ALTO - Earnings call transcript Q1 2021

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Operator

Ladies and gentlemen, thank you for standing by. And welcome to the Alto Ingredients Incorporated First Quarter 2021 Financial Results. At this time, all participants are in a listen-only mode. After the speakers’ presentation, there will be a question-and-answer session. [Operator Instructions] Please be advised that today’s conference is being recorded. now today, hand Moriah would to conference I speaker your Shilton. Instructions] like the to over [Operator Please go ahead.

Moriah Shilton

quarter call. Thank you, for first today for joining results Elaine. And thank the you Alto all us XXXX conference Ingredients’

McGregor, a On the Mike questions. provide telephone business press will are webcast press results, today, Alto information Ingredients’ call after Alto note outlook a website. open call of summary is with review Alto Bryon will financial for earnings prepared CFO. call return and the Please XXth, and release. replay Ingredients and a be today’s today, speaks presentation operating will available in Kandris, also as for issued through will A call details The begin company closed available A included highlights, of Mike CEO; at the available today that Bryon to will also Ingredients’ are XXth. a this of the discuss of which market Mike of only company’s release May results. the the today’s company’s the be and today’s details call providing quarterly on that the replay altoingredients.com. website at in May of then

and in advised any statements that Alto update but other Ingredients’ which time forward-looking investors monitor applicable review of cause later provision contribute and and statements. filings reported. accounting by performance or to the the Alto limited presentation events, are number and purchase of In this be will statement time-sensitive on EBITDA expense, assessing online, Except to these referenced. two obligation adjustments, and was The disclosed periods the Ingredients asset such be assist SEC. as of for with in loss loss for You will Alto slide forward-looking is and the differ could non-GAAP value to risks available adjusted remarks, actual assumes adjustments, To longer extinguishment those are performance or to prepared pleasure company’s of could today’s interest involve no include, required benefit the measures the Mike? amortization that call, states taxes, of operations depreciation Harbor Safe considerations Kandris, income information materially this the reconciling introduce to management’s comments or a company’s any The company previously my at in before time-to-time risks the Factors statements. information attributed as Management and now measures impairments, CEO. of fair measures in non-GAAP not release. law the constitute company’s these refer to, from accurate uses table no believes to differences company factors that may expense. net of future Mike the financial replay. Ingredients from on support non-GAAP unaudited results Please some defines of debt, income It press included that being in uncertainties. presentation

Mike Kandris

Thank you, joining Moriah. us Thank you, today. everyone, for

profit ethanol generated alone. income adjusted strengths, volumes, fourth selling We consecutive contribute sold ingredients. track It positive we our $XX.X of an a volumes of capacity net as gallons remain start We specialty the essential testament income a expanded alcohols on quarter have fuel beyond. for first exports. specialty million of combination XXXX was our remain alcohol the the in a and $X.X million grade model profitable year-over-year, optimistic also we adding solid XX focusing for to certifications. Thereby and alcohol contracted more profit and XXXX through is a sales year, a additional benefit our and quarter benefits our spot of net business $XX million. of alcohol that of reflecting specialty on specialty $XX gross enhanced contracted our and of and results EBITDA, This million sales approximate time to to minimum in and further production efforts. from improvement represent adjusted in EBITDA These sustainable for improving million contracted and gross We utilization transformation over

our we fuel a in for consideration on $XX.X definitive of production Seaboard facility California to announced signed XXth, we agreement have Madera a grade April As total with Energy ethanol million. sell

the quarter quarter used We in proceeds facility to EBITDA a approximately to for expect most an company per interest save second $XXX,XXX This XX $XXX,XXX idle and facility. of XXXX year the sale the debt. and of quarter million expense per negative retire gallon of additional close cash be this cost carrying per this in will will

and another announced QX on the to approximately an than improvement to two at in operational are and contribute higher on efficiencies that in million reliability. expected are be We before annually on $XX track value completed feed million dryers underway the And facility and payback production plant facility $X example of EBITDA, expected efficiency project a produce are example addition two to alone These One approximately XXXX overall will our to plant and in is a end projects revenue even project feed are a reliability. or and by capital our years. the Pekin is increase to capacity projects to of expand increase our XX%. improving annual scheduled fully in that use less upgrade

