Alto Ingredients, Inc. · NASDAQ:ALTO
Alto Ingredients — Pacific Ethanol — Investor Presentation (October 2020)
32 slides from Alto Ingredients's investor presentation, Oct 26, 2020
Slide 1: Pacific Ethanol Investor Presentation Fall 2020
Pacific Ethanol, Inc. Specialty Alcohols and Essential Ingredients INVESTOR PRESENTATION Fall 2020
Slide 2: Disclaimer
Disclaimer 2 Statements and information contained in this communication that refer to or include Pacific Ethanol’s estimated or anticipated future results or other non - historical expressions of fact are forward - looking statements that reflect Pacific Ethanol’s current perspective of existing tre
Slide 3: Management Presenters
Management Presenters 3 Mike Kandris President and Chief Executive Officer • Named CEO in May 2020 • Director since June 2008 and COO from January 2013 to May 2020 • Previously served as an independent contractor to the Company with focus on plant operations • 30 Years of general management experien
Slide 4: Table of Contents
Table of Contents 1. Company Overview 2. Industry & Markets 3. Strategy 4. Financial Overview 4
Slide 5: 1. Company Overview
1. Company Overview 5
Slide 6: Who We Are
Who We Are • Major producer of specialty alcohols and essential ingredients • 180 Acre campus in Pekin, IL • 250 mmgy of alcohol production capacity • Focused on four key markets • Health, Home & Beauty • Food & Beverage • Essential Ingredients • Renewable Fuels • Unique capabilities to produce spec
Slide 7: What We Do – Alcohols
What We Do – Alcohols 7 GNS / Food & Beverage API Grade Alcohol Industrial Grade Alcohol USP Grade Alcohol Ethanol (Renewable Fuel) Note: API certification will be attained by year - end 2020 We transform corn into specialty alcohols used in a wide range of consumer and commercial products Illustrat
Slide 8: What We Do – Essential Ingredients
What We Do – Essential Ingredients 8 Aventine TM Yeast Corn Gluten We transform corn into high value essential ingredients used in a wide range of consumer and commercial products Distillers Grains Corn Oil and Corn Germ Illustrative End - Use Products
Slide 9: Our Four Focus Areas
Our Four Focus Areas • API Grade Ethyl Alcohol • Mouthwash • Cosmetics • Pharmaceuticals • USP Grade Ethyl Alcohol • Hand Sanitizer • Disinfectant • Cleaning Products • Industrial Grade Ethyl Alcohol 9 Health, Home & Beauty Food & Beverage Essential Ingredients Renewable Fuels • Grain Neutral Spirit
Slide 10: Our Transformation
Our Transformation 10 July 2017 Acquired Illinois Corn Processing • Enabled entry into specialty alcohols sector • Created integrated Pekin campus delivering significant synergies April 2020 Divested Aurora Fuel Ethanol Plant • Sold remaining 74% interest in 145 mmgy fuel ethanol plant for $52.8 mil
Slide 11: Specialty Alcohols versus Fuel Grade Ethanol
Specialty Alcohols versus Fuel Grade Ethanol 11 Fuel Grade Ethanol Specialty Alcohols Market Size • Large • Niche Market Growth Drivers • Regulatorily - driven • Renewable fuels standard • Consumer - driven • Alcoholic beverages • Cosmetics • Cleaning products • Pharmaceuticals Product Pricing • Com
Slide 12: From Commodity Fuels to Specialty Alcohols
From Commodity Fuels to Specialty Alcohols 12 2019 9 Months Ended September 30, 2020 We have successfully transformed our business from a fuels focus to a specialty alcohols focus % Revenue Contribution Note: Excludes revenues from brokering third party gallons through Kinergy 11% Specialty Alcohols
Slide 13: What Makes Us Unique
What Makes Us Unique • Established producer of alcohol used in hand sanitizer with longstanding reputation for safe products • Strong demand for hand sanitizers and disinfecting cleaners for the foreseeable future • Increasing regulation of hand sanitizers favors incumbent producers 13 Strategic Loc
Slide 14: 2. Industry & Markets
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Slide 15: Specialty Alcohols Market
Other 49% Health 27% Beverage 14% Vinegar 6% Pharma 3% Ethanol (Fuel) 94% Specialty Alcohols 6% Specialty Alcohols Market 15 Ethyl Alcohol Market By Volume 15.9 bngy Ethyl Alcohol Market By Value $23.5bn Specialty alcohols are small volume… Source: EIA September Short - Term Energy Outlook, Distille
Slide 16: Specialty Alcohols Sell at a Premium to Fuel Grade Ethanol
Specialty Alcohols Sell at a Premium to Fuel Grade Ethanol 16 Key Drivers of Price Premium Over Ethanol • More complex products to manufacture • Greater investments in QA and certifications required • Quality and consistency is very important • End - products are for human consumption or applied to
