Gevo (GEVO) Reports Q2 Loss of $0.15/Share, Offers Outlook
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Gevo (NASDAQ: GEVO) reported Q2 EPS of ($0.15), versus ($0.66) reported last year. Revenue for the quarter came in at $8.11 million, versus $8.9 million reported last year.
Outlook for 2016
As previously disclosed, Gevo restarted production of isobutanol at its production facility in Luverne, Minnesota in March 2016. All operations, including the distillation system, are now up and running. During 2016, Gevo has produced approximately 168,000 gallons of isobutanol and one fermentation batch surpassed 20,000 gallons of isobutanol, slightly exceeding the high end of the range of our previously announced goal of 18,000-20,000 gallons per batch. The fermentation process is working well.
It has, however, taken Gevo longer than expected to complete installation of some additional distillation system equipment that was needed after initial operation of the distillation system began in March 2016. As a result, the onset of the production rate ramp-up was delayed and therefore the total annual 2016 production volume is projected to be lower than previously projected.
For the reasons discussed above, Gevo is changing its previously issued guidance in terms of production gallons in 2016 to the following:
Gevo now expects isobutanol production at its production facility in Luverne to be in a range of 500,000 to 650,000 gallons in 2016.
At this time, based upon the results at Luverne, Gevo re-affirms that it is on track to meet the other components of its previously issued 2016 guidance as follows. Gevo expects to:
Decrease the variable cost of producing isobutanol at its Luverne production facility to a range of $3.00-$3.50/gallon (assumes corn price of $3.65 per bushel and nets the value of the isobutanol distiller's grains (the "iDGs™"), enabling isobutanol to be produced at a positive contribution margin, based on an expected average selling price for isobutanol of between $3.50-$4.50/gallon.
Increase sales of isobutanol into core markets such as the renewable ATJ fuel, marina, off-road, isooctane and solvents markets.
Achieve an average quarterly corporate-wide EBITDA burn rate (excluding stock-based compensation) of $3.5-$4.5 million. Corporate-wide EBITDA burn rate is calculated by adding back depreciation and non-cash stock compensation to GAAP Loss From Operations.
Through the balance of 2016 and into 2017, Gevo will be focused on optimization work to improve the Luverne production facility at its current scale, but more importantly with a view towards significantly expanding the Luverne production facility. Gevo plans to optimize the overall production processes with the intent of improving robustness and consistency of production, increasing production volumes, and potentially producing specific grades of isobutanol tailored for specific applications. This optimization work could result in Gevo needing to add more equipment (tanks, controls, pumps, distillation columns, etc.), systems or processes in the future at the Luverne production facility.
Despite the production ramp-up delays described above, Gevo expects that by the end of 2016 to have the capability to be at a production run rate equivalent to 1.5 million gallons per year at its Luverne production facility. Although Gevo expects to have this production capability, Gevo currently expects to run at a rate less than 1.5 million gallons per year during 2017 as it scales up and tests new process improvements to further reduce costs and optimize production in general at the Luverne production facility with a view towards significantly expanding production capacity in the future.
“The first half of 2016 has been a significant inflection point for Gevo. We have achieved a number of key milestones year-to date, including restarting isobutanol production at Luverne, demonstrating successful commercial airline flights using our fuel, signing a key distribution agreement with Musket targeting the specialty fuel markets, and strengthening our balance sheet to include $22.6 million in cash as of the end of the second quarter,” said Dr. Patrick Gruber, Gevo’s Chief Executive Officer.
“I am pleased that all operations, including the distillation system, at our plant in Luverne are up and running and that the fermentations are going well. In fact, we are seeing up to 20,000 gallons of isobutanol per batch, and we remain on track to achieve our cost targets. While the technologies are working, we still need to continue the plant optimization learning curve, turning our attention to shortening batch cycle times and, given the importance of jet and isooctane, tailoring specific grades for those applications, particularly as it relates to the design of a large scale hydrocarbon plant,” said Dr. Patrick Gruber, Gevo’s Chief Executive Officer.
“On the market and sales front we have made good progress. Conducting commercial airline flights using our ATJ was a tremendous milestone. While all the testing had previously been completed during the six years of work with ASTM International, flying actual flights with our jet fuel demonstrates to people that this really can be done commercially. We are grateful to Alaska Airlines for being a good partner and we continue to have positive conversations with several potential customers in the aviation industry. We also made further progress in the development of the gasoline blendstock markets. We are extremely pleased to have a national player such as Musket as a partner, and it is good to see they are already distributing isobutanol-blended fuel into their customer network,” added Dr. Gruber.
For earnings history and earnings-related data on Gevo (GEVO) click here.
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