By Maxxwell A.R. Chatsko, The Motley Fool
Filed under: Investing
Biodiesel leader Renewable Energy Group reported fourth-quarter and full-year 2012 financial results – its first as a public company – after the market closed on Monday. The company is poised for sizable growth in the years ahead as it continues to expand its distribution network and bring new, multi-feedstock capacity online. However, a dismal outlook for the year ahead has smacked shares out of the gate today. Do the rewards continue to outweigh the risks?
Financials
How did 2012 compare to 2011? REG surpassed $1 billion in revenue for the first time in its history as management executed a profitable year in light of falling government credits and selling prices.
|
4Q12 |
4Q11 |
2012 |
2011 |
|
|---|---|---|---|---|
|
Gallons Sold |
38.38 million |
47.51 million |
188.4 million |
149.83 million |
|
Average B100 Price per Gallon |
$4.33 |
$5.20 |
$4.60 |
$5.23 |
|
Revenue |
$231.95 million |
$266.78 million |
$1,015 million |
$824 million |
|
Net Income (loss) |
($0.15 million) |
$88.1 million |
$22.26 million |
$88.87 million |
|
Adjusted EBITDA |
$13.64 million |
$29.52 million |
$96.5 million |
$107.3 million |
|
Government Incentives |
— |
— |
$8.33 million |
$65.82 million |
Source: Renewable Energy Group
The company raised a net of $59.9 million from its IPO, increased its nameplate capacity from 212 million gallons per year (mmgy) to 227 mmgy across seven biorefineries, and is currently constructing another 150 mmgy at four new or retrofitted facilities. The cash balance was strengthened to $66.8 million and debt was reduced from $81.6 million in 2011 to $37 million in 2012.
Some investors may shy away from REG due to its association with biofuels and the stigma of government aid. It is always good to note that the biodiesel sales to government incentive revenue ratio to check the validity of those fears. In 2011 nearly 8% of revenue came from government incentives, while just 0.8% could be chalked up to the same line on the books last year.
Does REG make biofuels? Yes, but it manufactures biodiesel in a profitable and investor-friendly manner. In fact, the company represents nearly 17% of the domestic market, which makes it a prime candidate to tap into the industry’s volume growth.
Outlook
We Fools don’t believe in worrying over short-term noise, but Wall Street is a different animal. The company has guided for a weak start to the year with 90 million-100 million gallons sold and adjusted EBITDA between $20 million and $40 million. Even in a best-case scenario, EBITDA would be markedly below the $66.2 million watermark of the first half 2012.
What’s the big deal? Well, from a macro standpoint, current B100 prices are about 13% lower than they were for the first six months of 2012. For example, the company enjoyed an average selling price of $4.60 per gallon in all of 2012, but current biodiesel prices are just near $4.30 per gallon. Contributing to and compounding …read more
Source: FULL ARTICLE at DailyFinance