Q1 2022 REX American Resources Corp Earnings Call

May 25, 2022

Okay.

Greetings and welcome to the Rex American resources fiscal 'twenty 'twenty 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 one followed by the <unk>.

Telephone.

You've got any time during the conference you need to reach an operator, Please press star zero.

I would now like to turn the call over to Doug <unk> Chief Financial Officer. Please go ahead.

Good morning, and thank you for joining Rex American resources fiscal 2022 first 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 1095 such.

Such forward looking statements reflect the companys 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 first quarter increased by 18% as we experienced higher pricing for ethanol distillers grain and corn oil.

<unk> sales for the quarter were based upon $64 5 million gallons this year versus 70 million gallons last year.

We reported gross profit of $11 9 million this year versus a gross profit of $19 5 million in the prior year.

For the current year.

For the current year quarter improved selling prices were offset by higher corn and natural gas pricing ethanol pricing improved by 27% dry distiller grain improved by 5% and corn oil pricing improved by 91% for this year's quarter over the prior year first quarter.

Corn cost increased by 27% and natural gas pricing increased by 86% for this year's quarter compared again to the prior year first quarter.

As inflationary pressures and the impact on commodity pricing from Ukraine, Russia conflict continued.

Gross profit comparison between years was also impacted by lower sales prices on certain ethanol contracts in the current year, when the purchase or paid to freight.

SG&A decreased for the first quarter to $5 2 million from $9 9 million in the prior year again. This primarily represents decreased outgoing freight cost charge to SG&A in the current year based upon certain ethanol contracts.

We had income of $2 million from our unconsolidated equity investments initiatives first quarter versus 570000 in the prior year.

The discontinued operations reflected in the prior year numbers are from the refined coal business as we ended those operations on November 18th 2021, there was no impact in the current year.

We reported a tax provision from continuing operations of $1 8 million for this year versus the provision of $2 2 million in the prior year.

These factors led to net income attributable to Rex shareholders from continuing operations of $5 2 million for this year's first quarter versus $7 3 million in the prior year.

Total net income per share from continuing and discontinued operations attributable to retro orders was 87 for this year's first quarter.

Versus the $1 30 in the prior year.

Stuart I'll turn the call over to you.

Thank you Doug.

Going forward.

Our operations for the current quarter are currently running significantly ahead of last year corresponding quarter. We are being we will be helped by a one time government payment.

And which from the.

Related to Covid to Covid relief and some improvement in ethanol profits quarter to date so far.

<unk>, it's Scott.

Currently we have $134 million in consolidated cash and we also have tax credits that we're able to use that word.

Forward that we're able to use against that.

Pre tax earnings or an outlier.

<unk> continues to help our cash flow.

Uses of cash include buying back on yet.

Should the market gap.

Go down significantly we have the cash to buying shares. We're also working very very hard on a carbon capture project. The periods. We will discuss this also in his segment.

Compatible.

Currently net large amounts of carbon nothing imminent, but if we found something.

Where we can make them industry less carbon intensive.

Our carbon capture.

That would be something we will consider and we can.

When you look for other ethanol plants that are well located they use the same technology we use.

Again, that's an industry, we know very very well.

Today, we have nothing imminent in that area to report, but we are continually we continually look at.

Now turn the conference call over to our CEO .

The fire.

Thank you Stuart I will be adding belief as I mentioned in our previous quarterly call. The operating environment in the beginning of first quarter.

Two was very challenging since then we have seen some improvement but it continue it continues to be.

While a number of reason and increase in ethanol production logistic problems and increasing the price of grown greater than the ethanol price and the high price of natural gas.

Although all of which are negatively affecting the crush margin as a note we consider to the crush margin as the price of oil gallons of ethanol and the price per bushel of grain divided by the realized yield.

At this very early stage of the second quarter, we expect the second quarter will be profitable on.

Kurt.

I wanted to turn into the company received $7 8 million as a part of global relief Bill passed by Congress in December 2022.

Im sorry December 2020 in June of 'twenty, and 'twenty, one USDA announced $700 million biofuel producer program to distribute would be as funds impacted produced ethanol biodiesel and other renewables.

