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Harry,
Thanks for the information. I can see $9.49 by next year if margins improve by 20+ cents per gallon from current levels.
If Neil and associates have already made the decision to supplement working capital through stock offering/dilution then it will take
longer. The key is margin improvement.
How will margin improvement occur?
Here are a few suggestions:
a. Need active sells and consumption to reduce global inventories.
b. The EPA reaffirmation of usage and industry securing congressional mind-share.
c. Using technology to refine more than 2.8 gallons of ethanol per bushel of corn, 49 lbs wet disillers grain per bushel and more corn oil to from each bushel of corn.
Random PEIX Thoughts
The ethanol industry needs an immediate boost in processing Margins, In the current environment, The stronger players such as ADM, VLO and GPRE are barely breaking even if that. Weaker companies such as PEIX are loosing money.
Quarter ending June 30 comparing USDA data on price of ethanol plus distillers grain sales less cost of corn looks to be similar to prior two quarters and subsequent quarterly reports... First 12 weeks of quarter ending June 30 are (51.80 per gallon), verses 03/31/2018 of 52.44 12/31/2018 amount of (50.03). Loss reported for 3/31 and 12/31 were 8 million and 13.6 million respectively. Prior five quarters to 6/30/2018. So it looks as though PEIX has a loss somewhere in the neighborhood of 10.8 million for quarter ending 6/30/2018. PEIX has reported losses totaling of 44.4 million five prior quarters to 6/30/201/8
How long can PEIX operate in this lack of processing margin environment?
PEIX is a survivor and are the losses during past five quarters and current lack of margin from the crush spread what has triggered the 34% decline in stock price since May 21 close of $3.70 and 44% during the 2018 year?
What does MGMT have up their sleeves to move back to profitability and restore working capital?
Raise income from share dilution?
Reverse Split?
Become more efficient?
Sell the Company?
Will EPA and USDA continue to support Ethanol Industry.
Will the USDA or the
These are all strategies that MGMT has used during rough patches in the history of the company. If margins do not improve will 11
again be considered?
One area I noticed that supplements the tough times is Kinergy who markets the companies ethanol production and third party gallons..
Why have the 3rd party gallons that the Company markets declined by 20 million gallons since quarter ending 06/30/2018?
Historically when PEIX stock is hammered in the marketplace, short interest is much higher than the current 6.66%.
Is a large trading group selling off its shares due to being on the wrong side of the market on other trades.
Margins and stock prices always go higher than they should and move lower than you think they will in commodity driven and Ag processing businesses.
I look to see an increase in share price this week. The stock is oversold. Ag processing is a cyclical business. The crush spread will improve, It would be nice to know when.
Any one have and ideas on how this company will reverse its trend?
The fourth quarter that will be reported in March should be excellent. According to USDA weekly Nebraska crush report for a wet plant, Variable processing Margins averaged 77 cents per gallon. This was 17 cents per gallon and 29 percent higher than the third quarter of 2016 and 33 percent higher than year prior forth quarter.
Note the 77 cents per gallon is a the price received for a gallon of ethanol plus the distillers grain less the cost of corn. It does not include the other costs such as electicity, labor, office expense etc etc. When the margin averages 50 cents, that appears to be near a breakeven point.
For the first quarter of 2017 we are currently averaging only 55 cents per gallon. The margin has declined for The weekly rate posted yesterday was at only 45.35 cents per gallon. This is the first time in 26 weeks that there has been below 50 cents per gallon. The rate has not been as yesterdays level of 45.35 in over a year. The weekly report has shown the crush margin decrease in value in each of last seven weeks.
Unless they are on the correct side of a hedge, PEIX is currently not making money.
Again, the fourth quarter report should show healthy profits. First Month of quarter 1 not so.
Need to get back on track.
Thanks Dutch,
GPRE releasing earnings 10/31 AMC and ADM On 11/1 BMO will provide a couple benchmarks prior to PEIX'S report.
Nebraska USDA spot margin for wet ethanol plants averaged 59.93 cents per gallon during third quarter verses 60.10 cents per gallon second quarter. This suggest similar results for third quarter and profits similar to those that were made in second quarter.
Average margin for first three weeks of fourth quarter is is 71.72 cents per gallon which is close to a twenty per cent increase over first and second quarters.
