Q4 2020 Alto Ingredients Inc Earnings Call
Okay.
Ladies and gentlemen, thank you for standing by and welcome to Alto ingredients fourth quarter and year end financial results Conference call.
At this time all participants are in a listen only mode. After the speaker's presentation there'll be a question answer session to ask a question. During the session you will need to press Star then one on your telephone please be advised that today's call is being recorded if.
If you require additional system price started this new York's reached an operator.
Oh nice to hand, the call over to Moriah Shilton. Please go ahead.
Thank you Michelle and thank you all for joining us today for the Alto ingredients fourth quarter and full year 'twenty 'twenty results conference call.
On the call today are Mike Mcandrew, CEO and Bryon Mcgregor CFO.
Mike will begin with review of business highlights.
Brian will provide a summary of the financial and operating results.
And then Mike what we're trying to discuss alto ingredients outlook and open the call for questions.
I'll tell ingredients issued a press release yesterday, providing details of the Companys quarterly and full year results.
The company also prepared a presentation for todays call that is available on the company's website at alto ingredients dotcom.
A telephone replay of today's call will be available through March 18th.
The details of which are included in yesterday's earnings press release.
A webcast replay will also be available at alto ingredients website.
Please note that the information on this call speaks only as of today March 11.
We're advised that time sensitive information may no longer be accurate at the time of any replay.
Please refer to the Companys Safe Harbor statement on slide two other presentation available on line.
They took some other comments in this presentation constitute forward looking statements and considerations that involve a number of risks and uncertainties.
The actual future results of all two ingredients could differ materially from those statements.
That could cause or contribute to such differences include but are not limited to events risks and other factors previously and from time to time disclosed and also ingredients filings with the SEC.
Except as required by applicable law the company assumes no obligation to update any forward looking statements.
In management's prepared remarks, non-GAAP measures will be referenced.
Management uses these non-GAAP measures to monitor the financial performance of operations and believes these measures will assist investors in assessing the company's performance for the periods being reported.
The company defines adjusted EBITDA as unaudited net income or loss attributed to alto ingredients before interest expense provision or benefit for income taxes.
Net impairments loss on extinguishment of debt purchase accounting adjustments fair value adjustments and depreciation and amortization expense.
To support the company's review of non-GAAP information later in this call a reconciling table was included in yesterday's press release.
It is now my pleasure to introduce Mike, Kansas CEO, Mike.
Thank you, Brian and thank you everyone for joining us today I'm excited to be with you. This morning to discuss the ongoing transformation of Alto ingredients I'll begin with the recap of the major milestones over the past 12 months, and then turn to a discussion of the business today, and our business and growth drivers in <unk>.
<unk> 21 and beyond.
We entered 2020 with an annual ethanol alcohol production capacity of 605 billion gallons, 14% of which were approximately 85 million gallons with specialty alcohol produced at our Pekin, Illinois campus, our longstanding specialty alcohol beer.
<unk> is profitable, but results have been obscured in the past few years and more recently by operating losses, and our renewable fuel business.
We reduced our ethyl alcohol annual production capacity by 55% through a combination of idling unprofitable fuel ethanol plants and selling certain undervalued production assets to stem these unsustainable losses.
The majority of the proceeds from our asset sales were used to repay debt and improve the company's balance sheet.
Today, we have total production capacity of 450 million gallons and our operating facilities with an annual production capacity of 290 million gallons, all operating facilities, alright, EBITDA breakeven or better.
Focusing on our core strengths, we maximize production of specialty alcohol at our Pekin campus, where spot demand was expanding rapidly in response to the COVID-19 pandemic and increased our annual specialty alcohol production capacity in 2020 to 110.
Gallons.
We also completed the refurbishment of our grain neutral spirits system or <unk> at our Pekin campus by year end further increasing our annual specialty alcohol capacity to 140 million gallons entering 2021, which makes us the largest producer.
Our specialty alcohol in the nation.
In summary over 48% of our production capacity at our operating facilities and over 56% of our Pekin production capacity is now capable of producing alcohol.
<unk> or exceeds USP quality specifications.
