Earnings call transcript Q2 2023

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Operator

Greetings, and welcome to the REX American Resources Fiscal 2023 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 Mr. Officer. Financial Chief Bruggeman, Doug Please go ahead.

Douglas Bruggeman

as thank Good Resources' our joining question-and-answer momentarily American for XXXX morning, presentation second comments to and fiscal get quarter REX We'll your you conference as well and session. call.

first, harbor review safe But I'll disclosure. the

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

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

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

prior million and the gross over $XX.X corn this ethanol million pricing prior products in gross for as from well to lower million gallons all of primarily of We profit XX.X second in the second the prior as $XX.X versus quarter due the Sales pricing Ethanol reported quarter. across slightly based decreased gas XX.X%, unit year. million year versus sales year-over-year. upon XX.X the by gallons lower for we natural were sold as profit quarter year lower year benefited this year

related expense $X.X quarter second million quarter. is This $X.X during the executive upon compensation the incentive increase stock to for increased to million. issuance from SG&A primarily

in within general of of accounting reported. costs expense quarter, rather gross profit and release shipping as than historically change SG&A the a in begin order second company highlighted selling, to to sales handling and as comparability method the press cost the of presented, the in made the classifying in As and administrative improve

of from general I'd prior The our impacts unconsolidated year this prior second to relief on year the no expense million selling, as income application number share the out retrospective COVID company their has and point had year's from equity included our applied earnings new change reported. a has goods administrative this the year. prior investments $X like and million only and impact of accounting $X.X million We versus quarter grants cost sold this of in approximately income received in the in for of USDA of $X.X policy.

our reported the by million benefit cash $X.X from in higher other plants. our year. received approximately income USDA $X.X short-term The million COVID-XX investments. of company aforementioned rates continued current year relief interest $X.X and versus grants and million the year, prior included interest the prior on the from In has We consolidated to

income compared items in $XX.X non-controlling million before income year of the ago and to taxes led with million interest These comparable period. $XX.X

received grants the the in two $X.X versus year interest income to current income in non-controlling the before quarter in taxes, million of year. relief of XX.X% two benefit last excluding $XX.X COVID-XX prior quarter million of However, the year, increased

shareholders to in year to of a provision million $X.XX We reported versus for prior year. REX REX $X.X million this this prior shareholders quarter. million of attributable a of the net in versus attributable were for the year income $XX.X tax share prior year. $X.X income $X.X for second year in $X.XX share per their led versus provision million This Net to the

for Stuart call turn his the over now comments. I'll to

Stuart Rose

-- the excuse better this better and that Zafar quarter Earnings right now discuss significantly quarter than than is in better further. we're third expected in quarter last significantly the will rate a third Thank quarter significantly me, to that into. quarter than currently third be the go are you, we're Doug. -- that to at last year's running than year's about

balance include buybacks a we expansion, which uses third not short-term is investments, second had quarter to quarter. than we in only the talk during third rate recently. approximately but on $XXX about will higher cash dips our have Rizvi, Our the quarter later. million earn Zafar which debts, the Ethanol expect Stock CEO, continue,

back -- or the dips. at but we not So back we have buying stock, buy we'll are moment, back see bought not if

is biggest again -- also the about which well talk also later. will We're will way, use carbon that Zafar on operation capture the be

to hopes, eventually We along of and that use operation, operation, possible, a be could but cash. our for just also our not others have may also come capture if use carbon our for

the capture will our now turn Thank to Zafar call about operation Rizvi, our carbon operation. about talk I'll and more over who ethanol -- you.

Zafar Rizvi

Good Thank morning, Stuart. everyone. you,

stage early which As second profit in I the quarter, first call, mentioned quarter saw the to of improvements this quarter we XXXX. in led in than the the previous

better and pleased produced impact previous with year's million the grants. COVID-XX of They team. after are quarter the We total last second results even $X.X than in than quarter, our better considering the

According to and ethanol August the during EIA the week August stock ending XXrd XXth. dropped production report,

of the results. second dropped USDA financial on price for impact expected report of We XX.X have also yield our showed a per which billion XXX.X year highest bushels corn, output XXXX-'XX. seen an August record natural acre considerably The bushels XXXX, has gas on XX, positive and

more South corn approximately early crop year, pleased to last Marion, this acres forecast And year. year per are bushels corn compared planted bushels this the of compared XXX We yields in the acre were also XXX with of year. to Dakota, XXX,XXX last

favorable But Gibson compared the were XXX year area acre compared which is acre last City, per year. this in last this yield corn bushels to XXX planted expect per almost be Illinois, acres bushels more We to XXX,XXX less to year year.

