Hydrocarbon revenue increased to $1 million from $0.1 million a year ago. This was driven by higher production volumes at the South Hampton Facility. During the December quarter of 2018, the company reduced production at the South Hampton Facility to upgrade the facility and double the production capacity.
Revenue derived at the Luverne Facility from ethanol sales and related products fell by 9% to $5.9 million. The company reduced its production of ethanol and distiller grains which resulted in lower sales for the period. This was due to an unfavorable commodity environment.
In 2020, Gevo will focus on securing long-term financing to enable it to construct one or more expanded production facilities to produce its renewable, low-carbon hydrocarbon products for customers such as Delta Air Lines. The “take or pay” nature of the agreements with customers such as Delta Air Lines and HCS Group GmbH should make long-term financing easier to achieve than in the past.
The company expects to produce about 15 million gallons of ethanol, which depends on the market price for ethanol. If the selling price for ethanol is too low, Gevo could limit or cease the production of ethanol to conserve cash. The company plans on producing ethanol only when a positive contribution margin is achievable.
The company began selling higher-margin, premium animal feed, protein products and corn oil, which is expected to improve the profitability of the Luverne Facility. The total amount of dry animal feed products, which are expected to be sold in 2020, is about 30,000 metric tons.
The agreements with Delta Air Lines and other customers demonstrated that the demand for Gevo’s renewable hydrocarbon products is real and growing. The company expects to secure even more contracts for hydrocarbons in the near future. The company is needed to focus on financing the build-outs and growing the business.