Q1 2021 REX American Resources Corp Earnings Call
Greetings and welcome to the Rex American resources fiscal 'twenty 'twenty, 1 first 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 1 followed by the for on your telephone.
If at any time during the conference you need to reach an operator, Please press star zero.
I would now like to turn the conference over to Doug Bruggeman, Chief Financial Officer. Please go ahead.
Good morning, and thank you for joining Rex American resources fiscal 2021 first quarter conference call.
We'll get to our presentation and comments for materially as well as your question 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 risk 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, but are not guarantees of future performance as such actual results may vary materially from expectations.
The risks and uncertainties associated with the forward looking statements are described in today's news announcement and in the company's filings with the Securities and Exchange Commission, including the company's report on form 10-K and 10-Q.
Rex American resources assumes no obligation to publicly update or revise any forward looking statements.
I have joining me on the call today Stuart Rose Executive Chairman of the board and Zafar Rizvi Chief Executive Officer.
Before going over the financial performance.
I would like to have mentioned an additional disclosure in our press release after mailing the proxy material. We noted that a reference to broker non votes and shareholder absentation counted counting against the proposal to amend the articles of incorporation so as to allow potential issuance of preferred stock by the company had been erroneously delete it.
For the proxy effective this morning that supplement to the proxy materials filed with the SEC.
Included referenced in this morning's press release were posted on our website and we will do a mailing to all stockholders of record breaking this supplement to shareholders' attention.
We apologize for this error, but are taking prompt action to remedy remedy and notify all shareholders.
Sales for the quarter increased substantially by 97% primarily due to higher production levels as we have idled our nugent plant during the first quarter of last year due to the impact of the pandemic amongst other factors.
Ethanol sales for the quarter were based upon 70 million gallons. This year versus $48.3 million last year. We also benefited from a significant increase in average selling prices and the ethanol and byproduct segment.
Reported gross profit of $19.5 million for the ethanol and byproduct segment versus a gross loss of $8.2 million in the prior year.
Gross margin benefited from the increased volume and selling prices, which were offset somewhat by higher corn pricing.
Gross profit also benefited from certain shipping costs being recorded in SG&A. This year based upon contract terms that our placement of shipping cost.
Our refined coal segment had a gross loss of $1.7 million for the first quarter of fiscal 2020.1 for.
$1.1 million for the prior year based upon increased volume.
These losses are offset by a tax benefit of $2.2 million and 959000 for the first quarter of fiscal 'twenty 'twenty, 1 and 'twenty 'twenty respectfully recorded from the section 45 credits and tax benefits from operating losses.
SG&A increased for the first quarter to $10 million for $4.6 million in the prior year.
With the primary increase reflecting again, the increased shipping cost related to certain ethanol contracts.
We had income of 570000 from our unconsolidated equity investment in this year's first quarter versus a loss of 477000 to prior year, reflecting the improved ethanol industry conditions.
Interest and other income decreased to approximately 43000 for 669000 to prior year, primarily reflecting lower interest rates.
We recorded a tax provision of 29000 for the first quarter of this year versus a benefit of $5.3 million in the prior year.
Fluctuations in rates are largely caused by levels of refined coal production and credits versus income during the period.
All of these factors led to net income attributable to Rex shareholders of $7.8 million in this year's first quarter versus a net loss of 7.6 million in the prior year.
I'd now like to turn the call over to Stuart Rose Executive Chairman of the board.
Uh huh.
Stewart are you there.
Sorry, going forward second quarter to day continues to be profitable similar to first quarter ethanol prices RIN prices and E. D. D D G prices and corn oil prices have been strong it's been.
And offset by higher corn prices natural gas prices for a recipe or C. O will discuss this further in the call.
He discusses the ethanol.
Refined coal area production. This quarter did they is exceeding last year's quarter, but by a large margin. This is mostly I believe due to reopening.
Causing higher utility use and also higher natural gas prices, which is change in the utility we work with we think over to more coal.
Business. This business ends in the middle of November but the credits can be carried forward for 20 years, and we believe we will benefit well.
From these credits with higher cash flows for years to come.
Quarter end Rex had an approximately consolidated onto your 93 million of cash and no debt uses of cash and looking for opportunities in the ethanol business. It must be a good plant a good locations and most importantly, a good price we've explored these and so far we have found nothing there we explore.
