Alto Ingredients Inc (ALTO)

[Rule_62]

Some revised numbers.

Based on the work done by Stockrosen, combined with the statement made by Neil in the Q4 conference call, I made some modifications to the PEIX margin formula. Here is an explanation of the changes along with the resulting numbers:

1. Q4 2014: Neil stated in the CC that the ethanol yield was approaching 2.80 gallons/bushel. I adjusted the the formula to reflect this from the default provided by PEIX (PEIX Ethanol - (CBOT Corn + Basis) x (1-Co product return)/2.74) to account for the increased yield (PEIX Ethanol - (CBOT Corn + Basis) x (1-Co product return)/2.80)

That results in an increase in the Q4 margin calculation from $0.847 to $0.875

2. Q1 2015: Neil also stated in the CC that corn oil production for Madera and Boardman would come online early in 2015. I further adjusted the above modified formula to reflect that increase in co-product return. I used the following logic:

a) Neil stated that corn oil value equates to $0.05 - $0.07/gallon of ethanol. I first took the middle value ($0.06) and multiplied it by 2.8 to get a value/bushel ($0.168).

b) I then divided that by the average cash price of corn to date for 2015 ($3.91) to get a percent return on the value of corn(4.3%).

c) Finally, as the increase only applies for 80M out of a total of 200M gallons of production, I multiplied that by 0.4 to get a final value of 1.7%

That resulted in a further adjusted co-product return of 31.7%, up from the previous 30% default value provided by PEIX. The impact on the Q1 2015 average to date as of Jan 16th is as follows:




The new formula still assumes a corn basis of $1.28. Although Neil did make some remarks regarding the basis, those comments are difficult to factor in at this stage. However, the 3rd column utilizes the nearby California price for corn, so it likely comes close to reflecting any difference in the basis.

Again, I caution that these numbers only reflect the difference in value of goods purchased vs goods sold. They do not reflect additional costs, including plant overhead, etc. To gain an understanding of additional cost factors, I would strongly suggest familiarizing yourself with the quarterly reports.