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The company's share price plummetted by 10.5c to close at 38.5c yesterday. The issue price when ABG floated late last year was $1.
ABG said the fuel tax legislation introduced in July had “heavily impacted” biodiesel sales in the third quarter, but the company had also been hit hard by drought conditions, which had increased the cost of “soft oil” feedstocks such as canola.
Although ABG’s proprietary biodiesel technology makes extensive use of tallow (animal fat), the purchase of soft oil feedstocks has been necessary in order to reduce the cloudiness of the biodiesel produced at its two plants in Narangba (Queensland) and Berkeley Vale (New South Wales).
The company said its attempts to mitigate cloudiness issues with the use of available, lower quality soft oils such as coconut oil (which is higher in particulates) had also affected plant performance and production.
Although biodiesel sales have increased to record levels after the market adjusted to the new legislation, the performance issues arising from the use of lower quality feedstocks meant the company was tightly constrained in terms of its ability to supply demand.
Sales for the quarter ended September 30 totalled 5.5 million litres, bringing year-to-date sales to 11.5 million litres. The company said it expected to produce and sell a further 9 million litres by the end of the current quarter.
As a result of the production issues it has faced, the company said it has decided to install auxiliary processes at both its facilities in advance of the 2007 timeframe it had originally anticipated.
Strategic partners Transfield and Worley Parsons will provide personnel and engineers to assist in installing auxiliary items.
The installation costs at the Narangba plant have been estimated at $2.5-3 million, including plans for an increase in storage and handling facilities.
Continuing drought is expected to keep feedstock availability and pricing conditions at terms less favourable than anticipated, also reducing the profitability of its recently acquired oil crushing facility.