For a few opportunities, but nothing as eminent we're looking at other at other opportunities in alternative energy that would fit our business skills. So far again nothing imminent.
Add backs on depths are authorized although.
Again, we buy stock on dips. We're also working on a serious carbon capture project.
So far our recipe will discuss further in his call I'll now turn net debt.
The call over to so far which day.
Thank you Stuart.
As I mentioned in our previous calls.
101, and started and ended with a challenging environment, but the operating environment.
1 is beginning to improve as production continued to increase regarding to report from EIA ethanol last week with 50.
5.7% ahead of the same week last year.
But the 121 production to demand for the 6.4% lower than the lawyer when compared pretty endemic.
Similar to <unk>.
2019 net.
<unk> and <unk>.
Inventories little change in demand debt at its lowest level since 2016 are guiding for the EIA last week.
Growth.
But 2 days reported.
The board for production and then stock both of it up and same time gasoline demand.
Good evening.
These improved conditions helped in the first quarter and resulted in a profitable quarter. We are beginning to see some decline in the crush margin due to number of effect including debt.
Cash price of corn China's ingredient.
The decline in the price.
Right.
But on the other hand, increasing the price of a cool non food grade corn oil. We expect the crush margin will continue continued to be under pressure in the near future. We expect to see improvement as the consumption of gasoline and creates for the people more comfortable driving distance as COVID-19 vaccine.
<unk> sizes, we are pleased that <unk>.
And for U S Circuit Court of Appeals granted EPA request to cancel todays module funded exemption, but over 70 requests, but we're able to be able to request a still under the EPA to view for them.
RFS.
Yes.
2011, 2020, we hope EPA, followed the law and the Jets.
Request.
<unk> also.
Also.
There may well be USDA report for a disappointing 2021 stock Carryout of 1 point to 7.5 billion well suited for that.
For the year however.
Gordon stock continue.
Sorry, 'twenty, 1 'twenty total corn stocks unexpectedly.
1 for 5 or 7 billions and corn production is forecast to rise 6% for approximately 15 billion bushels. The estimated corn yield for 'twenty..1 'twenty 2 is expected to be 1.
179, 5 bushels per acre to export.
Projected 2 for 5 billion bushels.
There was a there was a the Cleveland export of distiller daily.
<unk> Grand and ethanol in the first quarter for 121 exports.
Dried gram total approximately $2.6 million tons compared to 2.7 million tons.
Good morning.
We exported $399.3 million gallons of ethanol compared to 485.4 million gallon.
We are pleased China started to import ethanol and distiller dried things.
I would like to share the progress as to what you mentioned about the carbon sequestration for dogs.
I discussed.
Our previous gods.
We are working with the University of Illinois to drill a carbon sequestration desk. The University has completed its free drilling site geological site assessment.
Data for the bidding the class 6 per month application has begin using existing inflammation and U S. EPA has begun has been notified.
<unk> estimate lining location has been identified and assessment.
Such domestic contractor has been selected we expect us ethnic surveys that we began early to mid June debt.
Planning site selection and design of the well at all in progress.
Is it working on Paramount requirements for the well it will be permitted as a test monitoring well and then we expect it will be converted into a class 6 monitoring red.
A field study of the capture of tier 2 and the design other facility is underway.
We expect to start drilling in the well.
At least for.
It will take approximately 6 weeks to drill and other several weeks of testing it was acquired extensive modeling and computer stimulation.
But.
The behavior of the field when it is injected.
Simulation models will determine how much <unk> can be injected at the location.
At what rate.
Regularly distribution and the subset with as I mentioned in previous call. This project is still at a preliminary stage and we cannot predict yet that we will be successful.
Our target.
He is to achieve net zero emission and.
Suddenly we are very pleased to announce profit every quarter and 2 day and today. The second quarter is also expected to be profitable, we are very appreciative and thankful for their hard work of our colleagues in debt.
Moving to our key pieces of debt.
I will give back the floor.
Stuart oil for additional comments thanks Stuart.
Thank you so far in conclusion, we've outperformed most ethanol companies in the country. This quarter I'll close plants did bad loss at the beginning of the pandemic and people seem to think they were all equal now it's a good plants come online the good plants do well the bad plants might have.
