Pacific Ethanol, Another Ethanol Play Near Bankruptcy (PEIX)

Pacific Ethanol Inc. (PEIX) is still alive.  That is more than many ethanol companies can say.  The question is how long it can manage to survive.  After the open this morning, Pacific Ethanol filed a non-timely 10-Q with some basic data on the company’s first quarter results as far as what it expects.  It also comes with an ominous warning for shareholders.

The company, once backed by none other than Bill Gates, posted a loss of $23.9 million and a per share number at -$0.43 EPS.  It now anticipates reporting net sales of approximately $86.7 million for the three months ended March 31, down from $161.5 million for the same period in 2008.  The decline was in both volumes sold (some 24% in volume) of ethanol and in lower average selling prices (decreased 28% to $1.65 per gallon).

Its gross loss will be approximately $11.1 million, down from a gross profit of $15.7 million in Q1-2008; and it expects gross margin to be negative at -12.8%, compared with gross profit margin of 9.7% a year ago.

You know how little we think of ethanol. The statement from the company also sums this up better than we could ever say: If the company cannot restructure its debt and obtain sufficient liquidity in the very near-term, the company will need to seek protection under the U.S. Bankruptcy Code.

PEIX shares are down 8% at $0.66 and the 52-week trading range is $0.20 to $6.86.  If a bankruptcy comes into play here, that old $20+ handle two years ago will be as relevant as gold to a dead man.  There is no reason to think that shareholders will have anything left if and when it files for bankruptcy protection.

JON C. OGG