As I mentioned in our previous calls we are also evaluating several other projects that will increase production efficiency and energy saving as well as reduced water consumption. Some of these projects out of capital.

Intensive and require much analysis before they can be implemented all these projects up very early stage and may not materialize.

Yeah.

Let me give you a little bit details about the government sequestration as I mentioned in our previous calls we are working with the University of Illinois on drilling our government sequestration Grad plus that first well.

At <unk> was successfully drilled to total depth around 7100 feet.

With almost 2000 feet amount assignment sandstone.

<unk> <unk>.

The geological models are predicting the movement of the C O two injection into the subsurface is making subsets.

But August Additionally, we will be performing lot of injection.

At <unk> et cetera. This week.

<unk> evaluated the expected movement of Seo too as well as expected bloom area and storage capacity under the sub surface area.

These simulation models that are helping to complete the last six months application as predict as we predict the behavior of the CEO to when it is injected we expect to file the last six months, but by the end of June early July .

The accumulation model those.

Currently at preliminary stage, and and a little more work and a lot more work.

Still required how I want the data indicates <unk> produced by the whatnot, Kentucky facility and Mod can be injected and stored at the potentials sequestration site.

We will continue to evaluate that as we make progress and decided the injection well location. Once again. This is a highly technical and time consuming project and it will take time to make material progress.

<unk> has mixed testing was completed in the middle of February we are still in the process of a value add.

And modeling of the data and Thats. The one of the reason we are trying to make sure. The well location is at the proper location, which can have maximum garden.

Can be stored.

As I mentioned in a previous call almost 16000 large workplace two different points and 116 million points of data was collected and that is still being analyzed.

I wanted to treat that this project is still a very preliminary stage. It requires a lot of time consuming modeling and analysis, we cannot yet predict the result of the simulation models and whether we will be successful or not and somebody as Stuart mentioned, we are very pleased to announce once again profitable quarter.

A very difficult environment and progress with our carbon sequestration projects.

We are very appreciative and thankful for the hard work of our colleagues.

Having these days.

I will give the floor back to Stuart rose for additional comments. Thank you. Thank you. Thank you so far.

In conclusion again, we made money in a quarter when most of the public companies in the industry reported a loss.

We're well run ethanol company that makes money.

That consistently over the years has made money in ethanol and also have great hopes for the future and carbon capture we feel our carbon capture as well.

It is far more advanced than almost everyone else is trying to trying to get into this to this industry.

Importantly, like I said, we make money now.

For our shareholders, we're not just flipping on claims and hopes we have a very very good operating company in the ethanol business.

We really have a few things to think for that it's good plants good locations, but most importantly, the biggest thing and the biggest thing that separates us from the rest of the industry and why we've consistently done so much better than most of the other public companies in the industry, It's our people and they are important.

To us and again, we think we have the finest people in the industry.

It's really why we continue to outperform the industry I will now leave the forum open to questions.

Thank you.

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 request.

If your question has been answered and you would like to lead on your registration. Please press the one followed by the three.

Once again I would just tariff on question one followed by the four on your telephone.

One moment please for the first question.

My first question is from Jordan Levy with Twist Securities. Please proceed with your question.

Good morning, Nigel I really nice quarter.

And really nice quarter against a clearly challenging backdrop and I think that's a testament to I know you all have continued to run the company soon so great job there.

I'll start out on the carbon capture side of things for other stewards of Florida.

Curious if you can just Stuart you mentioned looking at other carbon heavy industries or ethanol.

Facilities, where you.

That might be able to benefit from carbon capture and I'm curious how you think about noon, we're still early stages in carbon capture how you think about that or an outright purchase of an asset like that versus entering into supply agreements with third parties that could also benefit from carbon capture I am just curious how you guys frame that.

It up when Youre thinking about.

Take that first.

Clark.

I believe the most important thing is to have the capacity the carpet in the hall.

That's what we're working on most Theres a lot of like you just mentioned ethanol plants out there that are embedding carpenters ammonia plant cement and carbon theres the electric utility submitting carbon.

And if we have them all we have the opportunity to.

Sure.

Capture carbon and a number not just in the ethanol business, but the most important thing is to have the whole they.