gallons through ethanol result XXX June ahead, export compared million if in could ethanol million in Looking -- were future XXXX. DDG XXXX continue, and the drop gallons this affect export negatively XXX to of this

have compared metric million ethanol period, XXXX. tons since same -- ton, export million to of XXXX a export same XXXX. dropped decrease export X.X metric XX% DDG June dropped through to compared DDG metric approximately the period the XXX,XXX were X.X During ton

quarter. Considering any all don't reasonable year and to we we these logistic DDG third a profitable problem, better we could last of ethanol major this quarter be face source corn increase, at at than early and export price, continue the and will than factors, if be stage of even better believe this

Let me expansion. provide carbon Ethanol and project Earth our plant sequestration on One update an Energy

sustainability and publish have the as our mentioned in our carbon project I captive addressing call, improves sustainability inaugural As report our the year, economy while believe that and will responsibilities in we performance large. are impact We the pleased sustainability what to we shareholders. financial a social company early our for advance goals accomplished previous our further highlighting

Energy have carbon storage We One other intensity. and facility, of budgeted Earth capture $XXX compassion expansion approximately million build to million a the to and gallon the to annually XXX plant carbon reducing related projects

have lead previously. build we carbon and Earth facilities and build build City. We Energy compression storage to items capture One plan to facility to capture sequestration plan the were and signed -- One ordered Gibson long been The in contract

is facility XXst, The XXXX, of delivery for facility by will testing delivered February start be construction to The the be which July is by construction of the of all scheduled expected completed middle will expect compression at XXXX. modular the to the We September. time in facility facility equipment of commence.

and of to inquiries We it for requirements agencies, We are we two governments project, Unfortunately, and receive of for the and and Class permits injection. on very permits. answered approved This any federal different in highly paperwork predict depends Class local of government different permit these local from complete the and states we will delays regarding consuming federal VI continue technical, the we agencies' cannot carbon time approval. while states is permits construction. several when EPA waiting all VI EPA

with Solutions, the other the our and entered River company. a NuGen Summit of partnered In ethanol agreement and carbon an Big developer a Navigator carbon with pipeline other Resources Carbon pipeline facilities largest decent world's update,

their pleased agencies reached this will complete about year. different year we We big are government and the or far next so have milestone early approval hope

ethanol Regarding the gallons year. plant we production to XXX Earth Energy have increase plans to a One million expansion,

produce expected is for facility. year apply gallon must an million this for which We million achieve million Because a EPA received to process. XXX late a last year this we XXX year is a can late year -- permit. have We gallons production, per XXX before gallon a permit next production two-step

We and achieve to XXX gallons. we million apply have million before XXX

facility be million the XXX the of day will capable So -- producing but one. gallon this from

million year. The a current gallon is capacity approximately plant XXX

the could is intensity carbon We provide and evaluate intensity, to provide achieve gallon produced ethanol intensity also a reducing continue depending social efficiency performance prepared shareholders. we for If these reduced low atmosphere we a that which related much on and energy the that other credit the be the our and products carbon would carbon carbon Section dollar ethanol improve fuel carbon the impact as projects score on reduce and with of sold. in clean a impact fuel financial to improved bio company's successfully will as production to goals, XXZ,

profitable these profitable quarter, to with NuGen a million ethanol River. the Once we XXth gallon carbon production benefits dedication at to to the not offtake XXZ hard we Energy achieve on our plan sequestration Big again, carbon without to milestones the consecutive project, at a pleased XXX maximize colleagues. agreement could summary, are and continuous and actually One work quarter, progress of signed Earth pipeline and companies In announce increase our

these efforts positive We are their achieving very appreciative on of goals.

