Australian Biodiesel Group finding local market tough

Australia's largest biodiesel producer, Australian Biodiesel Group, has announced that it is looking to raise AUD$15.9 million (US$12.4 million) to launch a new business plan after a difficult year in 2006. The money will be via a rights issue at 5c per share which values the company significantly below its current share price.

Changes to the Australian biodiesel market, including biofuels legislation, negatively impacted the company during 2006, which is now positioning itself to expand into North America where it is believed profits will be easy to come by. The biodiesel market has rapidly grown over the last three years in the U.S. on the back of rising oil prices, federal incentives and state based support of biofuels.

Analysis: A crippling drought and federal biodiesel incentives that are being phased out virtually before the industry has established itself in Australia have made it tough on the local producers. Expansion into the booming U.S. market is a good option, but what ABG are really praying for is for the drought to end and oil prices to go back up to last year's record highs.

[Source: Egoli]

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