New ideas, new hopes and dreams, but it's of course, they remain bad plants and anything that someone else might do if they start off with a high price for the ethanol producing ethanol will not will not will not carry forward into the type of profit set a good place to generate.
We're working very hard on our carbon arent hybrid capture part of that project.
Project, what's the part just describe again this is a real carbon capture project. There's a lot of people are announcing carbon capture projects, where the 1 that's actually working on a hole in the ground, which we think is the key to the carbon capture not just assembling a bunch of people that will give you their carpet it's not hard to find people.
Get rid of carbon everyone does but the key is putting that and doing it right into a hole, where it will stay in a hole and that's what we're working on and we believe we're way ahead.
Just about everyone in the country in that area.
Keys to our business is pretty simple we have good locations, we have very good stake in ICM plants.
And really the biggest key to our success is our people we've tried to get the best people the people that care the most and our CEO as you just heard is that detailed man he looks after that for us, but it looks after every detail in this business and has the interest of the shareholders in mind.
We think that's a big advantage along with having the best people in the interest of what we feel is the best people in the industry.
I'll leave it open to questions.
If you would like to register for a question. Please press the 1 followed by the for on your telephone.
You will hear a 3 ton prompt to acknowledge your request.
If your question has been answered and you would like to withdraw your registration. Please press the 1 followed by the free.
Once again, please press 1 for to register for a question 1 moment. Please.
Yeah.
My first question is coming from the line of Jordan Levy with tourists Securities. Please go ahead.
Good morning, all and really nice quarter against a.
Clearly challenging backdrop just wanted to.
Could just talk carbon capture maybe as far as Stuart.
Knowing kind of where you are in the process and it's still early stage. Just just wanted to get a reminder, what the initial thesis is behind the project and why why the area is attract is at an attractive place to explore that option and what's driving kind of looking into that just.
To give US a reminder on that.
So far.
Yeah, I think as you know whatnot synergy as I've mentioned in previous calls.
We are right at the command Simons and we have done.
It has to make testing for anybody.
With Lee and we discovered that the location, which we are at 1 not the energy not only can produce too at the same location. We can also the same time.
You don't do the card when sequestration for our own location and also we can also bring from other location to the pipeline. Our goal is to look at it.
For a more Illinois ethanol facility the other ethanol.
At our other facilities, whose reducing seo tool to bring that to that location. So we already had the land we already done the surveys we are now in the process.
Setting up the facility that we have some.
People was there last week and we are trying to look at debt how the facility will operate and how we can compress CEO too and then how far we can take our local area. We had a weekend to the carbon sequestration. So I think in a simple word we have the best.
Location.
And a proven location around that area as you know ADM is already has done very successfully.
And those areas. So so do we have supply of debt Rio 2 and we have the location.
And we also have the funds to make sure that we can achieve our goals.
Perfect day add to it and there's a lot of pay up towards the part you said a lot of people think you can just put any oil in the ground.
And it will stay in the C. O 2 will stay in the ground and that's a complete joke. It's a very serious business. It's a reason why it's very very few people doing it right now because it's a serious complicated business and the whole it's not something to be just taken taken lightly it's a very very difficult part of the process.
And like so far is that we've been working very hard at it for for a long period of time and people announcing that they're going to put them capture at carpet that's really seek to announce but it's a lot harder to find a legitimate legitimate whole where oil will stay in the ground, but we have we have identified an area of close to 1 of them.
Our plants, where we're working hard to make sure that if we do have a project it will be a legitimate project debt. The carpet the C. O 2 will stay in the ground and again, we think we're ahead of virtually everyone in this business.
That's great. Thank you for that and just as a follow up on more of the capital allocation side you all have been pretty consistent in share buybacks. Just curious you had some really strong free cash flow this quarter and knowing the ethanol volatility, but also you know where your cash position is just curious how are you.
All other thought about.
Dividends and the potential for either kind of a fixed dividend or as we've seen in some other sectors. Some have started to kind of do some variable dividend payout structure. Just curious how you think about that versus share buybacks.
The dividends and that's always a board decision, but my own personal opinion is we're a small company and you can either do dividends or share buybacks or share buybacks. We have the advantage of putting a floor in the or at least hoping to put a floor on the stock when there are dips and reducing the share count which increases the earnings per share.
