Eight Biofuel Stocks That Turn a Profit
Despite strongly growing global demand for ethanol and other biofuels, a surprisingly small number of companies actually make a profit.

Biofuels are booming. Increasing acreage is being given over to sugar cane, corn and soybeans, in order to produce biofuels. Despite rising costs, increasing competition and fears that the sector has expanded production too quickly, some companies are making good profits.

Yet, perhaps surprisingly, the number of these corporations is not great. Most companies in the sector lose money. Some do not even have any revenues.

Here, then, are eight companies that actually turn a profit:

The Andersons is a leader in grain and fertiliser merchandising in the Eastern seaboard. From this base it has moved into ethanol production, and this has become its fastest-growing product. It reported ethanol revenues of $85 million in the September 2007 quarter – 15 per cent of total company sales – compared to no ethanol revenues in the 2006 third quarter.

Archer Daniels Midland Company is a major global food processor. It has moved into biofuels, and is the largest fuel ethanol producer in the US and a world leader in biodiesel. It reported that corn processing bioproducts operating profit fell from $625 million in the December 2006 half to $528 million in the December 2007 half, due to higher corn prices and lower ethanol selling prices, partly offset by increased ethanol sales volumes.

China Clean Energy, based in the US, owns China-based Fujian Zhongde Technology, a specialty chemicals refiner that is moving strongly into biodiesel production, for the Chinese market. In the September 2007 third quarter it reported that biodiesel shipments were up 91 per cent from September 2006, to comprise 29 per cent of total revenues. It expects to launch production at its new 100,000-ton biodiesel plant in Jiangyin late in 2008.

Cosan is Brazil’s largest sugar producer. It is also the country’s largest ethanol producer and the world’s second-largest. Ethanol comprises about a third of total company sales. Lower prices for ethanol (and sugar), along with the appreciation of the Brazilian currency, pushed down profits quite sharply in the company’s October 2007 quarter. The company announced that it was holding back some sales in anticipation of rising prices.

Gushan Environmental Energy, listed on the NYSE late in 2007, is China’s leading biodiesel producer, based mainly on vegetable oil offal and used cooking oil. It expects to boost annual production from 240,000 tons to 400,000 tons by the end of 2008.

MGP Ingredients is a food processor and producer of ingredients and distillery products. Ethanol sales accounted for about 45 per cent of total company revenues in its June 2007 year, and MGP said it was also a strong driver of profits. However, higher corn prices and lower ethanol sales prices hurt September 2007 first-quarter profits.

US BioEnergy is a leading and fast-growing ethanol producer, operating from four plants, with a further four under construction. Thanks to lower costs and higher volume sales, it reported a profit rise in its September 2007 quarter from the previous quarter, despite declining ethanol sales prices. It plans to merge with VeraSun Energy.

VeraSun Energy, based in South Dakota, produces ethanol from five plants, with four more under construction. Its September 2007 third-quarter results showed sales up strongly from the September 2006 quarter, but with profits down, hit by higher costs and reduced ethanol prices. It plans to merge with US BioEnergy.

February 6th, 2008

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Eight Biofuel Stocks That Turn a Profit Despite strongly growing global demand for ethanol and other biofuels, a surprisingly small number of companies actually make a profit.

Eight Biofuel Stocks That Turn a Profit
Despite strongly growing global demand for ethanol and other biofuels, a surprisingly small number of companies actually make a profit.