ALTO - Earnings call transcript Q3 2021

Due to licensing restrictions, you must log in to view earnings call transcripts.

Operator

Good day, and thank you for standing by. And welcome to the Alto Ingredients, Inc Third Quarter 2021 Financial Results. At this time, all participants are in a listen-only mode. After the speakers presentation there'll be a question and answer session. [Operator Instructions] Please be advice that today's conference is being recorded. Instructions]. [Operator like Shilton. conference now host to turn Moriah today, to would over the your I ahead. go Please

Moriah Shilton

Thank you, XXXX thank the Justin. And Alto today joining Ingredients' for us third quarter results call. you conference all, for

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

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

Mike Kandris

the the by operation. joining essential installation our you, cattle, aquaculture infrastructure, by We initiatives improvements subsequent will to ingredients enhance strategic year-end business, sustainability completing the Thank in us make of production for and production feed our third because commission system the and advantaged at the realignment and protein increasing this advancing our we everyone, annually. than high benefit the thank to for you, quarter expanding first markets. poultry, feed Adding We almost CoPromax the to of protein decided this X will plant, end Moriah, over quarter technologies new today. XX,XXX our million investing mill nearby progress Upon restart dry protein yield of by In provide and tons profitability demand with with system patented annually pounds at the to protein Idaho our corn at produce greater In operations. September, in the oil to protein technology pork our its facility. Magic Valley, are of added serve completion, XX%. high of harvesting proximate enhanced and location and install project the content we of system It XX% first plan XXXX. the half the will to growing also launched

annually current of of high at the proteins protein we XXXX. approximately Valley, yeast will the of XXXX, in on is EBITDA. achieve expect will one mills. projects Starting additional dryer completion on at in $XX the Further, oil corn third mills, four sales economics Conservatively, combination revenue mills to our prices After quality We million sale project over successful the production assuming and at annual additional enhancing value grow of in and year-end. expect the million production both the and operation billion and full now our the other diversify to $X how expect our market we bolster of system based feed quantity sources and of prices. the We additional upgrades in technology EBITDA installation our basis. similar contribute generate fully in dry we and $X complete are before dry expansion premium to EBITDA contracted our is expect through of yeast rollout example our quarter, Magic earnings. all an annually we we completed This across the three

an X,XXX site also annually We the our oil our starting tons in production by expansion annual in corn approximately $X.X XXXX. finished EBITDA of Pekin million contributing estimated additional at capacity

in Pekin earnings and quarter quarter, repair anticipating upgrade the third a call scheduled second at major our in we challenging shutdown discussed infrastructure wet market and and As maintenance mill. conditions our

production we schedule condensers we to our our be capabilities cooling of support electrical plant In various replace efficiency infrastructure, and planned upgraded months further the demand and While and at outage to the significantly term was now pumps. XX redundancy doing improved extend facility intervals. reliability customer idled, supply and and so, improve long

increased essential market While the negatively impacted $X schedule that approximately efficiently, needs generated conditions, Still mill the prove revenues positive to to And resulting report profitable correct. quarter. for we with return decision to further million customers. the quarter. operations integral combined specialty to operate the This is an I'm of a position The in alcohol EBITDA operation loss wet and volatile in and improved pleased of in in the meeting us expenses net QX to more September. for reliably shutdown places our shutdown and ingredient the which

we of be alcohols that specialty customer growing at cleaning to supplies used variety a few. and to we obtained producer proactively our their with goods been our address We Pekin of certifications and in the end extending wet to a To existing name distillery of work growing spirits, customers continue XXXX new the everyday vinegars, mill. consumer are our cosmetics needs, ICP common mouthwash, from to certified including

prior to taken price We expect our to the of due entire to doing the redundancy across volumes sales a comparison years, normally specialty Pekin to annual which unique complete major With now. of activity, have supply customers commodity by quality and Campus provide contracting XXXX, this are by completed the to in alcohol end year regards so and more in customers. effort by further approach volatile surety to

