VeraSun forecasts drastically higher 3Q loss

The Associated Press
Published: November 13, 2008

SIOUX FALLS, South Dakota: Ethanol producer VeraSun Energy Corp. said it expects to report a third-quarter net loss of about $464 million — more than four times the number quoted in an earlier announcement that accelerated the company's fall into bankruptcy protection.
Verasun also said it was unable to report quarterly earnings this past Monday as scheduled because of "extraordinary and critical demands" of the bankruptcy filing.
The second largest U.S. producer, with about 13 percent of the nation's ethanol capacity, filed for bankruptcy protection two weeks ago citing volatile corn prices and bad bets on corn futures.
In mid-September, the company had estimated a quarterly loss of $63 million to $103 million. VeraSun earned a profit of $7.8 million in the third quarter of 2007.
VeraSun in a Wednesday filing with the U.S. Securities and Exchange Commission said that its quarterly earnings would be filed by Nov. 17.

The company said it expects to report a third-quarter gross loss — net sales less the cost of goods sold — of $206.7 million. VeraSun expects to report "a substantial operating loss" for the quarter of as much as $637 million, it said in the filing.
The company expects third-quarter revenue of $1.08 billion, up from $221.9 million during the year-ago period, on increased ethanol sales at higher prices.
VeraSun, founded in 2001, went public in June 2006 amid perfect market conditions. Corn was cheap, gas cost a bundle and refiners were clamoring for more ethanol to use as a cleaner-burning alternative to the additive MTBE.
But skyrocketing corn costs began cutting into ethanol producers' profits, and many tried to use hedging to control costs. Hedging sets future prices for corn sellers while helping buyers avoid the risk of volatile price swings by letting them lock in at a set cost.
After VeraSun locked into prices for its feedstock for the third quarter, corn went into a sharp decline from almost $8 per bushel to less than $5 per bushel in mid-August.
The company in mid-September tried to raise $20 million in a public offering, but later scrapped that plan and retained Morgan Stanley to help it evaluate "strategic alternatives" involving anything from a buyout to a partial sale of assets.
Trading of the company's shares on the New York Stock Exchange was suspended on Nov. 3.