We sold assets and generated substantial cash flow from operations over the past three calendar quarters. We also completed an equity raise in October generating $70 million in net proceeds these additional steps accelerated our ability to repay $146 million.
Dollars and total debt over the past 12 months materially reducing interest expense and strengthening our balance sheet and positioning us for the growth opportunities. We see ahead. We are now net term debt free and on target to be term debt free in 2020.
One Brian will discuss additional details in his prepared remarks finally to cap off the year, we announced a corporate rebranding our new corporate name Alto ingredients and new ticker symbol a L. T O embody our goal to deliver the highest levels of integrity.
Purity and quality to create greater value for our customers partners and shareholders in.
In summary, we are pursuing a consistently profitable path forward, which in 2020 produced adjusted EBITDA exceeding $67 million. This achievement was within the guidance. We gave in October of last year.
Turning to our business today, we are now a leading producer of specialty alcohol and a central ingredients are specialty alcohol products are used in common everyday consumer goods, including mouthwash cosmetics, sanitizers disinfectants and cleaning products. The majority of these <unk>.
<unk> are sold under fixed price contracts that are one year duration or longer.
Not only provides us with better visibility, but allows us to hedge our primary input costs and improved control over our bottom line results.
Hand, Sanitizers, we're in the forefront of the news last year and bolstered our positive 2020 results, particularly in Q2, and Q3 and Q4 and continuing today the surge and sanitizer demand has tempered by the resurgence in Covid restrictions and then abundant.
<unk> product.
In anticipation, we concentrated our efforts to deepen and strengthen our sales in non sanitizer product lines and to work with dominant named brand consumer product leaders, such as Procter and Gamble Michcon MVP to name a few.
As a result, our production mix today is well diversified with approximately 90% of our contracted volume being sold to major producers of food and beverage and home and beauty products and only 10% of our contracted volume going to sanitizer products are.
Although we've seen sanitizer demand returned to pre Covid levels, we do expect additional tail winds and demand to increase as restaurants arenas theaters offices in stadiums reopen and social activities increase existing low quality sanitizer inventories.
Will be consumed and replaced by higher quality products.
Utilize USP grade alcohol.
In short, we are well positioned to support customer needs for USP, API and beverage grade alcohol for 2021, and beyond and to provide quality products for consumer goods and sanitizer demand as needed.
For essential ingredient markets are painful campus has for decades produced a wide selection of products, such as corn meal, corn germ and east for use in human and pet food production. Most of these higher value and higher margin ingredients are produced at our wet mill.
<unk> co product returns in excess of 54% and lifting our average return across all operating facilities roughly 44%. Some of our highest quality products are also sold under fixed price, one year contracts or longer to customers such as Nestle and Purdue.
<unk>.
Regarding our renewable fuel products, we will continue to produce fuel ethanol to not only support our specialty alcohol production, but also to capitalize on ethanol beneficial low carbon characteristics integral to the ultimate de carbonization of our environment and we are.
We're optimistic about industry discussions around carbon reduction.
All this being said ethanol margins remained depressed even more so for our western operations.
After considering all reasonable alternatives and determining how and where to optimally deploy our resources and capital we have decided it best to consider monetizing both of our idled, California facilities.
Doing so will not only further strengthened our balance sheet, but also improve profitability by eliminating fixed carrying costs on idled assets.
Pivoting to 2021 and beyond today, we have contracted approximately 65% of the 110 million gallons of specialty alcohol capacity that was available during last fall's contract cycle or 50% of our now expanded capacity of one.
<unk> 40 million gallons.
This represents a significant increase in both total gallons contracted and average price over our 2020 contracts negotiated in the fall of 2019. It also reflects reductions we've made to reflect the realities and current dynamics and sanitizer consumption.
To this end, we are working with our customers to facilitate the blending and extending of these contracted volumes into 2022, and 2023 should consumer demand proved less than our customers originally anticipated.
As we look beyond 2021, I'd like to share a few of our longer term opportunities that will drive further growth for alto ingredients first we have worked diligently and collaboratively with key customers to obtain three critical and difficult to achieve.
