Earnings call transcript Q4 2022

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Operator

Greetings. And welcome to the REX American Resources Fiscal 2022 Fourth 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]

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

Doug Bruggeman

thank joining you fiscal And morning. Good for quarter call. XXXX REX conference fourth Resources’ American

well presentation We to the safe first and as review your disclosure. comments I will will question-and-answer our momentarily, get harbor but session, as

Such statements Act historical the keys statements uncertainties today’s within but forward-looking meanings current of conference of involve call current addition to beliefs, may as expectations. of that materially and In contains vary Securities of such, risks Reform Litigation Private XXXX. facts or company’s from and the conditions, forward-looking statements performance, reflect results future the actual expectations not are

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

me performance today, Chief Executive joining the call Rizvi, will review first his have call I for then Zafar Executive financial turn Stuart our Stuart Chairman the over the and Officer. on comments. I and of Board; to Rose,

ethanol quarter. X.X% during sales upon the we operations some declined for quarter million year, volume grain. XX.X gallons their last this we million weather-related to the for as XX.X experienced distillers by fourth lower experienced for the Sales quarter based disruptions and Ethanol as were year versus

corn gas as experienced We for prior pricing, million in the the quarter, current ethanol well In versus as natural reported year’s $XX.X lower gross of of pricing. profit a profit $XX.X million we gross quarter this and year. higher fourth year

and for compared gas by by the XX% conflict impact by pricing year’s the commodity pressures year, Ukraine-Russia and continued. to quarter cost this increased from as -- pricing inflationary prior increased of Corn natural XX the XX%

availability in experience facility poor harvest that NuGen corn higher based for local corn basis corn We and continue a upon reduced area. to pricing near the

increase due for in fourth an require SG&A primarily us ethanol classify in year, is to by we increase million to $X be paid that year. quarter the of increased as $X.X to from prior to which costs. the contracts million freight the number SG&A The the prior compared the

of income unconsolidated fourth $X.X quarter this had $X.X million We investment year. million in our income equity the from versus prior year’s in of

reflecting income company’s in increased the cash. year in to interest on our $XX,XXX dramatically versus other primarily and $X.X increased current The the previous million yields year,

on as There impact reflecting current year are those ended the operations XX, discontinued we coal The prior November was numbers XXXX. business year. operations the no from refined the in

provision primarily year, We the income $X.X the operations million reported reflecting million versus provision a year $XX.X year. current for level in tax of in the this of the lower from continuing of prior

the versus X, operations X-for-X to to REX $XX.X led the shareholders which net for year. versus These Total effective continuing factors fourth to from REX prior attributable from reflect prior $X.X income share continuing million in will $X.XX million shareholders year’s Again, point quarter of in all stock net year’s August was for this per operations this attributable $X.XX I XXXX. numbers share out the split, was quarter income year. fourth

Stuart, will the to now over turn I you. call

Stuart Rose

you, Thank Doug.

at roughly Zafar currently section much discuss ethanol forward, will further. his that running Going is breakeven year-to-date. in

quarter which carbon the Zafar -- of of -- cash capture, our consolidated uses the approximately years at is and have the the over the end we year million end discuss. $XXX again, cash include will Our next at the of cash couple of

the are money accounts, banks and to of best accounts Investing knowledge, cash secure. dealing this and market mostly treasuries are the now right we go is the cash are right our we that -- with, the interest-bearing investing and now very, and very

and comfortable banks is quality that top in our way. very, very feel invested very We cash consider good a we them

decent on that much -- We not cash debt. debt. have we have earning have do interest many are companies versus that We virtually no

So invest at cash that’s time. it’s a in our good this way opinion to our

back dips. will We buy on

plans Zafar and Rizvi which expansion some time. for ethanol talk always our of ethanol for to are have purchase we plants We plants, about at looking this additional will

We it. imminent, have good to plant but nothing we look certainly were very ethanol something if come up, would at

call Thank turn Executive you. will Rizvi, the I to Chief Officer. Zafar now our over

