REX - Earnings call transcript Q2 2019 | REX American Resources Corporation

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Operator

Greetings and welcome to the REX American Resources Fiscal 2019 Second Quarter Conference Call.

During the presentation, all participants will be in a listen-only mode. Afterwards, we will conduct a question-and-answer session. [Operator Instructions]

I would now like to turn the conference over to Doug Bruggeman, Chief Financial Officer. sir. ahead, go Please

Douglas Bruggeman

but thank quarter joining to conference momentarily, your and and harbor the Fiscal disclosure. our American XXXX comments Q&A, as well second call. as I'll you morning, review REX safe for Resources presentation first, Good We'll get

historical the statements Reform of meaning reflect addition forward-looking current contains Securities conditions, Litigation call of beliefs, not of the today's XXXX. but statements the to performance. guarantees In statements uncertainties that within current expectations and of conference Act Such forward-looking Company's involve facts or risks and are Private future

As materially results such, actual may from expectations. vary

the The today's reports and XX-K REX with news risks filings revise on the American in in XX-Q. no obligation statements. forward-looking Resources and or are including the update Company's described and associated to Company's and announcement any Securities publicly with Form forward-looking uncertainties the assumes statements Commission Exchange

the of Zafar Stuart joining today, Rose, me have Chairman Chief on Rizvi, Executive I and call Executive Board; the Officer.

our review then over Stuart financial and I’ll First, call comments. for turn to his the performance

ethanol the reduced primarily XX.X million ethanol this last resulted also versus quarter XX.X%, reduced Sales in were The sold. upon production due year. declined for gallons year the to unit lower XX.X sales million for based by-products. for Sales quarter gallons the

which availability conditions, lower affordable spring corn, after was as response current led NuGen reduced the year primarily to on ethanol the wet experience of production. production we largely The South to Dakota began corn plant to uncertainty in has

basis. lower on year-over-year grain pricing experienced also distiller We a

segment from Coal quarter. the a led million $X.X Ethanol year. rose $XX.X Combining consolidated the million segment the second at factors versus XX decreasing the to tax to are By-products for levels lower fiscal profit costs prior credits. year. Refined a corn Our and of gross million quarter recorded had The to X.X% compared for the the prior the from reflecting Section in benefits losses offset $X.X million $X.X by production year, for XXXX gross current second loss for these These

$X.X from and to from associated due commission to of with reduced SG&A production. to decreased corporate refined profitability decreased fees incentive $XXX,XXX associated million ethanol for lower primarily unconsolidated million and income $X.X affiliates reduced Equity quarter $XXX,XXX the quarter. the for compensation with a coal second the

Interest of and to other in XX tax $X.X reflecting levels. We and $XXX,XXX a the cash coal the on income credits Section interest primarily our versus The the million, increased is $X.X benefit for rates million from of a result million benefit increased from higher prior a of second benefit operations. $X.X quarter booked the cash year. refined

in factors and lower million attributable in The the the prior second prior reduced $X.X The to this the to current year quarter above of million versus earnings income compared year. year. benefits reflect to REX a share per shareholders led in $X.X levels for production of year, $X.XX net the $X.XX

I’ll Stuart, you. leave it to

Stuart Rose

Doug. you, Thank

charge, for – Going currently $X it's business excluding we forward, approximately depreciation our exclude to approximately of a rate current $X at our quarter, if running loss million pretax and ethanol non-cash breakeven. is the million

profitable production, Refined in quarter, same significantly last is that's that current this are be due coal – and should in an quarter basically to on from year's after-tax significantly quarter rate the to we’re – down running run currently projected slowing a that running still basis.

shortages a our the and Zafar issues, at $X.XX in current loss which because waivers. running a are currently fluid this we're commodity about and $X.XX we're rent Biggest and together, all is for quarter. business, CEO, presentation, to but approximately number will the rate talk later Rizvi, the again, it in Put corn

have over little that bought XXX,XXX significantly, on is authorization Should we we still the shares the cash over of on have buy balance historically drop $XXX terms sheet, dips. now to In a shares million. and

we continue look look can price We field of opportunities interested and lot a plants ethanol outside of currently, are faster that down field, for our but be opportunities we we to our the where imminent. than is feel use expertise. going the always nothing in We would for the profits in, there