Good Margins are keeping the stock price firm. You would think if margins are twenty percent higher then the stock should trade twenty percent higher. Or is this price in?
Would be cool to see margins swing back to over $1.00 per gallon as they were in the first three quarters of 2014. Plus PIEX traded at over $20 per share in August of 2014 when margins were over the $1.00 per gallon.
PEIX produced 113 million of ethanol quarter one
PEIX lost 13,5580,000 one
USDA Nebraska processing margin averaged 50.29 cents per gallon.
For second quarter USDA Nebraska processing margin averaged 60.19 cents per gallon.
If PEIX sold about the same amount of ethanol from their plants quarter 2 as quarter 1, and net margin improved by 9.9 cents per gallon as USDA reported, then second quarter should come in at break even or a small loss.
USDA weekly report on July 1, indicated margins of 70.91 cents. This indicates the plants should now be making solid profits.
If the corn crop keeps getting bigger, then margins should continue to remain firm. Ethanol companies will show profits. Good news for the industry and investors in ethanol companies
QUESTIONS-QUESTIONS-QUESTIONS
Falling knife is good description. Is this strictly a selloff, shortplay and or technical move. Profits are down and is the PEIX stock moving down because the market knows what this lack of profits and ultimely losses will do.
Did PEIX combine with AVR at the wrong time?? I have also always heard rumors and as a result had an uneasy feeling about the group of owners that controlled AVR prior to the combination. AVR dealings With the BK court showed that they knew how to take control of a company and leave investors and others with ZILCH.
Could this same group that took control in BK sold an AVRW bill of goods to PEIX mgmt. Did PEIX do their Due Diligenc? Does "the market" know something negative about the AVR balance sheet that most investors do not.
On the positive.....
PEIX went from a company with a question of continuation just two years ago to a viable company. You see on November 14th 2013 peix traded at an all time stock issue and split adjusted low of $2.33 per share. Ten months later on September 2, 2014 stock price was 21.64 cents a share higher. Now for over a year it has been in a sharp downturn. Can the stock price begin to move up again like it did two yearss ago??? Margins need to improve now like they did then.
The quarter considering purchase of remaining PEIX to make it to 100% and acquisition costs of AVR was much better than I was expecting.
I agree with you. Profitability forward should improve.
Current margins on cash market for 1st five weeks of fourth quarter currently averaging 10 cents per gallon higher (20%+)over quarter just reported.
Margins do need to improve more to really get things going.I would buy a few shares in the morning, especially if PEIX trades down if I had any discretionary funds. Would also be a buyer of ADM and GPRE.
Major decrease in short interest of close to 30%. Went from 4.8 million to 3.4 million.
Mortenm,
Current margin environment not good for the industry. Especially PEIX after taking on the AVRW debt and the investment group of shareholders that controlled them.
If you buy today or wait till after earnings you have to be of the mindset that the crush margin will improve. If margins do not improve then there is disaster lurking out there.
Sure ethanol might be on an uptrend but margins have been on the downtrend. Also following todays close, PEIX stock on a trading week basis is down ten weeks in a row.
Have not seen short interest for period July 15 yet, but based on PEIX stock performance, it is probably up significantly from the June 30 report.
I agree with you that it is wise to wait until after earnings to buy. However, I have also seen the opposite. That is heavy selling prior to earnings. Then just prior to report day or immediately following the earnings announcement, a move upward, even if the earnings or losses are on the wrong side of consensus.
Thanks Rule.
Great and thorough analysis.
Looks like anything above breakeven will be a positive.
The art of surprise you mentioned is also what concerns me. Third quarter concerns me too, especially with added AVRW debtload and current processing margins.
Did not disclose a whole lot about current AVRW financials and margins/loss to shareholders prior to the vote and merger.
Also looks as though candlewood being a passive investor might be lending shares to the short community.
Thanks
Correlation
USDA Weekly Nebraska ethanol crush on January 16, 2015 hit a 2 1/2 year low of 1.20 per bushel or 43.75 cents per gallon. This same day PEIX on an interday basis hit its calendar year low of 7.53 per share.
Fast forward to last Friday's Nebraska ethanol crush July 17, 2015
was reported at 1.20 per bushel or 42.9 cemts per gallon. PEIX again seems to again be moving sub $8 per share.
Margins need to improve for the AVRW acquisition to work.