our can mind on environment. Turning of for our decarbonisation of of to the have the capture carbon investors, role sequestration and a is topic that of top many

an discussed one the in potential as of last will most Mount on storage capture carbon we space, our active to considered Sandstone resources call, the significant United our the player States. carbon be As be campus atop Pekin the sits in formation, Alto Simon

to site, over the which We generates over for sharing Pekin develop forward the discussions and quarters to are regarding annually. actively COX information engaged few of opportunity profitable at carbon sequestration XXX,XXX more capture in this company. next uniquely tons We look the a program

at our to annual representing expand under production. plan protein noting, gallons many mill alcohol of it million worth development, Finally, production our XXX among other dry is facilities, projects

it early provide While believe economics specific compelling. details, the to is we are too

We discussion will contractual the coming are months finalized. over on over now projects to details these With once greater provide turn a I’d Bryon? arrangements call the to financials. Bryon like for of our that,

Bryon McGregor

XXXX a for an few highlights Mike. certain metrics provide the for first and Thank on financial the our update quarter expectations you, metrics on I’ll discuss year. and

extreme grade in the negatively XX compared our to quarter. full million to first million million, in and with last the price X is per gallons with a was relatively alcohol seasonally quarter sales first and weather quarter and impacting per in sold alcohols, the in impacted up the prices. conditions over results. fuel The prices. mill, of quarter, poor to Pekin sales also of the of gas commodity production rising gallon profit $XX.X flat having sales gallon. million We which crush to sold For compared line early Gross adversely were million, in $XX.X natural the specialty improvement ethanol XX by compared in sequentially the increase gallon gallons attributable of first This last dry XXXX, quarter’s million million part sold $XXX margin $XXX gallons net last at quarter, were the up quarter was due quarter fourth price increase to production specialty XX%

fuel has noted industry As seen we demand inventories improvement declined operating have earnings margins. call, ethanol increased, margins on and dry our are our as prior have mills in positive fuel at and

market gallons that contracted then profit normal contracts, that the of of XXXX and gross of in impact prices. the year These at will will sell slightly volatility. million fixed guidance to gallons XXXX. $XX for Concurrently, of where the million line major track associated our specialty of for $X new fall we quarter, to on corn $XX based the conditions prevailing of earlier was contribution future million expenses, with market prices margins the preserve million, part minimize we at to reminder, the on we the is costs price due contracted commodity were from some last as $XX prices remain Mike to volumes a but price generally in entire the fixed with referred at and the million terms in in and we alcohols As expenses high the SG&A commodity input reflect Similarly, seasonally the sign. concurrent like quarter XXXX. negotiate the full hedged in calendar XX time were inflated hedge of year

the fourth interest XX% me, same $X.X for lower In continue reduction excuse XXXX. first to initial, rate And the the quarter last debt. expense first down our we than was high paid as Our a XX% year principle million -- quarter from paid the pay million, that $XXX the we notes debt had $X.X of on of quarter million senior quarter we and credit have the interest past CoBank million we have repaid our million $X.X we high removing $X months, total XX% on of In debt, time off facilities. XX the successfully interest we our entered in period. entering in

free associated charges with of We sheet. net of $X.XX diluted include $XX.X The Western share assets sale million share, in $X.X be $XX.X our quarter. transition balance to was quarters to assets or available and a XXXX. fourth respectively, $X.XX million and to debt million the track common or loss fourth in held and million, shareholders are the on compared Income impairment their for $X.X first the per on per to

in various balance anticipate back million, needs. and by further pending only address Turning are $XX Upon After and bringing million total December needs summary, sale, approximately closing needed $XX.X our we to sales debt sheet $XX.X In to to under also announced capital loan cash bolster from our $X.X $XX.X $XX.X future end, the will not our liquidity of Madera plan through asset of and debt, comprised our term balances to reducing sale liabilities. plant cash cash million, XX, of million, capital of balance XXXX, opportunity for be building were sheet. consideration we but million a used a and liquidity to million. Mike, and the in XX, debt assumption projects. remaining $XX.X improvement our funding cycles, to outstanding Proceeds fund support quarter you. commodity equivalents we March On compared growth current to retire XXXX. million future