QX. result, the remainder negotiations through of to As we expect a extend

fully to than not for in gallons can time, in we while provide details at XXXX. this expect contract more we So XXXX

Turning to sheet. our balance

longer while costs $XXX,XXX produced the This Madera in removed As the quarter LLC the cash, we Stockton adding of quarter. facility negative for announced fuel-grade benefits completed to the servicing the and and per million when from acquisition as our $XXX,XXX term terminal carrying X, production Pelican plants on $XX in our marketer of quarter sale using economic regional sold exclusive of per November capabilities EBITDA retaining need to sale and gallons facility facility resumes ethanol in the customer second California the operations.

debt $XX to product be Campus. business various to sustainable noted impediments this in were offerings in only operations further we million strengthening profitable engaged We capture goal develop from remain the ingredients. important sequestration our began and our this stated contributed also ago. Today, sales months made in completes and structural previously discussions Thus and XXQ realignment interest our as we the fuel-grade XX expense, remove period. retirement months sharing options. with our strategy to term The of important sequestration but over more in forward production all is the by asset our prepay to actively As program our diversifying alcohols enhancements and We to and capture specialty carbon XXXX. expensive doing over the really financial our coming our to the at even This a parties bill. will integral essential $XXX proceeds we'll over approximately ethanol core considering achieving we debt of annual credits reinvesting to tax is our sale of we with same review and infrastructure Pekin for that restrictive not carbon contributed and federal financial look segments term in recent so, importantly, year-end to the million challenges. eliminated as and this the In in past and plans

industry. versatile we yeast the would to to products to include production, product improvements our made opportunities we offerings addition pursuing to more expand quality, yeast In food our are higher marketable

through business vertical are to call now opportunities to to pretty a we Finally, the pursuing turn extend integration. a to Bryon. financials. look like our as of Bryon specialty for additional discussion forward alcohol our providing actively appropriate. I'd information We over

Bryon McGregor

our you, update for provide Thank around expectations for results the on our some additional year. metrics profit and gross on I'll color and the Mike. provide quarter an

to the sale net terminal sequential gallon between high The the to fuel-grade by $XXX gallon and correlation For of price sold. Stockton in due average driven of third fall. million ingredient second established increased sales as is of in the We production the using fixed our This essential of $XXX quarter third-party quarter, a gallons over third-party ability Both the quarter well gallons million contract in sequential a in price price had at alcohol decline of $XX specialty sold of sold storage as our wet in from available of ingredients. last a specialty fuel-grade mill. service the as gallon million our of in third ethanol sequentially per alcohol gallon The million, revenue sold up XX per alcohol, $XXX essential an consisted prices. corn customers under X gallons of sales time was were to from quarter, alcohol, XX million our a year. and sales in million last an reflects ethanol increase quarterly our increase there largely shortage gallon region. average when ethanol facility our current XXXX, million and sales in was and are Of attributable of primarily specialty the during the production the shutdown down elevated

prices, transitory specialty point, price disinfectant was volume specialty QX at partially were of exports. of we in sales sold. sales locking price consumption of gallon the alcohol year-over-year lower growing increased in higher more the hedged year's sold so and was this The in was our average this While product than margins comparative demand specialty To offset alcohol at disinfectant QX total alcohol last corn growth alcohol sanitizer in contracted the obscuring which fall to fixed specialty year-over-year prices, positive of QX specialty last Spot and corn. contracted margins. uniqueness decline other current concurrently during price of tighter in decline but reflects our and the alcohol sanitizer by spike

also and returns achieved While equilibrium risen co-product expect we anticipate note will in have we for supply that future, We more foreseeable products sanitizer continued be and should over both resulting while as demand prices disinfectant demand a volatility ingredient certain on stable COVID-XX in dissipate. lagged corn essential year-over-year. rising impacts new sequentially ultimately and demand co-product industry-wide prices prices average have declining the

to and the mill considering wet bases. and $X.X We million repair profit EBITDA our the this maintenance campus. prices lost from was million. due of wet totaled with both last corn expect Pekin the one-time additional expenses $XX.X QX co-product returns impact high million, increase Expanding over improvements gross mill and Gross at outage the down on loss revenue of outage $X and made to quarter

