- Gross Margin: Improved by 37% over Q1 2024 and nearly 8% over Q2 2023.
- Net Income per Share: Increased more than 20% over Q1 2024 and more than 35% over Q2 2023.
- Ethanol Sales Volume: 65.1 million gallons, a 6% decrease from Q2 2023.
- Average Selling Price of Ethanol: $1.79 per gallon, down from $2.42 per gallon in Q2 2023.
- Dry Distillers Grain Sales Volume: 132,850 tons, a 6% decrease from Q2 2023.
- Average Selling Price of Dry Distillers Grain: $164.45 per ton, down from $226.48 per ton in Q2 2023.
- Modified Distillers Grain Sales Volume: 17,650 tons, up from 10,600 tons in Q2 2023.
- Average Selling Price of Modified Distillers Grain: $63.61 per ton, down from $103 per ton in Q2 2023.
- Corn Oil Sales Volume: 20.2 million pounds, slightly down from 20.7 million pounds in Q2 2023.
- Average Selling Price of Corn Oil: $0.43 per pound, down from $0.55 per pound in Q2 2023.
- Gross Profit: $19.8 million, an 8% increase from $18.4 million in Q2 2023.
- SG&A Expenses: Decreased to $6.4 million from $8.6 million in Q2 2023.
- Interest and Other Income: $4.4 million, up from $3.3 million in Q2 2023.
- Income Before Taxes and Noncontrolling Interest: $19.5 million, a 21% increase from Q2 2023.
- Net Income Attributable to Shareholders: $12.4 million, up from $9.1 million in Q2 2023.
- Net Income per Share (Diluted): $0.70, up from $0.52 in Q2 2023.
- Total Cash, Cash Equivalents, and Short-term Investments: $346 million, down from $378.7 million as of January 31, 2024.
Release Date: August 27, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- REX American Resources Corp (REX, Financial) achieved a 37% improvement in gross margin over the first quarter and nearly 8% over the second quarter of 2023.
- Net income per share increased by more than 20% over the first quarter of 2024 and more than 35% over the second quarter of 2023.
- The company has no debt, allowing it to grow without financial burden.
- REX American Resources Corp (REX) is on track to complete the expansion of its One Earth Energy ethanol production facility to 175 million gallons per year by the first quarter of 2025.
- The company has invested approximately $91 million into the One Earth carbon capture project and associated ethanol production capacity expansion, showing strong commitment to future growth.
Negative Points
- Ethanol sales volume decreased by approximately 6% compared to the second quarter of 2023.
- Average selling prices for ethanol, dry distillers grain, and corn oil all declined compared to the second quarter of 2023.
- The carbon capture and sequestration project faced delays due to regulatory actions by the state of Illinois, impacting the construction schedule.
- The company is experiencing delays in receiving equipment and components, which could affect the completion timeline of its projects.
- REX American Resources Corp (REX) ended the second quarter with a decrease in total cash, cash equivalents, and short-term investments, primarily due to ongoing construction projects.
Q & A Highlights
Q: Can you discuss the timeline for the carbon capture sequestration project, assuming you get the necessary permit approvals?
A: Zafar Rizvi, CEO: The EPA permit is expected by the second quarter of 2025. Construction is ongoing, and the carbon sequestration facility should be ready by the end of this year, pending utility interconnection. We anticipate starting operations around August or September next year, depending on permit approvals.
Q: What are your current priorities for using the $350 million in cash on the balance sheet?
A: Stuart Rose, Executive Chairman: Our first priority is the carbon capture and expansion of the Gibson City plant. We are also considering the expansion of our South Dakota plant and are always looking for acquisitions. Additionally, we have a buyback authorization, which we use strategically.
Q: What's the latest on your thinking about sustainable aviation fuel (SAF)?
A: Zafar Rizvi, CEO: We need to reduce our CI score to qualify for 45Z tax credits before moving towards SAF. Clear guidelines for 45Z are still pending, but we are focused on lowering our CI score.
Q: How are you doing compared to your budgeted amount for capital expenditures?
A: Zafar Rizvi, CEO: We are on track with our budget. While there have been delays in receiving equipment and components, we do not foresee any major increases in expenditures at this time.
Q: Have you seen any weather-related issues over the last quarter?
A: Zafar Rizvi, CEO: No major weather-related issues have been reported. There was some heavy rain in South Dakota, but it did not cause significant problems. We are expecting very good crop yields this year.
Q: What would warrant an investment in the expansion of your South Dakota plant?
A: Stuart Rose, Executive Chairman: The investment would not be dependent on the Summit pipeline but rather on the efficiency of a larger plant and corn availability. We are also considering lowering our CI score to qualify for tax credits.
Q: Can you provide more details on the impact of the regulatory moratorium on CO2 pipeline construction in Illinois?
A: Zafar Rizvi, CEO: The moratorium has led us to adjust our construction schedule. We are focusing on completing the capture and compression facility by the end of the year and will proceed with the pipeline once permits are received.
Q: What are your thoughts on the potential impact of the upcoming election on CCUS and ethanol policies?
A: Stuart Rose, Executive Chairman: Carbon capture is a bipartisan issue, and we do not expect significant changes in current laws. However, proposals to extend certain tax credits may be influenced by the election outcome.
Q: How do you see the market progressing through the remainder of the year?
A: Zafar Rizvi, CEO: We expect strong results in the third quarter, driven by favorable corn input pricing and increased ethanol exports. Our focus remains on profitability over production numbers.
Q: What are the main challenges you face in the carbon capture project?
A: Stuart Rose, Executive Chairman: The biggest challenge is obtaining permits. Building the pipeline and the well itself is less time-consuming than waiting for permits from the EPA and local authorities.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
