Aventine posts first-quarter loss

By Bryan Sims | April 08, 2008
Web exclusive posted May 6, 2008 at 11:13 a.m. CST

Excluding a $21.6 million noncash impairment charge for auction-rate securities, ethanol producer and end-to-end marketer Aventine Renewable Energy Holdings Inc. posted a first-quarter loss of $10.8 million versus a gain of $14.9 million the same quarter a year ago.

The Pekin, Ill.-based company beat Wall Street forecasts, credited with the upside of gradually increasing ethanol price realizations, increased demand, higher commodity spreads and inventory revaluations, however macro concerns remain. "While the first quarter beat should be positive for the stock, industry oversupply concerns persist and investor sentiment remains very negative," according to a research note by Eitan Bernstein, ethanol analyst for Friedman, Billings, Ramsey & Co.

Despite a 34 percent revenue increase due to higher volumes of ethanol sold and higher ethanol prices, Aventine said its revenue continued to offset over 40 percent of its corn costs. Additionally, "Aventine's wet mill operations are clearly helping the company to offset higher corn prices. The company sold a total of 158 million gallons of ethanol sourced from its alliance partners and through its purchase and resale operations, up from 140 million during the prior quarter," Bernstein added.

Aventine also continues to have liquidity issues surrounding its illiquid rate securities on its balance sheet, which it now carries as long-term securities. According to Bernstein, "the company currently has $206 million in capital availability but needs roughly $265 million to complete its 2008 expansion and maintenance operations."

Aventine is currently in the process of building two large ethanol plants; delays and escalations could negatively affect its stock as the company may need to raise additional capital to fund these expansions.

To view Aventine's report, visit www.aventinerei.com/pdfs/Aventine%20Announces%201st%20Qtr%202008%20Earnings.pdf.