We continue imminent. Again, we to that. nothing do have

Our cash that invested securities, income currently is income some in has and to our statement. sheet or short-term our balance being brought into

talk CEO, I'll Zafar over now Thank it on the turn to further you. our Rizvi business. overall to

Zafar Rizvi

everyone. Rizvi. brief. I'll keep morning, This Zafar is remarks Good my

continued first into quarter As continued the I it in our and third previous mentioned has quarter, second in challenging the has call, environment the now quarter.

the expected company delay yield delayed planting due problem, to in of is number regarding weather-related facing issues expected uncertainty harvest. of corn, which the corn The a our and

struggled have our at South facility corn adequate Dakota. obtain We in to supply for

continued at production to corn availability interrupted plant due to facility. this be Our

these quarter all XXXX, be reasons, the facing For earlier. a loss we of in will mentioned Stuart as third

refineries because On under uncertainty the small approved small the continued of top we experiencing that, through Renewable exemptions Standard. refineries gallons billion by reducing and obligation EPA effectively of are X.X XX Fuel trade exemptions. Recently, required the disputes the

resulted in These a mentioned led demand EPA waiver also. billion decline in the as to in price, totaling and crush XXXX, which also granted earlier for and margin, for ethanol the reduced waivers a X.X Doug XXXX gallons. a drop

export billion during XXXX, Ethanol million months compared gallons six year, the to But last export of gallons year. million healthy during period gallons. was X.X same very fell last XXX XXX the to approximately first

Brazil, running India trade to last uncertainty. due and were below ethanol three will level export importers. behind expect are top we exports last Canada, continued year's be volume, and the year's Ethanol

the will million months, barrels their XX.XXX with of week for blend We million once their a last because about ethanol into falling report resolved, XX the nearly XXX,XXX are believe, supply stock fuel below concern barrels air barrels, first more countries stock in ethanol according quality. to growing exports ended time of EIA. the and as to The ethanol two disputes trade will begin increase

the previous in X% Production increased hit during Production week a four to day, year. was barrels the last week. X.XXX less the months last week million from low rebounding same

six-month six-month of distiller fell XXXX, the to of first about tons compared X.XX export USDA. slightly first the the to metric concern of reduction metric million our according in million to X%. X.X in approximately That's a XXXX, tons grain, far As

DDG to export X%. increased Mexico However,

you to Mexico. while Korea trade Vietnam, the was dropped six XX% XXXX, South first Thailand exports with X%; months and of during XX%, As XX%, know, resolved dispute the and respectively. Turkey

market the Mexico, and Vietnam, eliminated. the the South China's five remain Thailand, top trading currently And value. believe Turkey are were same to unless Korea, at in near We XX% corn reduced XX% the DDG DDG the or approximately future would destinations. is tariff of

XX.X according to the report. crop bushels planted August corn earlier estimated corn about the yield USDA XX per is forecast is the XXXX we mentioned yield As corn, XXX.X approximately acre. acres Farmers bushels corn of projected million to billion and

with XX% corn good a seven-year related still to slightly improved last of excellent low Corn was the USDA to time in excellent but in good condition at the this condition, according year, report. XX% condition. a to At

to carryout and due delayed, the or XXXX many planted heavy XXXX The floods, is late planting expected very rain bushels all. season were for USDA. and not billion was But to X.XXX to at according be and acres

corn. adequate have struggled mentioned previously, of the supply obtain we I to As

year during have of not XX the last drought kind this We the including situation of XXXX. seen years

Let me gas. discuss about a bit natural little

important also us. natural gas know, for very is you the As

continue are industry forward. be as overall affecting increase. to far as expansion stable or our prices As This stay may going profitability to expected will drop storage more

shutdown project the investment during scheduled capital capital our any million We we and concern of million excluding maintenance $X our year. this $X.X we As far consolidated scheduled. no of to projects, plant. major approximately made $X At about improvements expenses time, at XXXX, have total ethanol capital estimated million this

As second I spite quarter small another cash mentioned and million very after-tax no $XXX of previously, problems the challenging disputes, exemption REX trade logistical reduction and interruption, REX profitable and debt. year, operating environment in throughout floods, delivered or has refinery

give I will back additional floor any comments. for Stuart Rose to the Stuart?