Zafar Rizvi

Thank you, Stuart. everyone. morning, Good

continue we environment Doug corn as Marian, a basis, As the the ethanol I to of addition, than mentioned affect the throughout continue strong Operating year negatively availability the of quarterly greater our crush way margin. to operations. is number previous [ph] factors due in a location. the particularly to has challenging affected mentioned, which Korea of call, the face South at just created production And in demand, that

considerably The retreated price quarter day profit a gas the have dropped recently. week-to-week. yesterday’s low to the ethanol according affected negatively barrels positive natural weeks margin we shows weekly high year also of million a gas drop seen natural during the XX And XX,XXX last production under report barrels X and EIA, day, news, price and

expected basis the for the harvest. get But corn are still to strong and positive

pleased of the availability Illinois. with corn are in City, We Gibson the

to domestic However, because of state, the strength. from corn growth in basis the beginning export are

are but corn selling are the cost. DDG, seen of still in they We have weakness -- these oil the and price above

and slowdown source any shortage face in or crush the the at economic logistical major recent first reasonable stage of quarter other this and export, continue at the corn Despite margin don’t corn of decline issue we in XXXX. headwinds, price early the to drought,

mentioned. time, to as expect just profitable at We breakeven or this slightly Stuart

of test was depth which Simon a me X,XXX around of the successfully you university points. to well project. The are almost feet, Let sequestration progress drilled some our feet in bullet our incurred. These Mount a total X,XXX give carbon sandstone

the well very plume of performed testing movement for water suitable The Completed evaluate subsurface. expected reservoir analysis very expected to indicates the geologically models COX, core predicting at a carbon well itself the as COX injection storage good sequestration. into quality. movement area, injection the rock are indicate of the Completed tests as

performed XD sequestration. completed verify of to still testing results indicates test plume. and XD reservoir The location injection rock modeling COX movement These and pressure, shows good Several very analysis target for and maximum is good expected carbon systemic storage. core this were other was and very a quality, tests

The XX tons received. lead with design The permit material of has have of completed, submitted. hazard to been compressor facility have for is ordered. part the equipment the been compressor three Class carbon signed facility contract long injection the has number million the to store and VI pipeline of identification been The completed capacity the and wells build been time

be and X -- pipeline the the facility studies All the order early the XXXX to build major which [ph]. signed. compressor expected equipment to finished on the by has is have FEED been contract engineered sized for work been facility, April The lead

We are our currently facility. carbon carbon sequestration working on deliver from a short to design study front-end pipeline for engineering

plant modular be modular prebuilt the end a will of then expect structured and We around will plant. by the December XXXX building delivered be the

again, some be four pleased We stage required years considerable consuming is this and has ago very will achieved early big We we what time make but predict highly continue project, we time we are progress. cannot technical, successful, started -- once to now milestone. it has

intensity, other that our are previous plant. consumption evaluating As as increase energy as we several production I will at mentioned, water also call, well projects in reduce improve efficiency efficiency, our reduced carbon to

We most will cost these under these greater decreased Reduction of soon. contribute Congress believe lead to be by the Act a to of the production. complete to of able projects we benefit Completion will Inflation will passed projects and

XXX reduced could decided a intensity also provide increase we Illinois, to XXZ, and to to much is capacity mentioned, as which just fuel sold. depending Energy, million carbon credit Stuart The Earth clean As as XXX ethanol the score gallons gallons. related at produced ethanol production intensity million from on of One fuel carbon $X gallon Gibson City, Section production

carbon the The strong company. plan which the Section XX metric the the XXZ, will switch $XX enhance we ton, to to of continue we cash to sequestration position of increased our payment expiration after which for

quarter are XXZ XXQ progress of carbon in to We we once difficult as production again once project. our expires. Act, XXZ to Section environment, pleased Inflation sequestration well good increase summary, a benefit maximize very, to In announce Reduction as very capacity and profitable the ethanol in plan

of achieve We sequestration decrease cannot atmosphere. we income embark projects milestones, we planning ethanol carbon will are ready achieve accomplish, carbon to in ethanol of hard the carbon and these provide colleagues. quarter carbon what and future, to production our in work to If on the intensity, low consecutive to a dedication reducing without the hit increase be we and can plan byproducts, positive while XXth

are positive appreciative to their efforts We of these achieve results. very

you, back to Stuart floor further the give will Stuart. comments. I Thank for

Stuart Rose

competitors most outperformed Zafar. Thanks, industry we have In again. of conclusion, the

future. will best plants, the which believe have potential done this, carbon think locations, again, We our in we capture, we have we great great be

most mentioned, is separates the and We industry, people between Zafar us rest our the biggest the best as the the have and people. importantly in feel the And we in difference and industry, from of they have happen. them, if hopes never but to just you that’s don’t people lot dreams, end, to and us competition can competition and the what a of implement have good tend

can do that in at very, plants we hope as very proven good plan look the that to people ethanol and and good in our capture have and have run past future. we We that and we carbon

now questions. call will leave the I open to

Operator

Truist Securities. Jordan Please Our first Instructions] you. proceed. Levy [Operator Thank from question with comes

Jordan Levy

Good Stuart… morning,

Stuart Rose

Hi, Jordan.

