Quarterly financials provide snapshot, construction funding loosens

By Nicholas Zeman | September 18, 2009
Financial reports of international biodiesel companies reveal an industry in turmoil. Palm oil production and palm methyl ester sales are strong. Asia is increasing its exports to Europe, and a South Korean company, in particular, has taken advantage of demand there, adding $48 million in revenue from one sale. While a Wall Street Journal headline characterizes the U.S. biodiesel industry as "running on empty," the world market is seeing renewed interest in new projects and cargo shipments continuing to move.

Construction firm BioDiesel International AG, headquartered in Grambach, Austria, is seeing financial interest in new projects again after the extended credit crunch since the global recession began. Several factors are spurring new construction and investor confidence, including greater yields, the ability to meet stricter quality standards and ever increasing feedstock flexibility, said Oberzaucher Bernd, BDI marketing and communications manager.
BDI is spurring the construction of new biodiesel plants with multi-feedstock technology. This includes improving biodiesel quality to fulfill stricter standards, increasing of feedstock flexibility and processing of high free fatty acid feedstock to reach greater yields. Other features the company pushes involve upgrading process automation, reducing operating material, energy consumption and plant safety. Adapting to new regulations is also very important.

"When key criteria for a successful biodiesel project are fulfilled, funding is easier," Bernd said. "Key criteria are secured feedstock supply and off-take markets, proven technology [which includes] guaranteed capacity, yield and the ability to adapt to upcoming stricter standards."

BDI reported sales in the first six months of 2009 were actually down nearly 20 million ($28 million) from 2008, but it recently received a 31 million order to build a biodiesel plant in Amsterdam, Netherlands. Therefore, total orders on hand amounted to 47.5 million. The company said it is "delighted" that the European Parliament now specifies that biofuels produced from waste and residual materials are rated twice as high as other biofuels as far as CO2 assessment is concerned.

Biodiesel Magazine found Asian companies are performing particularly well. Take the case of Wilmar International Ltd., headquartered in Singapore. In 18 years, it has gone from a small palm oil trading company to a multinational agribusiness that posted 23 percent growth in the second quarter, ending June 30. The group's total assets at that date were $20.7 billion. The company's first biodiesel plant in Riau, Indonesia came on line in January 2007 and has a current production capacity of more than 107 MMgy.

Willmar added two more biodiesel plants at the same site later in 2007 identical to the first facility, and has a combined biodiesel manufacturing capacity of approximately 320 MMgy. Palm oil is the feedstock of choice and one of the largest companies on the Singapore Stock Exchange reported that plantations and palm oil mills "registered a 26 percent increase in pre-tax profit to $107 million due to higher [crude palm oil] selling prices and higher production volume." ADM Asian Pacific Ltd. is a reported partner of Wilmar in several palm oil plantation companies that own 85,000 hectares (210,000 acres), mostly in Indonesia. Wilmar's total "land bank" weighs in at more than 180,000 hectares.

To the north in the Philippines, Manila's integrated oleochemical company, coconut grower and biodiesel producer Chemrez Technologies Inc. said that its coco-biodiesel sales were driven up by "the step up local requirements as the government mandate for biodiesel blend was increased from 1 percent to 2 percent effective February 6, 2009 pursuant to the Biofuels Act of 2006," the company reported in August. Chemrez said it is the largest biodiesel manufacturer in the Philippines and has a market share of 50 percent. Backed by strong demand for biodiesel and oleochemicals, Chemrez stated the bulk of revenues was "contributed by coco-biodiesel sales but these gains were partially dampened by the general soft pricing on account of much lower coconut feedstock costs and a more intensely competitive market environment."

An international trade deal increased the revenue of South Korea's SK Chemical, which recently completed its first biodiesel plant with more than 30 MMgy in production capacity at a refinery complex in Ulsan, South Korea. Switzerland-based Trafigura Beheer BV, an international oil trader that set up a biofuels desk in Singapore this year, has agreed to buy 18.48 million gallons from SK over the next year in a transaction estimated to be worth $48 million. The Asian chemical operation recorded total sales of $863 million and an operating profit of $59 million in 2008.

In the U.S., for the six months ending June 30, GreenHunter Energy Inc. of Houston reported a net loss of $4.3 million as compared to a net loss of $15.6 million in the same six-month period in 2008. The company has reportedly stopped producing at its refinery and is looking for a buyer. Dallas-based Evolution Fuel financial statements reflect the recognition of a gain of $14.46 million for the six-month period ending June 30, primarily "as a result of further reductions of debt and the elimination of certain contingent liabilities," the company stated in an August press release. Evolution Fuels has stopped production and stated in a Securities and Exchange Commission filing that it may not be able to continue.

In June, Nova Biosource Fuels of Montana was scheduled for delisting from the New York Stock Exchange for performance failures, having filed for bankruptcy protection in March. Global agri-giant Cargill Inc., one of America's largest biodiesel producers, reported net earnings of $327 million in the fiscal 2009 fourth quarter, down 69 percent from $105 billion in the same period last year. The company stated, however, that agricultural services in origination and processing remained strong and losses were related primarily to "risk management and financial" performance in the markets. Archer Daniels Midland Co. added that oilseed processing operating profit decreased as global demand weakened, down 73 percent to $208 million in quarter four 2009. "Refining, packaging, biodiesel and other operating profit decreased $13 million for the quarter," ADM reported. "Decreased European biodiesel margins and restructuring charges related to the Stratas JV (joint venture) negatively impacted results."
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