When we do report earnings and that's been our way of describing our giving back to our shareholders some money.
Again, where we're not a huge company, we're generating a lot of cash where we're fairly for our sights a barrel fairly rich company, where we do have a lot of cash, but we have uses for that cash what other uses as I said in my call was to do buybacks and support the stock when it when someone when they're.
Our dips in the stock we've done that for a number of years and it's worked pretty well for us over the years. So I imagine the board will keep with this plan.
That answers your question.
Yeah, Yeah, absolutely and if I could just sneak 1 last quick 1 and Stuart you mentioned.
You guys are always looking at kind of attractive opportunities and nothing eminent and I'm just curious.
How you're looking at you mentioned altered or other alternative energy potential I'm. Just curious if there are certain aspects within that that you think are attractive for fit with the business debt that you'd look at versus some other muscle try to.
Well, we've mostly looked at the ethanol business and we.
Looked at some very closely but either the location didn't work out the plant didn't work out or the price is too high so.
But that could change at any time, they know we're out there looking.
In terms of other energy there. So there's always the usual wind and solar we've looked at that over the years we are.
And to us the best opportunities are businesses that relate to the ethanol business and to us the best opportunity in the ethanol business is carbon capture and its not going to be an inexpensive situation.
Well received.
Oh very good tax credits from that business, which we know how to monetize have done in the past and would plan to do that in this case.
But it could be a very very large business and at the moment. That's what we're focused we're focusing on what's the first focusing on in terms of expanding our company and its my opinion something that we need to do not just for us, but for the country and for the forbidden fruit.
For the world at large so so we're we're very hopeful for that business and that's probably it for most important thing we can be doing right now and it could be very profitable for us if we do it right.
Makes a ton of sense. Thank you all.
Yeah.
As a reminder, please press 1 for if you'd like to ask a question.
Yeah.
There are no further questions I'll turn the call back over to you.
Okay, we'd like to thank everyone for listening to our call and we look forward to talking to you next quarter. Thank you very much bye.
That does conclude the conference call for today, we thank you for your participation and ask that you. Please disconnect your line.
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Greetings and welcome to the Rex American resources fiscal 2021 first 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 1 followed by the for on your telephone.
If at any time during the conference you need to reach an operator, Please press star zero.
I would now like to turn the conference over to Doug Bruggeman, Chief Financial Officer. Please go ahead.
Good morning, and thank you for joining Rex American resources fiscal 2021 first quarter conference call.
We'll get to our presentation and comments from materially as well as your question 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, but are not guarantees of future performance as such actual results may vary materially from expectations.
The risks and uncertainties associated with the forward looking statements are described in today's news announcement and in the Companys filings with the Securities and Exchange Commission, including the company's report on form 10-K and 10-Q.
Rex American resources assumes no obligation to publicly update or revise any forward looking statements.
I have joining me on the call today Stuart Rose Executive Chairman of the board and Zafar Rizvi Chief Executive Officer.
Before going over the financial performance.
I would like to have mentioned net additional disclosure in our press release after mailing the proxy material. We noted that a reference to broker non votes and shareholder apps limitation counted counting against the proposal to amend the articles of incorporation so as to allow potential issuance of preferred stock by the company had been a row necessarily delete it.
For the proxy.
Fact of this morning that supplement to the approximate cereal was filed with the SEC.
We include a reference in this morning's press release were posted on our website and we will do a mailing to all stockholders of record breaking this supplement to shareholders' attention.
We apologize for this error, but are taking prompt action to remedy remedy and notify all shareholders.
Sales for the quarter increased substantially by 97% primarily due to higher production levels as we had idled our nugent plant during the first quarter of last year due to the impact of the pandemic amongst other factors.
Ethanol sales for the quarter were based upon 70 million gallons. This year versus $48.3 million last year. We also benefited from a significant increase in average selling prices and the ethanol and byproduct segment.
Reported gross profit of $19.5 million for the ethanol byproduct segment versus a gross loss of $8.2 million in the prior year.
Gross margin benefited from the increased volume and selling prices, which were offset somewhat by higher corn pricing.
Gross profit also benefited from certain shipping costs be recorded in SG&A. This year based upon contract terms that our placement of shipping cost.
