Q2 2021 REX American Resources Corp Earnings Call
2021 second 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 star zero.
I would now like to turn the conference over to Doug Bruggeman, Chief Financial Officer. Please go ahead Sir.
Yeah.
Good morning, and thank you for joining Rex American Resources' fiscal 2021 second quarter Conference call, we'll get to our presentation and comments momentarily 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 company's filings with the Securities and Exchange Commission.
Putting the company's reports 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, I'll First review, our financial performance and then turn the call over to Stuart for his comments.
Sales for the quarter increased substantially by 398% primarily due to higher production levels as we have idled our nugent on one earth plants for a portion of last year's second quarter due to the impact of the pandemic amongst amongst other factors.
Ethanol sales for the quarter were based upon 69 million gallons this year versus $31.0 million gallons last year.
We also benefited from a significant increase in average average selling prices and the ethanol and byproduct segment.
We reported gross profit of $16.0 million for the ethanol and byproduct segment versus a gross profit of 553000 in the prior year.
Gross margin benefited from the increased volume and selling prices, which were offset somewhat by higher corn pricing.
Profit also benefited from a certain from certain shipping costs being recorded in SG&A. This year based upon contract terms and our placement of outgoing shipping cost and SG&A.
Our refined coal segment had a gross loss of $4.0 million for the second quarter of fiscal 2021 versus $10.0 million for the prior year based upon increased volume.
Losses are offset by tax benefits from this segment of $9.0 million and $11.0 million for the second quarter of fiscal <unk> 4041, respectively recorded from the section 45 credits and the tax benefits from operating losses.
As a reminder, we currently expect this business to end by November 18th of 2021 and just plain operation will no longer be eligible for tax credits based upon current legislation.
SG&A increased for the second quarter to $12.0 million from $8.0 million in the prior year.
This primarily represents increased shipping costs recorded in SG&A as mentioned earlier for certain ethanol contracts in which we pay shipping based upon contract terms as well as higher incentive compensation associated with higher profitability levels.
We had income of $9.0 million from our unconsolidated equity investments in this year's second quarter versus a loss of 507000 in the prior year.
Black and improved ethanol industry conditions during this time period.
Interest and other income decreased to approximately 39000 versus 197000 in the prior year, primarily reflecting lower interest rates.
We recorded a tax benefit of $10.0 million for the second quarter of this year versus a benefit of 4 million in the prior year.
Fluctuation in rates are largely caused by level of refined coal production and credits in the prior year, having a pretax losses versus pretax income in the current year.
These factors led to net income attributable to Rex shareholders of $16.0 million in this year's second quarter versus net loss of $1.7 million in the prior year.
In addition, our weighted average shares outstanding declined from $216006.0 to 6.011 million from last year's second quarter further benefiting the earnings per share.
As we announced this morning, we completed our most recent share repurchase authorization and our board of directors has approved an additional 500000 share repurchase authorization. We currently have approximately $5 million 971000 shares outstanding.
Stuart I'll now turn the call over to you.
Yeah.
Thank you Doug.
Where we're going forward. We're currently running in the ethanol business at a profitable rate.
Secondly, but significantly less in the quarter. We just reported the industry is hampered by high corn prices corn shortages.
A number of other issues, which are C. So far which Lee will discuss in his segment.
So when rents remain up in the air as a button administration.
<unk> issued any any rents for the future. So so we still don't know where that exactly stance.
Refined coal coal continues to run at a good rate it should be profitable again on an after tax and.
After tax basis. This quarter this business is that sort of.
That's up to and in the Middle of December.
Could hit what we couldn't shouldn't and I'm sure, we'll have significant tax credits to carryforward, which should help our cash flow.
Sure.
A cast when you had a consolidated cash balance of $203.0 million. We have completed the 500000 share buyback authorization for another 500000 shares we tried to buy on dips and we prefer to return our shareholders money and buybacks versus dividends.
So we do see share counts increases earnings per share and provides liquidity to shareholders looking looking too.
Possibly sell our stock.
We're looking for other opportunities in the ethanol business to buy plants. We've looked at a few things. This year, we've had success in buying anything and we have nothing eminent.
In terms of carbon capture that will be our biggest new project.
We're working hard on it we have a possibility of being a large player in that industry. We're working with the University of Illinois, an honest site and we've received the University of Illinois received a grant.
To help fund these works from the U S government, so far well will not discuss more of that in the ethanol business.
In his segment that supplier.
Thank you Stuart.
As I mentioned in my <unk>.
Previous call operating environment in 2021 is beginning to improve and production continues to increase.
These improved conditions helped in the first and second quarter and resulted in a profitable quarter, but now we are beginning to see a decline in the cash margin due to several factors, including the cash price of corn.
As Stuart mentioned availability of guns going.
Export a decline in the price.
Right.
Look green, but and but an increase in the price of non food grade corn oil.
