A trio of young biofuel firms recently reported their third-quarter 2011 earnings, offering a good glimpse into what's up and coming in the petroleum-substitute sector. Amyris, Codexis and Gevo all have different models and are at different stages in their growth. But all three firms have a common pair of themes. First, the market is still highly susceptible to fluctuations in oil and feedstock prices. Second, all three have initially focused on boutique petrochemicals as they work on ramping up production capacity.


Amyris, the California-based firm known for GMO petrochemical production, missed its third quarter earnings estimates, according to a report from Baird Equity Research. Baird has accordingly downgraded Amyris' stock rating to neutral, placing blame on Amyris' difficulties in ramping up production.

Amyris' model is focused on producing custom petroleum alternatives using sugar feedstocks and genetically modified yeasts that can process sugars into the company's base hydrocarbon (rather than alcohol), branded Biofene. From there, Amyris can make “specifically tailored” hydrocarbons for cosmetic, detergent, lubricant and fuel markets. The company has estimated that it is capable of producing around 50,000 specific types of molecules. According to a revised business plan from earlier this year, Amyris is currently focused on commercializing high-margin perfume additives and shark liver oil substitutes, with a hope to break into the higher-volume, lower-margin diesel market in the future as increased production capacity brings costs down.

The quick numbers:

  • Amyris reported Q3 revenue of $36.3 million, well down from Baird's $45.1 million estimate and a consensus estimate of $44.8 million. That left the company with a gross profit of just $500,000, a 1.5 percent margin.
  • Amyris' production outlook has dropped heavily for the 2011 fiscal year, from 6 million to 9 million liters to 1 to 2 million liters. This was due to difficulties with its production process as it tried to ramp up output. It is also largely due to the company's reliance on contract manufacturers as it continues to increase in-house production capability.
  • On a positive note, Amyris signed a deal with ETH Bioenergia and Usina Alvorada in Brazil to increase its access to feedstock. Starting in 2014, Amyris will have access to two million tons of sugarcane crush capacity via an ETH mill.

Overall, Baird has lowered its 2011 revenue estimate for Amyris from $196.6 million to $161.9 million. Gross margin estimates were lowered from 20.5 percent to 11.2 percent because Baird expects the company to face higher than expected production costs due to trouble optimizing its production process.

Amyris has said that its difficulties are not technology related, which is a positive sign. Instead, the firm claims it is having trouble optimizing its operating processes as it tries to increase production at its contract manufacturers. The question is whether those difficulties ramping up production will carry over as Amyris switches to in-house production facilities.


Codexis develops biocatalysts for commercial purposes, currently in the pharmaceutical industry and potentially in the advanced biofuel sector, as per a research agreement with Royal Dutch Shell. The firm recently partnered with Raizen, a massive ethanol producer and distributor in Brazil that holds the key to Codexis entering the lucrative cellulosic ethanol market. Because Codexis produces enzymes, not the fuels themselves, it is isolated from the feedstock pricing volatility that threatens other small firms in the sector.

Codexis' earnings were mostly in line with estimates:

  • Q3 revenue stood at $33.3 million, beating Baird's estimate of $32.6 million and the consensus of $31.8 million. Pharmaceutical sales stood at $12.2 million, while collaborative R&D revenues from work with Raizen and Shell were $19.2 million.
  • Boosted by research revenues, gross profit was $23.3 million and gross margin stood at 70.1%
  • Operating expenses were $35.6 million, resulting in EBITA of -$2.3 million.
  • Codexis' balance sheet is strong, with no debt at $70.7 million in cash with low cash burn.
  • Baird kept its Neutral rating and $6 price target.

Codexis has made a pair of strong partnerships that will allow it to expand beyond the more limited pharmaceutical market into biofuels. However, as a result of those partnerships and Codexis' lack of an end fuel product for sale, the company is reliant on collaborators to help commercialize its technology. Additionally, the company is dependent on the success of cellulosic fuel producers in order to have a customer base for its very narrow product line.


Gevo's model is based on retrofitting existing ethanol plants to produce isobutanol, then creating replacements for boutique and fuel petrochemicals. It believes it can produce replacements at competitive costs without subsidies. The company's estimates for retrofitting plants are very competitive as compared to proprietary construction, and the retrofitting of its first plant is on track. Like Amyris, Gevo is focusing on lucrative specialty chemicals and ethanol production until its production capacity grows enough to enter the larger fuel market.

Gevo reported strong earnings:

  • Strong ethanol sales led Gevo to report net sales of $17.5 million, beating Baird's estimate of $13.2 million and the consensus estimate of $15.4 million. Sales resulted in a gross profits of $1.3 million, higher than Baird's $0.3 million estimate but lower than the $1.5 million consensus.
  • Sales were strong at Gevo's Luverne, MN ethanol facility. The facility is currently being retrofitted, which is confirmed to be on track for a completion in the first half of 2012. This is a key factor to Gevo reaching its 2012 EBITDA break-even target.
  • Operating expenses were higher than expected, at $11 million versus the Baird estimate of $9.6 million. This was partly due to higher R&D costs as the company readies its Luverne plant.
  • Gevo seems on track to hit all of its growth targets, and with quality Q3 results, Baird reiterated its Outperform rating and $17 stock price target.

While Gevo's outlook is positive, as it grows, it is susceptible to low oil prices and/or high feedstock costs. Also, while it's still a frontrunner in its sector, a patent infringement lawsuit from rival Butamax as well as potential retrofit delays threaten its advantage over competitors.