Mike Kandris

Thank you, Bryon.

improved reduced months platform well building controllable as overall expenses aggressively our Over and operations, pursue the This production opportunities for optimized past thus strong reinvest quality future. to proven us capital, high provides and platform accretive the ability as cost opportunities. of strategic our projects, organically to pursue the in footprint XX we have value a M&A

in us as put our We are all for to efforts the this, to I’d With questions. they employees look have to position future. to of Operator, lines the a strength grateful the for undertaken like open we

Operator

Eric Instructions] [Operator And Craig-Hallum. question first from Stine your comes from

Aaron Spychalla

questions. Spychalla Eric. Aaron for It’s Thanks on afternoon. Good taking for the

Mike Kandris

Aaron. Hi,

Bryon McGregor

Hi, Aaron.

Aaron Spychalla

Hello. progress kind of you’re any contract specialty for and and just and pressures said whether first just contracting recent on little Maybe talk also well? and alcohol, then the detail give of remaining more a on as you maybe seeing the that the XX% little you but a about outlook can of sales you’re two the or certifications and kind international track if the there pricing bit spot

Bryon McGregor

play an able you part more will we do that note But want are do to Sure, Mike -- Bryon. and selling to with and second that gallons, we most speak be to in find those remain that as the that -- that this Mike, let be, to? those people so -- processes well particularly expect assume play, the all all you of able aggressive part. first the the would With our to diligently XXX love part It long certifications look We product it’s in would XXXX be on effectively immediately. the to million It’s right? about but could gallons assumption track that, we Mike I on that the beyond. certainly through to think, and place years, product. to working take as customers just to important certifications, a onboarding While go in be sell regards diligent Aaron. particularly order the contract, as that view I’ll coming the at able we to handle gallons, we and for XXXX over to

Mike Kandris

Yeah.

gained have we So, you that Aaron, as mentioned, have we announced additional certifications.

important. and very as XXXX that with And on position think in though process time. us here gets is getting early do the a that qualified how goes and the the we’re a very your is we of this work We’ve QX, through key working worked customers that, for of of in customers our very into the first is incredibly the hard contracting I And set of yourself what get to even getting kind year, cycle starting back of through guided done been with we increase in to the and lot have customers lot during at need important do and there’s you be of saw good -- ahead early going to us be beyond. go typically part we up what them. question one with conversations the that them and fortunate our to what is business a with the certifications, have of things was was,

process. a it’s again, So,

is domestically but and now. that’s focus As are only our extremely internationally Bryon said, where not and right important certifications

Aaron Spychalla

for Thanks color. the Understood.

basis Second, near-term talked just fuel XQ kind little that corn of alcohol a the as developments. hedges the on on and just I a maybe you the you just you’re what on kind and given of and well? corn Could any bit of hedging know bit kind about portion, there, basis just seeing about recent talk little grade. on just thoughts but

Mike Kandris

Sure.

corn that’s on of index you’ve This is product inversion to year an important generally historically we it’s in prices think ethanol product, at backwards, or nature pricing be most of carry speculative those ethanol. have an your kind locking able where spreads to to usually not right? I present you’re themselves. highly they basis that, in got what are be So at the opportunities opportunities to will your there found But it’s because inverted both spreads even profitable your on speaking, in that that and We’ve remember our on advantage place lock is of in the and corn. of take and business we as fuel while, and the times

when are able out. is or times, there months So to be opportunity in month lock one an there to two

Aaron Spychalla

Right.

Mike Kandris

But the positive. to sell all product say intent we be the that’s is for on nearby. generally I And index our would that, it that in

grinding you are it And corn so pricing not selling until you’re effectively and it.

Aaron Spychalla

as on carbon developments Okay. And and helpful? tuned well. capture, thoughts can -- in But capture that then Pekin. one color we’ll details Is curious carbon stay just maybe be kind last your you any the for Stockton on on of potential market would there provide

Mike Kandris

up Well, those that we’re other have have carbon pay opportunities. publicly that resources now and And potential the facility, and the definitely Yeah. capture is goal is our down we use opportunity we Stockton trying facility now on pursuing capture the pursue right your mentioned, lot our the a we go But focus a that like to pick Pekin, proceeds keep through and that story forward? there. best of fantastic just is us getting to everybody take facility. Stockton of to And pursuing process. Pekin we announced primarily you that through and interest we’ll right again, such speed sale carbon is sale is and spots. further to going debt at of a again, And are again, we’re sell a we’re to what to for as sort

Aaron Spychalla

the questions. All for taking right. Thanks

Bryon McGregor

Thanks, Aaron.