<unk> for our specialty alcohol production ISO 9001, IC HQ seven an ex Pat to support further penetration of domestic and international markets that require the highest quality products. As previously noted most of these products are contracted under.
Fixed terms each fall for the following year. Our goal is to continue to increase our share within the health home beauty and food and beverage markets to sell or expand capacity at higher values.
Second we are increasing our use facilities annual production capacity by approximately 15% we remain on schedule.
And on budget to complete the expansion by Q3 of 2021. This project will require a relatively low capital investment.
$5 $5 million and is expected to produce a payback in less than two years are over $3 million annually and EBITDA.
Additionally, this expansion represents only the first phase of the option to expand production of even higher value use derivatives with similar payback profiles.
In addition to the East expansion project, we have currently earmarked an additional $14 million in various capital projects that are expected to expand revenue increased efficiencies and the ore plant reliability. And example is the upgrade to our pekin feed dryers. This three.
$5 million enhancement is expected to produce even higher valued feed improve overall plant efficiency and reliability and as a result increase annual EBITDA by approximately $1.4 million beginning this year in Q4.
Also as recently mentioned income congressional congressional subcommittee hearings on climate change our Pekin campus sits on top of the mountain Simon sandstone formation considered to be one of the most significant potential carbon storage resources in the United States.
As a member of the carbon capture coalition, we are actively engaged in discussions to develop a carbon capture and sequestration program at the Beacon site and look forward to sharing more information regarding this uniquely profitable opportunity as activities progress.
We believe alto will be an active player in the carbon capture space.
There remain additional projects under development with attractive return profiles, we look forward to discussing them with you over the coming months. Once they are fully developed and approved with that I'd like to turn the call over to Brian for a discussion of the financials Bryan.
Thank you Mike.
I'll discuss a few financial highlights and metrics for the fourth quarter and full years 2020, and provide some thoughts on our expectations on certain metrics for 2021.
For the fourth quarter of 2020, net sales were $169 million compared to $205 million in the third quarter, the decline, resulting primarily from reduced demand for transportation fuels.
And rationalizing our third party trading volumes to focus on profitable geographical segments.
Our trading volume reduction was tempered by an increase in fuel grade ethanol production from our Pekin campus, mostly attributable to the restart of our dry mill that remained offline due to logistical constraints caused by extended Illinois River lock repairs from June through October.
As Mike noted earlier, we also saw a drop in customer demand for especially alcohol per sanitizer as retail shelves remained overstocked with lower quality sanitizer products.
Net sales were down by $189 million as compared to the same period in 2019, reflecting the idling or sale of most of our renewable fuel production.
Loss available to common shareholders.
Was $25 million or <unk> 30 per diluted share compared to income of $14 9 million or 24 per share in the third quarter.
This loss is attributable to the impairment charges of $24 4 million.
Associated with our western assets and their transition to assets held for sale on the balance sheet.
Without these onetime impairments, we would have generated a positive net income for both the fourth quarter.
The full year.
Adjusted EBITDA was a positive $16 $4 million, bringing our second half of 2020, adjusted EBITDA to $55 3 million.
Within our guidance.
For the full year of 2020 net sales.
$897 million compared to $1 4 billion in 2019.
Reflecting the idling of most of our renewable fuel production.
Cost of goods sold was $844 million, which resulted in gross profit of $53 million for 2020 compared to a gross loss of $10 million in 2019.
Cost of goods sold also included approximately $19 million and gross loss.
Associated with our idled production.
We expect these costs to be lower going forward as we implement our strategic initiatives to reposition or further monetize the idled facilities.
As Mike mentioned, we currently have earmarked approximately $20 million in capital growth projects this year, including the $5 $5 million per use expansion.
The remaining balance is intended to fund projects that will further increase our production of higher value feed as well as improve their reliability efficiency and safety of operations.
Yeah.
SG&A expenses were $32 million down compared to $35 million in 2019.
Due to a reduction in professional fees related to our efforts to resolve our debt issues.
