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BRANDS:

Cornwall holiday lettings 'upstart' aims for £10m turnover

'We saw the niche and we grasped it'

Alto Ingredients Inc (ALTO) (Q1 2024) Earnings Call Transcript Highlights: Navigating ...

GuruFocus Research
·4-min read

  • Net Sales: Q1 2024 net sales were $241 million, down from $314 million in Q1 2023.

  • Gross Loss Improvement: Improved by $800,000 in Q1 2024 compared to Q1 2023.

  • Adjusted EBITDA: Improved by $3.4 million in Q1 2024 compared to Q1 2023.

  • Specialty Alcohol Sales: Increased to 26 million gallons in Q1 2024 from 21 million gallons in Q1 2023.

  • Repairs and Maintenance Expense: $7.5 million in Q1 2024, $1 million higher than Q1 2023.

  • Cash Flow from Operations: Generated $1.4 million in Q1 2024.

  • Capital Expenditures (CapEx): $4.6 million in Q1 2024, part of a $25 million plan for 2024.

  • Cash Balance: $29 million as of March 31, 2024.

  • Total Loan Borrowing Availability: $91 million as of March 31, 2024.

Release Date: May 06, 2024

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

  • Alto Ingredients Inc (NASDAQ:ALTO) reported an increase in sales of high-quality alcohol from their Pekin campus, contributing to improved gross profit and adjusted EBITDA year-over-year.

  • The company successfully completed a biennial Pekin campus wet mill outage, which involved over 450 tasks aimed at maintenance and upgrades, enhancing future production reliability and rates.

  • Alto Ingredients Inc (NASDAQ:ALTO) has contracted approximately 93 million gallons of specialty alcohol at a premium, which is expected to positively impact future revenues.

  • The company's carbon capture and storage (CCS) initiative is progressing, with significant developments like the completion of a 2D seismic geologic survey and advancements in EPA Class VI permit applications.

  • Alto Ingredients Inc (NASDAQ:ALTO) generated $1.4 million in positive cash flow from operations in Q1 2024 and maintained a healthy cash balance and borrowing availability to support ongoing operations and investments.

Negative Points

  • Alto Ingredients Inc (NASDAQ:ALTO) experienced a decrease in net sales in Q1 2024 compared to Q1 2023, primarily due to lower market prices.

  • The company recognized an incremental loss of $4.9 million related to natural gas hedging activities due to historically low market prices.

  • Extreme cold weather in January impacted the Pekin campus operations, leading to increased costs and reduced production rates.

  • Issues at the Columbia facility with centrifuges led to production hindrances, although upgrades are expected to mitigate future risks.

  • Repairs and maintenance expenses were higher in Q1 2024 by $1 million compared to the previous year, reflecting the timing of accelerated costs.

Q & A Highlights

Q: Can you provide more details on the progress and future steps of the carbon capture initiative? A: Bryon T. McGregor, CEO & President of Alto Ingredients, explained that finalizing the agreement with Vault and advancing discussions with financial partners are crucial. Vault has progressed with the work required for the EPA Class VI permit applications. The goal is to submit the application by the end of summer 2024, with an 18 to 24-month review period expected.

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Q: What is the status of the equipment needed for the carbon capture project? A: CEO Bryon McGregor mentioned that the critical aspect is the EPA Class VI permit, but equipment like compression technology also needs to be purchased. The company is carefully timing these purchases to align with the permit approval process.

Q: How is the CoPromax or high-protein initiative progressing, and when do you expect it to operate as intended? A: McGregor stated that the system upgrades at the Magic Valley facility should meet performance targets soon. The success at this facility will influence the application of this technology at other locations.

Q: With the current visibility, do you see improvements in margin recovery for the rest of the year? A: McGregor noted that margins are improving and are expected to continue improving, especially with the onset of the summer driving season. However, the full impact of the recent wet mill downtime on Q2 results is still being assessed.

Q: Are there any expenses related to the CCS initiative that are not covered under this year's CapEx? A: CFO Robert R. Olander clarified that while the majority of CCS costs are included in the CapEx plan, there are some immaterial upfront costs related to field studies and legal reviews.

Q: What are the expectations for co-product revenues and CapEx for the remainder of the year? A: McGregor indicated that co-product revenues are expected to remain lower compared to last year. Olander added that the CapEx for the year is targeted not to exceed $25 million, aligning with expenditures in Q1.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

This article first appeared on GuruFocus.