REX American Resources (US:REX)2022-05-25 17:08Financial Data and Key Metrics Changes - Sales for Q1 2022 increased by 18% due to higher pricing for ethanol distiller grains and corn oil, with ethanol sales at 64.5 million gallons compared to 70 million gallons in Q1 2021 [6] - Gross profit decreased to $11.9 million in Q1 2022 from $19.5 million in the prior year, impacted by higher corn and natural gas prices [6][7] - Net income attributable to REX shareholders from continuing operations was $5.2 million in Q1 2022, down from $7.3 million in the prior year, with total net income per share decreasing from $1.30 to $0.87 [11] Business Line Data and Key Metrics Changes - Ethanol pricing improved by 27%, dried distilled grain by 5%, and corn oil pricing by 91% year-over-year, while corn costs increased by 27% and natural gas prices by 86% [7] - SG&A expenses decreased from $9.9 million to $5.2 million, primarily due to reduced outgoing freight costs [8] Market Data and Key Metrics Changes - The operating environment remains challenging due to increased ethanol production, logistics issues, and rising corn and natural gas prices affecting the crush margin [17] - Corn prices have been volatile, trading around $7.60, with natural gas at $9.20 and ethanol at $2.75 [39] Company Strategy and Development Direction - The company is focusing on carbon capture projects and evaluating potential acquisitions of ethanol plants that utilize similar technology [15] - A significant government payment related to COVID relief is expected to support operations, alongside ongoing evaluations of projects aimed at increasing production efficiency and reducing water consumption [18][19] Management's Comments on Operating Environment and Future Outlook - Management noted improvements in the operating environment but acknowledged ongoing challenges, particularly from inflationary pressures and commodity pricing due to geopolitical factors [17] - The company anticipates a profitable second quarter and is actively working on carbon sequestration projects, with plans to file for a Class 6 permit by mid-2022 [20][21] Other Important Information - The company has $234 million in consolidated cash, which may be used for stock buybacks if market conditions allow [14] - The carbon sequestration project is in preliminary stages, with extensive data collection and analysis ongoing [24] Q&A Session Summary Question: Inquiry about carbon capture strategy - Management emphasized the importance of having the capacity for carbon capture and is exploring opportunities in various carbon-heavy industries [34][36] Question: Demand for corn oil - There has been a significant increase in demand for corn oil, driven by rising prices and market dynamics [38] Question: Impact of the war on the ethanol market - The war has affected corn prices due to reduced exports from Ukraine, leading to increased costs and market pressures [42][43] Question: EPA's higher blending levels - Management expressed skepticism about the impact of higher blending levels, stating it would have minimal effect unless made permanent [44][45] Question: Status of exports to China - Exports to China remain low, with calls for tariff reductions to facilitate trade [46][47]