Both of our majority owned plants are producing below the capacity number. After these on a planned shutdown state availability have grown at a reasonable price and logistic problems due to the availability of DDG containers. We expect this trend may continue until heartless.
A logistic problem may continue longer although we have seen some improvement.
We expect the crush margin will continue to be under pressure in the near future.
Absolutely affect the third quarter.
I'd also like to share.
Listen the cartilage restoration project as Stuart just discussed we are what we're looking at the University of Illinois carbon sequestration test revenue.
Yep.
<unk>.
<unk> as I mentioned previously that it will be supposed to be completed this quarter. So it is completed and dealt unexpected by the end of September.
<unk> has been cleared and ready for site preparation and we expect those patients to start soon.
Applied fundamental product Astral.
The Illinois Department of natural resources, and expect to see the bottleneck within next one to two weeks it will be permitted at monitoring well and then we expect it will be converted into a profit.
Honestly in Grad plus.
Data prep failing the class six patent application has been begin existing using existing information and the U S. EPA has been notified the completion of the application process will continue as we began to receive more information after the well is completed.
I'll ask you like best.
<unk> has been sent out and several proposal had been to see we expect to start drilling the well in the path. It will take approximately six weeks to drill several weeks of testing it will require extensive modeling and computer stimulation predictable behavior. It up the field book when it is injected <unk>.
Stimulation model will determine how much <unk> can be injected at the location at what rate.
Eventual distributions in the sub surface area.
<unk> study of the capture of <unk>.
And the design of the facilities underway the design of the GAAP just to fill it is expected to be completed soon.
As I have mentioned in previous calls this project is still a preliminary stage and we cannot predict yet that will be.
We will be successful our target is to achieve net zero emission in summary, we are pleased to announce once again the profit every quarter, we are very appreciative and thankful for the hard work of our colleagues who achieved these results.
I will get back to Florida back to Stuart Rose for additional comments, thanks to look thanks Hooper and good.
In closing we've had a successful quarter, but we have a few obstacles in the near term horizon still we're running currently at a profitable rate good plants. Good locations and most importantly, we feel we have the best people and we're working with the best people on the Street and that's what really makes a difference of why our plants.
On a long term basis.
Consistently outperformed the industry.
Leave it open to questions.
Thank you if you'd like to register a question. Please press the one followed by the four on your telephone.
You will hear a three pronged technology a request. If your question has been answered and you would like to withdraw your registration. Please press the one followed by the three.
One moment please for the first question.
And our first question comes from Jordan Levy with the Truest Securities. Please proceed with your question.
Good morning, all and I know this quarter.
Hey, guys. Just just first wanted to start out on the far you mentioned the logistics issues with the DDG containers that.
I know, that's one or both of the plants can you just expand on that and is that a is that something that's specific to one area and what is the extent of that on what were looking like on utilization into the third and fourth quarter.
I think the problem, we had last month and beginning of some of that in this month.
It seems to be as I mentioned, it's beginning to improve because yesterday, we received almost 50 contain those and before that we were not receiving that many containers coming back to why not to note that was the.
Concern.
Export, mostly DDG had gone up in Saudi.
So there was lot of containers. So that was the reason due to that reason, we have to slow down little bit because.
Okay.
We have so many containers containers, which supposed to be at <unk>, but not of IV and DDG storage is getting full so that but it seems to be getting little bit better since.
Yesterday and last night <unk> backend stated was approximately 50 containers at sea.
So that's good.
Helping to reduce the load a little bit, but certainly as you as you know shipping problem is all around us.
Even though a prison by didn't mentioned that so those are the things we do.
Also facing some of those.
Okay got it and is that sort of the same.
Situation, you mentioned running at somewhat lower utilization.
Inability to get corn at a reasonable price we've seen obviously the financial market for corn come down a bit over the last week or two you're starting to see some pressure off on there too.
I think we have seen the base.
Although the seaborne price has come down, but I think the Bse is also beginning to become vegan.
Have seen that not only in.
So all together.
Even Illinois.
One time the basis as well as high as $55.0, plus basis and now the psus are.
Got me coming down or what all equal.
Everywhere in the industry, but.
Yes.
Due to that reason there was some concern that.
Within the next month, hopefully theyre going to be harvest and the vessels are expected to be minus and now it's still.
Plus basis, so we're trying to be very careful not to overbuy and not to overpay.
And then we ended up with the higher inventory price.
Sure sure. Thanks for that that's that's great color Stuart maybe for you.
Definitely encouraging to see you are continuing to buy back shares.
<unk>.
That authorization I'm, just curious if you think about that.
A couple of years down the road is there a point you get to wear.
It doesn't make sense to continue to buy back shares or is this something you think can.
Remain at the pace, it's been out in Europe.
All have been pretty opportunistic and when you choose to repurchase so is it just kind of a continuation of that or I'm. Just curious how you think about it longer term. That's a good question Jordan I think the way I look at it is there's always times, where we think not to buy when the stock is performing well on it. So we're there to to put a floor on.