They have the carbon capture all and it's not an easy thing to do it's a fire mentioned we havent.

Literally millions of points of data that are involved in getting the series six permit he can talk more about it.

But it is not easy we think thats. The most important thing then.

Then.

Well he is doing that we are looking around in different industries that have made a lot of carbon.

We hope to have a <unk>.

Very very large carbon capture facility that can be used to lower the carbon footprint.

For our area for the whole country. So that's that's our goal I'll turn it up insofar if he wants to add on to that.

I think the only thing you are.

Exactly right the value of them.

Most important.

If you don't have those.

You kind of have the card, but you will not be able to the carbon sequestration and the two.

EPA cloud six automotive it takes somewhere six to 18 months. After you apply for the bottleneck. So as you know we are working on this project almost three years so with it at this stage now ready to file the EPA Butternut is already takes so much time and now.

Further it once we apply depending on EPA.

Other information data acquired it will take six to 18 months. So it's a long process and certainly.

We'll have our own well, we already has location which is.

One <unk> who's producing the carbon and as Stuart mentioned, we will look at it.

If there is more carbon from other location.

Our own.

Okay.

Business, which we may have in the future and we can certainly can store that carbon also at the same pace.

And most of all we are sitting at the location.

At Mt assignments, and which is.

Really it is the best location at least in the Illinois area and we think it's the right place to do it.

Independently at this time and in the future.

It depends on what direction it may move.

No that's great color. Thanks, both of you.

Maybe I'll follow up.

Topic.

The quarter oils side of things, obviously, we've seen a lot of price increases in that product and as we've seen with Paul.

<unk> products and.

But.

Especially corn oil and some of that's probably driven from the renewable diesel sector and so with the just the relationship with Green prices I'm, just curious how the demand youre seeing on that versus how you've historically seen it.

I think certainly we have seen a lot of Goldman oil demand at this time, we've literally got gods.

Almost every day or every week and suddenly.

And suddenly, there's a higher demand and suddenly depth.

Corn oil prices consistently carry on growing up and as soybean oil is going up so it's almost trading close to the soybean and soybean oil.

And that's.

Suddenly is one of the.

Bright side in this business at this time and as you can see the bond is trading today about 760, which is down compared to last two weeks. It was up almost $8 15.

Natural gas is trading $9 20 ethanol is 275 when you look at all of these situations and DDG lately, we have seen the price up DDG.

<unk> compare to <unk>.

Even few weeks ago. So I think there is so many of them.

And logistic concerns. So there is so many other challenges at this time, we have but I think taking it one at a time and making sure that we've got this bridge.

Great I'll leave it there. Thanks, so much for all the details.

Our next question comes from Pavel <unk> with Raymond James. Please proceed.

Thanks for taking the question.

It's been a little while since I've been on one of your calls I think this is the first your first call since the war began.

And I thought I would just add kind of an open ended question.

How has the war affected the ethanol market, yes from the topline perspective or or the cost of goods perspective or both.

I think if you look at the recently, which we have seen the corn price is suddenly it's gone up because.

You plan produced approximately one 1 billion bushels.

And Dave.

Export almost 1 billion versus a year. So they are not able to export as much as they are and but on the other hand, some other complex countries like so.

<unk> and <unk>.

The top four countries are taking over that.

As exporting more than the United States, where suddenly we're concerned in the beginning that if all the export growth from that.

State than it will be really will have no kt for the 2020.

Yes.

Then also the concern other concern we see is that as overall USDA recently announced that won't production forecast down due to primarily due to.

Ukraine and the USA.

So we've seen weakness in the China and the European Union, but on the other hand, we certainly have seen a lot of you.

Bumper crops in Argentina, and Brazil. So there is certainly effect and as you can see there is also an effect on natural gas because that is.

The natural gas liquid natural gas would be exported to European countries.

So there is certainly is.

<unk>.

We had a big pressure on ethanol industry total these commodities.

Yeah.

I appreciate the.

Prospective on that let me zoom in on the EPA.

Allowing.

Higher blending level this summer.

How do you how do you anticipate that having an impact in practical terms in the United States.

I'll answer that one we don't we don't think it makes much difference at all it's peanuts overall, and it's just talk and most gas station.

