MEDELLIN, Colombia (ICIS)--Renewable Energy Group (REG) stock fell sharply on Thursday morning following the company's warning late on Wednesday that earnings for Q1 2014 will be hampered by severe winter weather and rising costs for feedstocks.
REG's stock was down $1.41/share, or 11.2%, to $11.17/share in Thursday morning trading.
The large US biodiesel producer and marketer now expects to report a net loss of $1.5m-3.5m and adjusted earnings before interest, tax, depreciation and amortisation (EBITDA) in the range of $1m-3m, which is below the company's prior guidance of adjusted EBITDA in the range of $5m-15m, REG said in a news release.
"Our performance this quarter was disappointing, yet not surprising in light of the harsh weather conditions that have impacted results in many industries across the US economy," said chief executive Daniel Oh. "A key element of our business model is the ability to generate positive adjusted EBITDA even under adverse conditions, and this quarter certainly demonstrated this. We will continue to focus on our operating results and long-term growth as the biodiesel industry adjusts to changed and uncertain regulatory conditions."
REG expects biodiesel gallons sold to be at the lower end of the guided range of 45m-55m gallons.
The original guidance reflected a lower margin environment than 2013 as the biodiesel market adjusts to the lapsed biodiesel tax credit and the delayed US Environmental Protection Agency (EPA) Renewable Volume Obligations (RVO) ruling.
REG said that the original guidance also assumed constant pricing for energy and feedstocks, but biodiesel prices decreased and feedstock costs increased more than expected.
Unseasonably cold weather reduced overall diesel demand, as well as biodiesel blends and also increased REG's utilities expenses, most notably a significant increase in natural gas prices, the company said. These factors combined to significantly tighten margins at the end of the quarter.
"We remain optimistic about the long-term prospects for REG and the biodiesel industry," Oh said.
The company will release its Q1 results on 6 May.
REG, headquartered in Ames, Iowa, owns and operates eight active biodiesel refineries in four states with a combined nameplate production capacity of 257m gallons and distributes biodiesel through a national network of distribution terminals, distributors and customers.
Biodiesel is an alternative fuel, produced from renewable resources. The most commonly used feedstocks are rapeseed, soy and palm oil.