Q4 2020 REX American Resources Corp Earnings Call
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greetings and welcome to the Rex American resources fiscal twenty twenty fourth quarter conference call during the presentation. All participants will be in a listen-only mode afterwards. We will conduct a question-and-answer session at that time. If you have a question, please press the one followed by the four on your telephone. If at any time during the conference, you need to reach an operator, please press * 0 month. I when I looked at as a conference over there. Cuz Bruggeman Chief Financial Officer, please go ahead.
Good morning. Thank you for joining American resources fiscal two thousand twenty fourth quarter conference call will get to our presentation and comment momentarily as well as your wage and answer session but first, I'll review The Safe Harbor disclosure in addition to historical facts or statements of current conditions. Today's conference call contains forward-looking statements that involve risks and uncertainties within the meaning of the private Securities litigation Reform Act of 1995. Such forward-looking statements reflect the company's current expectations and beliefs that are not guarantees of future performance as such actual results May Vary materially from expectations the risk and uncertainties associated with forward-looking statements are described in today's news announcements and in the company's phone now with the Securities and Exchange Commission, including the companies report on form 10-K and 10-q Rex American resources assumes no obligation to publicly update or revise any forward-looking statements dead.
I have joining me on the call today Stuart Rose executive chairman of the board and Zafar rizvi chief executive officer Alfred review our financial performance, and then turn the call over to Iraq for his comments sales for the quarter increased approx, 4.2% primarily reflecting higher year-over-year production in the ethanol segment and increase in pricing sales were based upon 67.7 million gallons this year vs. 65.9 million in the prior-year fourth quarter gross profit for the ethanol and byproduct of increased for the fourth quarter from 8.1 million to 8.3 million primarily do to improve improve distillers and corn oil pricing. The refined Cole segment had a quarter loss of one point four million for this year versus one point five million for the prior-year.
Sg&a decreased for the fourth quarter from 5.6 million to 4.4 million largely due to lower ethanol-free charges recorded in selling General Administration due to the due to service contract terms. The company recorded income from its unconsolidated Equity investment of $332,000 for the fourth quarter of this year versus 1 million in the prior year long recognized the tax benefit of one point eight million in this year's fourth quarter versus the benefit of three point four million in the prior Year's fourth-quarter the refined cold segment contributed a benefit of one point seven million this year versus one point five million in the prior year fourth quarter for the tax benefit of of factors led the net income for the fourth quarter of fiscal 2020 of 3.5 million 8 2 4 .4 moon in the prior-year while diluted earnings per share decreased from $0.70 to $0.59 Stuart on now turn the call over to you.
Thank you. Going.
Forward ethanol now is currently profitable and we're up against a. Last COVID-19 related closure. Last year terms of corn and ethanol prices them both up as virtually. All Commodities are up Christian Crush spreads remain challenging ddg is up with the price of corn the new body mass destruction appears to have appointees that are favorable to the ethanol industry, but rent pricing is still in pricing of the up right now. We are still waiting to see how they offer treatment pricing terms of the Cobra. The cover news is with the opening up of different states. It should help Drive in which should improve demand for a product especially versus last year terms of refined call remains profitable on an after-tax basis. We plan on ending that operation.
By year round this year terms of going forward with our cash. We have about a hundred and eighty million in Consolidated cash and equivalents. No jet pack plans are the continued to explore investing in carbon and carbon capture. We made progress there and it's been a fair amount of time. I'm working on that project. We also offer looking continue to look for a high-quality ethanol plants and the ethanol plants. We would hope to find if we should we find one student to buy would be in our opinion something that it's the best technology has good technology good locations. Good people at this point. I'll turn it over to Zafar rizvi or talk a little bit more about our our carbon capture business in our ethanol business. Thank you.
Thank you Stuart. As I mentioned in the last 3 call 20/20 started in a challenging environment due to the COVID-19 and dynamic with temporary shutdown our plans to Thursday and part of the second quarter and we struggle to find phone for a new facility. We saw a decrease in the fuel demand and negatively impacted the ethanol industry during a third-quarter condition improved will see the study flow of phone at both of our majority owned owned as well as minority-owned location this resulted in improved Crush margin and very profitable thoughts these improve conditions continue through through the beginning of the fourth quarter later. We began to see a decline in the crash margin in addition to the price of ethanol fuel to keep up with increase in price Farmers lost interest in selling their phone because they were receiving a direct payment from the federal government under the care act when China stepped up its dead.
Okay. It's going to purchase that led to the higher comprises Behind These factors. We experienced political uncertainty and trade disputes in addition to
Continue to consider and Grant small Refinery exemptions from RFS compliance years. We expect the cash. Margin in the near future to continue to be under pressure. But we also expect it to improve once the threat of COVID-19 declined with the progress in vaccinations and people began to drive more more again.