Our refined coal segment had a gross loss of $1.7 million for the first quarter of fiscal 2021 versus $1.1 million for the prior year based upon increased volume.
Losses are offset by a tax benefit of $2.2 million and 959000 for the first quarter of fiscal 2021, and 2020 respectfully recorded for this section 45 credits and tax benefits from operating losses.
SG&A increased for the first quarter to $10 million for $4.6 million in the prior year.
With the primary increase reflecting again, the increased shipping cost related to certain ethanol contracts.
We had income of 570000 from our unconsolidated equity investment in this year's first quarter versus a loss of 477000 to prior year, reflecting the improved ethanol industry conditions.
Interest and other income decreased to approximately 43000 from 669000 in the prior year, primarily reflecting lower interest rates.
We recorded a tax provision of 29000 for the first quarter of this year versus a benefit of $5.3 million in the prior year.
Fluctuations in rates are largely caused by levels of refined coal production and credits versus income during the period.
All of these factors led to net income attributable to Rex shareholders of $7.8 million in this year's first quarter versus a net loss of $7.6 million into prior year.
I'd now like to turn the call over to Stuart Rose Executive Chairman of the board.
Uh huh.
Stewart are you there.
Sorry, going forward second quarter to day continues to be profitable similar to first quarter ethanol prices RIN prices and D. D. D. D G prices and corn oil prices have been strong it's been offset by higher corn prices natural gas prices are far risky R. C O will discuss.
This further in the call.
He discusses he asked for an offsetting growth.
Fine coal area production. This quarter debate is exceeding last year's quarter by a by a large margin. This is mostly I believe due to reopening.
Causing higher utility use and also higher natural gas prices, which is change in the utility we work with we think over to more coal.
Business. This business ends in the middle of November.
Credit can be carried forward for 20 years, and we believe we will benefit.
From these credits with higher cash flows for years to come.
Quarter end Rex had an approximately consolidated onto your $93 million of cash and no debt uses of cash and looking for opportunities in the ethanol business it must be a good plant a.
Good locations and most importantly, a good price we've explored these items. So far we have found nothing there we're exploring a few opportunities, but nothing as eminent we're looking at other at other opportunities in alternative energy that would fit our business skills. So far again nothing imminent.
Stock buybacks on depths are authorized although.
Again, we buy stock on dips. We're also working on a serious carbon capture project, which so far which Pete will discuss further in his call I'll now turn net debt.
The call over to so far which day.
Thank you Stuart.
As I mentioned in our previous 2020 and started and ended with a challenging environment, but the operating environment 121 is beginning to improve as production continues to increase.
According to report from <unk> the ethanol.
Last week with 55.
5.7% I head up the same week last year.
But the 'twenty 'twenty, 1 for a reduction in EMEA and P D, 0.64% lower than that.
Lawyer, when compare pretty well.
We estimate that a week in 2.
2019, the ethanol inventories little change of a man debt at its lowest level since 2016. According to the EIA last week reported.
2.
Todays report reported.
EIA report shows production net stock both drop.
Same time gasoline demand.
Good evening.
Improved condition helped in the process for the first quarter and resulted in a profitable quarter. We are beginning to see some decline in the crush margin due to a number of factors including debt.
Cash price of corn, China's ingredient, but the decline in the price.
Distiller dried grain, but on the other hand increase in the price of a cool non food grade corn oil. We expect the crush margin will continue continued to be under pressure in the near future.
We expect to see improvement as the consumption of gasoline in Greece, where the people more comfortable driving distance as COVID-19 vaccination sizes. We are pleased that then.
For U S Circuit Court of Appeals granted EPA request to cancel todays module funded exemption, but over 70 requests for them.
Great.
We were able to request a still under EPS view auto pets.
Alliance.
<unk> thousand 11.
We hope EPS, followed the law and the Jackson.
Quest.
The other way.
For the.
There may well be USDA report for this.
Winding 'twenty 'twenty, 1 stock Carryout.
<unk>, 7.5 billion well suited for that.
For the EBITDA however.
Corn prices are expected to increase.
Uh huh.
Our stock continues.
I'm, sorry, 'twenty, 1 'twenty total corn stocks unexpectedly.
