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.
AI
