Alto Ingredients, Inc. Q2 FY2025 earnings call

• Adjusted EBITDA improved by nearly $6 million compared to last year, reflecting successful execution of productivity initiatives. - Focusing on short-term projects with immediate returns, prioritizing projects by cost, timing, and ROI impact. - Pekin campus carbon capture and storage project affected by Illinois governor's bill, developing alternatives. - Western facilities saw gross profit improvement with Alto Carbonic acquisition. - Marketing and Distribution segment improved through customer integration and business transitions. - Regulatory environment positive, 45Z regulations create opportunities for credits. - Crush margins improved due to summer driving season demand. - Finalized Scope 1 and 2 greenhouse gas verifications, submitted 2025 EcoVadis scorecard. - Annual Meeting of Stockholders elected new Board members.

Western assets: Gross profit improved by $5.6 million compared to Q2 2024. With the acquisition of the Alto Carbonic liquid CO2 processing facility, the Columbia plant's gross profit increased by $3 million to $2.3 million. The Magic Valley plant, primarily used as a terminal, saw a $2.6 million improvement in gross profit. Marketing and Distribution segment: Improved, reflecting integration of bulk volume customers from Eagle Alcohol business, fostering third-party ethanol marketing relationships meeting profitability criteria, and transitioning from low-return businesses. Pekin campus: Negatively impacted by quarter-over-quarter changes in derivatives and dock damage in April, but partially offset by increased sales of higher-margin ISCC products exported to Europe. Essential ingredients return at Pekin campus dropped to 44.2% this quarter, but realized hedging gains offset impact on profitability. Revenue contribution: Western assets contributed positively to gross profit, Marketing and Distribution segment showed improvement, while Pekin campus had negative impacts but some offset through ISCC exports.

• Focus on executable projects with short-term paybacks and long-term benefits, prioritizing by cost, timing, and ROI impact. - Evaluate opportunities to improve low-carbon prospects, asset monetization, and increase CO2 utilization and production. - 45Z regulations create opportunity for at least 2 plants to apply for credits totaling ~$18 million in next 2 years. - Continue to make progress on Western asset optimization and monetization plan, evaluate strategic alternatives for Pekin and the company.

• Illinois governor's bill prohibits CO2 sequestration through Mohammad Aquifer, affecting Pekin campus project. - Dock damage at Pekin campus impacted operations, totaling $2.7 million for the quarter. - Market volatility affecting ethanol prices and crush spreads. - E15 blending waivers implementation still pending further administrative review and regulatory updates. - Uncertainties in supply chain and cost fluctuations.

Q: With the Carbonic acquisition in Colombia, what's the outlook for further operational benefits and synergies?

A: There's room for growth at the Columbia facility, currently producing ~50,000 metric tons of CO2 annually with over 100,000 tons annual production capacity, and working with core customers for potential growth.

Q: How equipped is Alto to make the export strategy to Europe a substantial revenue stream from Pekin, and does dock damage impede progress?

A: Exceeded original projections for European sales with demand for unique products, but dock damage has workarounds but isn't as effective as historical operations, and working to repair the dock.

Q: Was the $1.1 million Eagle Alcohol improvement a one-time thing?

A: Yes, that was the final acquisition costs associated with acquiring Eagle and won't be seen going forward.

Q: Are there further reductions on the SG&A front?

A: Scrutinizing all spend, negotiating better terms with suppliers, lowering real estate taxes, and in-sourcing activities, collectively making a meaningful impact.

Q: How are the $18 million benefits from 45Z based?

A: Based on current CI scores under GREET calculations, with improvements for Columbia in 2025 and dry mill in 2026 with ILUC standard change.

Q: Insight into Western asset monetization process?

A: Continuing to work with Guggenheim, having conversations with prospective buyers, evaluating opportunities, process takes time due to diligence, and considering all options to maximize shareholder value