Gas stations in the east or the west they don't even offering.

And that didn't do it on a permanent basis.

There is no incentive to put in these 15 across the country. So we think it's just more bluster then it was real help to the industry. There will be some minor out very very minor help if a few people and a few pumps use <unk> instead of <unk>.

But this was not this one.

It was very similar to what the Trump administration did related to <unk> and what's not.

And it's more talk than it is.

And then any help for us whatsoever, the big help.

Great book was that USDA.

Real money and that really counts and that was correct.

How far do you want to add to that yes.

I think you are exactly right because unless EPA make this that we.

We can sell it all year around no one is willing to invest.

The nine months and then they have to shut down their pumps and then start over so this uncertainty is certainly creating a problem. So we need to we have got.

By then administer essentially really fast.

Should be able to sell <unk> earlier around just like any other brand.

That's the only reason we can certainly can increase this.

Demand more for ethanol.

Otherwise otherwise, it's going to be continue a problem.

Okay, and then just last question whats the latest on exports to China.

Been a recurring conversation I guess for what four years now.

Export to China is still really not as much as we expect we will continue that lost.

Even larger number we have not seen any export to China.

U S government and I think they have to work together to somehow to find a way to lift.

Sato.

<unk>.

Maybe as Biogen administration is saying some of the there will be importing from China, they're going to lift that.

Data USA will lift that up to.

The inflation because that's one of the reason is that inflation is also happening.

Contrary to some politicians I believe that we are collecting tax actually.

<unk> are paid by the citizen because as George the data.

Price of gold goes up and somebody has to pay for this.

So thats the one one of the also reason the inflation we are facing that lot of these imports, which we were getting from China and other countries that were cheaper price, but we'll put a tariff on it and it becomes more expensive for the citizen.

So that data has to be eliminated and on the other hand also China showed also eliminated all other tax status, which they have.

You sort of be a fair trade.

That's great.

Hi, Thank you very much.

Thank you.

Mr. Rose there are no further questions at this time I'll turn the call back to you for closing remarks, okay.

Thank you very much and we'd like to thank everyone for listening in and we'll look forward to talking to you again at the end of next quarter. Thank you bye.

Bye bye.

The conference.

And we thank you for your product.

Can you. Please disconnect your line.

So.

Right.

Okay.

[music].

Yes.

Okay.

Yes.

Sure.

Yes.

[music].

Okay.

Thanks.

Okay.

Yes.

Okay.

Yes.

Okay.

Perfect.

[music].

Okay.

Third.

[music].

Yes.

Okay.

Sure.

[music].

Okay.

Thanks.

[music] procurements.

Yes.

Okay.

Thanks.

Yes.

[music].

Okay.

Yes.

Okay.

Uh huh.

Okay.

[music].

Okay.

[music] et cetera.

Okay.

Yes.

Okay.

[music].

Yes.

Okay.

Right.

Okay.

[music].

Thanks.

Yes.

Okay.

Yes.

Okay.

Yes.

[music].

Yes.

Thanks.

Okay.

[music].

Okay.

Yes.

[music].

Yes.

Okay.

Sure.

Okay.

[music].

Okay.

No.

That's helpful.

Yes.

[music].

Okay.

Yes.

Sandy.

Good morning.

Okay.

Yes.

Okay.

[music].

Okay.

[music].

Yes.

[music].

Okay.

[music].

Okay.

[music].

Yes.

Okay.

[music].

Sure.

Okay.

[music].

Okay.

Yes.

[music].

Okay.

[music].

Okay.

[music].

Okay.

[music].

Okay.

[music].

Okay.

Yes.

Thank you.

Okay.

Yes.

Okay.

[music].

Greetings and welcome to the Rex American resources fiscal 'twenty 'twenty 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 one followed by the <unk>.

Telecom.

Please go at any time in the conference you need to reach an operator, Please press star zero.

I would now like to turn the call over to Doug Bruggeman, Chief Financial Officer. Please go ahead.

Good morning, and thank you for joining Rex American Resources' fiscal 2022.

First 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.

Such forward looking statements reflect the companys current expectations and beliefs, but are not guarantees of future performance.