Stuart Rose

conclusion, low a the In going quarter outperformed during and almost we supply prices drastically challenging problem RIN are any can a Thank current difficulty quarter. I industry next and in you, remember. cause in the most Corn our in than profitability to the of time more time they're Zafar.

As to cash not. advantage opportunities the survive, that still to just possibly may that people have other have ability opportunities balances large take Zafar but to of other cash have mentioned, we and not people

long-term, to be going best feel the the in plants Most get have importantly, terms that's business. to think feel of we we these the all we we needed we difficult have best In through people and times.

questions. I'll now leave forum open the to

Operator

Our first question Raymond from [Operator Molchanov Instructions] line James. Pavel go of Please with comes ahead. the

Pavel Molchanov

macro and appreciate I Thanks kind of on for the the the guys. market. perspective question taking Hello

and you you a So large you indeed have cash said balance, do.

one said now You've of right also right that or modern conditions the you indicated in now history. is worst ethanol industry that

pick and under circumstances many up your of I advantage taking of from you which prevent that distressed? to underlevered deploying the sheet some would cash of imagine balance are current What assets

Stuart Rose

right at the corn that but is not and we much lot have in as the are price. the down belt, prices are a interested what down plants of – least – at, have possibly which distressed, have are what and large we looking gone not here XXX% as You’re Fagen/ICM the asking gone significantly,

being justify and looked current have that's least asked at price one for type party we we just and those And plants. even of the can't we've talked to

knitting. we premium at a industry are When gotten we've of prices, stuck it player we’ve tried away plants issues. that, are out to but inexpensive there lot But much very pretty out this there hasn't our the sale well. be so Now and for there very, from to worked in

and of the not price that pay very, seen to attention we So buy we would those see possibly meets very but all nature have that something if it, close try to do criteria. definitely and right, we was anything

being if we to once, the the money. going price least and biggest being the that's think price losing – something right, is part now especially but at So buy but we're right

Pavel Molchanov

Right.

you are you assets. that to it that's Is you back these So trade war going for the as end with have is Why everything to is? a what which do expecting to normal? very because people bid-ask attribute do China and go this, wide described spread think

Stuart Rose

about are been a against have ethanol talked Trump’s Trump, being there's expecting. favor that business. couple of think certainly things People in of possibly competing of I talk about adjustments. rent the There's people talked it.

nature if help of that something would So that would a us happen, lot.

right the Dakota. this but that right know corn written Ending very China what war him to that, harvest the now, I'll see going it DDG The us and help lot. exports follow-up the issue help which settled. a don't that fall, and ethanol let help South articles it. would – because doesn't we just is is supply, And tight would slightly. on go But Zafar, our corn would away is be It second is I a lot. biggest this, been trade in There has now about

Zafar let I'll So expand that. on

Zafar Rizvi

Yes.

own XX% elevators farmers sometime problem the the I is on I September. the according XX% USDA of corn new we're report South corn, only the Pavel, and Dakota is of to which that, think in think, expected X, having is report in June own

it So a drop. it are corn at was dropped, they the were now the looking $X price. and farmers looking When continued to at pound $X.XX,

that they to least price at again take corn sell. they Then So out will are go and back hoping will it $X.XX.

South So have a this I corn. is lot the not it's selling, then new coming in that storage kind elevators since is we are total time. million of harvest problem this are see Dakota. quite there excellent of don't reason – we are is to if shortage farmers bushels XX% XXX harvest is at But then not of facing of the that’s supply mean, the much, the and good will and Still be there

farmers mentioned, ethanol have and high At we at that year was price also the willing the drought not the still were was time. high. seen even corn As But very I it. time at they But because happy they not that $X selling corn, it. just now, they they $X.XX, getting a are $X.XX, sell to with so see were $X, were so time,

is what problem the corn the really causing the area. with supply in – of that's So the that

look the other Illinois, on hand, farmers. you is XX% by only in But corn it's if owned the at the of

Dakota. Illinois than we have little to a up, so than a but so South bit there that's bit corn different is little – available, situation pay And

