Alto Ingredients, Inc. (ALTO) Q2 2026 Earnings: Revenue $246M (+12.5%)
ALTO — Q2 2026 Financial Report Analysis
Q2 · Fiscal year 2026 · Published by Pham Hop
Alto Ingredients swung to an $11.7M Q2 profit ($0.15/share) from an $11.0M loss as the ethanol crush margin tripled to $0.33/gallon; sales rose 12.5% to $245.7M, with a $5.1M 45Z clean-fuel tax credit on top.
Revenue
$246M
+12.5% YoY
Net income
$12M
Diluted EPS
$0.15
Operating margin
3.5%
This period vs a year ago
Same period last year
This period
Revenue▲+12.5%
≈$218M
$246M
Year-ago figures (≈) are worked out from the growth rate the company reported. Each row has its own scale.
Alto Ingredients swung from a $11.0 million loss to an $11.7 million profit in the second quarter of 2026, and almost all of the swing came from one number outside its control: the crush margin — what a gallon of ethanol sells for minus the cost of the corn needed to make it. That spread tripled from $0.11 to $0.33 per gallon as ethanol prices rose and corn got cheaper. Net sales rose 12.5% to $245.7 million, gross profit went from a $1.9 million loss to a $16.6 million gain, and diluted EPS came in at $0.15 against a $0.15 loss a year earlier. A new federal clean-fuel tax credit added another $5.1 million on top, but the company was profitable even without it.
At a glance
$0.33 per gallon crush margin, up from $0.11. The market spread between ethanol and corn tripled; management attributes about $17 million of extra gross profit to it — essentially the entire year-over-year improvement.
$16.6 million gross profit vs a $1.9 million loss. Gross margin went from -0.9% to 6.8% of sales, the fourth straight profitable quarter.
$28.5 million of operating cash flow in the quarter (derived from the $32.7 million first-half total less $4.2 million in Q1). Cash generation was even stronger than earnings, and it went into paying down $8.5 million of term debt this quarter ($25.1 million year to date).
What Alto does, briefly
Alto runs five alcohol plants (three in Pekin, Illinois; one each in Oregon and Idaho, the Idaho one idled since before 2025) with 330 million gallons of yearly capacity. It sells three kinds of product: fuel-grade ethanol blended into gasoline, specialty alcohols (beverage-grade spirits, and industrial/pharmaceutical alcohol for things like mouthwash and sanitizer), and what it calls essential ingredients — the by-products of turning corn into alcohol, such as animal feed (distillers grains), corn oil, yeast and CO2. It also resells ethanol bought from other producers. Because corn is the main cost and ethanol the main product, results swing with commodity prices far more than with anything management does in a given quarter.
The numbers
Metric
Q2 2026
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Q2 2025
YoY Change
Net sales
$245.7M
$218.4M
+12.5%
Gross profit (loss)
$16.6M
$(1.9)M
n/m (loss to profit)
Gross margin
6.8%
-0.9%
+7.7 pts
Operating income (loss)
$8.6M
$(8.1)M
n/m
Operating margin
3.5%
-3.7%
+7.2 pts
Net income (loss)
$11.7M
$(11.0)M
n/m
Diluted EPS
$0.15
$(0.15)
n/m
Adjusted EBITDA (company measure)
$23.7M
$(0.2)M
n/m
Market crush margin (per gallon)
$0.33
$0.11
+200%
Average sales price per gallon
$2.15
$1.95
+10.3%
Average corn cost per bushel
$4.73
$4.98
-5.0%
Total gallons sold
88.5M
86.7M
+2.1%
Essential ingredients return
51.6%
45.2%
+6.4 pts
Operating margin is the share of sales left after running the business, before interest and tax. "Essential ingredients return" is by-product revenue as a percentage of the corn bill — at 51.6%, the feed, oil, CO2 and yeast sold paid back just over half of what Alto spent on corn. "n/m" = not meaningful, since a percentage change from a loss to a profit has no useful value.
For the first half of 2026, net sales were $470.4 million (+5.7%), net income was $16.0 million versus a $22.7 million loss, and diluted EPS was $0.20 versus a $0.31 loss.
Why the quarter turned: price up, corn down
The filing breaks the gross-profit improvement down plainly: improved crush margins contributed about $17 million of extra gross profit, partly offset by about $2 million of higher repair and maintenance costs from spring shutdowns at the Pekin dry mill and the ICP plant and work at the Oregon CO2 facility.
Both sides of the spread moved in Alto's favour:
Ethanol prices rose. The benchmark Platts ethanol price averaged $1.92 per gallon versus $1.72 a year earlier (+11.6%). Management credits "robust export demand, strong domestic blending activity, and tighter ethanol inventories following industry-wide spring maintenance outages," plus the federal Renewable Volume Obligation (RVO — the amount of renewable fuel refiners are legally required to blend into gasoline and diesel) for 2026 now being set. Alto's own average realized price was $2.15 per gallon, up 10.3%.
Corn got cheaper. Alto paid an average $4.73 per bushel versus $4.98 (-5.0%), which management ties to favourable crop conditions and larger projected grain supplies.
By-products sold for more. With biodiesel and renewable diesel makers buying corn oil as a feedstock, the Pekin campus's by-product price per ton rose 14%, lifting its essential-ingredients sales $5.5 million to $45.1 million even though tonnage was flat.
