Alto Ingredients Q3 Sales Rise as 45Z Credits Support Earnings

Alto Ingredients reported higher third-quarter sales but lower operating profit as weaker margins at its Pekin Campus outweighed gains elsewhere, while Section 45Z tax credits provided a significant contribution to net income.

Net sales for the three months ended September 30 rose 7% to $257.9 million from $241.0 million a year earlier. Gross profit fell 37% to $14.8 million from $23.5 million, while income from operations declined to $7.0 million from $17.0 million as cost of goods sold increased faster than revenue and selling, general and administrative expenses rose.

The company recognized $7.6 million of transferable Section 45Z tax credits, net of transaction costs, during the quarter. That contribution brought year-to-date net credit earnings to $16.6 million and helped offset the decline in operating income. Alto said it expects at least $20 million of net Section 45Z tax credit earnings in 2026.

Third-quarter net income was $13.0 million, or $0.16 per diluted share, compared with $14.2 million, or $0.19 per diluted share, a year earlier. Adjusted EBITDA was broadly stable at $21.0 million versus $21.4 million. Alto defines adjusted EBITDA as net income adjusted for items including interest, taxes, depreciation and amortization, unrealized derivative gains and losses, asset impairments and certain other items.

Pekin margins decline as Western production improves

The Pekin Campus remained Alto’s largest business, with segment sales rising to $164.5 million from $154.9 million. Its gross profit, however, fell to $9.5 million from $18.9 million as segment costs increased.

Western production sales advanced to $30.3 million from $25.9 million, and gross profit increased to $2.6 million from $1.5 million. Marketing and distribution sales rose to $64.7 million from $61.2 million, while gross profit decreased to $3.9 million from $4.4 million.

Alto said market crush margins remained healthy and profitable during the quarter. Essential ingredients sales increased 10%, while the company’s reported return for that category improved to 53.5% from 52.5% in the third quarter of 2025.

Debt reduction and capital investment

Alto generated $13 million of cash from operating activities, supporting capital spending and debt repayment. Total debt declined to $54.5 million at September 30 from $79.6 million at the end of 2025, and the company said term debt was reduced by $30 million year over year. Net interest expense fell to $1.5 million from $2.8 million.

Cash and cash equivalents were $23.6 million, little changed from $23.4 million at year-end. Working capital increased to $119.6 million from $96.8 million, while total borrowing availability reached $108 million, comprising $43 million under an operating credit line and $65 million under a term-loan facility.

Management is pursuing more than $10 million of high-return capital projects in 2026 as part of a broader effort to improve plant utilization and reliability, expand capacity for higher-value revenue streams and optimize carbon dioxide production. The company is also targeting premium and diversified markets, maintaining cost discipline and advancing supply-chain and sustainability programs.

Policy benefits remain subject to execution and market risks

The presentation identified the extension of the Section 45Z tax credit through 2029 and broader availability of E15 fuel as potential industry benefits. California legislation enacted in September 2026 cleared the way for year-round E15 sales, though the timing and scale of adoption remain uncertain.

Alto cautioned that its outlook depends on factors including renewable-fuel and specialty-alcohol market conditions, export demand, corn and natural-gas costs, tariffs and supply-chain constraints. Results could also be affected by the company’s ability to complete capital projects on time and within budget, monetize carbon dioxide production, obtain expected carbon-intensity scores and tax-credit values, and secure sufficient low-carbon corn from farmer partners.