeks”.

Pricing. The average selling price was unchanged from the
previous quarter, despite lower oil prices.

Cash picture. Cash on hand was $14.1 million as of March
31, 2016 ;

Reaction from Fortress BioAmber: “We are making steady
progress in ramping up Sarnia , from both a production and a sales
perspective. Our transition to an operating company is complete
and we are focused on reaching full production capacity and
selling the output of the plant,” said CEO Jean-Francois Huc. “As
we ramp up, the macro environment in which we operate is beginning
to improve and higher oil prices could lead to greater demand for
biobased products in the second half of the year,” he added.

REG (REGI): “Significant increase” in gallons sold, “better margin
environment,” and “a more stable regulatory environment.”

In Iowa, Renewable Energy Group announced Q1 revenues of $305.6M
on 98.0 million gallons of fuel sold, a gain of 63.7% in gallons
sold compared to Q1 2015. Adjusted EBITDA for the quarter was $9.9
million compared to negative $30.2 million in the prior year
period, without any adjustments for the 2015 Biodiesel Mixture
Excise Tax Credit (BTC). Adjusted EBITDA for the first quarter of
2015, after giving effect to the retroactive reinstatement of the
BTC, was negative $14.5 million.

Profits: The increase in gross profit was due to the
significant increase in gallons sold along with a better margin
environment. Gross profit was $25.1 million, or 8.2% of
revenues, compared to gross Q1 2015 loss of $16.2 million, or 7.0%
of revenues.

Production: REG produced 86.2 million gallons of
biomass-based diesel during the quarter, a 42.1% increase.

Prices: The average price per gallon sold of biomass-based
diesel decreased by 7.9% to $2.92 which was due to lower heating
oil and RIN prices.

Cash: At March 31, 2016, REG had cash and cash equivalents
of $164.1 million, an increase of $117.0 million from the prior
quarter end. This increase was largely the result of collections
related to the retroactive reinstatement for 2015 of the biodiesel
mixture excise tax credit.

Reaction from Fortress REG: ”The REG team delivered solid
execution in the quarter. We continued optimizing our fleet of
plants while integrating our newest biorefinery in DeForest,
Wisconsin and bringing REG Geismar back online,” said REG
President and CEO Daniel J. Oh. “A more stable regulatory
environment in the U.S. enabled us to focus on growing our
business.”

Upcoming earnings seasons highlights

Pacific Ethanol, May 4
TerraVia, May 4
Codexis, May 9
Amyris, May 10
Biox, May 10
Dyadic, May 12
Evogene, May 19

Jim Lane is editor and publisher  of Biofuels Digest where this article was originally published.
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