So we really is that the have. concern

Pavel Molchanov

billion question – Renewable law the corn statutes, on in this and gallons it – back of that to we not at in One has Okay. changed says Standard explicitly country XX me obviously blending all. going XXXX, for last that ethanol have that have Fuel to

to and you reason XXXX the whether are gallons the EPA do fact XXXX? have refinery going we is waivers, fact, XX to Given billion in industry blending doubt in be in

Stuart Rose

we based number going XX our put My built – – opinion plants are these based problem to make we on our blend that so all built on is capacity it. and put to the plants going being it, XX billions we to billion rent we're and the the and billion. into The have we plants industry is

a happens and industry probably possibility. time. will equilibrium, prices them quickly The only down, things go there'll for the industry will, demand shouldn't the and are. should closing is supply And I won't will probably that said and of long that long, into be, and should plants there ethanol way but back shortages the then and then we issue and with way have supply be some if a real go up. There demand of get up, the stay and some they prices it so be some

a being is to followed. very law law required to disappointed XX the number. using as that that it’s – very And to at billion me, be ethanol our the mentioned, are not opinion gallons of you and but refinery think blended But lower industry that small to all exemptions is And supposed disappointing not moment, is the just producers. I is

Pavel Molchanov

Great.

So get are we going view? blend this the year your in billion gallons XX to

Stuart Rose

That's answer. no. They're do opinion, a opinion, Trump. going to require not Zafar, have My My different up Are no. require it? it. going to to they you

Zafar Rizvi

the I think tough situation we it given will facing are right now. be which

away as almost XX by and as of effectively have gallons as – a is which X.X there some XXX already that I plants to already information shutting million gallon, million taking you to billion because already are worth So are them – know, plants they reduced shutdown. far ethanol XX.X down the is probably billion

looks in you it know different. know, the situation is not the Tomorrow blend also time down, production maybe we to are So able at total commodity is – this XX be will think don't changed. we and that's it will I reduction we – go and market. this in But gallons different do billion as year. will like And

Pavel Molchanov

it. Okay. Appreciate

Zafar Rizvi

you. Thank

Operator

line Our with sir. of ahead, comes question Please the Singular from next Instructions] go [Operator Christ Research. Sakai

Christopher Sakai

How Hi. I this or coming those quarter? Canada are this in declining? are they mean are growth still and they to exports see India Brazil, how And do you numbers quarter?

Zafar Rizvi

at and exported last January exported. million India million XXX June. Brazil I was June gallon exported gallon $XXX.X think, Brazil, this you was was at to was year the to was was And to January period, look XXX if million same

compared million certainly So India there exported. But exported, XXX to million year, was year drop. this is gallon last XX was which is

increase is there India there but huge Brazilian in answer gallon So that a is your the question? to gallons, drop this year. Does

Christopher Sakai

Okay. openings is Thanks. Yes. as as China see ethanol? And then they concerned, do Will you there? any far any demand

Zafar Rizvi

tariff, import you But this heavy has to they said war, is there's they And which going not not that blend to even and this to is resolved, we're any through, China want think really China import, given be I encourage as does to going ethanol. trade XX%. export. really any know, try unless going that if

have. we concern main the that's So

China, same we any, about in year, was last very exported. period it the compared to million there was this is see If gallons So about year far, XX little export.

got So than export worse China. to it to year really last

Christopher Sakai

coal one for tax Okay. then long XX those the How for And cuts business. thing last? those, Section do the

Stuart Rose

They last little over two more for two years. years, more a

Douglas Bruggeman

for two We carry Production up years. years. forward more XX to them can

Stuart Rose

Correct. you, Doug. Thank

Christopher Sakai

Okay. All right.

Stuart Rose

have There That's are generate. how use whatever to long we more we years. XX

Christopher Sakai

got. Thanks. Yes, all Great. that's I've Okay.

Zafar Rizvi

questions. the you Yes. Okay. for Thank

Operator

you, no turn Mr. further time. have back I'll we Rose. And it questions this over at to

Stuart Rose

listening, Okay. We'd quarter. much. you talk like to next to Bye. and so you thank Thank everyone for we'll

Zafar Rizvi

you, Bye-bye. everyone. Thank

Operator

to lines. today's and concludes call. your please ask We participation your for disconnect thank you That you

REX American Resources (REX) 29 Aug 192019 Q2 Earnings call transcript