REX American Resources (US:REX)2021-12-01 21:02Financial Data and Key Metrics Changes - Sales for the quarter increased by 63% due to higher pricing for ethanol, distillers grains, and corn oil [5] - Gross profit from continuing operations was $25.2 million compared to $18.9 million in the prior year [5] - Net income attributable to REX shareholders from continuing operations was $13.3 million, a 47% improvement from $9 million in the prior year [7] - Net income per share from continuing operations was $2.23, up from $1.47 in the prior year [8] - Cash balance rose to $219 million from $108.7 million at year-end [11] Business Line Data and Key Metrics Changes - The company has discontinued refined coal operations, now focusing solely on ethanol and by-products [4] - Ethanol sales volume decreased to 69 million gallons from 74.6 million gallons due to limited corn supply at the beginning of the quarter [5] - Ethanol pricing improved by 76%, dried distillers grains by 43%, and corn oil pricing by 146% compared to the prior year [5] Market Data and Key Metrics Changes - The operating environment improved in 2021, with favorable ethanol and corn oil prices contributing to increased crush margins [13] - Logistic problems are affecting production and net income, with challenges in rail and container availability [13] Company Strategy and Development Direction - The company is focusing on carbon sequestration projects and exploring alternative energy opportunities [11][14] - Plans to develop a hub for carbon sequestration, with initial project costs estimated between $35 million to $50 million [28] - The company is open to considering other alternative energy projects and carbon capture opportunities [11] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the current quarter, indicating a significantly better performance due to rising crush spreads [10][18] - The company is cautious about predicting future commodity market conditions due to various influencing factors [25] - Management highlighted the importance of logistics in maintaining ethanol prices and production levels [24] Other Important Information - The company reported a tax provision of $4.3 million for the third quarter, down from $5 million in the prior year [7] - The carbon sequestration project is in preliminary stages, with ongoing testing and modeling to predict CO2 behavior [15][16] Q&A Session Summary Question: Thoughts on the significant move higher in ethanol prices - Management noted logistics issues as a key factor driving ethanol prices higher, with demand outpacing supply due to transportation challenges [24] Question: Larger scale investment in carbon capture - Estimated costs for carbon capture projects range from $35 million to $50 million, with potential for further investment based on initial project success [28] Question: M&A and alternative energy projects - Management discussed potential opportunities in carbon capture and other alternative energy projects, emphasizing the need for a place to store captured carbon [34] Question: Legal status of RINs for 2021 - Management indicated uncertainty regarding EPA's actions but noted that prices for RINs have been declining recently [36]