Alto Ingredients (ALTO) 6 Aug 24 2024 Q2 Earnings call transcript

Alto Ingredients Inc. recently held its second quarter 2024 earnings call, providing investors and stakeholders with insights into the company's strategic initiatives and financial performance. The call, led by President and CEO Bryon McGregor and CFO Robert Olander, highlighted the company's efforts to improve operational efficiency, expand revenue streams, and navigate regulatory challenges in the carbon capture and storage market.

Operational Improvements and Financial Performance

Alto Ingredients reported a net loss and adjusted EBITDA that were negatively impacted by costs related to wet mill outages, preventative repairs, lower feed and carbon prices, and realized losses on hedging activities. However, the company's initiatives to increase production and improve operational efficiency at its Pekin campus have begun to yield positive results. These efforts include capital upgrades and the implementation of a new alcohol loading dock, which are expected to increase capacity utilization and reduce transportation costs. The Pekin campus generated over $10 million in gross profit in Q2, reflecting the operational improvements and higher crush margins.

Strategic Initiatives and Expanding Revenue Streams

Alto Ingredients is actively expanding its revenue streams to ensure sustainable profitability in the long term. One of the company's strategic initiatives is the implementation of carbon capture and storage (CCS) technology. The company is working collaboratively with partners to optimize the project and navigate regulatory challenges, with the goal of reducing greenhouse gas emissions and creating a more sustainable business model. Another strategic initiative is the expansion of its operations in the Western plants, which includes capital upgrades and the implementation of technology to improve plant efficiency and profitability.

Regulatory Challenges and Market Dynamics

The carbon market remains dynamic, with current prices at historic lows and voluntary carbon markets still nascent. Alto Ingredients is navigating these challenges by aligning with partners to share risks and financial benefits. The recent enactment of the SAFE CCS Act in Illinois has added clarity to the industry on CCS projects, although it also imposes new safety and financial requirements. The company believes the act will provide a clearer picture of the regulatory environment, allowing it to make informed decisions about its CCS project.

Looking Ahead

Looking ahead, Alto Ingredients is focused on continuing to improve operational efficiency, expand revenue streams, and navigate regulatory challenges. The company's strategic initiatives, including the implementation of CCS technology and capital upgrades at its Western plants, are expected to contribute to long-term profitability and sustainability. With a strong balance sheet and a strategic focus on operational improvements, Alto Ingredients is well-positioned to capitalize on market opportunities and navigate challenges in the ethanol and carbon markets.