1 for 5 or $7 billion and corn production is forecast to rise 6% for approximately 15 billion bushels. The estimated corn yield for 'twenty..1 'twenty 2 is expected to be 1.
179, 5 bushels per acre for export.
Projected to 145 billion bushels.
There wasn't the debt about the Cleveland ex Florida.
The daily day Grand and ethanol in the first quarter of 2021 exports.
Dried gram total approximately $2.6 million tons compared to 2.7 million tons.
And going into 'twenty.
We exported $399.3 million gallons of ethanol compared to 485.4 million gallon.
We are pleased China started to import ethanol and distiller dried grain.
I would like to share the progress has taught imagine about the God once sequestration for those projects I discussed.
Our previous gods.
We are working with the University of Illinois to drill a carbon sequestration desktop revenue.
He has completed its free delivering site.
Logical site assessment, the first stage for preparing the class 6 per month application have begin using existing inflammation and U S. EPA has begun has been notified that <unk> estimate lining location has been identified and assessment.
So that's a good contractor has been selected we expect that seismic surveys that we began early to mid June.
The planning site selection and design of the value at all in progress. The universities is working on a per month requirements for the well it will be permitted at the desk monitoring.
And then we expect it will be converted into a class 6 monitoring Brad.
Our feed study of the capture of <unk>, 2 and the design. Other facility is underway, we expect to start drilling in Nebraska.
At least for.
It will take approximately 6 weeks to drill and other travel weeks of testing it with a quite extensive modeling and computer stimulation.
But.
The behavior of the fee or 2 when it is injected <unk> simulation models will determine how much C. O 2 can be injected at the location.
At what rate.
Gradually distribution into sub sub growth as I mentioned in previous calls. This project is still at a preliminary stage and we cannot predict yet that we will be successful.
Our target.
He is to achieve net zero emissions in summary, we are very pleased to announced profit every quarter and 2 day and today. The second quarter is also expected to be profitable, we are very appreciative and thankful for their hard work of our colleagues in debt.
I'm doing okay.
I will give back the floor.
Our growth for additional comments thanks Stuart.
Thank you so far.
Clearly, we've outperformed most ethanol companies in the country. This quarter I'll close plants did bad laughs at the beginning of the pandemic and people seem to think they were all equal now it's a good plants come on line the good plants do well the bad plants.
They have new ideas, new helps new dreams, but it's of course, they remain bad plants and anything that someone else might do if they start off with a high price for the ethanol produced in the ethanol will not will not will not carry forward into the type of profit set a good point to generate.
We're working very hard on our carbon carbon capture project. What's the part just describe again. This is a real carbon capture project is a lot of people are announcing carbon capture projects, where the 1 that's actually working on a hole in the ground, which we think is the key to the carbon capture.
Just assembling a bunch of people that will give you their carpet it's not hard to find people that wanted to get rid of carpet and everyone does but the key is putting that and doing it right into a hole where it will stay in a hole and that's what we're working on and we believe we're way ahead.
Just about everyone in the country I get in that area.
The keys to our business is pretty simple we have good locations. We have very good stake in ICM plants and really the biggest key to our success is our people. We've tried to get the best people the people that care the most and our CEO as you just heard a detailed man he looks after they progress.
It looks after every detail in this business and has the interest of the shareholders of mine.
That's a big advantage along with having the best people in the interest of what we feel is the best people in the industry now leave it open to questions.
If you would like to register for a question. Please press the 1 followed by the for on your telephone.
Here are 3 total prompt you acknowledge your request.
If your question has been answered and you would like to withdraw your registration. Please press the 1 followed by the free.
Once again, please press 1 for to register for a question 1 moment. Please.
Right.
My first question is coming from the line of Jordan Levy with true Securities. Please go ahead.
Good morning, all and really nice quarter against.
Clearly challenging backdrop, just wanted to ex U.
We could just talk carbon capture maybe zafar Stuart.
Knowing kind of where you are in the process and it's still early stage. Just just wanted to get a reminder, what the initial thesis is behind the project and why why the area is attract is at an attractive place to explore that option and what's driving kind of looking into that just.
To give US a reminder on that.
So far.
I think as you know whatnot.
As I've mentioned in previous calls.
We are right at the command Simons and we have done.