additional give I'll for comments. to Stuart floor Rose Stuart? the back

Stuart Rose

-- significantly if expect conclusion, companies. the again especially quarter forward, year Zafar. this In feel gone year. public of like along pretty the far during this results most do plants as we quarter. the among we ethanol they'll Thank in in our we good the the did the the be the this you, going location quarter look going real in than good, good quarter, good keep have plants during to results best this next best other the in third of they to of year industry, last our again quarter crops We third along ethanol industry, And have better outperformed pretty is the and so

best shareholders the earlier, earlier, carbon more a the but people ethanol people us have much, larger, capture, we the things what gotten We about if company. do much we to be for for And have, working much ethanol feel thing better. we working much, we in worried and will and And little industry. these to the in can we biggest did same a in that that profitable hope us industry, capture our carbon said for have are seem the have as Zafar we and were

to I'll now questions. floor the leave open

Operator

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

Jordan Levy

the [Multiple for thanks and Speakers]. all, morning, Good

Stuart Rose

Hi, Jordan.

Jordan Levy

nice you capture Really a Stuart. thinking for side about permits things, maybe starting that a been of of of VI exciting been that construction thing. September in for Hey, all the submitted updates approval, clearly and but carbon And quarter. have Class forward and lot moving with sort there's to talked just Zafar,

to be as that it's you say approach opportunities. you with conservative And fair think all how tend pretty team I to a investment

So time timeline us the and you're the equipment bit a the how that of approval knowing about maybe on little some you've long just thinking a ordered kind lead timeline EPA there of give and have on there? you potential for

Zafar Rizvi

you. Thank

inquiries that have two from As I we EPA. mentioned

So it takes we six somewhere applied for the permit. Generally months months. to speaking, it's months about nine since XX almost

XXXX. permit the we for And at have provided. are those documents many will which before with the understand of we aspect that earlier, EPA, they of we since conversation not end inquiries the we looking now expect technical our we have So

items, don't people our far, And least already, have start we close don't to then do be started things, behind two will XX years the some to so -- we two have and you all receive. XX lead years at because years to no of two But lot not before a we construction these if they months takes to these inquiries. who three it

earlier. these, started some had So of we

the million we once projects, of XXX we for is are will intensity the that working to part ethanol XXX score which expanding then of several delay, gallon, be million any plant we gallon. can if our And also carbon our plant. is there reduce expanded on And thing still our intensity other

as as So to we we be benefit not from will we but like may sequestration. carbon on much still benefit have XXZ

reduction, there, can projects. partly in on of benefit but still So which from delay will stage different carbon delay intensity early XXXX working we we're a other

Jordan Levy

Speakers] [Multiple And Absolutely.

Stuart Rose

are the with government Johnny-come-latelies University the and for to answer can of getting We've you University just walk on people so believe on in are we And they're the the were they a that this their get that are People projects -- process a your right, this far we far being a but little close lot they on level applications, Illinois seeing we that -- grant. they where of Jordan, permit. that behind question both work lot and further, of the we so same this are type behind of of Illinois even applying. working of permitting to with they've We've worked the not been and think years. we're at can't even done are.

that approve a time Illinois, to we even EPA and long, way may people grant project has doing it don't be the it the -- carbon on and University been may government if right they on or with -- but it's talking yet we've of are is projects know And with going don't working about know been long Daniels. it. to not a happen, they of with capture know putting done They're They a and working that which do for has sure we EPA lot may is which or Archer the may just already for these real. and -- not not this, the U.S. us,

that have that along permit of others we very, complicated application way, way. well. And going So us lot think a just a It's in a It and can very you get work lot doesn't and process. we're throw a for a in way process. these

Jordan Levy

expansion, might all to about any for able capex for $XXX of on the any for capture down talked you've you all do certainly impressive million us plant and work of additional and required maybe you break on in -- Maybe break that issue, and Absolutely that terms what sort all that seems budgeted help us if just the a constitutes and could somewhat be front. that been separate that initiatives? way that Yes. that carbon being incremental

Zafar Rizvi

have This carbon basically for sequestration how stage. for we we other is ethanol facility be how we budget think, will estimate, at but much I not a this be disclosed really have and not and disclosed. will much

I had $XXX pipeline But million construction from disclose total miles X include miles million So the gallons. -- certainly and this to that we not I'm that area, then included to sure well that at for and we budget, then facility the of stage. million XXX X the can XXX production subsurface estimate about and that

So that's inclusive, all million. $XXX

Jordan Levy

$XXX Okay. process the being great. show mentioned you $XXX to you million, to clarify, can And That's if plant have just you $XXX Zafar, but expansion the on this kind would include of million the run first? two-step to expansion, million even a

