Ethanol producer GTL Resources says that first half trading is ahead of expectations thanks to an improvement in margins. 

The main factors that determine margins are the prices of corn, ethanol and natural gas. Any sharp swings in the prices of these commodities can have a detrimental or positive effect: for example, a rise in corn prices will eat into margins.  

House broker Arbuthnot had been predicting a sharp fall in GTL’s profit from $14.5 million to $3.7 million during the year to March 2011. The broker had expected pressure on margins, while forecasting a small improvement in revenues to $228 million.

Management warns that it is still difficult to predict the full year outcome. There are potential regulatory moves that could influence the full year figures and beyond.  The authorities may mandate a higher proportion of ethanol in blended fuel levels – possibly 12% to 15% – and there could be a renewal of the blenders’ tax credit.

GTL’s key project is its Illinois River Energy production facility at Rochelle in Illinois, USA, which produces more than 100 million gallons of ethanol per year from corn grown in the local area.

Market: AIM

Symbol: GTL

Price: 71p

12 month high/low: 85.5p/24.5p

Market cap: £22.7m