Slide 17: Increasing Use of Hand Sanitizer Driving Incremental Demand
$574 $628 $688 $1,267 $2,097 $3,166 $4,419 2017A 2018A 2019A 2020E 2021E 2022E 2023E U.S. Hand Sanitizer Sales ($mm) Increasing Use of Hand Sanitizer Driving Incremental Demand 17 Source: The Insight Partners Analysis Hand Sanitizer Sales by Type Growth in hand sanitizer sales could provide a powerf
Slide 18: Alcoholic Beverage Consumption Continues to Grow
190 195 201 205 210 215 220 226 231 239 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 Alcoholic Beverage Consumption Continues to Grow 18 U.S. Distilled Spirits Sales by Volume Key Drivers • Social currency of brand authenticity and heritage • Modern consumers seeking unique and personalized exp
Slide 19: Ethanol Prices Have Largely Recovered to Pre-COVID Levels
$0.60 $0.80 $1.00 $1.20 $1.40 $1.60 Oct-19 Dec-19 Feb-20 Apr-20 Jun-20 Aug-20 Oct-20 Ethanol Prices Have Largely Recovered to Pre - COVID Levels 19 Source: NASDAQ market data as of October 19, 2020 Ethanol prices have recovered to pre - COVID levels which creates upside to margins LTM Ethanol Price
Slide 20: 3. Strategy
3. Strategy 20
Slide 21: The Four Pillars of Our Go Forward Strategy
The “Four Pillars” of Our Go Forward Strategy Broaden Addressable Market by Obtaining Certifications 2 Sell or Repurpose Western Plants 1 Further Increase Efficiency and Reduce Costs at Pekin Campus 3 Expand Into Complementary Products & Market Segments 4 21 Near - term Focus
Slide 22: 1. Sell or Repurpose Western Plants
1. Sell or Repurpose Western Plants 22 Plant Fuel Grade Ethanol Capacity (mmgy) Status NBV PP&E ($mm) Magic Valley 60 Idled $26 Columbia 40 Operating $17 Stockton 60 Idled $38 Madera 40 Idled $34 TOTAL 200 $115 C OLUMBIA Boardman, OR S TOCKTON Stockton, CA M ADERA Madera, CA M AGIC V ALLEY Burley, I
Slide 23: 2. Broaden Addressable Market by Obtaining Certifications
2. Broaden Addressable Market by Obtaining Certifications Certification Description Required For Number of North American Holders (Alcohol Producers) Status ISO9001 • World’s most widely recognized quality management system certification • Prerequisite for ICH Q7 and EXCiPACT certifications N/A Cert
Slide 24: Recent FDA Action Favors Incumbent Alcohol Suppliers
Recent FDA Action Favors Incumbent Alcohol Suppliers 24 Recent FDA Announcements Regarding Hand Sanitizer Hand Sanitizer in the News The Food and Drug Administration has added to its list of hand sanitizers to avoid because they may contain methanol, a toxic substance when absorbed through skin or i
Slide 25: 4. Financial Overview
4. Financial Overview 25
Slide 26: Q3 2020 Quarterly Financial Summary
($12) $29 $34 Q1 Q2 Preliminary Q3 2020 Quarterly Financial Summary 26 Impact of business transformation Adjusted EBITDA ($mm) (1) Revenues ($mm) $311 $212 $204 Q1 Q2 Preliminary Q3 (1) Please see Appendix for information related to use of non - GAAP measures Impact of idling Western Plants
Slide 27: Significantly Improved Balance Sheet
Significantly Improved Balance Sheet 27 Summary Debt Capitalization • Proceeds from the common stock offering will be used to (i) retire a material portion of our Senior Notes and term loans; (ii) pay transaction fees and expenses and (iii) for general corporate purposes • Senior Notes have a 15% in
Slide 28: Summary & Wrap-up
Summary & Wrap - up 28
Slide 29: Key Takeaways
Key Takeaways • Successfully transitioned production to ~50% specialty alcohols • Focused on health and essential ingredients markets going forward • Investing in QA / certifications to expand addressable customers and markets 29 Transitioning to More Stable, Higher Margin Businesses 1 Good Visibili
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Slide 31: Production Facilities – Pekin Campus Overview
Production Facilities – Pekin Campus Overview 31 • 180 Acre campus in Pekin, IL with 100 years of operating history • One wet mill • Two dry mills – one dry grind ethanol plant; one distillery • Yeast plant • ~275 Employees • 250 mmgy (1) total alcohol production capacity • ~50% Specialty Alcohols •
Slide 32: Use of Non-GAAP Measures
Use of Non - GAAP Measures 32 Management believes that certain financial measures not in accordance with generally accepted accounting principles ("GAAP") are useful measures of operations . The company defines Adjusted EBITDA as unaudited net income (loss) attributed to Pacific Ethanol, Inc . befor
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