Alto Ingredients(US:ALTO)2024-05-08 20:15Production Capacity and Sales - The company has an annual alcohol production capacity of up to 350 million gallons, including 110 million gallons of specialty alcohols[66]. - In 2023, the company marketed and distributed approximately 383 million gallons of alcohols and over 1.5 million tons of essential ingredients[66]. - Specialty alcohol sales from the Pekin Campus increased year-over-year, contributing to improved gross profit and higher Adjusted EBITDA[77]. - The company sold 26 million gallons of specialty alcohol in Q1 2024, up from 21 million gallons in the same period of 2023[81]. - The company has contracted to sell approximately 93 million gallons of fixed-price specialty alcohol for 2024 at an average premium of $0.31 per gallon[81]. - Total gallons sold increased by 1% to 99.0 million gallons for the three months ended March 31, 2024, compared to 98.5 million gallons for the same period in 2023[92]. Financial Performance - Adjusted EBITDA for Q1 2024 was $(7,053) thousand, an improvement from $(10,419) thousand in Q1 2023[88]. - Consolidated net sales for the three months ended March 31, 2024, decreased by $73.3 million, or 23.3%, to $240.6 million compared to $313.9 million for the same period in 2023[95]. - Net sales of alcohol from the Pekin Campus production segment declined by $24.0 million, or 18%, to $108.4 million for the three months ended March 31, 2024[98]. - Gross loss improved to $2.4 million for the three months ended March 31, 2024, from a gross loss of $3.2 million for the same period in 2023, maintaining a gross margin of negative 1.0%[106]. - The marketing and distribution segment's gross profit declined by $0.6 million to $0.7 million for Q1 2024, attributed to lower margins from third-party fuel-grade ethanol sales and lower sales volumes[109]. - The Western production segment's gross profit decreased by $3.7 million to a gross loss of $8.3 million for Q1 2024, with $1.3 million due to lower renewable fuel margins and $2.4 million from higher sales volumes at lower margins[110]. - Net loss available to common stockholders improved to $(12.04) million in Q1 2024 from $(13.48) million in Q1 2023, representing a decrease of 10.7% in loss margin[118]. Operational Changes and Projects - The company completed a biennial wet mill outage at its Pekin Campus, which will improve production rates despite negatively impacting sales and margins in Q2[83]. - The Magic Valley facility is undergoing modifications to enhance profitability and is expected to resume production in late June or early July 2024[84]. - The company is negotiating terms for its carbon capture and storage (CCS) project, aiming to submit a permit application by the end of Q3 2024[79]. Market and Risk Management - The company is exposed to market risks related to ethanol and corn pricing, with ethanol prices sensitive to global supply, crude oil demand, and government regulations[137]. - The company manages its corn purchases through volume contracts to fix prices, exposing it to market risks associated with corn price fluctuations[138]. - Essential ingredients demand is influenced by livestock feed numbers and feed alternative prices, which can affect the company's revenue[139]. - The company employs risk management strategies, including derivatives, to mitigate market risks associated with ethanol and corn prices[139]. - The company does not enter into derivatives for trading or speculative purposes, focusing instead on managing operational risks[136]. Cash Flow and Capital Management - Cash, cash equivalents, and restricted cash decreased by 7.5% to $42.1 million as of March 31, 2024, down from $45.5 million at the end of 2023[121]. - Working capital declined to $95.8 million at March 31, 2024, from $103.5 million at December 31, 2023, primarily due to a decrease in current assets[123]. - Cash flow from operations was $1.4 million for Q1 2024, a significant improvement compared to $23.3 million used in operations during the same period in 2023[124]. - The outstanding balance under the Orion Term Loan was $60 million as of March 31, 2024, with a total facility amount of up to $125 million[133]. - Kinergy's operating line of credit had an outstanding balance of $32.2 million with $25.9 million of unused borrowing availability as of March 31, 2024[129]. - As of March 31, 2024, the company has future commitments for capital projects totaling $10.8 million, scheduled to be satisfied through 2024[134]. - The company committed to contingent payments of up to $4.1 million in cash over the next two years related to the acquisition of Eagle Alcohol, contingent on meeting certain targets[134]. Pricing and Sales Trends - Average sales price per gallon for Pekin Campus decreased by 20% to $1.90, while Western production decreased by 32% to $1.80 for the three months ended March 31, 2024[92]. - Essential ingredients sold from the Pekin Campus decreased by 6% to 212,600 tons for the three months ended March 31, 2024, compared to 226,900 tons for the same period in 2023[93]. - Net sales of essential ingredients from the Western production segment increased by 39% to 100,800 tons for the three months ended March 31, 2024, compared to 72,400 tons for the same period in 2023[104]. - The average sales price per ton of essential ingredients from the Pekin Campus decreased by 22% to $219.70 for the three months ended March 31, 2024[99]. - The consolidated total return on essential ingredients increased to 49.8% for the three months ended March 31, 2024, up from 45.4% for the same period in 2023[93]. Sensitivity and Market Analysis - A sensitivity analysis estimated that a hypothetical 10% adverse change in ethanol prices could result in a pre-tax income decrease of $6.7 million, with a similar impact expected for corn[141]. - The company recognized net gains of $3.3 million and net losses of $1.8 million related to changes in the fair values of derivative contracts for the three months ended March 31, 2024, and 2023, respectively[140]. - The company does not have material exposure to interest rate risk and conducts all transactions in U.S. dollars, minimizing foreign currency risk[135].