JB to triple ethanol output
JAMAICA Broilers (JB) said that its has secured new contracts that will triple its ethanol production this fiscal year.
What's more, while the bump in fuel sales is expected to translate into a similar increase in revenue, ethanol profit is projected to grow at a much faster pace.
Once fixed costs are covered, a higher proportion of the revenue from each gallon of ethanol sold goes to the bottom line, said JB's vice-president of energy and finance Ian Parsard.
"It's not linear, it's more exponential," said Parsard.
JB's ethanol revenue for its last fiscal year ending April 28, totalled $1.2 billion, which means that revenue for the 12 months to next April will likely look closer to $3.6 billion.
However, operating profit before corporate expenses, which totalled $62.8 million in its last fiscal year, will likely come in a good deal more than $190 million, or simply three times the profit.
JB's total operating profit totalled $1.4 billion in 2011/2012.
The company, which also processes poultry and animal feed, on Monday told the Jamaica Stock Exchange (JSE) that it booked processing (tolling) contracts for the period July 2012 to April 2013 "which will result in a 200 per cent increase in volumes processed by the group's Ethanol operations in the 2012/13 fiscal year, when compared to the previous year".
Under tolling contracts, JB Ethanol uses its two, 60-million gallon dehydration plants to process hydrous, or wet alcohol into anhydrous ethanol on behalf of customers for a fee.
"The increased business is mainly attributable to favourable developments in market conditions which range from reduced cost of Brazilian hydrous ethanol and increased price of fuel grade ethanol in the US," said the notification to the JSE.
Parsard said that most of the additional volumes will likely fill the fuel mandate for advanced biofuel — such as sugar cane ethanol — in the US.
Under US regulations, the amount of conventional biofuel, such as corn-based ethanol, has been capped.
Meanwhile, lobby efforts to reinstate a 54 US cents per gallon tax on ethanol exported to the US from non-CBI countries will wait until after the presidential elections in November.
The expiration of the ethanol tariff in December led to a dramatic decline in the price of the biofuel being imported from large producers such as Brazil. It also meant that countries benefiting from duty-free concessions under the Caribbean Basin Initiative (CBI) would no longer have a leg up on larger exporters.
JB's idea is to engage with lobbyists and diplomats, who in turn would try to convince US House representatives of the benefits of extending the tariff, especially as it relates to Brazilian ethanol, which is cheaper than the corn-based variety of the biofuel.
"While we still have it (lobby efforts) on the burner refocusing after the elections," said Parsard. "At that point we expect a more favourable outcome."