The stock when the stock dips and that's so hopefully I'll never have to use a 500000 shares buyback, but should the stock dipped to prices that we think are our.
Our unrealistic in our minds that's.
That's when we choose to do the buyback.
Probably have been buying back for longer than anyone in the and I'm sure. We have anyone in the industry and we certainly think we know what we're doing when it comes to buyback we're not just buy back to throw money out there with bi we do it opportunistically and we do it on depths than we've historically done it that way.
One of the things that I think separates us from the rest of the industry first of all we consistently make money SEC.
I think we're good stewards of that money, we don't we don't.
We do have our speculative project, which is a big one one of the biggest and then we hope to be huge.
And carbon capture but we also watch her money for our shareholders money like around money in and we try to.
You said and.
And not just just make announcements from mining at different projects, we'd like to make sure that we're using it in a wise way and consistently we've done that which has allowed us I think over the years too.
To way outperform almost everyone in the industry.
Yeah, absolutely agree and then just the last one for me maybe the power for you.
The carbon capture project, you mentioned kind of preparing the site for the past 12.
This fall in and how long that will take some time to get the results out of the monitor it I'm just curious when we think about timing the major kind of milestones we should be looking for to track. The progress on that that project is it early next year, we might have an initial sense of what this looks like and then kind of what the steps are.
After that might be after the test well assuming things go well.
I think the task well, we same store at this stage at least we think that it will be industrial was speed.
Do you see this year and then it takes as I said six to eight weeks and after the test well is completed then we will be doing a lot of stimulation and looking at how does.
Subsurface is reacting to it.
Main purposes.
It really also not just to decide look at the location and decide how much got when a discount store each event because if this well.
Hold about 2 million ton.
I E are you kind.
Kind of hold only a 1 million ton a year, so that will be give us a little.
Color on that how much we can really bring the carbon from different several other different locations either ethanol facilities, which we have non binding agreement.
So that will determine actually how much storage we have and then we can decide in the same area that we need to dig another well that will be not.
Also carbon sequestration, well it will not be a test well or something so.
Those are the really the reason we wanted to make sure the best well is it.
And define the area and can forum, but seismic testing on the other area is saying that how much down it kind of hold so I think by next year by this June.
We will have pretty good idea, where exactly we stand with dislocation.
Great and exciting to see that moving along as well. Thanks. Thanks for all the details guys.
Thank you Jordan.
Our next question comes from Graham trace with Raymond James. Please proceed with your question.
Hi, good morning, and thanks for taking my questions.
I guess first I was wondering when you expect the EPA to really to release, the 2021 biofuel blending volumes mandates.
And maybe just wanted to gauge your expectations there.
Personally I have no idea if they were supposed to do it long ago I don't know what they're waiting for I I don't get it but that's so far do you have any more clarity on when it may come out.
I don't really know I think you are right Stuart.
Oddly.
White houses have to approve it and so we don't know when they will approve it there are so many.
The uncertainties and things that are going on at the White House right now.
She is right now that I don't know that this is top of their agenda, but it should be top of the epa's agenda.
They may not be able to run it by anyone who knows what's going on there, but it is disappointing to be honest with you.
Yes.
I would like to know what what we're shooting for.
This year it makes no sense.
There's all there's reports out there that the EPA is.
You know ready to send their recommendations to the White house.
But.
There's no clarity on how long that will take.
But.
You know from what I've read and I'm sure you've read the same thing you know there's some speculation that the EPA is going to propose reducing.
The number of returns for 2021 versus 2020.
Yes, but I think Doug this is a follow up but I think theres not sure that is going to be a biodiesel ethanol. So that's really not clear because biodiesel diesel is not producing as much as the.
Required. So there is rumors it's maybe a biodiesel rins, we needed to be reduced either ethanol. So it is not very clear what happened.
Page.
Got it.
Understood.
That's definitely helpful and then.
Guess sticking sticking with the EPA.
As we look at at least the near term potential for fuel shortages in the way it goes.
Hurricane Ida.
We've seen that there've been some requests from the EPA to allow more ethanol to be pulling in Louisiana.
Other states impacted by the storm.
Just wanted to see what your views are on that situation.
We're always going to favor more ethanol, but I think there could be a lot less driving in Louisiana.
I don't think thats going to hit on an overall basis I would not look at that as being any.
Permanent change.
Got it all done and I think it's not a long term so I think.
Short term it may demand may increase and then.
Depends on really how long they contribute that so but so as we all know I have to acknowledge okay.
Clean fuel and we encourage people to use that as much as they can.
Yeah.
Got it understood. Thank you for taking my questions.
Thank you.
As a reminder to register a question. Please press the one followed by the four on your telephone.
And our next question is from Chris Sakai with singular research. Please proceed with your question.
Hi, Chris.
Hi, everyone. Good morning.
Good morning.
That's good.
Stuart mentioned that the.
