VeraSun Earnings: Corn Prices Up, Profit Down

Wall Street was expecting a net loss from VeraSun on Wednesday, but the ethanol company surprised with a profit of 4 cents. That was good enough news to lift its shares up 4 percent to close at $6.96.

But that was about as good as the news got. The 4-cent profit for the most recent quarter was rather puny compared to the 27 cents a year earlier.

VeraSun (VSE) has done a good job of trimming costs in the face of record corn prices, but it’s fighting an uphill battle. It’s ramping up capacity, and its planned acquisition of U.S. BioEnergy, expected to close by April, will add to economies of scale and make VeraSun the biggest ethanol producer in the U.S.

Still, VeraSun said the average price of corn it paid in 2007 was $3.60 per bushel, up from $2.16 cents in 2006. Meanwhile, the average gross price of ethanol sold in 2007 fell to $1.99 per gallon from $2.18 in 2006. Some analysts have suggested corn prices could stabilize or even correct this year, and VeraSun seems optimistic that ethanol prices could keep pace with corn prices, making the summer a better season for the industry.

VeraSun CEO Don Endres said Wednesday that the company is positioned to be a low-cost, high-volume leader in the ethanol industry. That sounds good, but it doesn’t overcome the prospect that the industry itself could continue to see hard times for a while.


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