Stock price behavior directly related to margin.
That said average USDA Nebraska Margin for second quarter was 66 cents per gallon so the quarterly report should be ok. First 4 weeks for Third quarter USDA Nebraska Margin is 45.84 cents. So the markets need to increase for PEIX and the ethanol industry.
Rule, Dutch,Payment and the Rest of the Board,
Candlewood has changed their website. Before they changed the websidte they listed owning about 1.6 million shares of GPRE. This is a little of 4 percent outstanding interest. Do you read anything into this?
Also looks to me like PEIX will be doing well to make a million dollares the second quarter. First three weeks of third quarter looks to be operating in a deficit position.. AVRW side probably has losses for both quarters.
What does the board think of earnings possibility for second and third quarter.
Thanks,
dank
My first thought on the release is it might be good news to soften a poor quarter ending 3/31 report that will be reported this Tuesday.
After the dust settles, and regardless, of what happens to the stock price after earnings are released. According to USDA crush margins report income from ethanol and bi-products less cost of corn is averaging about 30% more(first five weeks of second quarter) than the quarter about to be reported.
PEIX current stock price is probably overvalued based on earnings about to be released. This is more than offset by current crush margins that if maintained or increase make this stock very undervalued.
My concern is more on what type of quarter Aventine will release. AVRW and PEIX are about ready for their wedding day and AVRW should disclose first quarter performance to the investment community(not just PEIX magmt) prior to the merger
According to finance.yahoo.com nine analysts average projected earnings this quarter was 11 cents per share. So they missed by a big number.
Last quarter the spread/margin of price of ethanol and distillers grain minus cost of corn according to USDA average only 53 cents.
First four weeks of current quarter this same average is 66 cents.
25% increase.
Under present crush margin conditions, Not a major concern about the first quarter result.
I would like to see them publish AVRW results and balance sheet for the first quarter prior to the consolidation.
GPRE earnings release today after market close and conference call 4/29. Interesting to see results
Thanks Rule for your take,
AVRW financials do not appear to be as transparent as PEIX, and PEIX's seem to always include "surprises and wonder where this charge came" from stuff.
In principal and on paper, the AVRW/PEIX merger looks to be solid and good for both companies, however AVRW stategy of not having to report financials to the public and SEC the past couple of years concerns me.
I have confidence in PEIX management if they find something that is not right during the due diligence period, they will address the issues and bring them inline before the deal is done.
Remember 6 or so years ago, PEIX was going to buy a small plant in Goshen, California. After announcing the deal, PEIX decided not to buy when they found the plant was not producing to spec and there were other bottlenecks too. That plant is still idle.
Rule,
Noticed in the filing that for the 9 months ended September 30th of 2013 and 2014 avrw cost to procure corn was 4.43 and 7.14 per bushel. During this same interval/period USDA Nebraska average was 4.18 for 2013 and 6.78 for 2014.
PEIX should have a higher cost of corn during that period due to the extra miles of logistics of receiving corn.
The question comes from the AVRW 2013 number of 7.14 per bushel.
Why do you think 2013 AVRW 7.14 cost to purchase corn was so much higher that that of ?than PEIX 7.05 and USDA 6.78?
FYI - Aventine Building Storage:
http://www.auroranewsregister.com/articles/2015/02/04/aventine-building-storage-facility
Thanks
There were a few questions regarding AVRW assets, margins, and other holdings that Mr. Koehler was not able to provide answers today. If I understood him correctly he would not answer because
AVRW is a private company.
There are no financials available to the common shareholder because AVRW does not file reports with sec nor release this information except probably to their bankers and companies interested in buying AVRW.
Neil also said PEIX would put the acquisition/merger out to shareholder vote.
My question to this board and PEIX mgmt: With no financial data from AVRW to review, what basis will shareholders have to make an educated decision.
Looks like you can use two theories:
1. Trust Me.
2. Caveat Emptor
A lot has happened since 2005. Need to find a list of current major shareholders
A bit of AVRW history:
To go back even a little further back in time aventine was once a subsidiary of the Williams Companies (WMB). The company went under the name of Williams Bioenergy LLC.
In February of 2003, WMB sold its equity interest in Williams Bio-Energy L.L.C. (a private corporation) to a new company formed by Morgan Stanley Capital Partners. for 75 million. At this time they changed the name to Aventine.