The March 9th the report of the usda's showed that carry out stayed at one point five billion bushel with export at two point six million bushel. The estimated yield is 162 bushels per acre. And Aetna plants are expected to consume approximately five billion bushels in 2021 Soca.
Export of the distiller grain in 2020 was approximately 10.96 million tonnes compared to ten point eight million in 2019. We took considerable improvements in export during the last quarter of the year. Can we 20-21 Mexico South Korea and Indonesia over the top three importers in Rome in January? Twenty Twenty-One acknowledged sports during 20, 20 20 total of 1.3 billion gallons compared to 1.46 between gallons of 2019 off Gunnery 2021 XSport total 164.7 billion gallon compared to 151.3 million gallon in January.
India or China and Canada water top three importers. So we saw we saw that India is suddenly is on the top of the list compared to dead generally either. It's it's normally it's a real or Canada. So we see some improvements coming out from India. Also, let me give you some progress in the carbon sequestration project. I discussed in our previous calls. We are working with the University of Illinois to drill a carbon sequestration test while to determine suitability for an injection valve at our 100 kinergy off of University of Illinois is in the process of evaluating a permit application determined to dismiss survey to select the test. Well location and contact being a front-end engineering design for its create study of the CO2 capture system. The data will be analyzed in the make to make sure the location is suitable for test characterization. Well the university wage
Back to start the bidding test. Well, once the drilling permit is granted and the design is completed. We expect to start drilling the characterization. Well in early September would take approximately six weeks to drill and another several weeks of testing. It will require extensive modelling and computers to Malaysian predict the behavior of the CO2 when it is injected these stimulation models will determine how much CO2 can be injected at the location and what rate and it is eventual distribution in the subsurface. This project is still at a preliminary stage and we cannot predict yet that we will be successful. Our Target is to achieve Net Zero emission in summer. We are pleased to announce the profitable quarter and year in spite of a very difficult environment for the ethanol industry and other businesses last year. We are very appreciative and thankful for the hard way Jose.
Of our colleagues during this pandemic.
To achieve these results and I will get back to floor to Stuart Rose for his further comments Thanksgiving. Thank you in conclusion. The economy starting wage open up. We have great plants great people great locations. We have High Hopes when the economy does open up that that our business will will improve as demand improves most importantly in the biggest thing that we have going for is is is our people they they stuck with us through thick and thin and they are what we feel makes a difference and what separates us from the rest of the industry and what will continue to to allow us to to outperform the industry. Thank you. I'll now leave it open to questions.
Thank you. If you would like to register a question, please press the one followed by the four on your telephone. You'll hear a three-tone prompt to acknowledge. Your request off. A question has been answered and you like to withdraw your registration, please press the one followed by the three. Once again to register for a question, please press the one followed by the four on your telephone. One moment, please for the first question.
How our first question comes from the line of Jordan Levy with true Securities, please go ahead morning all and nice quarter against the pretty challenging backdrop on the macro front. Maybe if we just start on the carbon capture side kind of you guys provided an update on the Illinois program. Maybe could you just talk to the potential? You see we've seen some some private companies and whatnot announce projects around large-scale carbon-capture pipelines and off and Facilities. Could you could you just talk to how you're viewing that market potential outside of the University of Illinois project and it's something that's of Interest.
Zafar I think as you know that there is some going something also is happening in North Dakota are bombing and some other area but we are working with the university almost over a year and we have a we have the land and we know exactly where we will be drilling and we are evaluating all those things. So we we seem to be ahead of most of other people who are at at the stage. It takes approximately to you know from start to end. It takes about 2 to 3 years before you really able to drill your for your drill your first valve which is characterized as well. Then you back to make sure how much it can handle the CO2 in that area and then you have to get a permit which is you know V6 permit and then you have a game.
have before you start injecting so it's
Is a long process I can certainly can see some of those as you mentioned. There's pipelines are building but I think we think we have to have a storage first month and if we don't have a storage that pipeline you can bring the CO2 when exactly we're going to store that so we our our thinking is we should have a storage valve then we pick the next step about the pipeline. So that's the direction. We are going compared to other people who are really discussing the pipeline only.
Sure, is it far as we think people are going backwards on this? They're doing the pipeline, which that's nice. They have a pipeline, but you could always truck see if you do hold and put it in which we think is the most important thing. It doesn't really mean anything. So we're working on the whole first and we assuming we we bought can get that done. Then we'll work on the will work on the pipeline and deal with that and deal with the delivery. But if you don't have a hole in our opinion you really if you don't have a place to walk toward the product you relate not even at Ground you're not even in the ball game in our opinion. Yeah, because you know the permitting process along from EPA, but after you drill that and you really realize that this is the proper location and from characterization well with an injection, well, then you first you get the wage.
