Renewable Energy Group, Inc. (Nasdaq:REGI) today updated its financial guidance for the third quarter of 2012.
For the third quarter, REG now expects to report Adjusted EBITDA * ranging from a loss of $2 million to a loss of $7 million. The company’s prior guidance for Adjusted EBITDA was a gain of $10 million to $15 million. The company expects to report gallons of biodiesel sold in a range of 60 to 63 million, compared to prior guidance of 55 to 60 million. The change in guidance is directly related to movements in commodity prices, a steep depreciation in the price of RINs and tighter margins than expected.
Mr. Daniel Oh, President and Chief Executive Officer stated, “Despite these fluctuations in our markets, we remain optimistic about the long-term prospects for REG and the biodiesel industry. The recent finalization of the 2013 RVO provides growing demand for the next year. Our flexible feedstock technology gives us a long term advantage as a low cost producer, since we can adjust to fluctuations in feedstock prices. Furthermore, REG continues to have a strong balance sheet with cash to sustain our growth strategy.”
"Our risk management positions serve the economic purpose of reducing the effect of changing commodity prices and protecting the margin and profitability of contracted biodiesel sales. Volatile commodity fuel prices late in the quarter affected the market value of financial contracts, causing most of the reduction in Adjusted EBITDA; however, the cash margin earned from biodiesel sales is protected by utilizing these financial contracts,” continued Oh. “From an accounting perspective, we must recognize such risk management losses in the third quarter, although the biodiesel sale that a position is protecting may occur in the fourth quarter.”Oh continued, “A secondary driver of our results was the decline in biodiesel RIN prices of approximately 35% during the quarter, which negatively impacted our revenue and resulted in tighter margin per gallon sold than expected. RINs can and do trade separately from energy and fluctuate in value based on supply and demand.”