Then in December of 2005 Aventine Renewable Energy Holdings, Inc. announced its offering of 20,000,000 shares of common stock at $13.00 per share($260 million) The proceeds of the offering will be used to repurchase an equal number of shares of common stock from its existing stockholders, substantially all of which are held indirectly by the Morgan Stanley Capital Partners funds managed by Metalmark Capital.
On the surface looks to be a win win.
A concern I have is that AVRW lists no financial information for shareholders on their website. There were no filings on SEC site either. AVRW traded on the pink sheets and must not be required to file with the SEC financial reports.
AVRW like PEIX, had financial trouble. AVRW was in bk in 2009 and emerged in March on 2010.
White Box and Houlihan and Lokey were major debt holders. If these companies are still the controlling interest in AVRW then PEIX management had better do their homework and due diligence prior to this marriage. During the BK, WB and H AND L left no prisoners and prevailed over all shareholders objections.
AVRW Shareholders were left with zilch and these interests took over AVRW.
Does anyone know how many shares of stock open interest that AVRW.
Catkin,
Thanks for the info. I also agree with you on Rule62 post. I cannot recall who stated this in the last couple days and it was well said. Rule is this PEIX message board "go-to-guy"
Catkin,
I started composing this last night so most so most refers to 12/15/2014 and not today.
PEIX performance is all based on how the price they sell ethanol for, and how much they have to pay for corn. I really do not care if price of ethanol goes up or down. I want to see the difference between the Price of ethanol, less the cost of corn widen in ethanol's favor.
Long term, my thought is if US corn and sorghum and sugar for ethanol acres stay similar in 2015 to what they were in 2014, then price of corn should not get out of hand. With lower gas prices, ethanol consumption should increase. So the price movement of ethanol a few weeks/months in the future should then decouple from the oil price massacre.
As long as PEIX is averaging 85 cents or more margin per gallon each quarter, then their balance sheet should keep improving. If balance sheet keeps improving then stock price should maintain and/or increase in the long term. It was about 13 months ago PEIX hit its all-time trading low and close of $2.33 and 2.41 per share respectively.
Market also has to bottom, was today the bottom for PEIX, does not look as though it was. When markets turn volatile, whether in a bull mode or bear mode they usually run farther than one expects. then they stabilize. I thought PEIX was over priced last August when it traded in the low 20’s. Likewise I think it is undervalued today at 9.41. Will it go lower than todays close, or hit a 52 week high before next August, only the market knows. Does not look like oil prices have bottomed yet so, i suppose ethanol has not yet either.
Regards,
dank
If this sell off is anticipating margins to decrease substantially from today, and they do, then the market has it right.
My thought is the margins are going to continue to be firm and the market has it wrong. (always the optimist)
One other variable is that the Brazilian currency has taken major hits and Jan15 is trading at .3700. Just last year was trading in the 50's. If Brazil is able to produce more than anticipated, one might might forecast that our US dollars would want to buy Brazilian ethanol for import to US because of the low Brazilian currency value in relation to US currency..
Most that I have read says US will export ethanol to Brazil. If you look at the US/Brazil currency exchange rate this does not make
a whole lot of sense.......... Unless Brazil does not produce enough ethanol to full fill domestic demand.
A few random thoughts on PEIX
PEIX is a tough one to read.
Excuse my memory as I cannot recall who on this board posted in past five weeks that the inverted ethanol futures market showing higher prices on the front end of contracts verses those 3 to 12 months further out. The old saying that the market only knows may apply here. The large groups that trade PEIX are definately pushing it down. Does the market sense reduced margins about to take over the trading environment. Margins have softened. Last I looked, margins are still averaging over $1.00 per gallon. This margin surely suggests that sub $ 10 per share is very undervalued price is they can be maintained.
also
I was always under the impression that an inverted market showed strong demand and tight supplies. Perhaps this reflected in the basis "on the market" as producers as selling on the cash market higher than the any of the futures contracts trading prices.
also
Does it make sense that oil market collapse is a reason for a stock market correction down draft that we are experiencing. I was taught many years ago that lower energy prices was good for the economy and would stimulate business. So why this carnage? Does this make sense? Do markets make sense??
also
Could those with the a large position in warrants, and that have exercised or still hold, have something to do with the short interest increase and subsequent downward move from 23.97+ to 9.10 then back to 15.19 then back below 10 as of today's close. What a whipflash!