State and then it take a permission from about six months to six to twelve months. So I think that's why it is important to start. Well first so that way by the time we have well ready the pipeline can come and bring it there too. And as I mentioned previously that we have some non-binding agreement with some of that tunnel facilities in Illinois who are willing to also Supply the carbon to us. So we am looking at that way to make sure we have storage facility first before we go to the pipeline site know that I think that makes a lot of sense, um Stewart maybe a question for you is as far as well talked about you as you know, as is natural you guys are always kind of looking at potential ethanol.
Plants that you could expand to and and depending on the quality of the plant and and that sort of thing. Could you just discuss how how you see that market today versus you know, maybe a month ago and historically we've seen some some deals to go across recently some sales some purchases on the ethanol facilities side, but just curious how you're viewing on Market.
There are there are plants for sale right now a lot of our competitors seem to be emphasizing other products. So they're definitely plants for sale. We if we took us to buy one and we'd have to find something that fits our mode of operation which is they have the best plants good locations good corn Supply. And those are those are fewer fine, but they they potentially are out there. We'll see what happens this it's an interesting time because we're probably the company that most seriously takes it takes the ethanol industry most seriously and we think the ethanol industry, especially if it can become close to a zero carbon industry has a huge future wage. But um, and that's our opinion are the people in the industry seem to be back in a way. So we're pretty excited about possibilities there, but you never know what
will happen
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Be just one more Zafar maybe for you. We talked about you know, the the crop yields and how they're shaping up this year know that you know a lot more corn planting a year then the last year with the increase in demand. You just talked to the specific regions you all Supply from and how how you're seeing that shape out. I know it's early days and uh, you know, not sure if you can get a sense of that yet, but just curious if if that's something you can comment on I think guys, you know, the car the plants is the phone is the last year was planted about ninety million Acres. I think they have they just saw the report actually future average survey showed that it's going to be probably going to be blood flows to 93.665 million phone records will be planted. That's about 3.1% more than last year as you know, the insurance value is close to I think $4.65 off.
Approximately somewhere so I think we see that certainly is due to Insurance value and also on prices staying above $5 at this time and money will be more will be planting this year even compare to last year. But certainly we have also seen Farmers has enough money and I'm not really keeping that in the storage and not bringing up there in selling. So we have seen the both things. And if you remember last year's time possible with very difficult to find the cone and then suddenly after the core word on of the planting season started the phone was available everywhere and you can buy very often. So I think there is certainly we see farmers are settings are not as as as we like to see and but we see that the wage
It will be more accurate will be granted than last year and hopefully depending on whether will be a good graph.
Great. Thanks so much for the details guess. Thank you Jordan.
As a reminder to register for a question, please, press one for our next question comes from the line of Chris with singular, please go ahead. I'm going to have one good morning. Just I had a question on any if you guys had any sort of weather-related production delays this last quarter off and it's so you know for how long
There was some delayed in the area. I think it was slow down at some of those people aren't all around actually in South are not together and somewhere in Iowa also, but that was for about maybe three to four days when slow down for but it was not more than eight. That was due to the supply of natural gas. But overall it was not any delay.
Okay, great. And as the economy's reopen globally, you know, where do you see, you know the the wage I guess the biggest country.
Because country of ethanol export you mean. Yes. Yes, I think as you can see recently as I mentioned faith in prepared remarks India will suddenly almost in a January. It's a 53.2 million gallon India campaign and Thursday. We see always before a better deal and Canada and Kia was even last year in January, but only 13.3 million gallon so you can suck. I'm thirty-three million two hundred fifty-three million. I think we see a lot of potential in India and we have seen in the China lately China in January alone. Twenty twenty two point seven million gallons a purchase. And we also see Canada our neighbor I think as you can see they are pushing very carbon-credit and they even the Supreme Court just yep.
Stay at the order that would Canadian government is going to charge the carbon carbon tax and that will stay. So I think that all of these things we going to see that would certainly Canada China India and Brazil Brazil has slowed down because due to some of those tariffs. Hopefully Biden Administration work with Brazil and remove tariffs. I think we certainly see that growing in in those area even even even some of the Arab oil-producing companies are buying it to make sure they are due to the environmental reasons.
Okay. All right. Great. Thanks.
Thank you.
There are no further questions at this time. I'll now turn the call back over to the presenters for closing remarks.
We thank everyone for listening to our call and we look forward to talking to you after the end of after the end of next quarter. Thank you very much. Bye thank you that does not include the conference call for today. We thank you all for your participation and ask that you please disconnect your lines.
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