Jordan Levy

…Zafar and And… Doug.

Doug Bruggeman

Thanks.

Jordan Levy

this I backdrop, that’s worth what should capital like XXXX you us out, for some recognizing capacity. could plan for One you seems moving just forward challenging plans Certainly …nice quarter Maybe the in give initiatives Earth’s start think, a if and we expect against have to is expanding there? for another you any sure. mentioned might commentary of around Maybe year. CCUS

Stuart Rose

Zafar?

Zafar Rizvi

to as expand we $XXX I have said, we Jordan, plan million. -- to

are what We June all quarterly evaluating the call all at the meeting will cash to total numbers return the the We take expansion investment. and facility have we or hope have cost time. that the and at shareholders process and exactly carbon the will of on sequestration other those in to our those ethanol that at disclosed the of

Jordan Levy

of And throughout presumably the would be the course year? expansion this

Zafar Rizvi

Exactly. Yes.

had we we think we the information on evaluation major those all what’s has the return and investment. putting of already looking are and done, financial models are have I see

at ethanol expansion to if that’s the XXZ look sequestration, was go mentioned, -- to million all that XXZ, that about and trying that a we million the are I if benefit to working if $XXX carbon reduce carbon I we or we years, to the from we before even intensity, our are of sure as $XXX of mentioned, couple more achieve with As we $XX had million production able we on those which make carbon what and intensity. were and

benefit really of are out be all to forward. projects coming those moving -- we So us great for

and make investment million, That’s on looks we and we leads the considered to like have putting to evaluate could it all return to by of So million, trying we corn sure but what will want $XXX $XXX area. spend to expand that. we do packet are create we not deficit that it together, that have hopefully, in saying

Jordan Levy

updates expect some working the of sort the Zafar, into and us kind maybe -- you where and Can the be Great. out will just you be of just this carbon XXXX. to be I Can lay Thanks all I to end know high at and you What a exiting on to for appreciate comments time? you are what expect gave you for look on at mentioned, for XXXX? completed level. for the targets up that. you moving year of And us lay back capture, on there just out

Zafar Rizvi

time our I long of equipment. have equipment, those taken we to equipment most the lead so items, is long out items, year those takes all we think as and as leading that, some -- as a mentioned and half the I of all ordered have

will needs And expect will -- will by will we this to around to that a need facility seven pipes end connected, modular lot the have unit which our it. be there’s the or of mentioned, have that as modular year because I and be that start months that delivered construction also, be compressor to unit, we of electric, will then built be longer, at around because six to months will take building also

the by which So our goal so and happen do XXXX. the that’s our XXXX. some goal project this that’s Certainly, the by other out goal our delay uncertain -- this -- it but to end things, is can what of have to we not project, and of and come their finish is all end

Stuart Rose

are is and a other not benefits. and are one getting XXXX, and that in tapping Jordan, for they know lot should $X.X are up announcing pipelines years the XXXX they ethanol into the thing industry. economic really of to of doing people XXXX, -- are you are economic COX people the But a gallon. all the benefits The projects bulk

We million that XXX -- have to hope plant. we gallon expect

of we COX dependent COX that, into They the companies we announcing are doing So all, even these they half built. if are of at receive capture. doing whatever most we get that really on will pipelines own whereas pipelines happen are receive are their but capture, being not they

doing are We our own.

have four years This bulk with company. mentioned, We Zafar share project. something project. is pipeline and we for is as doing to our the where this, not been shareholders’ revenues the have this It’s of the our

and it take again, In pipeline That’s think has what a a million company, they our our and we of and be the expect. And of to very all the are but come and XX good captive plan shares, then very, has can hope case, profits ability small will company, we profits. course, that’s the we shareholders, and a our percentage significant.

Zafar Rizvi

the difference Exactly. between and us Yes. That’s others. major

$XX, and -- its really were also, XXQ XXZ that was think, Stuart no mentioned, I was time. $XX. now at trying So as there look ago it years we four when at to

all some to coming So productive. really are these see benefits

Stuart Rose

Zafar They as saying to accrue shareholders is exactly. our will

Zafar Rizvi

Yeah.