We're looking at some acquisitions, but didn't make any this quarter.
I wanted to see why what was what were the main reasons there.
I might take this year and the main reason was we were we were up yet.
So simply said we.
We as I said earlier, a good try to be very very good stewards of our of our.
Stockholders money and we were we did not get what we were looking for.
And so we move on that shelf.
In truth, we're better off buying our own shares and the price that we've seen of acquisitions out there we can by Iraq cherish cheaper. So that's how we choose to go but we will not spend more than we think we need to spend for an acquisition.
Ben.
And then a couple, but we did not get them and.
So I think in the long run our strategy has worked in.
That's that's how we'll continue to do it.
Yeah.
Okay, Alright, Thanks, and then I guess internationally.
Uh huh.
Where are the.
But countries that are demanding.
On ethanol.
Where's the best countries I think as you can see that basically this year we have seen.
Got it.
The other countries.
More ethanol.
But compared to.
Canada, South Korea, Korea in Peru, and Mexico, I think China has achieved.
Some of them this year, but the problem is that is Brazil.
Italy off this year compared to last year.
Astronaut export this year about $664 million compared to last year.
31 billion.
Actually imported only 34, 31% to $6 million compared to last year of $177 million.
And in 2019, almost $211 million, so, but Brazil was not there at this year compared to last several years.
Yes.
Yeah.
Oh did you mentioned, China, there how's it going with the guidance.
China.
Imports this year some of them close to that.
China imported close to $100 million gallons this year.
We can put on that.
I had somebody yes.
Let me look at it I will get back to you about it.
Yes.
Okay.
Okay. Thanks.
And then as far as the rest of the year growth I mean, do you have any idea as far as spreads go.
As I mentioned I think in this.
This business really is.
Commodity business it depends on week to week sometime in the month to month as I mentioned that in previous previously my prepared remarks that suddenly the crush spread is under pressure at this time so.
Getting back to your China, Yes, China imported almost 100 million gallons this year.
That's what the correct information.
Okay, alright, great. Thanks.
Thank you.
Our next question is from Jared Edelen with South Dakota, That's been office. Please proceed with your question.
Hi, Thanks, guys and thanks for taking the question.
I wanted to get a little.
More.
Color around the dynamic of the drought that's going on this year and in your car and consuming areas. If you have a sense of.
If there is.
B any future.
Acute shortages.
Thats occurred in the past.
For you guys.
Especially in the new chatting on Earth facilities.
Thanks Les.
Look at the one at a time I think.
One of your facilities.
If you look at this.
Yes.
The phone yield for 2021, it is expected to be.
$180.0 million million.
Bushnell and also approximately $2 million.
Acres were planted more this year compared to last year.
We expect.
Yes.
The expected in Illinois.
And one last energy area.
A lot of rain and consistently lot of bran and is expected to be a really good good crops.
Illinois, Indiana and Ohio.
<unk> expect it to be tough.
But used in our Minnesota.
As you were asking in the north and South debate are expected to be lower than last year due to drop in diarrhea, but one thing, which is we see a little bit positive, particularly for ourselves.
This year in South Dakota, approximately 1 million more acres were planted compared to last year.
Good evening.
It goes down a little bit we still think.
Overall.
Perhaps it will be.
Almost better than last year, if the yield stay as it is now.
And we have ran approximately three to four five inch last couple of weeks in that area with the overall new Gen area is not as bad as we had seen.
Note.
No thats allocated out of west northwest upheld Decatur and enough to create.
So although there is certainly is pretty bad, but new Gen area is not as bad as.
Compared to other area, so but overall it is not as good as last year, but the only thing to kind of be in a handful we have.
More acres planted this year then.
Last year.
Wonderful, Thank you and could you touch a little more on some of the byproducts.
Try DDG and modified DDG as well as.
Corn oil and how impactful that price increases have been I've been to your profitability.
I think that we have seen as I mentioned earlier that we have seen the corn oil price is really seems to be going much higher than expected.
If you look at even now.
We will be issuing soon.
Complete details or even in the press release.
You can see that.
The fall in oil price.
Above average in July was 47% compared to last year. It was 25.
Six months is a 41.
So what we have seen recently, even as high as 60% to 65.
<unk> hundred 60 <unk>.
Are found.
Our DDG price as came down and it was trading previously closed to us.
100% to 110% of the corn value, but now we have seen some better at 85% to 90% of the phone revenue.
Great. Thank you that's all.
Yeah.
Okay.
Mr. <unk> I'll turn the call back to you there are no further questions at this time.
Great. Thank you so much I would like to thank everyone for listening and we look forward to talking to you in our next conference call. Thank you very much bye bye.
Bye bye.
This does conclude the conference call for today, we thank you for your participation and ask that you. Please disconnect your lines.
Okay.
Uh huh.
[music].
Hum.
Okay.
Okay.
Sure.
[music].
[music].
Greetings and welcome to the Rex American resources fiscal 2021 second 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 star zero.