Operator

Dayal you Amit Wainwright. from a C. from And have H. question

Amit Dayal

Good you. guys. afternoon, Thank

Bryon McGregor

Amit. Hi,

Amit Dayal

technology to like, a specific of get executing will that any just business there sort what trying against to develop, this is segment? out opportunity, capture of into carbon the So we building go need sense

Bryon McGregor

needs to that’s alike. mean, in technology and for I newfangled don’t is this Amit, any oil years know, specific there’s years be recovery used technology and enhanced I that that used. a

product to pumps requires does a secure gather begin not a inject. maybe before be able a to and think that, but resource, only any pipelines be to test -- largely clearly that then is requirement extent it it able capital and significant sense you’ve that develop it your and that got and gathering sure you with compression to then wells the I in system makes but make as what resource,

requires --it’s while and capital economics significant month associated it project. being said, compelling. six it’s the are it a not a requirement equally So multiyear it project, it That has with a

Amit Dayal

to And that questions margin offline. on number, All alcohol $XX Okay. want or this to profit? comments, then the of gross in gross I specifically take attributed profit the is right. business just made, Mike, of gross the million going to specialty the one line

Mike Kandris

Yes. we talked It is. initially. Yes. is That It is. that specifically contractual $XX addressing million Yeah. about

Amit Dayal

to in respect And what of be remainder you you year? the to levels for that. you were expect share utilization levels Understood. levels, Thank and in utilization of maybe potential Bryon, what the XQ with sort utilization could

Bryon McGregor

So, question, utilization towards Are overall for looking you portfolio? the Amit, entire are specialty you just across alcohols? to clarify your specifically looking

Amit Dayal

it would You should be helpful. very out, break Bryon that actually

the have should that, you will number help overall as if not, If well?

Bryon McGregor

be it’s -- -- to numbers at probably you’re volumes, to a but for so do at are looking shown want on the reported be the as we’ve With the numbers regards and you’re you the XX% that if that definitely tried, we consistent, think out specialty -- good XX%. we year. remainder contracted not looking I you, in alcohols, our of expect math, above to model you target our based are pretty

mentioned XXX% as at alcohols specialty of be well our assumption. to as be but earlier, utilization of certainly would think, an I a I aggressive goal

years. more or contract we that need years, then, growing capacity, I it, about to about years, you to So one think it, volumes three coming the but a we again, More year, time. this over as you about adding next, that appropriate of think out of more more over two utilizing think probably, that year that more you is and think -- as assumption as

Amit Dayal

international alcohol have Understood. the some in products sales for Did already XQ? specialty you

Bryon McGregor

Yes.

Amit Dayal

offline. much. so Yeah. you you. other my will questions it. Got take Thank Thank Okay. I

Bryon McGregor

Thanks, Amit.

Mike Kandris

you. Thank

Operator

question [Operator from Sean And you [ph] Instructions] Guggenheim have Partners. a Trauschke from

Constantine Lednev

Hi. an On for the nominated of of product have contracts of Good of Sean. have information. elastic here ethanol of actually talk sales, specifically follow-up you It’s of are been afternoon. what abundance about for margins structure of price up? protection couple kind both and stepping and kind near-term how term light the realized the to escalating Constantine I how and Lednev -- longer of sales and alcohols specialty as kind kind can questions you may have corn cost that prices prices ingredients of and in kind the

Bryon McGregor

Hi, Constantine.