Is the last five percent of stock that PEIX has not yet bought receiving a yet to be announced major buyout premium from PEIX?
Why did PEIX pay big dollars for many warrants to be exercised?
I suppose that todays closing value of $9.41 per share adjusted to about 6.25 cents per share for reverse stock splits, dilution and warrants etc, is better than Verasun and Aventine did to their shareholders. It still makes no sense to me, given the current business environment, and that financial progress that PEIX has made, has lost about 37 percent of its value in the last 20 trading sessions.
Thanks Rule 62,
Those USDA reports can be game-changers!
Yes,
I agree and do not forget the cost of corn component. Ethanol can go down 10 cents in value and PEIX margin will be close to the same if corn drops 28 cents per bushel.
This overall of commodity meltdown might collapse ethanol prices further and as long corn goes down to the proportional 2.8 gallons of ethanol per bushel corn then plant margins are still healthy. That is the case thus far. Sure the margins have narrowed past week, but while the price has collapsed the margins have not collapsed.
Looks to me good probability that market is reading standalone ehtanol processors wrong. Price of ethanol has lost value in past few weeks and while not percentage wise is following crude oil down. PEIX stock is getting hammered at a higher percent than oil companies whose earnings will be effected by crude collapse in a negative way.
Providing margins do not deteriorate, earnings should remain firm and continue PEIX on its recovery. I think there was a post that average fourth quarter margin to date is $.93 per gallon.
Last week margins will still over $1.00 per gallon.
Potential for PEIX looks much better than one year ago.
General assumption that PEIX and the other stand alone ethanol processors are taking hits in the market even though margins are relatively strong.
Really now,
What amount of the 1.53 per gallon margin do you attribute to corn oil?
Thanks,
dank
How ironic for PEIX and other ethanol processors to take a hit today. USDA released their weekly gross crush margin of 4.28 per bushel or $1.60 per gallon This is the fifth highest weekly number in the previous 406 weeks. The four higher weekly crush numbers were in 2014 the last two weeks of March and first two weeks of April. During this period PEIX traded in a range of $13.81 to $19.00 per share. During this 7+ year period the average is about 83 cents. These are the USDA numbers from Nebraska report. There are several states they post and I use Nebraska because this is this report uses wet distiller grain price. I realize the West coast sales numbers are different than the Midwest. Just use them for a benchmark and trend.
Today's 13 percent stock loss looks to be somewhat of an over reaction. It looks as though the market is assuming ethanol price will follow oil price collapse. Every time I make an assumption I am wrong 99 percent of the time. I would like to see the market be wrong on this assumption too.
As long as corn price is in a downtrend too gross margin from processors will stay over $1.00 gallon. If this type of margin holds long term, PEIX is undervalued.
Will get a better read on if the processors margins can hold next week. Today was a bit of a blind side from traders.
Thank BioFuel99,
It was my my understanding PEIX did little or no hedging with futures contracts, so I assumed Kinergy followed suite.
I also thought Kinergy was a contract marketer for PEIX and a couple other California ethanol producers. My assuption was Kinergy backed to backed their purchases with their sales, thus relying on a margin from each transaction.
So I was also assuming that Kinergy did minimal participation in futures and hedging and was having a hard time visualizing Kinergy loosing any money during the quarter not to mention 8 million dollars.
Thanks for your efforts.
Regards,
dank
BIoFuel99,
I did not see where Kinergy lost 8 million last quarter.
Is a number that is on a 10k or other type of report?
Thanks,
dank
Stock price on 9/30/14 end of third quarter was 10.76. This was 2.80 per share less stock price than prior quarter end.
Thus with a declining stock price from prior quarter, I would have imagined there would have been a positive adjustment for outstanding warrants.
So this 4.378 million dollar negative adjustment is much more than anticipated.
Did Mgmt pay warrant holders a fee to exercise? Looks like this fee could have been as high as 7 million dollars. This is way too much.
If PEIX has that kind of cash to burn, why pay the warrant holders inducements? MGMT should consider buying the rest of the company back and paying shareholders who supported the company cash or stock dividends before paying warrant holders to exercise.
fyi:Court rules against GreenShift in corn oil separation case
http://www.ethanolproducer.com/articles/11590/court-rules-against-greenshift-in-corn-oil-separation-case
Margins significantly reduced =s Short Interest Percent increase and industry wide stock price reduction.