Having resolved these issues and further reduce overhead costs, we expect SG&A expenses for 2021 to total between 20 million and $25 million.
Loss available to common shareholders was $16 4 million or <unk> 28 per diluted share compared to loss of $90 million or $1 90 per share.
2019.
Adjusted EBITDA was positive $67 4 million compared to negative $1 $7 million in 2019.
Turning to our balance sheet at December 31, 2020, our cash and cash equivalents were $47 7 million compared to $38 7 million at September 32020.
Improvements in the balance sheet came predominantly from improving improve profitability asset sales and proceeds from the public offering completed in October for net proceeds of $70 million.
Of these proceeds we used approximately $60 million to accelerate our repayment of high cost debt.
In total for the fourth quarter, we reduced our debt outstanding by $66 million.
The combination of $43 million in there and our term debt and $23 million and our line of credit as a result.
We reduced our debt by approximately $146 million during 2020.
Proceeds from our future asset sales will be used to further retire debt.
Bolster liquidity and fund needed capital projects.
Given the ongoing market demand dynamics and associated volatility in both the hand, sanitizer and renewable fuel markets. We believe it is inappropriate to provide guidance at this time.
What we can provide us additional framework related to our specialty alcohol contracted product.
Setting aside the many other variables, including the sale of both our renewable fuel and on contracted specialty alcohol, we would expect our specialty alcohol contracted sales to contribute at a minimum $60 million and gross profit for 2021.
As noted there are significant items that could materially impact these results first.
Export sales.
And growth in specialty and industrial alcohol demand.
The ability of our customers to take all of their contracted volume.
Third market demands for products like hand, sanitizer, and disinfectants getting back to the new normal of people out in the public spaces could have a materially positive impact as.
As we would sell at spot market premiums to meet the greater demand similar to what happened in Q2 and Q3 last year.
Fourth increased ethanol margins as demand rises for renewable fuel as businesses reopen and travel picks up.
Crush margins year to date or negative <unk> 25 per gallon.
Materially impacting profit margins.
Comparatively Q1 2020 gross margins were approximately negative <unk> 11 per gallon.
And while our current operating facilities are operating at EBITDA breakeven or better every five <unk> increase in crush margin directly equates to a $5 million increase in EBITDA on an annual basis.
And fifth realizing the timely close and the cost savings from the monetization of our California plants.
In summary.
For 2021. In addition to this framework, we expect to further reduce annual SG&A expenses by at least $7 million.
To reduce interest expense by as much as $14 million year over year and to reinvest these savings in capital projects that will further improve future results.
With that I'll now turn the call back to Mike. Thank.
Thank you Brian as you can see we've now built a foundation based on consumer demand, we suspended and minimize the impact of unprofitable operations and reduced operating and overhead expenses.
We also believe our transformation is far from complete.
With a significantly improved balance sheet, we are actively developing and exploring new build and buy opportunities to grow and expand our business to further increase revenues and profitability, while maintaining and controlling expenses.
We look forward to sharing more information with you regarding our plans over the coming months and years I'd now like to open the call for Q&A operator.
As a reminder to ask a question. Please press Star then one if your question has been answered and you'd like to leave yourself from the queue price per pound key.
Our first question comes from Eric Stine with Craig Hallum. Your line is open.
Hi, Mike Hi, Brian.
Hey, Eric.
So just trying to do the math here on you know and I know that you're kind of separating out the.
The volumes that are not contracted and you're also suffering separating out ethanol, but if I do the math.
I mean, it feels to me like that's basically a kind of an EBIT.
Kind of flat year over year.
Roughly but then you know then obviously there would be above and beyond that spot market sales, so that sort of thing.
That a fair way to characterize it.
I suppose I guess the <unk>.
Got to take into account all of the other factors that.
It occurred in 2020.
That is not in the numbers that I just gave you.
When you've got you've got the ethanol sales you've got other and other items that are impacting those results as well.
I would say that it's actually an improvement.
Okay. No. That's fair I mean, just to be conservative I mean, just to kind of set a baseline.
Doing the math on your gross margin your gross profit guide, what you've talked about for SG&A.