I would now like to turn the conference over to Doug Bruggeman, Chief Financial Officer. Please go ahead Sir.
Good morning, and thank you for joining Rex American Resources' fiscal 2021 second quarter Conference call, we'll get to our presentation and comments momentarily 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 company's filings with the Securities and exchange.
Inge Commission, including the company's reports 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, I'll First review, our financial performance and then turn the call over to Stuart for his comments.
Sales for the quarter increased substantially by 398% primarily due to higher production levels as we had idled our nugent on one earth plants for portion of last year's second quarter due to the impact of the pandemic amongst amongst other factors.
Ethanol sales for the quarter were based upon 69 million gallons this year versus $31.0 million gallons last year.
We also benefited from a significant increase in average average selling prices and the ethanol and byproduct segment.
We reported gross profit of $16.0 million for the ethanol and byproduct segment versus a gross profit of 553000 in the prior year.
Gross margin benefited from the increased volume and selling prices, which were offset somewhat by higher corn pricing.
Most profit also benefited from a certain from certain shipping costs being recorded in SG&A. This year based upon contract terms and our placement of outgoing shipping cost and SG&A.
Our refined coal segment had a gross loss of $4.0 million for the second quarter of fiscal 2021 versus $10.0 million for the prior year based upon increased volume.
These losses are offset by tax benefits from this segment of $9.0 million and $11.0 million for the second quarter of fiscal 2021, and 2020, respectively recorded from the section 45 credits and the tax benefits from operating losses.
As a reminder, we are currently expect this business to end by November of 2021 at this plant operation will no longer be eligible for tax credits based upon current legislation.
SG&A increased for the second quarter to $12.0 million from $8.0 million in the prior year.
This primarily represents increased shipping cost recorded in SG&A as mentioned earlier for certain ethanol contracts in which we pay shipping based upon contract terms as well as higher incentive compensation associated with higher profitability levels.
We had income of $9.0 million from our unconsolidated equity investments in this year's second quarter versus a loss of 507000 in the prior year.
<unk> improved ethanol industry conditions during this time period.
Interest and other income decreased to approximately 39000 versus 197000 in the prior year, primarily reflecting lower interest rates.
We recorded a tax benefit of $10.0 million for the second quarter of this year versus a benefit of 4 million in the prior year.
Fluctuation in rates are largely caused by level of refined coal production and credits in the prior year, having a pretax losses versus pretax income in the current year.
These factors led to net income attributable to Rex shareholders of $16.0 million in this year's second quarter versus a net loss of one 7 million in the prior year.
In addition, our weighted average shares outstanding declined from $216006.0 to 6.011 million from last year's second quarter further benefiting the earnings per share.
As we announced this morning, we completed our most recent share repurchase authorization and our board of directors has approved an additional 500000 share repurchase authorization. We currently have approximately $5 million 971000 shares outstanding.
Stuart I'll now turn the call over to you.
Thank you Beth.
Where we're going forward. We're currently running in the ethanol business at a profitable way.
Secondly, but significantly less in the quarter. We just reported the industry is hampered by high corn prices corn shortages.
Number of other issues, which are so far rich will discuss in his segment.
So when rents remain up in the air as a button administration is not issued any any rent for the future. So we still don't know where that exactly stance.
Refined coal call. It continues to run at a good rate it should be profitable again on an after tax after.
After tax basis. This quarter this business is done.
That's up to and in the Middle of December So we could hit.
Couldn't shouldn't and Im sure well have significant tax credits to carry forward, which should help us catch slopes up until yesterday.
Sure.
Arms, a cast when you had a consolidated cash balance of $203.0 billion. We have completed the 500000 by share buyback authorization for another 500000 shares we tried to buy on dips and would prefer to return our shareholders money and buybacks versus dividends.
So we do see share counts increases earnings per share provides liquidity this shareholder's lucky lucky too.
Possibly sell our stock.
We're looking for other opportunities in the ethanol business to buy plants, we've looked at a few things this year.
The success of buying anything and we have nothing imminent.
In terms of carbon capture that will be our biggest new project.
We're working hard on it we have a possibility of being a large player in that industry or working with the University of Illinois, an honest site and we've received the University of Illinois gets received a grant.
To help fund these works from the U S government, so far well, we'll now discuss more of that in the ethanol business.
In this segment that supplier.
Thank you Stuart.
As I mentioned in my.
Yes.
Operating environment into 2021 is beginning to improve and production continues to increase.
The improved condition helped in the first and second quarter and resulted in a profitable quarter, but now we are beginning to see a decline in the crush margin due to several factors, including the cash price of phone.
As Stuart mentioned availability of guns going export or decline in the price up.
It's distiller grains, but and but an increase in the price of non food grade corn oil.
Both of them had a majority owned plants are producing below the capacity number after he's done a plant shutdown.
Availability of corn at a reasonable price and logistic problems due to the availability of DDG containers. We expect this trend may continue until harvest.