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 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 first quarter increased by 18% as we experienced higher pricing for ethanol distillers grain and corn oil.

<unk> sales for the quarter were based upon $64 5 million gallons this year versus 70 million gallons last year.

We reported gross profit of $11 9 million this year versus a gross profit of $19 5 million in the prior year.

For the current year.

For the current year quarter improved selling prices were offset by higher corn and natural gas pricing.

Pricing improved by 27% dry distiller grain improved by 5% and corn oil pricing improved by 91% for this year's quarter over the prior year first quarter.

<unk> cost increased by 27% and natural gas prices increased by 86% for this year's quarter compared again to the prior year first quarter.

As inflationary pressures and the impact on commodity pricing from Ukraine, Russia conflict continued.

Gross profit comparison between years was also impacted by lower sales prices on certain ethanol contracts in the current year, when the purchase or paid to freight.

SG&A decreased for the first quarter to $5 2 million from $9 9 million in the prior year again. This primarily represents decreased outgoing freight cost charged to SG&A in the current year based upon certain ethanol contracts.

We had income of $2 million from our unconsolidated equity investments initiatives first quarter versus 570000 in the prior year.

The discontinued operations reflected in the prior year numbers are from the refined coal business as we entered those operations on November 18th 2021, there was no impact in the current year.

We reported a tax provision from continuing operations of $1 8 million for this year versus a provision of $2 2 million in the prior year.

These factors led to net income attributable to Rex shareholders from continuing operations of $5 2 million for this year's first quarter versus $7 3 million in the prior year.

Total net income per share from continuing and discontinued operations attributable to retro orders was <unk> 87 for this year's first quarter.

Versus the $1 30 in the prior year.

Stewart I'll turn the call over to you.

Thank you Doug.

Going forward.

Our operations for the current quarter are currently running significantly ahead of last year's corresponding quarter. We are being we will be helped by a one time government payment.

And which from the.

Related to Covid to covenant relief and some improvement in ethanol profits quarter to date so far.

<unk> <unk>, our CFO will discuss this further.

Currently we have $134 million in consolidated cash and we also have tax credits that we're able to use.

Going forward that we're able to use that.

Pre tax earnings and help our cat.

We use to help our cash flow.

Uses of cash include buying the stock on yet.

You have to hit the market gap should our stock got it down significantly.

Cash to buying shares. We're also working very very hard on a carbon capture project requirements. We will discuss this also in that segment.

Compatible industry currently net large amounts of carbon nothing eminent but if we found something where we could.

Where we can make them index created less carbon intensive.

Our carbon capture.

That would be something we will consider and we continue to look for other ethanol plants that are that are well located that use the same technology we use.

And again, that's an industry, we know very very well.

Today, we have not.

Other area either to report, but we are continue we continue to look.

Now ill turn the conference call over to our CEO .

Okay.

Thank you Stuart I will be very belief as I mentioned in our previous quarterly call. The operating environment in the beginning of first quarter two was very challenging.

Since then we have seen some improvement but it continue it continues to be a.

Challenge for a number of reason and increase in ethanol production logistic problems and increasing the price of grown greater than the ethanol price and the high price of natural gas.

All of which are negatively affecting the crush margin.

As a note we considered the cash margin as the price of oil gallons of ethanol and the price per bushel of grain divided by the realized yield.

This is very early stage of the second quarter, we expect the second quarter will be profitable.

Kurt.

The 120 toward the company received seven 8 million as a part of global relief Bill passed by Congress in December 2022.

Sorry December 2020 in June .

USDA announced $700 million biofuel producer program to distribute these funds impacted producer of ethanol biodiesel and other renewable fuels.

As I mentioned in our previous calls we are also evaluating several other projects that would increase production efficiency and saving as well as reduced water consumption.

Some of these projects are capital intensive and require much analysis before they can be implemented all these projects up very early stage and may not be materialize.

Let me give you a little bit detailed about the carbon sequestration as I mentioned in our previous calls we are working with the University of Illinois on drilling a got a bunch of questions Brad.

First well at <unk> was successfully drilled to total depth around 7100 feet in which almost 2000 feet amount Simon sandstone.

And Kurt.