SG&A $X.X $XX the down range expenses quarter within million, SG&A our was the full year prior historical QX in decline procuring higher corn the average. a seen the still the tracking million solid Regarding $XX than largely cost of in quarter XXXX. of complete, million from and prices corn for between high bases we've in and at both harvest of prices with significantly

the Our continued and $X what And paid quarter same approximately the one-tenth our interest $XXX,XXX, Stockton the as of XX% outstanding we of paid pay the paid debt. year have to down last the the expense interest in third only quarter QX term we in of lower balance was debt. rate from than we with we in sale proceeds off high now facility our million

the income to income last and loan is diluted last During loan $X.XX $X from was or year. quarter share third Net per shareholders common our we second which loss program related second compared the million $X.XX or to from of forgiveness share million quarter. recorded available in payroll protection $X.X to per of $X.X million,

CapEx cash $X decline compared and our on repair $XX.X on our spent September million our mentioned outage $X in XXXX, million. XX, to our third projects, XXXX. previously were $XX in XX announced previously million cash the to sheet totaled million balance we and June $XX Turning cash Pekin on reflects million, which equivalents This quarter

We million some projects. quarter. future range and the opportunities level expect finance of to With to rational between expect CapEx $X debt anticipated, in million to secure we CapEx $XX these projects fourth in

product finance and time to a options attractive portfolio. needs any sheet with expanded optimize diversified future at enterprise plan restrictions improvements to balance our our addressable level liquidity cash allocations. than support implemented debt line of debt, operational we our further we to deleveraged access in of markets addition, based facilities have to the credit In Having cost from high our asset history. our Today, most eliminate our

for the back turn call update I'd to full financial Mike, XXXX. provide like guidance an on to our the I year Before

fourth and profit from logistical consolidated to costs a nine the and derivatives around excluding month consolidated corn million ethanol impact -- specialty commodity company their mill on from increase $XX the comfortable gross we expect profit expectations, Now our at recent We high million including $XX the profit gross in visibility wet guidance from on Alto's gross we of high providing be and basis. profit shutdown sufficient have This that many impact performance improvements margins. quarter. contracted financial gross volatile the year any considers volatile a conservatively are highly full abnormally minimum alcohols variables assuming our including of in prices, bases, XXXX

including the commodity volatility this XX least to utility that year-end. And to on markets -- positive secured unusually we've our you. we've back risks. to spreads if not will expectations these corn, production in other in Mike, continue year the begun Given locking We've short-term year increase. in input and this QX fuel-grade and ethanol months our costs experienced and through through at begun for costs our the we've next margin next variable corn mitigate given the

Mike Kandris

starting year projects you, like Bryon. EBITDA XXXX. in track Thank out close our I'd prepared To the on remarks summarize complete to we to this my will are increase that

First EBITDA annually. our and $X approximately both should dryer in facility million upgrade yeast contribute Pekin

an the at capacity production oil corn Pekin estimated annual site million. expanded our $X.X Second, will contribute

would and our expect we of Building million approximately other carrying an EBITDA mills, this the as vertical remaining $X of and of opportunities in additional we we XXXX million in future see the we're integration, $X XXXX. the million million beyond. total to to growth annually aggregate to compared Idaho for and project transformation $XX.X EBITDA as date in and facilities. negative from over XXXX-XXXX. million Q&A. energized EBITDA XXXX these on $X to system additional under are our development, And $X improvements in sequestration project costs we EBITDA sold company. bringing can should Add in for alone we've contribute the now ready about CoPromax $XX in In such the carbon million completion removed see projects the and and could accelerated why annually CoPromax fourth, in XXXX Third, online EBITDA in Operator, an we excited made you three rollout the high-value other are

Operator

our from Stein comes Thank Craig-Hallam. Instructions] you. And first [Operator Eric from question

now is line open. Your

Aaron Spychalla

for Aaron questions taking Good It's Yes. Eric. afternoon. Thanks Bryon. on the and Spychalla for Mike

Bryon McGregor

Hi Aaron.

