Gevo Q1 results highlight isobutanol batches, jet fuel agreement

By Katie Fletcher | May 12, 2015

On May 12, Gevo Inc. released its financial results for the three months ended March 31, with an update on recent corporate highlights, including successful isobutanol batches run at its Luverne, Minnesota, plant and the recent jet fuel agreement with Alaska Airlines.

The company reported revenues of $5.9 million compared to $900,000 in the same period in 2014. The increase in revenue during the year is primarily a result of the production and sale of approximately $5.1 million of ethanol and distiller’s grains following the transition of the company’s Luverne plant to the side-by-side (SBS) configuration. The SBS mode provides the plant with the capability of producing both isobutanol and ethanol simultaneously.

During the quarter, hydrocarbon revenues were $500,000, primarily related to the shipment of biojet fuel to the U.S. military during the first quarter. The company also generated $300,000 in revenue during the quarter associated with ongoing research agreements.

The cost of goods sold increased by $4.6 million during the first quarter compared to the comparable period in 2014, due primarily to the increased production activity at the Luverne plant. Gross loss reported for the quarter was $3.3 million, and after deducting $1.5 million of depreciation expense, the non-GAAP cash gross margin was a negative $1.9 million for quarter one, compared to a negative $3.2 million in the same quarter in 2014. The quarter ended with cash and cash equivalents of $4.4 million. The net loss for the first quarter of 2015 was $7.3 million compared to $12 million during the same period in the prior year. Gevo reported a loss of 88 cents on earnings per share (EPS) for quarter one 2015.

Patrick Gruber, CEO of Gevo, began the investor call discussing the company’s plant in Luverne. “We produced ethanol and also ran isobutanol as we needed to,” Gruber said. “In the isobutanol runs we proved out the performance of an approved yeast biocatalyst. We also supported due diligence efforts being conducted by different parties.”

He added that the isobutanol process ran well. “We are pleased that the diligence showed that our projections of full-scale costs to produce isobutanol look good, meaning that the isobutanol process should give margins of 50 cents to $1 per gallon.”

Overall, revenues for the plant decreased for the first quarter 2015, as compared to those reported during the fourth quarter of 2014. Gevo attributes the decrease to a combination of lower ethanol prices and lower overall ethanol and isobutanol production.

As far as licensing, Gevo has been working with Praj Industries Ltd., a process engineering and equipment manufacturing company for the ethanol and brewing industries, to license and commercialize Gevo’s isobutanol technology globally. The company is on target to sign at least one binding agreement with at least one licensee for its isobutanol technology this year, Gruber said during the earnings call. “We should be able to do this based on the feedback we’ve received,” he said.

According to Gruber, Gevo has seen strong demand globally for the licensing of its isobutanol technology, and there appears to be growing interest in South America using both sugar cane and corn as feedstocks. “I really like that we are achieving geographical diversification for our isobutanol technology,” Gruber said.

Also discussed during the earnings call was an announcement made in May that Gevo signed a strategic alliance agreement with Alaska Airlines to purchase Gevo’s renewable jet fuel and fly a commercial flight on alcohol-to-jet fuel (ATJ). “Alaska Airlines is a forward-thinking company and we look forward to working with them,” Gruber said. “They know they need a strategic alternative to petro-jet and they are willing to step up, they know they can’t just sit back and wait.”

Gruber said the company has been running and testing jet fuel on octane since 2011. “The conversion technology to make these fuel products is ready for primetime we believe,” he said.

Gruber said projections show ATJ could have much less volatility month-to-month when compared to petro-jet. Gruber also mentioned that airlines will probably have to deal with a carbon tax at some point, and ATJ serves as a good alternative.

An uptick in interest for isooctane, a key ingredient to make high-performance gasoline fuels, was also mentioned. “Going forward we’re going to focus on getting license deals completed, moving forward on the alcohol and the hydrocarbons and moving it towards the jet or to the ethanol—the propylene and the hydrogen—I want to see how this unfolds, it’s exciting,” Gruber said. “I also like the progress we’re making with our technology and on the intellectual property front.”