Alto Ingredients (ALTO) Q3 2024 earnings summary

Executive summary

• Pekin Campus increased specialty alcohol sales and production uptime, driving improved profitability and a tenfold increase in gross profit year-over-year, despite volatile market conditions and lower net sales.

• Entered a definitive CO2 transportation and sequestration agreement with Vault 44.01 for the Pekin Campus, advancing carbon capture and sustainability initiatives.

• Specialty alcohols comprised 42% of Pekin sales volume, up 7 percentage points year-over-year, with a 4 million gallon increase in sales.

• Magic Valley facility upgrades improved production, but margin compression from regional corn bases and declining byproduct prices led to plans to idle the plant.

• Published a comprehensive 2023 sustainability report and earned multiple third-party certifications, enhancing customer relationships.

Financial highlights

• Q3 2024 net sales were $251.8 million, down from $318.1 million in Q3 2023; gross profit improved to $6.0 million from $4.2 million year-over-year.

• Adjusted EBITDA was $12.2 million, compared to $13.6 million in Q3 2023.

• Net loss narrowed to $2.4 million ($0.04/share) from $3.5 million ($0.05/share) in Q3 2023.

• Cash and cash equivalents at September 30, 2024, were $33.6 million, with $92 million in total loan borrowing availability.

• Realized derivative gains were $3.6 million, down from $6.2 million in Q3 2023.

Outlook and guidance

• Specialty alcohol sales are expected to reach 90 million gallons in 2024 and match in 2025.

• Corn prices are anticipated to remain low into 2025, supporting strong carryout but increasing export demand and transportation costs.

• Unless economics improve, Magic Valley plant will be idled before end of Q4 2024, expected to positively impact financials.

• Plans include expanding higher-margin production, pursuing CCS, optimizing efficiency, and advancing sustainability certifications.

• The company continues to pursue capital improvement projects, including a second alcohol loading dock at Pekin Campus, but notes the need for significant additional capital to complete some initiatives.