Hey Dutch, yes I've been watching, even though I haven't been posting. From my model, on production and Kinergy sales I had them pegged at 3-4 cents less in earnings than last Quarter. Of course the problem with last quarter (Q2) is it looked like the profits were enhanced by selling a considerable amount of carbon credits which they had amassed, so it was difficult to know how any sale of carbon credits would also affect things.
As for their statement:
“Net loss of $3.8 million for the third quarter of 2016 was impacted by over $11 million of extraordinary expenses, including higher beginning inventory valuation, lower margins in the Company’s ethanol trading business resulting from the intra-quarter drop in ethanol prices, significant repair expenses and non-cash mark-to-market adjustments related to open hedge positions."
"higher beginning inventory valuation"
On June 30th the terminal price bid/ask for ethanol in California was $1.78/$1.80. By August 2nd it was down to $1.52/$1.53. That could account for the statement about "higher beginning inventory valuation" which could have resulted in having to sell inventory at a lower cost than it cost to produce it. We don't know how much that might have amounted to.
"lower margins in the Company’s ethanol trading business"
Yes, I saw this part coming. The Kinergy margins appeared to be somewhere around 1-2 cents/gal lower for Q3. I doubt they lost money, but I doubt they made much. Again, the slide from June prices to early August likely hurt them.
We don't know what the "significant repair expenses" might have been or what cost is attached to them.
It's the last statement that caught my attention though. Me thinks they got caught in a bad hedge. Me thinks it might be more than they care to admit. Once the 10Q is available, it would be interesting to see what changed vs Q2 in that department. It will also be worth taking a look in any reduction/increase in the value of carbon credits as a predictor for possible profit enhancement in Q4.
As for Q4, so far on the production side, it's smoking for all three areas (California, Nebraska and Illinois). So far Kinergy is performing about the same as last quarter. Not currently holding, but if the price gets slammed in the coming days, I'll be a buyer based on Q4 performance to date.
