Gevo provides update on side-by-side operations in Q2 results
Gevo inc. has released second quarter financial results, reporting revenues of $7.7 million, up from $1.9 million during the same period of 2013. The company attributes the increase to the production and sale of ethanol and distillers grains following the transition of the Luverne, Minnesota, plant to side-by-side (SBS) operational mode, which enables the production of both ethanol and isobutanol.
The cost of goods sold for the quarter increased by $4.7 million, primarily due to increased production activity at the Luverne facility. Research and development expense decreased by $2.2 million, while selling general and administrative expenses decreased $1.4 million. Interest expense increased $5.8 million. The company reported a non-cash gain of $2.8 million related to changes in the fair value of derivative warrant liability and embedded derivatives contained in the convertible notes issued in 2012, and a non-cash loss of $5.1 million related to the change in the fair value of the convertible notes issued in the second quarter of 2014 to Whitebox. The net loss for the quarter was $17.2 million, compared to $15.2 million for the same period of last year.
During a call to discuss the quarterly results, Patrick Gruber, CEO of Gevo, indicated the company believes it has turned the corner of SBS operation of producing isobutanol and ethanol, solving many of the operational issues it has encountered. The facility is currently producing ethanol in three of its four fermenters. The fourth production line is dedicated to isobutnaol.
According to Gruber, the company’s technique for managing infection seems to be working well with SBS production. We have not experienced cross contamination in isobutnaol production or ethanol production, he said.
Regarding isobutnaol production, the facility has achieved yields greater than 90 percent of its target. In addition, isobutanol batch cash costs have decreased by more than 25 percent. Gruber noted the facility is currently installing a small distillation column that will aid in debottlenecking the isobutanol side of the plant.
"By installing the additional distillation equipment at Luverne, we expect to be able to achieve production levels of 50,0000-100,000 gallons of isobutanol per month by the end of 2014. As we continue to learn and optimize the isobutanol production process, we believe we can ultimately increase our production rate to approximately 2-3 million gallons of isobutanol per annum under the SBS, while we are running at an annual production rate of approximately 18 million gallons of ethanol. With the much improved cash flow profile of the plant and the United States District Court's decision to stay the trial relating to U.S. Patent Nos. 7,851,188 and 7,993,889,Gevo's overall corporate burn is expected to decrease significantly going forward," continued Gruber.
Overall, Gruber said Gevo expects to see the plant EBITDA breakeven by the end of the year. In addition, by the end of the fourth quarter, the company expects the production of isobutanol to be reliable, meaning the product can be sold on a normal ongoing commercial basis.