So that's a good starting point.
Maybe.
Maybe just curious then how do you how do we think about the rest of it so you've got $70 million.
Under contract at better pricing.
And maybe that's that's the reason why it's higher year over year.
But then in terms of the additional well that you brought on it sounds like you missed the window. So that's the reason why some of that additional $30 million of G&A facility is not.
Under contract.
That I mean, so how should we think about the rest of that because clearly.
I mean, there's a lot more volume that will contribute above and beyond whatever we judge the guide to be for.
2021, just on the base.
Yes.
I think one of the things we recognized Eric early on and I, Brian commented on it.
We saw the.
The slowdown in sanitizer, which was kind of leading the charge in Q2, and Q3 and really bolstered the results and immediately we shifted our focus to doubling down on getting the certifications working with customers like Procter and gamble too.
Intensify our efforts around gaining certifications that would.
Give us a leg up in terms of quality and.
The ability to penetrate new markets and so that that is where our focus is you are absolutely right. We had 110 million gallons going into the contract period.
GNL system came on at the end of the year.
And so we have that available to us or another 70 million gallons.
We will work diligently to place during the course of the year and definitely if you think about 2022 and 2023.
All of those gallons will definitely be in the contract cycle.
And we need to be we will be positioned to place those gallons going forward in future years.
This year will be a big effort, using our certifications and customer relations to be able to.
See what the proper direction is but also to place some of those gallons during the course of 2021.
At higher values got it and.
But you may.
Maybe not.
The spot spot sales that you saw and I know it was focused on hand sanitizer more than in Q2, and Q3, I mean, you're still planning to make spot sales of that remaining 70, that's not under contract. It's just that there's variability into what markets those might go into that.
That sort of thing in terms of deciding to not include that as part of your outlook is that fair.
That's fair and I think a couple of markets. In addition to the consumer.
<unk> that we're working hard at to penetrate we're seeing opportunities internationally.
We have some long standing relationships and we've seen that is.
We have an ability to move some of that specialty alcohol internationally when the market spiked in 2020.
Basically there was very little that moved into the international market now we see that as there is an opportunity to place some of that incremental capacity.
Maybe Eric going in and out of that is again just.
One other point is that we intend to produce that specialty alcohol.
That it would sell at a premium.
But we're not we're.
We're not we have not a frame that out for you with regards to what exactly it is not the same as fixed price contracts.
Absolutely.
No. It makes total sense and certainly I mean, it helps obviously to have those two are the three certifications and.
And as you think about making those sales.
In various markets and you would command a premium so.
Okay.
And then maybe just last one for me so.
I guess not a surprise that you've made the decision to sell.
Some of the western plants and just the thought process. It sounds like you're just going to sell the California plants and I know you're producing C O two out of.
You know one of the others.
What's the thinking on keeping the you know the two the one in Oregon and the one in Idaho.
What we will continue to do is monitor.
Where we are with both of those locations.
Again, we've said publicly.
We know for the long term, we have to do some repurposing. If we are going to run those plants to make sure that we can maintain.
<unk> operations on a consistent basis.
The Magic Valley location is very unique in that it has.
Kind of a unique market the markets, we serve out of that location typically have commanded.
Reasonable pricing and we're looking at things like high protein.
At all our dry mills basically.
To take advantage of what we enjoy at our wet mill, which we've been doing for an awful long time.
We are looking currently at expanding that into our dry mills, where it makes sense. So it's a work in progress on Oregon and Idaho.
We're going to work hard to see if there is a positive path forward with California, we looked hard at those and basically came to the conclusion that.
We needed to monetize.
Those those facilities.
And then I'm sorry, just maybe one last one can you just remind us of the carrying costs.
Most recent carrying costs of I guess, maybe just stick with the two in California since those are top of mind.
On an EBITDA basis day.
They cost us anywhere between two and $300000 a month each.
Hey.
Thank you.
Thanks, Eric.
Yeah.
Our next question comes from Amit Dayal with H C. Wainwright Your line is open.
Thank you good morning, Mike and Brian.
Marty.