Aaron Spychalla

talked bit on seeing the it, few you imbalance at first little how current Can you how demand on can our see but you that over normalizing the you about elaborate you're Maybe And supply quarters? next the just a just end. time? Hello.

Bryon McGregor

Sure.

largely point export it's export the are think product. and markets ability at and first demand. foremost the Aaron driven, impact then I the this constraints logistical an having distribute by And certainly on to

You're ethanol talking about margins? particularly fuel

Aaron Spychalla

mean, COVID a the alcohols. supply I the industry's over increase, a that bit abate. is Bryon. coming on still No. more little like talking of in demand I supply. out Actually talked was about spike, But but we've starting there high-grade I'm sorry seems to exports too. seen you just It about

normalizing. So just you just -- But on elaborate can talked please? a about little you that that further

Bryon McGregor

Sure.

as deep volume end pointed in harvest the still given in negotiations So around a expect carry we're we out, and commodities. of through contractual in mike and year to that volatility lot the late to

to That XX, product effectively being to contributing we're a it additional and able gallons, said, a gallons million ago at supply, like capacity. XXX something expect to from But color XX in values there and So half place able place long little we would what of to point. or That's difficult this it's more our long goal. any in -- generally product. we strategy again but able view also more ball this to year being into and production additional the is we certainly We value provide at to mean, as being we higher higher that. our be products. sense I place now of potential to a is a a million expect see And went say do

goal cannibalizing to we're I sure but only to the absorb that not to be products everyone existing services our ourselves that make market's of think not got the and and able it's So else

Aaron Spychalla

you All on a kind on the recent then, steps? you right. just bit the And carbon level just little next And update and impact you of capture. increasing a seeing What at the activity. provide legislation? from bit the an opportunity the discuss then, little a there? are potential Can mentioned Obviously, and And there? maybe frame high opportunity contribution proposed just can of

Bryon McGregor

Yes.

little in I'll -- Mike missed color I you anything. if give then a and me fill Let of bit

Mike Kandris

Absolutely.

Bryon McGregor

basis options, they credit it in That the those and per CoX the lot introduced as And those available than multiple seeing from -- discussion having to benefits One couple to parties on that ton So, go parties efficient doing manifests of $XX as can just or per some a from credit. parties who at as significant couple fence direct be selling within seen we're time able expect a it forms. is monetize in that pay a and things. thing of infrastructure being to retained to that just would at or the and would tax bill years pay we've to effectively pay that significant available that be low to is think is metric for tax development and through share or everything amongst of value that for on or of risk gallon boost Really, that. handling so and -- positive see effectively fee ton. eligible means the and and completion about best with begin in they've would more really have would is a full to beginning structure. our us program we're a the -- The the the the of -- economic find with for it metric from potentially really per you that also efficiently pay. and itself to it's latest exploring line. time absorb The increase about is allocating significant benefits That One cost. risk at internalizing own possible kind XX much array $XX of significant the we're ton per from to the $XX rather per XXQ metric credit. And increase a for of claim

anything add? So, more want that. to come you to on Mike,

Mike Kandris

described. Yes. to reached because The on gamut. right that sequestration. the before the would with it only fence we've geology talked profitability we've the at are we maximize And shareholders good we And folks own have soon runs to. understanding a we'll it we lot a to your on Aaron of is, we this. somebody thing we some bill from is, want thoughtful do And to conclusion sit certainly as great for of folks. line. gamut add It of options, opportunity for carbon contracting for be is how the we do off again, runs or a lot approach we in want us, be We able again, the this. said value company the top for the I do and infrastructure when We to with news to have everyone. And to very changed that it way best of hand inform And what Bryon as talking as on things have

Aaron Spychalla

All right.

