Aventine posts strong third-quarter earnings

By Bryan Sims | November 03, 2008
Web exclusive posted Nov. 5, 2008 at 2:52 p.m. CST

Pekin, Ill.-based ethanol producer and marketer Aventine Renewable Energy Holdings Inc. posted a net income of $2.5 million, compared with a net loss of $1.9 million in its second quarter report earlier this year.

According to Aventine, the gross profit for its third quarter report was negatively affected by higher corn prices, higher conversion costs that resulted from increased utility and maintenance costs, a lower cost or market inventory adjustment and lower coproduct returns. The company also recorded market adjustment of $4.7 million due to the decline of ethanol and corn prices.

Aventine generated $14.3 million of cash from its operations. For the first nine months of 2008, the company generated cash flow from operations totaling $56.6 million.

Net income was positively affected by significant gains on hedging activities, including gains on short corn positions and short gasoline positions used to fix prices on gasoline-indexed ethanol contracts and lower selling, general and administrative expenses.

"Our operations generated positive cash flow despite a difficult operating environment," said Ron Miller, Aventine president and chief executive officer. "We continue to focus on operational excellence and on our net liquidity position given the cash requirements necessary to complete our new facilities. Operationally and in the marketplace, we continue to be a leader in the ethanol sector."

Aventine reported that its revenues were flat at $599.5 million versus $601.6 million in the second quarter of 2008 with higher volumes offset by lower pricing. Its coproduct revenue decreased to $33.7 million in the third quarter, down from $37 million in the second quarter, citing declines in coproducing pricing approximating the decline in Chicago Board of Trade corn prices.

A total of 226.6 million gallons of ethanol were sold in the third quarter versus 22.3 million gallons it sold during the second quarter. Aventine attributes this to the increased supply as gallons sourced from marketing alliance partners increased along with purchase/resale transactions.

Aventine also provided an update on its two 113 MMgy ethanol plants under construction in Aurora, Neb., and Mt. Vernon, Ind. In addition to the announcement of extending the construction period and pushing back the start-up date of the Aurora facility, Aventine said it will continue to "evaluate a number of other actions designed to increase the amount of liquidity available, including reducing inventory levels, seeking additional debt and equity financing, potentially delaying construction or start-up of our Mt. Vernon expansions and other strategic initiatives."

To read Aventine's third quarter report in its entirety, visit www.aventinerei.com/pdfs/Aventine%203rd%20Quarter%20Earnings.pdf.