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Earnings preview: Ethanol likely to hurt Gevo Q2 results

Gevo Inc. (NASDAQ: GEVO) is set to release its earnings results for the second quarter on Wednesday after the market closes. The renewable chemicals and low-carbon fuel company’s results will be hurt by higher operating expenses and lower production volumes of ethanol. The short-term fluctuations in the price and demand for petroleum-based fuels and competing substitutes could also hurt the performance.

As of March 31, 2019, the company continues to engage in research and development, business development, business, and financial planning, optimizing operations for low-carbon ethanol, isobutanol, and related hydrocarbons production and raising capital to fund future expansion of its Luverne Facility. The facility has a production capacity of about 20 million gallons per year of ethanol, 45-50 kilotons of animal feed, and 3 million pounds of corn oil.

The company’s transition to profitability is dependent upon the successful development and commercialization of its product candidates and the achievement of a level of revenues adequate to support its cost structure. Gevo is likely to continue raising additional cash along with the restructuring of its debt and addressing to cost structure for achieving profitability and positive cash flows.

Photo Courtesy: Gevo / Facebook post

Gevo believes that the demand for low-carbon fuels and renewable chemicals will continue to grow in the future. The company expects to incur losses through at least 2020. The company expects to increase revenues by focusing on low-carbon ethanol in the near term, debottlenecking production, while adapting and optimizing the Luverne Facility’s energy and equipment infrastructure to reduce the reliance on fossil-based energy sources.

Analysts expect the company to report a loss of $0.37 per share on revenue of $7.02 million for the second quarter. In comparison, during the previous year quarter, Gevo posted a loss of $7.19 per share on revenue of $9.42 million. The company has missed analysts’ expectations in all of the past four quarters.

For the first quarter, Gevo reported a wider loss due to higher operating expenses and lower gain from change in fair value of derivative warrant liability. Total revenues decreased by 22% year-over-year as planned lower production volumes in response to a decline in ethanol sales prices hurt ethanol and co-product revenues.

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