2 D seismic testing.
Obviously, and we discovered that the location, which we are we are at 1 <unk> not only can produce C. O..2 at the same location. We can also at the same time.
You don't do the guard when sequestration for our own location and also we can also bring from other location to the pipeline. Our goal is to look at it to go to more Illinois ethanol facilities or other.
At the non.
Our other facilities, whose about reducing C O tool to bring that to that location. So we already have the land we already done there's other ways. We are now in the process of.
Yeah.
Setting up the facility that we have some.
People, what they add on if you look at last week and we are trying to look at debt how the facility will operate and how we can compress Seo tool and then how far we can take our local area. We had a weekend to the government sequester issue. So I think in a simple word we I have the best.
Location.
And a proven location around that area as you would know ADM. He's already has done very successfully.
And those areas. So so do we have supply you have to adhere to and we have the location.
And we also have the funds to make sure that we can achieve our goals.
Perfect day add to it and it's had a lot of growth.
Towards the part you said a lot of people think you can just put any oil in the ground.
And then it'll stay in the C. O 2 will stay in the ground and that's a complete joke. It's a very serious business. It's a reason why Sperry very few people doing it right now because it's a serious complicated business and the whole it's not something to be just taken taken lightly it's a very very difficult part of the process.
And like so far is that we.
Net working very hard at it for it for a long period of time and people announcing that they're going to capture that carpet and that's really seek to announce but it's a lot harder to find.
I'll, let Jeremy Metz legitimate whole where oil stay in the ground, but we have we have identified an area close to 1 of our plants, where we're working hard to make sure that if we do have a project it will be a legitimate project debt the carpet.
Well stay in the ground and again, we think we're ahead of virtually everyone in this business.
That's great. Thank you for that and just as a follow up on more of the capital allocation side.
Been pretty consistent in share buybacks, just curious you had some really strong.
Free cash flow. This this quarter and knowing the ethanol volatility, but also where your cash position is just curious how you all have thought about.
Dividends and the potential for either kind of a fixed dividend or as we've seen in some other sectors. Some have started to kind of do some a variable dividend payout structure. Just curious how you think about that versus share buybacks.
The dividends, it's always a board decision, but my own personal opinion is we're a small company and you can either do dividends or share buybacks or share buybacks, we have the advantage of.
Putting a floor in the or at least hoping to put a floor on the stock when there are dips and reducing the share count which increases the earnings per share when we do record earnings.
That's been our way of describing our giving back to our shareholders some money.
So again, where we're not a huge company, we're generating a lot of cash where we're fairly for our size of barrel fairly rich company.
Do have a lot of cash, but we have uses for that cash what other uses as I've said in my call was to do buybacks and support the stock when that when someone when there are dips in the stock we've done that for a number of years and it's worked pretty well for us over the years. So I imagine the board will keep with this plan.
Okay that answers your question.
And yes, absolutely if I could just sneak 1 last quick 1 and Stuart you mentioned you guys are always looking at kind of attractive opportunities and nothing eminent and I'm just curious.
How you're looking at you mentioned alternate other alternative energy potential I'm. Just curious if there are certain aspects within that that you think are attractive for fit with the business that debt you'd look at versus some other muscle try to.
Well, we've mostly looked at the ethanol business.
We've looked.
We looked at some very closely but either the location didn't work out the plant didn't work out or the price was too high so.
But if but that could change at any time. They know we're out there looking.
In terms of other energy there. So there's always the usual wind and solar we've looked at that over the years we are in.
And to us the best opportunities are businesses that relate to the ethanol business.
For us the best opportunity in the ethanol business its carbon capture and its not going to be an inexpensive situation.
Well received.
Oh very good tax credits from that business, which we know how to monetize that I've done in the past and would plan to do that in this case.
But it could be a very very large business and at the moment. That's what we're focused we're focusing on what's the first focusing on in terms of expanding our company and it's my opinion.
And that we need to do not just for us, but for the country and for the for day for good.
For the world at large so so we're we're very hopeful for that business and that's probably for most important thing we can be doing right now and it could be very profitable for us if we do it right.
Makes a ton of sense. Thank you all.
Thank you.
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Yeah.
There are no further questions I'll turn the call back over to you.
Okay, we'd like to thank everyone for listening to our call and we look forward to talking to you next quarter. Thank you very much bye.
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