Logistics problem may continue longer although we have seen some improvement in U S.
We expect the crush margin will continue to be under pressure in the near future, which could adversely affect the third quarter.
Also like to say as well.
And the Godless request different project as Stuart just discussed we had what we had one thing with the University of Illinois carbon sequestration Pascal.
The two D. Seismic survey if completed as I mentioned previously that is supposed to be completed this quarter. So it was completed and results are expected by the end of September.
<unk> has been cleared and revenue per site preparation and we expect those.
Based on that to start soon.
We have applied for a bundled product astral.
But I'm, the Illinois Department of natural resources and expect to see the bottleneck within next one who do weeks it will be permitted at best monitoring well and then we expect it will be converted into a profit.
Honestly in Grad.
But if anything the class six application has been begin lifting using existing information and U S. EPA has been notified the completion of the application process will continue as we began to receive more information after the basketball is completed now.
I'll ask you like basketball.
The revenue has been sent out and several proposal had been to see we expect to start drilling the well in the path.
Take approximately six weeks to drill several weeks of testing it will require extensive modeling and computer stimulation to predictable behavior it up the field pool.
Is injected.
These stimulation model will determine how much <unk> can be injected at the location at what rate.
You went through distribution and the sub surface area.
<unk> study of the <unk>.
And the design of the facility is underway the design of the GAAP just C. O. Two facilities are expected to be completed soon.
As I have mentioned in previous calls this project is still a bit early stage and we cannot predict yet that will be.
With that we will be successful our target is to achieve net zero emission in summary, we are pleased to announce once again the profit every quarter, we are very appreciative and thankful for the hard work of all.
Colleagues to achieve the desired.
Getting back to Florida back to Stuart Rose for additional comments still look backs apart in conclusion, we've had a successful quarter, but we have a few obstacles in the near term horizon still we're running currently at a profitable rate good plants good locations and most importantly, we feel we have the best.
People in and we're working with the best people and they get the street and that's what really makes a difference of why our plants on a long term basis.
Consistently outperformed the industry and I'll leave it open to questions.
Thank you if you'd like to register a question. Please press the one followed by the four on your telephone you will hear a three pronged to acknowledge your request. If your question has been answered and you would like to withdraw your registration. Please press the one followed by the three.
One moment please for the first question.
And our first question comes from Jordan Levy with the Truest Securities. Please proceed with your question.
Good morning, all and I know this quarter.
Hey, guys.
Just first wanted to start out on the <unk>.
You mentioned the logistics issues with the DDG containers at I don't know if it's one or both of the plants can you just expand on that and is that a no.
Is that something that's specific to one area and what is the extent of that on what what were looking like Oh.
Utilization into the third and fourth quarter.
I think the problem, we had last month and beginning up some of that in this month.
It seems to be as I've mentioned, it's beginning to improve because yesterday, we received almost 50 containers and before that we were not receiving that many containers coming back to one.
That was the.
Concern.
<unk> explored mostly DDG at one Earth energy.
So there was lot of containers. So that was the reason due to that reason, we have to slow down little bit because we can.
We have so many containers, which is supposed to be at <unk>, but.
But not of IV and DDG storage is getting full so that but you seem to be getting little bit better since.
Yesterday, and last night Digest back and that was approximately 50 containers at sea.
So that's helped.
Helping to reduce the load.
But certainly as you as you know that shipping problem is all around with us.
Even though our prison by didn't mentioned that so those are the things, which you are also facing some of those.
Okay got it and is that sort of the same.
Situation, you mentioned running at somewhat lower utilization.
The ability to get cornered a reasonable price we've seen obviously the financial market Brooklyn would come down a bit over the last week or two are you starting to see some pressure off on there too.
I think we have seen the base.
Although the seaborne price has come down, but I think the Bse is also beginning to become the vehicle.
We have seen that not only in south.
So all together.
Even Illinois.
And the one time the base as well as high as $55.0, plus basis and now it appears to me coming down or what.
Equally everywhere in the industry, but yes.
Due to the reason there was some concern that.
Within the next month, hopefully, they're going to be harvest and the vessels are expected to be minus and now it still.
Plus basis, so we're trying to be very careful not to overbuy and not to overpay.
And then we ended up with a higher inventory price.
Sure sure. Thanks for that that's that's great color Stuart maybe for you.
Definitely encouraging to see you all continuing to buy back shares.
Chris.
That authorization I'm just curious if you think about.
A couple of years down the road is there a point you get to wear.
It doesn't make sense to continue to buy back shares or is this something you think can.
Remained at the pace, it's been out and you all have been pretty opportunistic and when you choose to repurchase. So is it just kind of a continuation of that or I'm. Just curious how you think about it longer term right. That's a good question Jordan I think the way I look at it is there's always times, where we think not to buy when the stock is performing well.
So we're there to to put a floor on the stock when the stock dips and that's so hopefully I'll never have to use a 500000 shares buyback, but should the stock.
