Q&A with Steve Core, board member for multiple ethanol plants
Steve is featured in this year’s Biofuels Financial Conference panel, Meaningful Reports for Financial Leaders.
What is the more important decision(s) made by the board annually? What information do you utilize to make that (those) decisions?
Communicate clearly with management about goals for the year with a time-line and naming who is responsible to complete the tasks. Boards need to have a board retreat each year to review the past year and set goals for next year and a one-to-five-year plan.
What’s the critical difference for planning for long- versus short-term?
For long term goals you need to be comfortable with the outlook for ethanol. If you are not, can you get comfortable, and how can you be the last plant still running if times get tough?
A. Consolidation
B. Efficiency upgrades
C. Expand
For short term, what pays back quickly, and does that improve the position of the company for long term.
What’s been the biggest change you’ve seen since your introduction to the industry versus now?
In the beginning, everyone was eager to make more product and profit. The attitude was more aggressive, and as time went on, management told the board that their plant was the best, they worked the hardest and that was done by every plant out there. The plants became comfortable at the rate they were running, and the board and management lost their aggressiveness. Plants that were in the top 25% of plants, were passed by a few aggressive plants. The industry now has new leaders.
What is the one thing you with you’d known when you started working with ethanol plants years ago that you know now?
If the plant is not moving forward every day with new ideas and better efficiency plans, the plant is actually moving backwards.
What’s your advice for finding the balance between taking too much or not enough risk?
In the beginning, all plants worked hard to pay down debt. Now most boards don’t want to borrow money to expand or get more efficient. Interest rates are 3.5% (very low). Some debt is good—maybe twenty cents per gallon of total production. Look at long range plan, when considering return to investors. The goal should be 50% to l50% return on original investment each year. This goal should be attainable, and if not, how can we get there?
You’ve worked in a variety of different industries. What do you think is a challenge unique to managing biofuels versus other industries? The politics of ethanol are always present and ever-changing. They were there when the plants were built, and will be there in the future. Boards and management need to get comfortable with that aspect. Take on managed risk, and you will be rewarded. This is a great industry.
Don’t miss Steve at this year’s Biofuels Financial Conference!
To learn more, please visit the BFC website.