Jordan Levy

will think leave great I I I really commentary. that’s at Thanks. it. that. appreciate it

Stuart Rose

Thanks, Jordan.

Operator

question Research. Singular from next Please comes Sakai proceed. with Our Chris

Chris Sakai

Can talk Good about… Hi. you morning.

Stuart Rose

morning. Good

Chris Sakai

the countries XXXX? see you largest where … export of for

Zafar Rizvi

you ethanol, of Export mean?

Chris Sakai

Yes.

Zafar Rizvi

to XXXX. -- I Canada Netherlands was million billion billion that Korea gallons for X.X than The South -- higher Okay. -- gallons for X% exported imported million, gallons, XXXX X.X million, compared was XXX XXXX and total export has was and and the XX XXX think

Chris Sakai

in Okay. you seeing derailments? your -- Thanks. increased train the in all to Are any recent cost rail due

Zafar Rizvi

Not really.

on they I basically rates, on think has the that it railroad monopoly the always their direction. track increase

have due is So really increase which there’s seen to it this in But increase recently situation, the and always their not rates. derailed we rate.

Chris Sakai

for talk permitting you process about Okay. so the CCS? Can Thanks. far the

Zafar Rizvi

I am you sorry. Could repeat question, your please?

Chris Sakai

process -- processing permitting going? the is How

Zafar Rizvi

of permit, the The we that requirements it they received we they time, process, couple which Since have and documents. which answered permitting we questions, review. requested. that all all and is -- the have We completed the submitted documents they which them under have all confirmed the they

the we well test So know than previously, the that government there, long we from cannot control, and have we But should test previously permit well done and at were sooner on area anybody how it permit else, applied expect the agency, take. to we depends those because already going we they they we our received receive time. and that

that receive -- is the hope sooner we on depend we agency. rest will we really now So and

Chris Sakai

Okay. Great. your Thanks for answers.

Zafar Rizvi

you. Thank

Operator

question Price proceed. Raymond next with Our James. comes Please from Graham

Graham Price

for questions. Thanks the taking Hi.

ago? it about First are valuations landscape around was relates I off, to a wondering your M&A How year thoughts assets. the as versus two looking just or producing

Stuart Rose

more want ago. that’s their I for We are. people can’t -- anything haven’t But year seen I two I valuations honest, anything -- to up they significantly did significant or that sale that a would up for than they you would be how so assume tell plants

has other some think carbon leads cap type so -- carbon companies public company reason, are they of to had some type more. everyone have For worth -- their of plans capture no every and

the that they contention are contribute bottomline to they companies dealing of delayed; will that end of the will think Our think. we pipeline some all, they is of up all, companies with think second we not either; these will that be first what

that, valuing sure, In case, keep a just are we to XXZ, now companies XXQ, hope two Zafar get of their year that a distributed for to because opportunity, did they or the of bulk meantime, legislation the the in But of up can mentioned, they different be for ago, it. than because money more lot our a the for to of gallon we to people. $XX $X that’s a passed ton

Graham Price

I Understood. Got Okay. policy follow-up, had more it. And macro my then, question. a for

So the year Midwest. EXX round blending EPA proposed the recently allowing in

your far opinion? Just plan this enough wondering, go in will think do happen and that does you

Stuart Rose

Zafar, do you answer? want to

Zafar Rizvi

to Yeah. say. It’s hard

other -- -- trying other to are states exemption year the the states and and -- to think the and they to see, different from EPA. in that’s can around I are applied for implement trying the different Iowa location several all you -- as

it’s a around, year eight have year nine I and months all and hope then they all or six gas if it’s around months not year station discourage to over. discontinue it’s to -- EXX, months start the because in have then

what trying happened. already Congress we do that’s Congress that. hopefully, a introduce we year So any allow that around, and to but hope will is what and -- EPA will in legislation cannot to probably predict There all or

Graham Price

it Thank clear. I That’s it. you on. very much. pass will Got

Stuart Rose

you. Thank

Operator

at questions Rose, there are no further time. this Mr.

Stuart Rose

Okay. and end talking talking forward the after Well, to we and this you. to this look of Bye. end quarter. the after quarter for of again listening thank Thank everyone we everyone

Operator

does We participation a the today. for great for you That that disconnect call ask conference and your your thank conclude Have please you day everyone. line.

REX American Resources (REX) 23 Mar 232022 Q4 Earnings call transcript