Zafar Rizvi

Exactly. right. That's

of be some So, we which already yes, designed, plant the will tanks fermentation designed the and been built. already are

will when them that, -- to of show with going gallon see be capable -- is in do designed testing million make $XXX But we to which sure they are be million -- $XXX and that. after we So are required expansion testing day producing the stack X then will XXX to EPA to we from be testing will it we have to the do immediately to complying other the million, completed. and

Then for $XXX we apply million.

that 'XX, So the that and year will even we for $XXX when gallon. whole apply XXX we that million, received produce for million can in XXXX, in we the apply and

million for March in XXX for received -- be million we but February or even gallon so that will So XXX gallons, XXXX...

Jordan Levy

you so hop I'll in it. all the Got Thank back much. queue.

Stuart Rose

working our as COX And technical, and our hard big which and a He working we to out, hard. a of working difference is it are lower but in pointed XXZ we're COX score. intensity, lot very also, million company very is reducing calculations. -- $XXX The our includes it's improvements Zafar making makes

Jordan Levy

so Thanks much. Awesome.

Stuart Rose

Thank you.

Operator

from Our next question Raymond proceed. comes Pavel with Molchanov Please James.

Stuart Rose

Pavel. Hi,

Pavel Molchanov

-- thanks for question. taking for the Thanks

era. curious of $X on kind if touched in now corn You the is out a we a I since it's terms this And what bushel think you've number cheapest pre-COVID moment, of for guess, I'm been purchasing. sustainable? you seen is the if corn zoom

Zafar Rizvi

to hard say. It's

production I think depends and quickly ultimately it's harvest all depend the the how comes. also then

harvest and we as final could the because then the price denting. -- you is cannot -- And of if heat corn it's to impact the export. than major we demand going it some on, results will believe will predict be not be already a the that's really we matter the be be And future, but But a what supply and know, different but now. going see in all there's and what waves so

then, Ukraine you that so And as corn. know, the of many international price change can and events

the close then the Brazil crops since corn seen crops, has crops corn -- price price U.S. we that dropped. We their a has very corn the producing -- is even bumper price is but coming have to have since

is matters. this this to say So It's stage. at all hard international several depend really on

Pavel Molchanov

asked in opportunistic times. through terms guys potential what before asset control, of acquisitions? can capacity getting Okay. expanded in multiple Maybe seeing M&A you some of our terms you I've kind and of Are question you any this

Stuart Rose

Not currently.

We them. have have and -- the hard anything. to we past, I in I get seen -- not don't currently, tried we've But

fact, pay, I become so at best has good, buy are things we better things company and to to couple people industry in certainly much the the a the think in In now and last doing aren't better time when prices want of the months.

on we capture have is and our properly three carbon other uses of attention our carbon think, potential I projects. So, capture maybe --

applied hope next couple two them, ready years, One pretty that of the have others to we in with EPA. we've be of we but quick the

more than find capture companies. is in, those taking else's mergers for it's carbon someone ethanol or uses of own and other probably of potential to our uses think projects, our whether I carbon that's growth

this is think our in point of better time. probably focus a that time at I

Zafar Rizvi

at and gallon you XXX million ethanol XXX from our it, I million location facility the XXX XXX from I million. that will was we the consumption that, think, Pavel, originally, add have grown look both million if to

Now million. million from we are to XXX XXX growing organically

certainly availability the are from our we we And we these good growing most location think the other ethanol location plants. not own area. to of know we plants. So corns -- that know how And better that We of organically the it's then our was production out important grow some as and thing year. over is as find much acquisition than had what

Jordan Levy

it. Got very much guys. Thanks

Stuart Rose

Thank you, Pavel.

Operator

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

Chris Sakai

Yes. Hi. about... Can you talk

Stuart Rose

Hi, Chris.