On the margin front could you give us.
Just color on specialty alcohol margins, excluding ethanol it looks like ethanol just in sort of pressuring are depressing margins when you guys would.
It would be nice.
Just to get a sense of what the specialty oncology margins on a standalone basis.
So I guess, what I'd say is we're not.
We're not prepared to provide for various reasons.
Proprietary.
Yeah.
Competitive reasons, we're not.
The prepared to provide that detail, but what you can see is from the information that we've given you is is that.
That on the gallons that are contracted that there'll be contributing at a minimum.
$60 million in gross margin or gross profit.
So you can put it.
Do the math at least then look on an aggregated basis, what the contracted volumes or and then I guess, what I'd also emphasize as I was thinking about the question. The prior question that we got.
Was that we actually have volumes that are contracted for more than the 70, but we have per that for this discussion to that 70 million gallons because.
We just.
You don't know, what's going to happen with the sanitizer.
Net product that's going into sanitizer market.
And with respect to other specialty alcohol business is there any seasonality in that Bryan or is it pretty steady volume as you know every quarter.
There's a little bit of seasonality, but I don't think anything do you need to make adjustments for in your model.
Okay understood.
<unk>.
Oh.
Interest payments for 2020, one could you give us a sense of I know you said, you're going to be around 14 million lower and.
In that context by 'twenty two.
Be well.
When you eliminate another significant portion of a day potentially.
Given if some of these asset sales go through so just yes, I'll get a sense.
Interest burden other companies with great growth.
Thanks.
So I.
I guess, you know worst case scenarios we have.
We have the <unk>.
In your notes.
Mature in December of this year, we certainly intend to try and pilot pay those off earlier than expected.
The we're actually obligated to use of proceeds from asset sales, particularly western asset sales for the reduction of that debt or elimination of that debt. So yes, we would expect that to come down significantly, but even if you carry that through maturity. It's a significant we're talking about we made a payment.
In January on the senior notes of $5 million.
So we're basically at a $25 million balance.
On the senior notes and.
We would continue to expect to make at a minimum.
Production is amortizing payments on that debt maturity. So.
It's fairly well, particularly compare comparatively to what it was last year.
It's pretty nominal.
Understood. Thank you just one last one other carbon storage side Mike.
The next day or what should we be looking for in terms of developments that need to come through for you guys to take the next steps in moving towards.
Maybe commercializing this opportunity.
Yes, we will.
We'll provide more information as we get it we're very optimistic and excited about that opportunity again, we're uniquely positioned from a geology standpoint, and we also produce.
At that campus a substantial amount.
<unk>.
That would would work well with the project.
We have a couple of parties that we are discussing.
Opportunities with them when we know more we'll certainly.
Share that with you, but we are optimistic about.
It's a long term project make no mistake about it but it's a it's a real mover. If you can pull it together and again, we're uniquely positioned to take advantage of that.
Understood that's all that gas. Thank you so much.
Thanks, a lot.
Again to ask a question. Please press Star then one.
Our next question comes from Amit <unk> with BW gas financial your line is open.
Hi, I was first wanted to see if you encounter any competitive pressures during the contracting.
Period, and if the if that was resulting in any kind of pricing pressure or anything like that.
I'd say no more than I mean, it is a competitive business right.
We.
And.
Again, we expected as we've had these discussions back in May June July.
We had discussions.
Our quarterly results and then phone calls and alike.
We expected that.
For lack of a better term.
Benefits of.
The.
The increased demand.
Pricing that was occurring around the sanitizer product would help lift prices.
On the other.
Products and we saw that but I would also say that the.
You Werent seeing the same kinds of premiums by the time you hit the contract period.
That you otherwise, we're seeing in May and June which is normal right you would expect that.
Peak markets don't last long.
Yes.
And.
But I think that.
We're optimistic.
It's why we again made decisions early on in that contracting process, whether it was.
May and June to make sure that we connected with customers that we thought had long term.
Long standing.
Incumbency that would allow us to continue to strengthen and deepen those relationships and not just sell.
One product, but multiple products.
Yeah, I would add.
