Alto Ingredients, Inc. Q3 FY2024 earnings call

Management Statement and Operational Highlights

• Pekin Campus: Increased production capabilities and uptime. Finalized CO2 transportation and sequestration agreement with Vault. Modernizing equipment, building second alcohol loading dock to improve logistics.
• Magic Valley: Completed harvesting tech upgrades, restarted facility but margin compression led to consideration of idling.
• Sustainability: Completed 2023 sustainability report, advanced CCS initiative, focused on reducing carbon footprint.
• Market Review: Q3 had ethanol margin fluctuations, lower carbon prices in some regions, but some recovery expected in Q4; corn prices expected low in Q4 with strong carryout into 2025.

Segment Performance

• Pekin Campus: Q3 2024 consolidated gross profit improved to $6 million. Specialty alcohols reached 42% of total Pekin sales volume (7 percentage points higher than same period last year). Gross profit contribution from Pekin was $6.2 million. On track to sell 90 million gallons of specialty alcohols in 2024 and expect to match in 2025. Building a second alcohol loading dock at less than $3 million, scheduled for completion in 2025.
• Magic Valley: Completed upgrades to harvesting technology, restarted facility but faced margin compression due to regional corn basis and market price declines, resulting in a gross loss. Plan to idle the plant before end of Q4 if no economic improvements.
• Columbia Facility: More economically resilient due to lower transportation costs, premiums on lower carbon ethanol, and CO2 sales.

Guidance

• Pekin Campus: On track to sell 90 million gallons of specialty alcohols in 2024 and match in 2025. Second alcohol loading dock at Pekin to be completed in 2025 with cost less than $3 million.
• Magic Valley: If no economic improvements, plan to idle the plant before end of Q4.

Risks

• Market Fluctuations: Ethanol demand and price fluctuations, carbon price volatility.
• Magic Valley Challenges: Margin compression due to corn basis and market price declines.
• CCS Implementation Risks: Awaiting EPA submission and approval, financing and equipment sourcing for CO2 sequestration.

Question and Answer Q: How should we be thinking about Magic Valley's targeted annual EBITDA uplift around $9 million that was originally outlined? Does that outlook still stand given what's been demonstrated so far?

A: Original expectations were based on different market conditions; current market changes have offset benefits.

Q: Touching on the carbon capture side and the SAFE CCS Act, do you envision any change to the moratorium timeline for new permits given the recent ADM leaks?

A: Uncertain, but changes in CCS work quality may affect.

Q: Have you considered seeking recourse against harvesting technologies in some way to be compensated for the losses that they were likely responsible for?

A: Exploring all options, fundamentals of technology still sound.

Q: Could you comment or provide more color on the Guggenheim hire and what precisely they're looking at and what the thought process is there?

A: Considering all options including partners, sale, or improvements for Magic Valley.

Q: Based on the discussion, would this review also consider the sale of the entire company?

A: All options, including sale, are considered for shareholders.