Thougt it would be interesting to list what the some of the public traded ethanol companies stock has done since late August when the margin meltdown started. So I included spreadsheets below for a few companies trading symbol. Listed both are standalone and diversified. The more diversified companies have faired better. Cannot figure out why standalone AMTX has the least loss of stock value. I would have thought GPRE stock would have performed the best because they have the more proven management results.
It is all about margin. Where do we go from here/ Will margins adjust and come back. Will short sellers go to far and be caught forcing prices to move up. Who else may report strong margins plus hedges for the quarter we are now in and forward that are much higher than today's cash margin values.
MARGIN
Used a loose average margin Reduction of 47.86 percent
(61 cents per gallon today verses $1.17 per gallon on 8/29/14.
Used from USDA report NW_GR213. This report does not reflect actual plant performances. It simply acts as a guideline for
Processing Margin(Price of Ethanol plus byproducts sells, less cost of corn.) Does not include selling/administrative/Interest/Fixed costs/Depreciation/adjustments etc.....
Today 8/29/14
$.61 $1.17
Short Interest Increase.
Short Interest
9/30/14 verses 8/31/14
Stand Alone AMTX 410,484.00 7.48%
Stand Alone BIOF 658,506.00 14.52%
Stand Alone GPRE 7,519,799.00 9.07%
Stand Alone PEIX 4,255,560.00 35.90%
Stand Alone REX 942,036.00 71.60%
Diversified ANDE 765,277.00 3.76%
Diversified CZZ 2,200,431.00 30.24%
Diversified ADM 4,806,257.00 -10.16%
Diversified VLO 11,297,939.00 96.64%
Stock Price
Today Verses 8/29/14
Stand Alone AMTX $7.75 -18.08%
Stand Alone BIOF $5.34 -57.65%
Stand Alone GPRE $30.70 -31.30%
Stand Alone PEIX $11.55 -50.02%
Stand Alone REX $66.79 -37.48%
Diversified ANDE $59.01 -14.19%
Diversified CZZ $11.32 -3.99%
Diversified ADM $46.84 -6.06%
Diversified VLO $46.25 -14.57%
On the good, if there are any warrants outstanding, and they base the warrant adjustment on stock value as of the last day of the quarter, there will be a slight adjustment to add to paper profit for the third quarter report.
Third quarter should be be exceptional as one benchmark of cash crush value(nebraska) before administrative, interest, warrant adustments etc averaged 3.15(1.06 per gallon) (verses 3.58 or 1.27 per gallon immediate prior quarter) the first ten weeks, and about 2.19(.78 per gallon) the final three weeks of the quarter. So the overall average was still close to 2.94 (1.04 per gallon.
Last Friday's report was 1.79. Remember this is per bushel. So converting to a per gallon variable cost to produce now running at 64 cents per gallon. (verses third quarter average of 1.06.
Using the Nebraska Benchmark( use Nebraska because they quote wet distillers grain on report the same as PEIX produces) the Last quarter in which PEIX averaged less than 70 cents was the quarter ending March 31, 2013. Average for variable income for this thirteen week quarter was 66 cents per gallon. The company reported $846,000 income from processing and outside marketing which did not show good results.
THE DIFFERENCE BETWEEN THEN AND NOW
PEIX was very near a second bankruptcy the third quarter of thirteen. Direct Margin began to improve on went on a six quarter rampage averaging over 1.03 per gallon. Back then PEIX was only producing 35 million gallons per quarter and marketing another 65 third party gallons. They should be near 50 million production gallons this quarter and if last quarter is any indication 80 million third party gallons. Current Margins seem to have stabilized. The have paid off considerable amount of debt. Their balance sheet is in a much better position. On 3/31/13 PEIX stock closed at 4.39 per share. Current value is 13.83. This $10 off the high set in early September.
I think the market has overreacted to the current situation. The ag-processing industry is notorious for being very cyclical. It is always difficult to plan because on a cash basis you have little control over the cost you pay for your raw material or price you can charge for your finished goods. PEIX is set up to weather the storm and at 13.80 is undervalued.
If margins do not improve 64 cents in variable should cover the rest of cost but not much more.