Prices that we think are our.
Our our unrealistic in our minds that.
That's what we choose to do the buyback.
Probably have been buying back for longer than anyone in the and I'm sure. We have anyone in the industry and we certainly think we know what we're doing when it comes to buyback why not just buy back to throw money out there with bi we do it opportunistically and we do it on depths than we've historically done it that way.
One of the things that I think separates us from the rest of the industry first of all we consistently make money SEC.
I think we're good stewards of that money, we don't we don't.
We do have our speculative project, which is a big one one of the biggest thing that we hope to be huge and carbon capture but we also watch her money to our shareholders money like around money and and we tried.
To use it and not just just make announcements from mining at different projects, we'd like to make sure that we're using it in a wise way consistently we've done that which has allowed us I think over the years too.
To way outperform almost everyone in the industry.
Yeah, I absolutely agree and then just the last one for me maybe the power for you carbon.
Carbon capture project, you mentioned kind of preparing the site for the post world.
This fall in and how long that'll take some time to do.
The results of the monitor it I'm just curious when we think about timing the major kind of milestones we should be looking forward to track the progress on that that project is it.
Early next year, we might have an initial sense of what this looks like and then kind of what the steps are out there that might be after the Tesla assuming things go well.
I think that that's well we.
Same store at this stage at least we think that it will be a desk well with speed.
Do you see this year.
And then it takes as I said six to eight weeks and after the test well is completed then we will be doing a lot of stimulation and looking at the house.
Subsurface is reacting to it.
Main purposes.
Really also not too just to decide.
Look at the location and decide how much god when a discount store each event because if this.
Can hold about 2 million done.
Yeah.
Are you kind of hold only a million ton a year, so that will be give us a little.
Color on that how much we can really bring the goldman from different.
Are there different locations either ethanol facilities, which we have non binding agreement.
So that will determine actually how much storage we have and then we can decide in the same area that we need to dig another well that will be not.
Also carbon sequestration well it will not be a task.
So.
Those are the really the reason we wanted to make sure the well is it.
Can do fine the area and can forum, what assessment testing on other adi's, saying that how much does that need to kind of hold so I think by next year by this.
We will have pretty good idea, where exactly we stand with dislocation.
Great and exciting to see that moving along as well. Thanks. Thanks for all the details guys.
Yes, Thank you George.
Our next question comes from Graham Trades with Raymond James. Please proceed with your question.
Hi, good morning, and thanks for taking my questions.
I guess first I was wondering when you expect the EPA to relate to release, the <unk> 2021 biofuel blending volumes mandates.
And maybe just wanted to gauge your expectations there.
Personally I have no idea if they were supposed to do it long ago I don't know what they're waiting for I I don't get it but that's so far do you have any more clarity on when it may come out.
I don't really know I think you are right as to what it's ugly.
White houses have to approve it and so we don't know when they will approve it there's so many.
The uncertainties and things that are going on at the White House right now so there are a few.
She was right now that I don't know that this is top of their agenda, but it should be top of the epa's agenda.
They may not be able to run it by anyone who knows what's going on there, but it is disappointing to be honest with you.
We at least to me would like to know what what we're shooting for.
That's it for this year it makes no sense.
There's all there's reports out there that the EPA is.
You know ready to send their recommendations to the white house, but.
There's no clarity on how long that will take.
But you know.
Yeah.
From what I've read and I'm sure you've read the same thing theres. Some speculation that the EPA is going to propose reducing.
The number of rens for 2020 one versus 2020.
Yeah, but I think Doug dishes.
But I think that I'm not sure that is going to be a biodiesel ethanol. So that's really not clear because biodiesel diesel is not producing as much as that.
Yeah.
Wired. So there is rumors it's maybe a biodiesel rents we need to be introduced either ethanol. So it is not very clear what happened.
This stage.
Okay.
Got it understood and.
That's definitely helpful and then.
I guess sticking sticking with the E P. A.
As we look at at least the near term potential for fuel shortages in the wake of.
Hurricane Ida.
So we've seen that there have been some requests from the EPA to allow more ethanol to be bold in Louisiana.
The other states impacted by the storm.
Just wanted to see what what your views are on that situation.
We're always going to pay for more ethanol, but I think that probably would be a lot less driving it will be scared.
That's what I don't think that's going to hit on an overall basis I would not look at that as being any.
Permanent interchange.
Yeah got it all done.
I think it's not a long term so I'd take a.
Short term it may demand may increase and then depend.
It depends on really how long they contribute that so.
So as we all know I have to acknowledge that.
Clean fuel and we encourage people to use that as much as they can.
Yeah.
Got it understood. Thank you for taking my questions.
Thank you.
As a reminder to register a question. Please press the one followed by the four on your telephone.
And our next question is from Chris Sakai with singular research. Please proceed with your question.
Hi, Chris.
Okay.
Hi, everyone. Good morning.
Good morning.
