FutureFuel Corp Q1 2025 Results: Disappointing but Still Profitable.

FutureFuel Corp's Q1 2025 results were disappointing, with a visible loss of $17.64 million despite a long trend of profitability. The company made a $4.33 million profit in Q1 2024. Despite this decline, the company remains a hold due to its potential for future growth and ongoing profitability.

FutureFuel Corp's (NYSE:FF) first quarter 2025 results were disappointing, with a visible loss of $17.64 million despite a long trend of profitability. The company made a $4.33 million profit in Q1 2024. Despite this decline, the company remains a hold due to its potential for future growth and ongoing profitability.

The company's revenue dropped from $58.28 million in Q1 2024 to $17.54 million in Q1 2025. The main reasons for this were reduced demand for biodiesel, rising costs, and a lack of clarity regarding regulatory support [1]. The company will now fully focus on the chemical segment, following the uncertainty from the current US administration.

The biggest impact was the collapse of gross profit, driven by a sharp decline in turnover without a proper reduction in costs. The cost of goods sold in Q1 2025 ($31.56 million) decreased by 40.02% compared to Q1 2024 (from $52.70 million), while turnover decreased from $58.28 million to $17.54 (79.44%). This resulted in a net loss of no less than -$17.64 million in Q1 2025, while the company booked a profit of $4.33 million in this quarter last year.

The company's balance sheet remains strong, with no debt and $97.1 million in cash on hand. This ensures that it can weather difficult times and still have room for expansion. However, the special dividend that FutureFuel paid to shareholders in 2024 ($2.50/share) reduced the company's cash position. It still holds a lot of cash, but this was not an ideal time for that dividend payment.

FutureFuel's chemical segment focuses on multi-year contracts for tailored products in industries such as agrochemicals, coatings, industrial solvents, etc. The company is constructing a backward-integrated custom chemical plant, which is projected to be operating by the end of 2025. This project has led to a doubling of capital expenditures in 2024 compared to 2023.

FutureFuel's biodiesel segment, which comprises the majority of its revenue, faces significant challenges. The loss of the Biodiesel Blender's Tax Credit (BTC) system and the introduction of the new Clean Fuel Production Credit (CFPC) system have created uncertainty around margins. The CFPC system rewards companies for producing and selling "real" biodiesel based on emissions intensity, but the calculations behind this new system are not yet clear.

The company's competitors include large chemical players such as Eastman Chemical and Huntsman on the specialty side, and large biofuel refiners such as Renewable Energy Group and Green Plains on the biofuels side. FutureFuel's niche specialization in specialty chemicals and feedstock-flexible biodiesel plant provide a competitive advantage, but the company must adapt quickly to niche or regional opportunities.

FutureFuel's fair value is calculated to be $4.38, with a current stock price of $4.09, indicating a discount of 6.62%. The company currently pays an annual dividend of $0.24, which amounts to a 6% Dividend yield annually.

In conclusion, FutureFuel Corp's Q1 2025 results were disappointing, but the company remains a hold due to its potential for future growth and ongoing profitability. The company's focus on the chemical segment and its strong balance sheet provide a foundation for future success.

References:
[1] https://seekingalpha.com/article/4797025-balancing-decline-and-potential-why-futurefuel-corp-remains-a-hold