I'll good. queue. for the questions. back hop Sounds Thanks taking in

Operator

[Operator And our from next from Instructions] question comes Amit Dayal H.C. thank. Wainwright. And

now open. Your is line

Amit Dayal

much million if in you. higher afternoon Thank profit things the revised a be quarter? you move How forward could year, guidance $XX the the mentioned minimum. this everyone. gross as for for you Good Bryon,

Mike Kandris

we've At peg, at It's a months has difficult seen what probably fuel to six were long the the as those things you're the same Yes. abysmal of eight seeing That's a significant largely we are go bad optimistic. the some the there in XXXX fuel degree this a they margins quarter. in margin make to are time, that the bit to clearly because in have structure ethanol beginning particularly the business up of first to those as pretty time for And a been there's some great a for an moment is -- and very a that question. long margins as -- remain to since best industry. way last

basis sold. we saw basically is the But alone, have par our in see mean, sometimes QX for at relation we could just we corn The goods pay additionally only the for I do see Pekin the market that the cost impacted normalized other associated negative additional and and you not and revenue in was of challenges the mill, that both Chicago. normally that results with a clearly in in wet cost would to basis that

So minus $X.XX, you were $X.XX some minus over it looking can point of a that and that so at $X.XX kind see impact. well $X.XX, in you at market,

So a wasn't saw was some kind weren't while It of just all you you and the it what available. was off the couldn't moderation the in corn prices QX, seeing and lock came that in in. doing bit they little basis you work

spot So really having to basis. on pay you're paying prices the

not number, million able was but to million. what peg the beat on the this. the about $XX we've XX been much, are to upside around the $XX low -- significant from we But today to generate the to what it's too step bush but minimum, the even So up this optimistic I'm a

Amit Dayal

And for from top of you made? potential Mike, improvements $XX.X in see four mills. protein you the million the you on this Thank mentioned Is Understood. the you've that EBITDA dry already improvements from that. production might $XX million

Mike Kandris

will it XXXX, million be the system XX.X in we've what in in in during installing of to just we because be half first was would would the $X the yes, It reported addition, addition be XXXX. [ph]

the in and a four contribution XX.X million all counted will be be We there. the we the $X So total it running, what When XXXX. Valley, will mills we in that's $XX dry benefit million are $X EBITDA Magic up million. in of think at

incremental XXXX XX X. and XX an from So the what's number in included the

Amit Dayal

debt. now a you of And Thank with sheet stronger the in much position, no balance that. Understood. sort for Okay.

previously. something look markets that and that You've come wider a as acquisitions product create for more into could diversify indicated you potential you to play acquisitions portfolio. end your or continue Is interesting to

Mike Kandris

Yes, we something we be prior to ship packaging, the We that what need -- could absolutely. longer even in we're we is term. go smaller part in indicated be containerization, that's drums totes vertical calls primarily at. think And ability integration, think I to bulk to a value-added looking of and doing that

that you do through So either can do that you it acquisition can or yourself. through building

It those the at possibilities, the looking location, entire have can our important enhance, have we're certifications to we're because so, campus. at another that on the was space of I to we'll redundancy our alcohol plants across the there looking spectrum all that way same specialty had mentioned that the but we we the site alcohol. enhance And alcohol by other that And having complete year quality at. are multiple our produce Pekin specialty at That's high things end. portfolio.

Amit Dayal

all Okay. now. offline. I Thank for much. you. my That's have take I'll you other so questions Thank

Mike Kandris

Thank you.

Operator

thank And for I questions. no back Kandris would call further turn to showing I'm And the you. Mike closing remarks. like to now

Mike Kandris

you, again Thank Justin. you support. today Thank for joining us and for your ongoing

future are we we've and made of us. have we progress excited you ahead tell, the can the bright As about

afternoon. conference virtually attending have the with continuing Thank to XXth you and progress. be upcoming dialogue forward Alpha you as and on Hallam. will we make We look further Craig good Select November our a

Operator

for concludes and today's This call. disconnect. conference now may you participating Thank you

Alto Ingredients (ALTO) 10 Nov 212021 Q3 Earnings call transcript