Pacific Ethanol (NSDQ: PEIX) expects to report a fourth-quarter net loss of $14.7 million, compared with a loss of $3.1 million for the same period in 2006, according to a Wednesday filing with the Securities and Exchange Commission.
Shares fell 12.5 percent on the news, closing at $4.33 per share after rising 2.6 percent Tuesday to close at $4.95 per share.
The loss was anticipated after Pacific Ethanol last week said it would delay filing its earnings until March 31, according to DTN research analyst Rick Kment.
"If their investors are well-informed, there will not be a big shakeout at this point because I think those investors really following the market will be expecting this," Kment said.
Still, the net loss was larger than analysts had expected. According to a Thomson Financial poll, a panel of eight analysts predicted a loss of 13 cents a share. The loss reported in the preliminary filing amounts to a loss of 39 cents per share (see RTT News).
In its Wednesday filing the company said it expects to report a gross profit of $1.7 million for the fourth quarter, compared to a gross profit of $11.7 million year-over-year, with the gross margin dropping from 14.6 percent to 1.3 percent.
In spite of the net loss and given current economic conditions, the anticipated gross profit is a positive sign that the long-term state of Pacific Ethanol's business is "solid," Kment said.
"These are two very different years," he said, speaking of 2006 and 2007. "2006 was probably as optimistic a market as we're going to get -- the second half of the year was very bullish -- and this [gross profit] is encouraging in this bearish market."
Pacific Ethanol blamed the anticipated reduced margins on lower ethanol sales prices and "significantly" higher corn costs. Corn, which hovered around $2 per bushel for years, now sells for more than $5.50 per bushel.
The company sold its ethanol for an average of $1.97 per gallon in the fourth quarter, outpricing VeraSun Energy (NYSE: VSE) and Aventine Renewable Energy (NYSE: AVR), according to Seeking Alpha.
Pacific Ethanol’s higher prices make sense,considering the company’s location, Kment said.
Pacific is based in California, while VeraSun and Aventine are based in South Dakota and Illinois, respectively. Midwest ethanol prices are lower because it costs less to transport corn to ethanol factories. On the coasts ethanol prices are higher, but manufacturers also pay more to get the corn, Kment said.
Pacific Ethanol didn't say how much it pays for corn.
The company, which halted construction of one of its plants in December, also said it might be forced to delay or abandon construction of more plants if it is unable to raise additional financing. Already it has defaulted on its current credit agreement because of a delay in the construction of two plants, according to Seeking Alpha.
Pacific Ethanol isn't the only greentech company looking for credit. Thomas Weisel Partners analyst Jeff Osborne released a research note last week forecasting that Evergreen Solar (ESLR) will run out of cash this summer and will likely look to raise debt financing to replenish its capital.