The gain was concentrated in one place. The Pekin campus segment went from a $5.0 million gross loss to a $12.4 million gross profit — a $17.4 million swing, of which the filing attributes $15.9 million to better alcohol margins and $1.5 million to volume. The Western plants improved by only $0.4 million (to $2.0 million), and marketing and distribution (reselling other producers' ethanol) slipped $0.1 million to $1.4 million.
A shift in product mix
Export economics got worse during the quarter. The filing says disruptions in the Middle East raised freight costs and made vessels from the Gulf Coast less certain, making Brazilian ethanol more competitive in Europe. Alto shipped fewer export gallons (though at higher premiums, so export revenue still rose) and pushed more of its fuel-grade ethanol into the strong US market instead. Specialty alcohol gallons sold rose 18.1% to 23.5 million, Pekin's own renewable fuel gallons rose 9.7%, and third-party gallons resold fell 19.2% to 24.0 million — so more of what Alto sold came from its own plants, where it keeps the production margin rather than just a trading fee.
What the headline numbers hide
About 44% of pre-tax profit was a tax credit. The new Section 45Z clean-fuel production credit — a federal subsidy paid per gallon of low-carbon fuel, which Alto sells to other companies for cash — added $5.1 million, booked below operating income as "transferable tax credits, net." Without it, pre-tax income would have been about $6.6 million rather than $11.7 million. Still profitable, as management says, but the credit is a policy-dependent item whose transferability is scheduled to end after 2027 under current law, per the filing.
No tax was charged on the profit. The tax line was zero in both years because Alto is using past losses (net operating losses) to offset this year's income. That flatters net income now; it won't last forever.
Hedge accounting cut the other way. Q2 GAAP earnings absorbed $3.6 million of unrealized derivative losses — paper losses on commodity hedges not yet closed out — versus $2.1 million a year earlier. For the half year it reversed: a $4.4 million unrealized gain boosted the first six months. Adjusted EBITDA strips these out, which is why Q2 adjusted EBITDA ($23.7 million) is so much larger than net income. Note that adjusted EBITDA does not exclude the 45Z credit.
Cash conversion was strong, helped by working capital. First-half operating cash flow was $32.7 million against $16.0 million of net income. Part of that came from timing: accounts payable and accrued liabilities rose $17.9 million and inventory fell $10.1 million, partly offset by receivables up $12.8 million. Receivables rose 23% from December to $67.9 million, faster than the 12.5% sales growth, which fits the higher-price, higher-volume quarter but is worth watching.
The EPS gain is operational, not engineered. There were no buybacks — diluted share count actually rose about 3% to 77.1 million. Interest expense fell $0.85 million (to $2.0 million) because of debt paydown, a small contributor next to the $16.7 million swing in operating income.
Overhead rose 30%. SG&A climbed to $8.0 million from $6.2 million, which the filing explains as a $0.8 million performance-compensation accrual plus the absence of a $0.8 million one-time gain in 2025 from the final Eagle Alcohol acquisition payment. Excluding those, SG&A was flat.
Guidance, now vs last quarter: after Q1 Alto expected about 90 million gallons to qualify for 45Z, worth "approximately $15 million" net. It now says "90 million gallons, or more" and "an expected minimum of $15 million" — a slightly firmer tone, not a numerical raise. The $25 million 2026 capital budget is unchanged ($11.5 million spent so far, $10.6 million of it in Q2).
Takeaway: Alto's turnaround this quarter is a commodity-spread story first and a company story second: a $0.22-per-gallon jump in the crush margin accounts for roughly $17 million of the $18.6 million gross-profit swing. What Alto controls — running its own plants harder, steering gallons to the strongest market, cutting debt — means it can capture a good margin, but the margin itself was handed to it by ethanol and corn prices.
Balance sheet
Alto ended June with $24.0 million of cash, $41.3 million of unused borrowing capacity on its Kinergy credit line (which had $34.6 million drawn), and up to $65.0 million potentially available for capital projects under its Orion term loan. Term debt is down to $29.9 million after $25.1 million of repayments this year; long-term debt on the balance sheet fell to $60.5 million from $63.0 million at year-end. Shareholders' equity rose to $259.9 million from $245.2 million.
Outlook
What management says: Third-quarter crush margins "thus far... continue to be healthy and profitable" — and Q3 has historically been the annual peak. A debottlenecking project at the Pekin dry mill, its most efficient plant, adds about 8% (5 million gallons) of annual capacity, with the full benefit expected in Q4; extra dry-mill gallons also qualify for more 45Z credit. A third CO2 storage tank at the Oregon (Columbia) plant should be running in Q4, and a second alcohol loadout at Pekin by year end. Management is also leaning on wider adoption of E15 (gasoline with 15% ethanol rather than the usual 10%), pointing to several Midwestern states moving to year-round E15 and California's Assembly Bill 30.
Our read: The second half should look good if Q3 margins hold up as management describes, and the extra Pekin capacity plus 45Z credits give a modest structural lift independent of prices. But the year-over-year comparison gets much harder from here: the business was loss-making in H1 2025, so the easy comparisons end once margins normalise. The things to watch next quarter are (1) the crush margin — every $0.10 per gallon on roughly 60 million production gallons a quarter is worth about $6 million of gross profit before hedges, so it dominates everything else; (2) whether the dry-mill expansion actually shows up as higher Pekin production gallons; (3) whether 45Z income runs ahead of the $15 million minimum; and (4) whether export demand recovers or Alto keeps leaning on the domestic market. The idled Magic Valley plant in Idaho stays idle "through the filing of this report," and a restart would be a signal that management expects margins to last.