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Monday, May 11, 2015 2:44:22 PM
I'm expecting a miss on earnings. I hope I'm wrong, but I'm also not currently holding. From what I can tell, I'm expecting the Kinergy side earnings to be similar to Q4. However, the PEIX production margin looks to in line to take a pretty big hit.
The PEIX numbers for Q4 (taken from the Q4 earnings PR) were as follows:
Cost of corn $4.97
Sale price of ethanol $2.15
Value of co-products as a percentage of corn costs 28.5%
Note, there was a calculation error in the PEIX margin, It's fixed now.
So
Revenue/gallon - cost of corn less value of co-products
=$2.15-($4.97*(1-0.285))/2.8 gallons/bushel
=$2.15-$1.269
=$0.881/gallon
Compare that to the numbers for Q1 produced by the PEIX formula.
The unadjusted PEIX formula predicts $0.358. That's a huge drop (52 cents/gallon) in revenue. Multiply that by quarterly production of 50M gallons, and it forecasts a very substantial drop in gross revenues.
I would take that as a worst case scenario If I'm correct in the prediction that the co-products should be worth more than the PEIX formula predicts, it will help dampen that loss. Of course, none of this takes differences in other differences in quarterly expenditure into account.
I guess we'll know soon enough, but I'm expecting a miss. On the bright side, the numbers to date for Q2 suggest increased earnings for Kinergy, and at least break-even for PEIX. Add the combined synergy of Aventine in the mix, as well as the increase in corn oil production, and Q2 should be profitable. As I stated earlier, I'm definitely a buyer on any substantial post-earnings dip.
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