Who’s Up, Down, Top, Charmed and Strange in the Bioeconomy: Learnings from the Earnings, as Four Bellwether Stocks Report

by Jim Lane (Biofuels Digest) ... So, let’s look at Q3 earnings statements now just coming out from four of the sector’s signature companies in light-duty and heavy-duty fuels, enzymes, and nutrition and wellness. Namely, Aemetis, Novozymes, Renewable Energy Group and Amyris.

Aemetis

In California, Aemetis said that revenues for Q3 jumped increased $5.7 million and gross profit jumped 36%, while ethanol volumes rose 8.4 percent over Q3 2017. , Overall reaching $44.6 million for the quarter, compared to $38.9 million in Q3 2017.

The company noted that the increase in revenues was driven by the rise in ethanol volumes and also by a rise in the prices for wet distillers grains, and stronger demand for India biodiesel.

The big highlights. Two stand out. On the operating efficiency side, the company will be implementing the Mitsubishi Chemical Corporation ZEBREXTM membrane dehydration system at the 60 million gallon per year Aemetis fuel ethanol plant in Keyes, California. The sales transaction involves a subsidiary of MCC, Mitsubishi Chemical America, Inc. The Aemetis plant upgrade is the first ZEBREXTM system installation in North America and is the largest implementation of the ZEBREXTM system worldwide.

The upgrade from the traditional Pressure Swing Adsorption (PSA) dehydration process to the ZEBREXTM system can reduce energy consumption in the production of biofuels by up to 25%, increasing production capacity while reducing the usage of fossil fuel-based energy and lowering the carbon intensity (CI) of ethanol produced at the plant.

On the ethanol side, the company continues small-scale production of cellulosic ethanol from waste orchard wood and nutshells at its newly constructed integrated demonstration unit at the InEnTec Technology Center in Richland, Washington — and is progressing toward a construction start on its new cellulosic ethanol facility in California to capture the very high prices that cellulosic fuels are commanding in the California market right now.

Novozymes

In Denmark, Novozymes touted healthy if not spectacular organic sales growth ....

The big highlights. 3 out of 5 segments grew, with Food & Beverages and Bioenergy performing very well. Agriculture & Feed should be benefitting now from the altered BioAg-sales cycle moving sales from 1H to 2H, and we may see continued brightness there. Bioenergy’s been a star all year. Novozymes Innova yeast has been gaining an impressive set of trials — and looking more like a growth0-stage company in the bioenergy sector than a maturing company — interesting development, one to watch especially as US E15 deployment begins to be realized.

Amyris

The Big Highlights. Obviously, headwinds in the Vitamin E market. Also, Amyris’ zero calorie sweetener made from sugarcane has received designation as GRAS (Generally Recognized as Safe), and allows Amyris to begin commercial sales.

Renewable Energy Group

We have to do some special math for REG because biodiesel continues to be in a sort of tax credit limbo. If you reallocate the net benefit of the biodiesel tax credit to applicable periods in 2017, adjusted net income was $40.4 million and adjusted EBITDA was $55.0 million in the third quarter of 2017.

And, if the currently lapsed BTC is retroactively reinstated for 2018 on the same terms as in 2017, REG’s net income, Adjusted net income and Adjusted EBITDA would each increase by approximately $70.0 million for Q3 2018 and by $178.7 million for the first nine months of 2018. So, you might say there’s quite a bit of winking and finger-wagging going on between Ames and biodiesel’s supporters in Washington DC.

The Big Highlights. Well, there’s the fate of the Biodiesel Tax Credit, and with the lame-duck session now on in Congress, we’ll be keeping our eyes on the fate of tax credit reinstatements. Could be a windfall there for shareholders. Meanwhile, look at REG’s small mountain of cash (by bioeconomy standards, not Apple’s). At September 30th REG had cash and cash equivalents of $156.6 million, an increase of $79.0 million from December 31, 2017. Additionally, REG had $52.9 million of marketable securities. Will the company conclude the “winter is coming and gird its loins” for potential loss of the BTC? Likely, for now. But if the BTC is restored, we might find that the company could accelerate plans to fund its share of development of its proposed renewable hydrocarbon plant in Ferndale (Wash,) with Phillips 66, or may well look to re-enter the M&A market.

The Digest’s Take