That's good.
Stuart mentioned that the Youre looking at some acquisitions, but didn't make any this quarter.
Wanted to see.
Why what was what were the main reasons there.
I might take this year and the main reason, which we were we were outbid.
So simply said.
We as I said earlier a good try.
Try to be very very good stewards of our.
Our.
Stockholders money and we were we did not get what we were looking for and so we thought that shelf.
In truth, we're better off buying our own shares and the price that we've seen of acquisitions out there we can by Iraq cherish cheaper. So that's how we choose to go we will not spend more than we think we need to spend in foreign acquisition and.
Have been cut.
A couple, but we did not get them in.
Hum.
So be it I think in the long run our strategy has worked and.
That's how we'll continue to do it.
Okay, Alright, Thanks, and then I.
Internationally.
You know where where the.
But countries that are demanding.
Ethanol.
Where's the best countries I think as you can see that basically this year we have seen.
Canada and other countries.
More ethanol versus shipped but compared to.
Canada, South Korea, Korea in Peru, and Mexico.
I think China has achieved its some of them this year, but the problem is that it's a better deal was completely off this year compared to last year.
And I cannot export this year about $664 million compared to last year.
It's already $1 billion and Brazil actually.
Ported only $64.0 million to $6 million compared to last year at $177 million.
In 2019.
Almost $211 million, so, but Brazil was not there at this year compared to last several JV.
Yes.
Oh did you mentioned, China, there how's it going with the guidance.
China imports.
Imports do you see as some of them pretty close to it.
China imported close to 100 million gallons this year.
Let me confirm that.
Go ahead some of yes.
Let me look at it I'll get back to you about it.
Okay.
Okay. Thanks.
And then as far as the rest of the year growth I mean, do you have any idea as far as spreads go.
As I mentioned I think in this.
The business really.
Commodity business it depends on week to week sometime in the month to month as I mentioned that in previous previously my prepared remarks that suddenly the crush spread is under pressure at this time.
No.
Getting back to your China, Yes, China imported almost 100 million gallons this year.
That's what the correct information.
Okay, alright, great. Thanks.
Thank you.
Our next question is from Jared Edelen with South Dakota. That's monotonous. Please proceed with your question.
Hi, Thanks, guys and thanks for taking the question.
Yeah. Thanks, I wanted to get a little Hmm.
More.
Color around the dynamic of the drought that's going on this year.
In your car and consuming areas. If you have a sense of if there is.
Gotta be any future.
Acute shortages.
Has occurred in the past.
For you guys.
Especially in the new chatting on Earth facilities.
Thanks Les.
Look at the one at a time I think.
One of your facilities.
If you look at this.
Yes.
The bond yield for 2021, and two is expected to be.
$180.0 million million bushel and also approximately $2 million.
Goodbye planted more this year compared to last year, but we expect that.
Forward you'd.
In Illinois, Illinois, and one synergy area.
A lot of rain and consistently lot of rain and it's expected to be a really good good crops.
Illinois, Indiana and Ohio.
<unk> expect it to be tough yield, but usually in our Minnesota.
As you were asking in the north and South debate are expected to be lower than last year due to drop in that area, but the one thing which is we see it would be positive, particularly put out great.
This year in South Dakota, approximately 1 million more acres were planted compared to last year.
Even if it goes down a little bit we still think.
Overall.
Perhaps it will be.
Uh huh.
Almost better than last year, if the yield stay as it is now expected and we have returned approximately three to four five inch last couple of weeks in that area.
Our new Gen area is not as bad as we have seen.
Note.
No thats allocated out of West Northwest of South Dakota, and then offer greater.
So although there is certainly is pretty bad, but new Gen area is not as bad.
And compared to other area, so but overall it is not as good as last year.
Only thing to kind of be helpful. We.
Have more acres planted this year than.
Last year.
Wonderful Thank you and could you touch a little more on some of the byproducts mainly.
Mainly try DDG and modified T D G as well as.
Corn oil how impactful the price increases have been I've been to your profitability.
I think that we have seen as I mentioned earlier that we have seen upon oil price it really seems to be going much higher than expected.
Yeah.
If you look at the event.
We will be.
Soon the complete details out even in the press release.
You can see that.
The corn oil price is.
Above average in the July was 47 times compared to last year. It was 25.
And six months is a 41.
So, but we have seen recently, even as high as 60% to 65.
<unk> hundred 60 <unk>.
Are found.
Our DDG price as came down and it was trading previously closed to us.
<unk> percent to 110% of their own value, but now we have seen some better at 85% to 90% of the phone revenue.
Great. Thank you.
Yep.
Okay.
Mr. <unk> I'll turn the call back to you there no further questions at this time.
Great. Thank you so much like to thank everyone for listening and we look forward to talking to you in our next conference call. Thank you very much bye. Thank.
Thank you bye bye.
That does conclude the conference call for today, we thank you for your participation and ask that you. Please disconnect your lines.