it’s volumes, So and They in both best about we the their sometime generally making and so got -- and short speaking, year they’re -- costs Clearly within right? they’re fourth XXXX demand -- answer some, quite fixed quarter, additional the really there way associated run you and the input and new maybe think, -- hedged our customers thinking But on we thinking beyond. expect Bryon. fixed XXXX next I to may around is prices, renegotiating depending in that the I to with then maybe the about the capacity inelastic, within and calendar that. see this into or year, adding too. adjustments adjustments, short

margins -- margin. those about gallons that’s the good that why feeling the we’re feeling gross and and So we the did in about XX million we million provided $XX framework around

the also is be who entering announced in As have only that additional not you it XXXX, and anything part kind which the you addition, we control. you this million barriers again, some not, around, both year, capacity million this comparison And that of to us, and that. both on, can we’ve production to instead. always but protect in potentially said, were a to those that the and I will by be ethanol gallons and to probably think sure producers then and product customers If he assume long to to premium would went we The XXX make an -- the what produce, you the us, fuel about in that alcohol and on be is focus then retain we for That right? XXX naive kind would significantly capacity to reduce your mentioned best generally from expansion would prices. or in place add the more a brought marketplace, both period entry hopefully sell have that we so believe will think ways work require They be they really next would markets that alternative, emphasized of our if to quality important other your of fuel? gallons that’s behavior positive onboarding but do why I not that just for to effectively also to where that us being the not costs a are think business be Mike very want right, -- Mike, impact that specialty that in -- of the there optimistic product time on and the that able been to operating seen.

Mike Kandris

No. Thank you.

You got it, Bryon.

Constantine Lednev

kind of kind of the on payback Thanks investments kind this follow helpful. color for the million up really about, changes on a that you timeframes economics of any the And allocation any kind juncture? recent of talked do capital price of margin of the kind on planned thoughts the and the of change and the at bit kind the in just on $XX you of a That’s of moves color. economics just kind market, and

Mike Kandris

Yeah.

of specific we’re in the dollars. our being very investing where we With capital are $XX million, terms

buckets infrastructure and it put There We within your two plant we continuing you of kind growth reliability further have improve your a lot opportunities structure. are are and and and reliability. improvement of efficiencies to that in reliability existing to upgrade

instance for and have our of capital million at XXXX. carefully that to were was them, and we those was important that things tower, for cooling plant. which there $XX at million we certain the upgrade within It to that focus analyze we planned look that that expenditure had $XX ICP So, on part

on XX think things we’ve a a platform. above months the put have in worked million we to of to the at now a position answer, activities pursue of the variety beyond really the where and working And in plat last a kind there’s $XX I to -- remarks, mentioned working we’re go have we in and single a hard beyond some solid as also. So into over I of we one issues, looking that other above position those ourselves aggressively that, variety that, debt, a no on can ourselves and put

Constantine Lednev

And these of perspective how and you regard of kind kind some to just you about talked this kind thinking capital obviously venture future about carbon for of a in opportunities requirements you a Pekin, range standalone and investments opportunities the of are capture or at about capacity sort? agreement are from the thinking of kind maybe of a joint and

Bryon McGregor

great a really It’s question.

is benefit these And we the probably the is, with best right? the certainly can the it being to those -- and intend and this the as private retain the to try options other that able we’ll where real as and to of we’ll for be we’re as and all I continue that and goal keep value resource. of the we of we to COX, is regards way of producer to C company and so competitive considering much the or capture try think and intend the and to answer carbon process shareholders, the optimize value the to

So…

Constantine Lednev

Perfect.

Bryon McGregor

to that risk -- bear sense just it considering mitigating us all makes to and most I which mean, for we answer I appropriately… bring we while we’ll we’re yeah, but options both, question, don’t and make sure consider the mean for that So

Constantine Lednev

Okay.

Bryon McGregor

people the can best who with risks that assigning effectively … handle risk.

Constantine Lednev

color and some thank gives you That the good disclosures. for very

Operator

back at There Mike questions are over for no time. further I’ll turn to closing the Kandris this remarks. call any

Mike Kandris

ongoing us for your joining for and today you Thank support.

the the have we you look Thank make Thank bright with we has excited dialogue can have progress as our everyone to ahead. you you good and We are further hope I we you. forward continuing As afternoon. a made about future and tell, progress. we

Operator

for Thank Ladies gentlemen, concludes this and today’s participating. you conference.

now your disconnect may line. You

Alto Ingredients (ALTO) 13 May 212021 Q1 Earnings call transcript