Are Things at KiOR Going From Bad to Worse?

It has not been a good year for biofuel producer KiOR (NASDAQ: KIOR  ) . Aside from the stock being down over 75%, the company has badly missed its guidance targets virtually every time, and its CFO quit without any explanation. Then, to top off the 12 months of disappointment, KiOR ended the year with another resignation and more production shortfalls.

Condoleezza Rice takes a hike
In a filing with the SEC on Dec. 23, it was revealed that Condoleezza Rice resigned from the board of directors due to "the demands of other business commitments and personal time constraints." In stark contrast to when CFO John Karnes resigned, there was a detailed explanation and the proper language assuring the shareholders. It read, "Dr. Rice's resignation is not due to any disagreement with the Company on any matter related to the Company's operations, policies or practices."

Rice's resignation included a friendly, farewell positive statement. The fact that all of this was and continues to be missing regarding the CFO's resignation is worrisome. Before, it could at least be theorized that the proper information was simply missing. Now we know KiOR is more than capable of including it all – but it doesn't exist regarding the CFO's departure. It sounds like the CFO's resignation was on less-than-friendly terms and leaves another mark of uncertainty as to what's going on with the company.

Production shortfalls that keep on falling short
The first and biggest blunder KiOR made was with its May 9 production guidance, given nearly halfway through the second quarter. Recall at the time CEO Fred Cannon stated, "We expect that total fuel production during the second quarter will range between 300,000 and 500,000 gallons, keeping us on track to fall within our projected production range of 3 million to 5 million gallons for 2013." When the shipping figures came in 75% below the bottom of its range and a flurry of class action lawsuit press releases came out, one would have thought, or at least hoped, KiOR learned its lesson.

On Aug. 8, KiOR lowered its full year production goal. Cannon stated, "We expect our full year production levels will be in the 1 million to 2 million gallon range." A big reduction, but it should be more realistic and prove reliable, especially being much closer to the end of the year, right? Wrong.

On Nov. 7, KiOR only had seven weeks left in the year, and Cannon said, "We believe that our full year production levels will exceed 1 million gallons." Another drop from August, but it's at least within the range of the previous goal even if toward the bottom.

Then, finally, on Dec. 23, KiOR said it expects to only produce 410,000 gallons in the fourth quarter, bringing the total year's production to 920,000 and missing each of the previously lowered targets. Cannon said that KiOR is "pleased" with this, but should shareholders be pleased? Consider this: In September the company produced 151,443 gallons. For October, it was 167,087. The last two months imply a slip backwards to an average of around 121,457 gallons. Wrong direction.

Other biofuel companies
Unlike KiOR, Renewable Energy Group (NASDAQ: REGI  ) and Green Plains Renewable Energy (NASDAQ: GPRE  ) are ending the year with stock prices at more than double where they started it due to their excellent operational performance. For example, last quarter Renewable Energy Group reported revenue leaped 42% to $458.4 million. Net income had a dramatic turnaround, from a loss of $6.9 million to positive $78.5 million or $2.31 per share, though $42.1 million of that was an IRS tax benefit. Analysts expect Renewable Energy Group to report positive EPS of $1.66 next year while KiOR is expected to lose nearly a buck per share.

Meanwhile, Green Plains Renewable Energy saw a bit of a revenue decline, but gross profit was up 47% last quarter. The company swung from a net loss of $1.0 million to net income of $9.4 million, or $0.28 per share. Analysts expected Green Plains Renewable Energy to post $0.96 in EPS for the year and 58% more next year at $1.52 in EPS.

Foolish final thoughts
It would be nice if KiOR would surprise the Street and break the habit of disappointing. While so many other biofuel companies are reporting solid performance, cautious Fools should consider staying on the sidelines until KiOR too presents evidence of solid performance in the form of historical results. Since management itself can't seem to forecast even near-term operations, it makes it near impossible for investors to do any better.

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