Positive first-quarter earnings reflect diversification

By Bryan Sims | June 02, 2008
Despite volatile corn prices continuing to compress ethanol plant operating margins, many of the nation's top producers and companies highly involved in the industry still managed to see an upswing in their first-quarter 2008 earnings reports.

Much of the first-quarter success was attributed to diversified ethanol producers pulling in positive profits. These ancillary business segments contributed to additional revenue that would have otherwise been lost if dependent on ethanol production alone.

Cambridge, Mass.-based Verenium Corp., a pioneer in the development of cellulosic ethanol production, posted total revenues of $15.2 million, compared with $11.3 million the same quarter a year ago. The company's specialty chemicals and enzymes business did especially well, reporting $11.2 million in product revenue.

Omaha, Neb.-based ethanol producer Green Plains Renewable Energy Inc. reported a net income of $9.9 million. This was an improvement over the fourth quarter of 2007, the company's first quarter of ethanol production, when it reported a net loss. Pre-tax earnings of $12 million for the first quarter included net gains of $6.7 million from commodity derivatives.

Brookings, S.D.-based ethanol producer VeraSun Energy Corp. posted a 257 percent increase in revenues totaling $516.5 million. Its net income increased to $7.6 million, compared with a net loss of $300,000 during the same quarter last year. Total revenues increased by $372 million, compared with $144.5 million in the same three-month period last year.

Pacific Ethanol Inc. reported net sales of $161.5 million, an increase of $62.3 million compared with $99.2 million during the first quarter of 2007. According to the company, "this increase in net sales is primarily due to a substantial increase in sales volume, which was partially offset by lower average sales prices."

Despite volatile prices and heavy demand for its corn, soybeans and wheat processing, Archer Daniels Midland Co. generated a 42 percent increase in its third-quarter earnings. The Decatur, Ill.-based company posted net earnings of $517 million, compared with $363 million during the same quarter last year. Conversely, the operating profit of ADM's Corn Processing Segment took a hit, decreasing $79 million for the quarter "due to increased net corn and manufacturing costs, principally energy," the company said.

Privately owned agri-giant Cargill Inc. reported net earnings of $1.03 billion, up 86 percent from $553 million during the same period a year ago. According to Cargill spokeswoman Lisa Clemens, the company's earnings from producing, trading and distributing ethanol and biodiesel globally impacted less than 3 percent of the company's first-quarter results.

Despite record oil prices impacting its refining business, Marathon Oil Corp. still managed to garner a 2 percent increase of its first-quarter net profits. The Houston-based oil, gasoline and ethanol refiner and supplier earned a net income of $731 million, compared with $717 million during the same quarter last year. Revenues rose 38 percent to $18.1 billion versus $13 billion last year.

CSX Corp., a Jacksonville, Fla.-based transportation company, reported that its first-quarter revenues rose due to the increased transport of ethanol. CSX generated significant growth in six of its 10 markets, resulting in first-quarter revenues of $2.7 billion, a 12 percent increase from the same quarter last year. First-quarter earnings were up 63 percent from last year. Total earnings at CSX for the quarter were $351 million.