Alto Ingredients(ALTO) - 2024 Q3 - Earnings Call Transcript

Financial Data and Key Metrics Changes - In Q3 2024, consolidated gross profit improved to $6 million compared to$ 4.2 million in Q3 2023, while adjusted EBITDA was $12.2 million, down from$ 13.6 million in the same period last year [9][25][30] - Net sales decreased to $252 million in Q3 2024 from$ 318 million in Q3 2023 due to lower market prices [25] - The consolidated net loss was $2.4 million, an improvement from a net loss of$ 3.5 million in Q3 2023 [29] Business Line Data and Key Metrics Changes - The Pekin campus contributed $6.2 million to gross profit, improving tenfold year-over-year, driven by productivity improvements and a positive sales mix [26] - Specialty alcohol sales increased by 4 million gallons compared to the same period last year, reaching 42% of total Pekin sales volume [12][26] - The Western facilities reported a gross loss of$ 2.3 million, a decline of $3.8 million year-over-year, primarily due to downtime and costs associated with upgrading the Magic Valley facility [28] Market Data and Key Metrics Changes - Q3 2024 began with solid ethanol crush margins supported by strong exports, but domestic demand weakened due to a decline in miles driven [15] - Carbon prices were approximately 80% lower in Oregon and Washington and 20% lower in California compared to the same period last year [16] - Corn prices are expected to remain low, which may increase demand for US corn exports but also strain logistics and drive up transportation costs [17] Company Strategy and Development Direction - The company is focused on sustainability, having finalized a CO2 transportation and sequestration agreement with Vault, aiming to lower its carbon footprint [10][11] - Plans to modernize equipment and facilities are ongoing, including the construction of a second alcohol loading dock at the Pekin campus to improve logistics [13] - The company is exploring alternatives to monetize or optimize its Western assets, including potential partnerships [20] Management's Comments on Operating Environment and Future Outlook - Management acknowledged that market conditions have changed dramatically, impacting the original EBITDA uplift expectations for the Magic Valley facility [39] - The company remains optimistic about future profitability improvements and is committed to managing changing market dynamics [37] - Despite challenges, management believes that the fundamentals of the technology at Magic Valley are sound and that significant benefits are still expected [43] Other Important Information - The company generated$ 18.6 million in cash flow from operations in Q3, bringing the year-to-date total to $6.3 million [31] - The company invested$ 500,000 in CapEx during Q3, with a year-to-date total of $9.8 million [32] - The company completed its 2023 sustainability report, increasing disclosures on environmental, health, safety, and quality metrics [22] Q&A Session Summary Question: What is the outlook for Magic Valley's targeted annual EBITDA uplift? - Management indicated that original expectations are difficult to ascertain due to significant changes in market conditions affecting corn oil and protein values [39] Question: Will there be changes to the moratorium timeline for new permits due to recent ADM leaks? - Management noted no outward response from the EPA and highlighted improvements in operational practices since ADM's approval [41] Question: Have you considered seeking recourse against harvesting technologies for losses incurred? - Management is exploring all options, including potential recourse, but emphasized that the current market state is not permanent [43][44] Question: What is the purpose of engaging Guggenheim Securities? - The engagement aims to evaluate all options for maximizing returns, including partnerships, asset sales, or further improvements [45][46] Question: Will the review consider the sale of the entire company? - Management stated that all options, including the sale of the company, are always considered in the interest of shareholders [47]