Alto Ingredients

Alto just posted its fourth straight profitable quarter. Second quarter net income hit 11.4 million dollars, or 15 cents per share, a 22.7 million dollar swing from a loss a year ago. Gross profit came in at 16.6 million dollars versus a 1.9 million dollar loss last year, and adjusted earnings jumped 23.9 million dollars to 23.7 million dollars.

Sales climbed to 245.7 million dollars from 218.4 million dollars, and management says the company stayed profitable even before counting the 5.1 million dollars in clean fuel tax credits it booked this quarter. The balance sheet keeps improving too. Current debt went from 16.6 million dollars at year end to zero, interest costs dropped to 2 million dollars, and there is 106 million dollars of borrowing room available.

Alto just opened a 50 million dollar program to sell new shares whenever it wants. On a company worth roughly 392 million dollars, that is a meaningful chunk, and every new share makes existing ones worth a little less. Management says it will be disciplined about using it, but the option is now sitting there.

This is still a business tied to corn, natural gas, and fuel prices, and those swing hard. Costs of goods sold ran 229.1 million dollars this quarter, so a small move in input prices can wipe out the 16.6 million dollars of gross profit fast. Add in a micro-cap stock that can drop 20 percent on one bad quarter, and the ride will not be smooth.