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Wednesday, May 13, 2020
Gevo, Inc. (GEVO)
Wider Quarterly Loss, But Cost Cuts Are Positive
Gevo Inc is a renewable chemicals and biofuels company engaged in the development and commercialization of alternatives to petroleum-based products based on isobutanol produced from renewable feedstocks. Its operating segments are the Gevo segment and the Gevo Development/Agri-Energy segment. By its segments, it is involved in research and development activities related to the future production of isobutanol, including the development of its biocatalysts, the production and sale of biojet fuel, its Retrofit process and the next generation of chemicals and biofuels that will be based on its isobutanol technology. Gevo Development/Agri-Energy is the key revenue generating segment which involves the operation of the Luverne Facility and production of ethanol, isobutanol and related products.
Poe Fratt, Senior Research Analyst, Noble Capital Markets, Inc.
Refer to the full report for the price target, fundamental analysis, and rating.
Wider 1Q2020 loss, but 2020 estimated EBITDA losses narrowed to $14.4 million due to idling of Luverne plant in response to ethanol market weakness. Adjusted 1Q2020 EBITDA of $(6.3)
million was wider than $(4.0) million in 4Q2019 due to weaker ethanol market. Luverne plant idling reduces operating losses and improves cost structure to push quarterly cash burn down below the $4 million range.
Solid progress on Phase 1 goal of lower carbon intensity. Luverne plant idled for foreseeable future, but no change in near-term strategy. Wind energy is now in place and biogas strategy continues with build out of renewable natural gas (RNG) production. Phase 2 expansion backed by existing supply portfolio. Supply agreements of 17 million gallons/year in place (valued at $600 million) and potential supply agreements in the up to 70 million gallons/year range (~$1.5 billion of added value) are ongoing despite the current turmoil in the airline/refining industries. Interest in commercializing the concept remains high and industry partners could be added shortly. Potential expansion plans include retro-fitting two other existing ethanol plants and…
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