Xethanol’s March toward Bankruptcy

In the continuing saga of Xethanol (XNL) – the poster child for overhyped cellulosic ethanol claims – they took one more step toward bankruptcy this week with their earnings release:

Xethanol Announces First Quarter 2007 Financial Results

I will bet this is one they would have rather skipped. Xethanol managed to more than double their loss of a year ago:

For the first quarter of 2007, the company reported a net loss of $5.5 million, or ($0.19) per share, as compared to a $2.2 million net loss, or ($0.15) per share, for the prior year. The increase in the net loss was primarily the result of an increase in general and administration expenses as well as $2.4 million in non-cash charges.

Too bad that increased loss wasn’t due to increased R&D. That might have created something of value. Administration expenses do not.

How much did they have to sell to lose $5.5 million?

The company reported net sales of $2.4 million for the first quarter of 2007 compared to $2.5 million in net sales for the comparable period in 2006.

Ending on a positive note, they still have enough cash on hand to continue losing money for a few more quarters (although they may have trouble securing any more debt):

As of March 31, 2007, the company had cash and equivalents of $20.8 million and $443,000 of long-term debt.

It’s amazing to me that investors still think this is a company worth $40 million, its current market cap. Of course a year ago that market cap was 10 times that. Well, I tried to warn people. First with this:

Ethanol Investing: Counterpoint

And then with a series of stories on Xethanol stretching back almost a year:

Archived Xethanol Stories

I don’t think this will be the last time you read of a cellulosic ethanol pretender going bankrupt, though.

5 thoughts on “Xethanol’s March toward Bankruptcy”

  1. I’d like to suspend the law of gravity and the law of you have to pay back the money you borrow, but I don’t have the omnipotence of your typical Texas legislator, I’m afraid!

  2. One wonders what the legal and administrative costs they cite really were. Are there a bunch of fraudsters at the top of this organization?

  3. Dedini achieves breakthrough: cellulosic ethanol from bagasse at $27cents per liter ($1/gallon)
    Dedini’s São Luiz Mill in São Paulo state began producing cellulose bioethanol from bagasse – the leftover cane stalk after the sucrose is pressed out – at about US$ 40 cents a liter in 2002. But production costs have now fallen with improvements in processing technologies to below €20/US$ 27 cents a liter (US$ 1.02 per gallon). “This means the fuel is cost-competitive with oil at US$42 a barrel,” said Dedini Operations Vice President José Luiz Olivério at the seminar.
    The technology is based on a combination of two processing steps that convert bagasse, the lignocellulose-rich byproduct from cane processing, into ethanol: (1) pretreatment of the biomass with organic solvents, and (2) dilute acid hydrolysis. The innovation consists of the pretreatment phase which allows the diluted acids to do their work much faster and more efficiently. The liquid hydrolyzates are then easily fermented and distilled into ethanol.

  4. Xethanol is not about to go bankrupt. With $20 million cash in the bank and another $7 million in assets it is far from that… its stock price is, however very close to its net cash value – and could be a takeover candidate…

  5. With $20 million cash in the bank and another $7 million in assets it is far from that…

    You have an interesting definition of “far from that.” They just lost $5.5 million, and their losses went toward things like administration expenses. So, it created nothing of value. So tell me, how many more quarters can they sustain those kinds of losses? As I wrote in the essay “they still have enough cash on hand to continue losing money for a few more quarters.” So, no, they are not far from bankruptcy.

    I do agree with your point on stock value versus cash on hand, but remember they are also tied up in litigation.

    Cheers, Robert

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