Pacific Ethanol: Strong Results, Future Looks Bright

Congratulations to Pacific Ethanol (PEIX) for beating analyst expectations in its first quarter results.

Highlights:

- Net Income grew to $3.0 million compared to a net loss of $0.6 million in Q1 of 2006

- Net sales hit $99.2 million, an increase of $61.0 million, or 160%, compared to $38.2 million for the same period in 2006. Thomson Financial expected sales of $90.7 million

- EPS of $0.05 per diluted share. Thomson Financial expected $0.05 per share

- Net sales for Q1 of 2007 up 160% over Q1 of 2006 and up 23% from Q4 of 2006

- Gross margin exceeded 15%

- Gross profit for the first quarter of 2007 totaled $15.3 million compared to $2.3 million in the first quarter of 2006.

- EBITDA for Q1 of 2007 reached $4.8 million compared to EBITDA of negative $0.5 million for Q1 of 2006

- Gallons sold nearly doubled from Q1 2006 (19.8 million gallons) to 37.5 million gallons

- Four plants now under construction and on schedule to achieve production capacity goal of 220 million gallons per year by mid-2008

The company's stock rose $1.45 (10.5%), to $15.28 in aftermarket activity after ending the regular session down 14 cents to $13.83.

The Future Looks Promising

It is evident that the high price of corn this quarter has cut into the earnings of every ethanol producer. Aventine Renewable Energy Holdings Inc. spent an average of $3.58 per bushel, up 69 percent from a year ago. Pacific Ethanol spent an average of $3.69 per bushel. VeraSun Energy Corp, which incurred losses in its first quarter, got the short hand of the stick, paying more than $4 a bushel for corn, more than double what it paid a year earlier.

Corn prices, though, are expected to decline. So far in the second quarter, prices have traded between $3.43 and $3.90 and have fallen about 4 percent over the past four weeks. Prices are expected to continue to decline ever since the USDA report showed that farmers would plant 15 percent more corn than they did last year.