The geological models are predicting the movement of the C. O two injection into the subsurface is making subsets, but August . Additionally, we will be performing lot of injection test at <unk>. This week and to evaluate the expected movement of Seo too as well as expected.

Bloom area.

Storage capacity under the sub surface area.

Simulation models that are helping to complete the classics Paramount application as predict as we predict the behavior of the CEO .

When it is injected we expect to file the last six months by the end of June early July .

The assimilation model.

It's currently at preliminary stage and and a little more work and a lot more work.

Still required however, the data indicates our industrial tool produced by the whatnot, Kentucky facility and Mod can be injected and stored at the potential sequestration site.

We will continue to evaluate further as we make progress and decided the injection well location. Once again. This is a highly technical and time consuming project and it will take time to make material progress.

D assessment testing was completed in the middle of February we are still in the process of evaluating and modeling of the <unk> data and Thats. One of the reason we are trying to make sure. The well location is at the proper location, which can have maximum garden.

It can be stored.

As I mentioned in a previous call almost 16000 large workplace two different points and 116 million points of data was collected and that is still being analyzed.

I want to treat that this project is still a very preliminary stage. It requires a lot of time consuming modeling and analysis, we cannot yet predict the result of the simulation models and whether we will be successful or not.

In summary, as Stuart mentioned, we are very pleased to announce once again profitable quarter in a very difficult environment and progress with our carbon sequestration projects. We are very appreciative and thankful for the hard work of our colleagues on achieving these results.

I will give the floor back to Stuart rose for additional comments. Thank you Stuart. Thank you. Thank you so far.

Conclusion again, we made money in a quarter when most of the public companies in the industry reported a loss in our company, where well run ethanol company that makes money.

That consistently over the years has made money in ethanol and also have great hopes for the future and carbon capture we feel our carbon capture.

As well.

It is far more advanced than most everyone else is trying to trying to get into this to this industry.

Like I said, we make money now.

For our shareholders, we're not just flipping on claims and hopes.

We are very very good operating company in the ethanol business.

We really have a few things to thanks for that it's good plants good locations, but most importantly, the biggest thing and the biggest thing that separates us from the rest of the industry and why we've consistently done so much better than most of the other public companies in the industry, it's our people and their importance.

To us and again, we think we hit the finest people in the industry and that's really why we continue to outperform the industry I'll now leave the forum 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.

You will hear at three Tom Toms technology request.

If your question has been answered and you would like to lead you registration. Please press the one followed by the three.

Once again to register a phone question.

Followed by the four on your telephone.

One moment please for the first question.

Okay.

My first question is from Jordan Levy with Securities. Please proceed with your question.

Good morning, Thank you I really nice quarter.

And really nice quarter against a clearly challenging backdrop and I think that's a test.

I know you all have continued to run the company soon to say.

A great job there.

I'll start out on the carbon capture side of things for other Stewart as a floor.

I'm curious if you can Stuart you mentioned.

Looking at other carbon heavy industries or ethanol.

Facilities.

That might be able to benefit from carbon capture and I'm curious how you think about noon, we're still early stages in carbon capture how you think about that.

An outright purchase of an asset like that versus entering into supply agreements with third parties that could also benefit from carbon capture I am just curious are you guys kind of frame that up when youre thinking about.

I'll take that first.

Apart.

I believe the most important thing is to have the capacity the carbon hall.

That's what we're working on most Theres a lot of like you just mentioned ethanol plants out there that are admitting carbon there is ammonia plant cement and carbon there is the electric utility submitting carbon and if we have the whole we have the opportunity to.

<unk>.

To capture carbon and a number not just in the ethanol business, but the most important thing is to have the whole they have the carbon capture all that.

It's not an easy thing to do at the fire mentioned, we havent.

Literally millions of points of data that are involved in getting the series six permit he can talk more about it.

But it is not easy we think thats. The most important thing then.

Then.

Well he is doing that we are looking around at different industries that have made a lot of carbon.

We hope to have a very very large carbon capture facility that can be used.

While we are the carbon.

Brent.

For our area for the whole country. So that's that's our goal I'll turn it up to as far if he wants to add on to that.

I think the only thing you are.

Exactly right the value of the <unk>.