Just that.
Definitely the customer base that we're dealing with when it comes to the higher grades of alcohol. It's all about quality. It's all about process. It's all about consistency those type of things and.
And.
Spending the time energy and financial resources to get the certifications was imperative for us.
To be able to work with those customers you do not see the.
The volatility and change.
Once you have locked in with a customer and they are satisfied that you're.
A key member of their supply chain and you do things the right way and our goal is to continue to build on that because the more you can do that it does it does create an opportunity to have a long term relationship with really key people and when youre dealing with high <unk>.
Quality companies it even becomes more important.
And what's the strategy behind.
Getting your utilization rates up I mean, it was it still remained pretty low in Q4.
When you say utilization rates, you're talking about overall production.
Utilization of production capacity, I mean production versus capacity.
The overall production capacity.
Yes, I think.
If you look at the way.
B, the Pekin campus, where we have 56% of specialty alcohol and we have our high high value feed products, which don't don't want to ignore that that's a big contributor and a and a great piece of business for our company.
That that capacity is running quite well, we have a dry mill at the peak in campus that we brought back online.
In Q4 that is one of the top tier producing.
Plants its shares it has the benefit of being part of a campus and it's operating at.
Other than breakeven as far as the other capacity, we just we look at it from the standpoint.
Is it is it better to keep them idled or and bear the idle cost or to try to run them at.
Margins.
Just don't make sense and Thats. So we carefully monitor that we look at it.
Daily weekly.
And that's why we decided to bring the dry mill in Pekin back on because we saw that we could generate positive margin there.
It's a.
So look at it every day and.
We're running the capacity, we know is at breakeven or better.
Alright, and my other question was on the.
Gross profit guidance does that also include the corresponding.
That's in all sales that will be coincide with the 70 million gallons.
No.
Yes.
The framework that we gave you was related only to.
The contracted specialty alto.
Okay.
Producing $70 million of specialty alcohol I would have to assume that you are also producing 70 million gallons of ethanol fuel ethanol as well right.
Yes, more or less I mean, if you can optimize you'd be somewhere around 60, 40 specialty versus ethanol that's kind of your planned ratio, but yes. So if you've heard from simplistic purposes, Thats correct and that.
That framework that we gave you that gross profit is related.
Only two especially the contracted specialty alcohol not the ethanol.
And my follow up question is I mean.
As far as hand Sanitizers are concerned.
Your customers have been very much publicly talking about hand, sanitizer demand being up this year versus 2019 levels, but then theyre not really contracting with you why.
That kind of path, but not really following through with that kind of contracting with you.
Yes, I don't know.
I'm not sure that I agree with the premise of the question in the context of Theyre not contracting with us indeed.
We had.
The fall of last year 110 million gallons of which we have contracted.
Materially or the majority of that product.
To assume that youre going to actually start up a plant in the first quarter or second quarter of this year and I think that you are already going to sell product.
Inc.
Questionable given the current.
Supplies.
Capacity in the marketplace.
We deal with.
Folks that are <unk>.
Hold names in the Sanitizer hand sanitizer.
World and.
We talked to them we follow.
We have contracted substantial amounts of their business, but it's it's more or less given the glut of product that's out there and a lot of the subpar product that came into the market in Q4.
They're.
They are taking a wait and see look in terms of what how much they want to contract until they see that the inventory has been.
Liberated.
And.
We do expect again as we said in our remarks that once people get back out and drive in schools and arenas and so forth. We could see we could see that volume go up.
But we're.
Like in 2020, we're not rolling forward. The exact same volumes of 2020, we're taking a very conservative approach.
Okay. Thank you.
Okay.
At this time I'd like to turn the call back over to Mike, Kansas for closing remarks.
I want to thank everybody for joining us today, and we're excited about alto ingredients.
Foundation, we've built and the opportunities for growth going forward and we look forward to speaking to you in the near future. Thank you very much.
Ladies and gentlemen, this does conclude the program you may now disconnect everyone have a great day.
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Yes.
Okay.
Okay.
Yes.
Yes.
Moving forward.
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