Contr: RFA: Ethanol Prod. Minor Effect on Land Use

Pacific Suffers a Dismal Third Quarter

By R. Brown, Web Exclusive Posted Nov. 11, 2008
Pacific Ethanol, Inc. (NASDAQ: PEIX), recently featured in our web exclusive, “Corn Prices Strike the Ethanol Industry from Both Sides,” announced yesterday, the details of a dismal third quarter. Pacific’s net loss for the three months ended September was $54.9 million compared to a loss of $4.8 million for the same period last year. Included in the net loss was a non-cash impairment charge of $26.6 million associated with the Pacific’s suspension of its Imperial Valley project. The company blamed the summer surge in, and volatile commodity and ethanol prices for its greater-than-expected net loss. Excluding impairment charges, Pacific’s net loss for the quarter was 51 cents per share. Analyst had expected a loss of only 16 cents per share.

Pacific mentioned some not-so-bleak details. For example, sales rose 56% to $184.0 million compared to the same period last year, gallons of ethanol sold rose 30% to 65 million gallons, and Pacific achieved it goal of reaching a production capacity of 220 million gallons per year by opening its Stockton plant. On the other hand, corn prices rose 54% compared to the same period last year-resulting in a negative EBITA of $18.4 million compared to $6.8 million for the same period last year.

As we mentioned in our earlier exclusive, this is not a localized problem. The ethanol industry, especially corn ethanol, is going through a horrific cycle. Earlier this month, giant ethanol producer, VeraSun (NYSE: VSE), filed chapter 11 bankruptcy citing elevated feedstock prices as the main cause of its demise. The industry now looks to the newly elected administration for bio-fuel mandates it hopes will re-stabilize things once again.

Investors ran for the exits upon knowledge of Pacific’s loss. The company’s stock prices dropped 15.74% to 91 cents per share, -86.02% lower than its 52 week value.

For more information, visit Pacific Ethanol’s website: http://www.pacificethanol.net/site/index.php/news/