REX American Resources (US:REX)2024-12-03 19:55Financial Data and Key Metrics Changes - REX American Resources reported a net income per share of $1.38, a 97% improvement over the second quarter of 2024, marking the second most profitable quarter in the company's history [7][26] - Gross margin improved by 1% compared to the third quarter of 2023, despite a 21% reduction in product revenue [8] - Gross profit for the third quarter of 2024 was $39.7 million, slightly up from $39.3 million in the same quarter of 2023 [23][24] - Total cash, cash equivalents, and short-term investments at the end of the quarter were $365.1 million, down from $378.7 million at the beginning of the fiscal year [27] Business Line Data and Key Metrics Changes - Ethanol sales volume increased by approximately 3% to 75.5 million gallons compared to 73.2 million gallons in the third quarter of 2023 [21] - Average selling price for ethanol decreased to $1.83 per gallon from $2.32 per gallon in the prior year [21] - Dry distillers grain sales volume decreased by 5% to 170,116 tons, with average selling price dropping from $194.94 per ton to $147.14 per ton [22] - Corn oil sales volume was approximately 23.4 million pounds, down from 24.1 million pounds, with average selling price decreasing from $0.61 per pound to $0.44 per pound [23] Market Data and Key Metrics Changes - Ethanol exports were approximately 33% higher in the first nine months of the calendar year compared to the same period in 2023, returning to pre-pandemic levels [30] - Corn input prices have improved due to a bumper crop in the Midwest, ensuring adequate supply for the plants [29] Company Strategy and Development Direction - The company aims to complete the construction of its One Earth Energy carbon capture and compression facility and expand its ethanol production capacity to 175 million gallons per year, with plans to further permit for 200 million gallons [6][11] - The company is focused on maintaining strategic freedom and pursuing additive growth projects while remaining debt-free [9] - Future projects may include sustainable aviation fuel and third-party carbon sequestration [31] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's ability to maintain profitability despite challenges in the regulatory environment and potential changes in federal policy [28][31] - The anticipated completion of the ethanol production expansion is expected to enhance profitability [31] - Management remains cautious about the impact of potential changes in the 45Z tax credit and the incoming administration's policies [36][50] Other Important Information - The company has invested approximately $103 million into the One Earth carbon capture project and ethanol production capacity expansion combined, with spending on the CCS project at $52.9 million and ethanol expansion at $50.2 million [18] Q&A Session Summary Question: Thoughts on Biden administration not finalizing 45Z guidance - Management expressed uncertainty about the implications of the incoming administration on growth initiatives related to 45Z and emphasized the difficulty in benefiting from it without finalized regulations [36][37] Question: Areas of opportunity for deploying cash - Management highlighted potential share buybacks and opportunities in new ethanol plants, although current prices are above their willingness to pay [45][46] Question: Decisions on carbon capture project pending clarity on 45Q - Management indicated that they would likely continue with the carbon capture project regardless of 45Q's status, citing market opportunities for low-carbon products [50][51]