Chris Sakai

natural gas of price the your Yes, how profitability? affecting and that's

Zafar Rizvi

the this -- time, over has $X. trading natural to was at it price to the last think considerably gas year, dropped I close $X

Now $X, P&L it's on less. the second $X or and it's major because impact expense about that's Suddenly, we have. a highest

February, the So believe that or the which bit The year. pricing certainly little depends through and March winter situation season be. January, the this we December, least we better, will at a to little natural little is helping better, predict we continue stay same will happened price prices what have to will feel but we in close that be different bit this a much But can in same and a now. continue or cannot

Chris Sakai

Have and price this locking the for in future? hedging prices these you about [indiscernible] potentially thought

Zafar Rizvi

have We January, look throughout natural leave buy open. do our But for the consider that price of it's prices through those do or if December, those certainly, February, it everything March, see not do purchased year. it, some is stage we We feasible the facilities. consumption we But this we at consider, -- at we gas not. lowest those ethanol

Chris Sakai

which for Okay, sounds countries are it more? globally, demanding ethanol you can about demand good. talk And then

Zafar Rizvi

top I continuously on basically the list. the think Canada ethanol that demand is is of

and certainly, countries, But UK, month, dropped, year Netherlands We has demand importing the the five These U.S. export last is mentioned -- ethanol Korea the as top previously. I have and last which Peru. seen South are the from

Chris Sakai

the for Okay. Thanks answers. Great.

Stuart Rose

welcome. You're

Operator

question Mammoth with proceed. from next Our Locke David Investments. Old comes Please

David Locke

you are How gentlemen. morning, Good today?

Stuart Rose

morning. Good

David Locke

in throughput? Could to since think per guys business I of, just ask to of the dollars same now, that in about of like said trading have that, been of then capacity of what the you've assets it in that quick it, Thanks. is what question sort cost want haven't sort call And new the related able buy. anything Good. on gallon right terms of industry there's a seem you do What you you of any kind holders that metric? found in and assets ask of the doesn't terms guys

Stuart Rose

-- depends $X.X I cost The cost probably the And in be not just one that $X plant I a level the would but to would think don't that for one. off one a And building anyone have don't if it there buying project. -- estimate. of build the the if at was know on buy building versus a price. we plant in even to somewhere sale. that's to would cuff advantage I It gallon,

your that in advantage, carbon you operation is you advantage get or and own could take through away to much pretty big capture in it's right a XXZ be could away right it's be The pipeline business credits. whether whether project, but through

was in there's something big So a secrets this. sale. But in for about advantage the industry There's there no if in everyone all the knows prices. all honesty,

If you pretty something, were high. would the price to be find

David Locke

expansion, like kind along one doing that XXX of terms you in a are less? brownfield is guys sort that million. Is like that range? lines XXX million Or of the what of to of from to along $X the high moving similarly lot And plant --

Zafar Rizvi

lot equipment there $X because many -- range is less already It than facility facilities certainly already other of exist. already certainly and you have it and is is so loading other

certainly it than is So less $X.

David Locke

sustainable And spend there if points air of can guys on you general, air sort if couple or topic, an opportunities Okay. guys on of fuel fuel, might at a to forward? -- you might unrelated some do just that there's capacity in in ethanol soak seconds up ethanol any sustainable going anything reflecting some

Zafar Rizvi

to of other And we can produced if then reason ethanol future, gallon SAF. certainly not have expanded we only to have X ethanol our as facility the in of see, advantage XXZ. X pivot take that pivot, gallon to one every Yes, which, the I think that's approximately of can we you And SAF. of because

several have with believe we companies are they to the convert SAF. discussion -- have and really can So other technologies they ethanol we have -- who

those. in have discussion So we with

We are to -- in certainly market. exactly the make sure try what is

So stage, decided people that certainly get feel certainly pivot will to comfortable know is let at this technologies at successful, to into will pivot there it. we we that if which this SAF. can is to we But and no we proven experiment. we'll And way, time, the later other we once

Stuart Rose

That saying, of reminds pioneers. and and someone me and we're at watch it. we who's We'll will the an not And be then take pioneers old see think successful we'll successful, the and of the have the of possibly ethanol believe the get into that we largest ethanol -- to we one don't business it and take fuel. will that producers will be make ethanol arrows,

So we'll happens. We'll someone with be if ready see technology. ever successful what is the

David Locke

Okay. gentlemen. for Thanks time, very much your

Operator

further no are there continue presentation or closing with this at Rose, time. remarks. your Please Mr. questions

Stuart Rose

everyone listening, we next hope with us listen quarter. No, and thank want you. and I Thank to for just Bye. you'll be

Operator

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

REX American Resources (REX) 30 Aug 232023 Q2 Earnings call transcript