VeraSun: Mediocre Second Quarter Results; Third Quarter Looks Promising

VeraSun Energy Corp. reported mediocre second quarter earnings this morning due to high corn costs. The company paid an average of $3.62 per bushel which at least was an improvement from their first quarter cost of $4.05 per bushel. Aventine's corn costs, on the other hand, sequentially increased from $3.45 to $3.99 per bushel.

Corn costs for VeraSun are expected to take a steep drop third quarter. In today's earnings conference call, CEO Donald Endres estimated costs to be in the $2.90-$3.00 range (per bushel). This is great news. On the contrary, Aventine expects their corn costs in the third quarter to average $3.70 per bushel. This is not so great news.

Here is what VeraSun has been paying recently for its corn at its three ethanol plants:

Date Aurora Plant Fort Dodge Charles City
7.23.2007 $2.90 $2.85 $2.78
7.25.2007 $2.84 $2.79 $2.72
7.26.2007 $2.90   $2.85 $2.78
7.27.2007 $2.93 $2.88 $2.81
7.30.2007 $3.04 $2.91 $2.84
7.31.2007 $3.06 $2.96 $2.86
8.01.2007 $2.99 $2.89 $2.79

Ethanol sales for the second quarter totaled 63.4 million, an 11 percent increase over second quarter 2006. The increase was due to the opening of VeraSun's Charles City, Iowa plant. With a production capacity of 110 million gallons per year, the plant started operating in early April. The plant is currently operating at full capacity. VeraSun managed to sell its ethanol at $2.21 per gallon, up from $2.13 in their first quarter. CEO Donald Endres expects ethanol prices to be in the $2.00 - $2.15 range third quarter.

Overall, VeraSun's earnings fell 23 percent. The company earned $15.1 million, or 19 cents per share, compared with $19.6 million in the second quarter of 2006. However, VeraSun managed to beat analysts' expectation of 14 cents per share. VeraSun's revenue of $169.6 million, though, just came short of analysts' expectation of $172.4 million.

Investors should look forward to VeraSun's third quarter with their corn prices low and the Charles City, Iowa plant running at full capacity.

VeraSun which currently has a production capacity of 340 million gallons per year, is hoping to expand to one billion by the end of 2008.


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