Most important.

If you don't have those.

Have you thought about.

You will not be able to the carbon sequestration.

Got you.

<unk> <unk> six per month, it takes somewhere six to 18 months. After you apply for the bottleneck. So as you know we are working on this project almost three years, so with it at this stage ready to file the EPA, but is already takes so much time and now further at once.

We apply depending on EPA.

Other information data acquired it will take six to 18 months, so it's a long process and suddenly.

We'll have our own well, we already had location which is.

One <unk> who's producing the carbon and as Stuart mentioned, we will look at it in the future. If there is more carbon from other location.

Our own.

That's good.

Business, which we may have in the future and we can certainly can store that carbon also at the same place.

And most of all we are sitting at the location.

At Mt assignment and which is.

Really.

The best location at least in the Illinois area and we think it is.

Is the right place to do it independently at this time and in future depend.

It depends on what direction it may move.

No that's great color. Thanks, both of you.

Maybe I'll follow up on a different topic.

The quarter oil side of things, obviously, we've seen a lot of price increases in that product as we've seen with Paul.

Whole products.

But.

Especially corn oil and some of that's probably driven from the renewable diesel sector.

Just the relationship with Green prices, just curious how the demand youre seeing on that versus how you've historically seen it.

I think certainly we have seen a lot of Golden oil demand at this time, we literally got the gods almost every day or every week and suddenly.

And suddenly there is a higher demand and suddenly depth.

Corn oil prices consistently carry on going up and as soybean oil is going up so it's almost trading close to the soybean and soybean oil.

And Thats.

Certainly is one of the.

I'd side and disagree with us at this time and as you can see the bond is trading today about 760, which is don't.

Compared to last few weeks it was up almost $8 15.

And natural gas is trading $9 20 ethanol is 275 when you look at all of these situations and DDG lately, we have seen the price of <unk> has gone.

There too.

Even few weeks ago. So I think it is.

So many of those and logistic concerns. So there is so many other challenges at this time, we have but I think taking it one at a time and making sure that we've got this bridge.

Great I'll leave it there. Thanks, so much for all the details.

Our next question comes from Pavel <unk> with Raymond James. Please proceed.

Thanks for taking the question.

It's been a little while since I've been on one of your calls.

This is the first your first call since the war began.

And I thought I would just add kind of an open ended question.

How has the war affected the ethanol market from the topline perspective or or the cost of goods perspective or both.

I think if you look at the recently, which we have seen the corn price is suddenly it's gone up because.

You plan to produce approximately $1 1 billion bushels.

And Dave.

Export almost 1 billion versus a year. So they are not able to export as much as and but on the other hand, some other complex countries like Argentina.

Argentina and Brazil.

For complete countries are taking over that.

As exporting more than the United States, where suddenly we're concerned in the beginning that if all the export growth from.

United States than it will be really will have no kt for the 2020.

Good morning.

Yes.

Then also the concern other concern we see is that as overall USDA recently announced loan production forecast dawn due to primarily due to.

Ukraine and the USA also.

So we've seen weakness in the China and the European Union, but on the other hand, we certainly have seen a lot of you.

Bumper crops in Argentina, and Brazil. So there is certainly effect and as you can see that is also in fact on natural gas because it is.

The natural gas liquid natural gas will be exported to European countries.

So there is certainly is.

<unk>.

We had a big brand.

Sharon ethanol industry total these commodities.

Yes.

I appreciate the.

Prospective on that let me zoom in on the EPA.

Allowing.

Higher blending level.

<unk>.

How do you how do you anticipate that having an impact in practical terms in the United States.

I'll answer that one we don't we don't think it makes much difference at all it's peanuts overall and it's just talk.

Thanks, Jim.

Patients in the east or the west they don't even offering.

And that didn't go out on a permanent basis and there is no incentive to put in the <unk> across the country.

It was just more bluster than it was.

Real help to the industry there will be some minor out very very minor help if a few people and a few pumps used 15 instead of 10.

But this was not.

It was very similar to what the Trump administration did related to <unk> and what's not.

And it's more talk than it is.

And then any help cuts whatsoever, the big help.

Great book was that USDA.

Real money and that really counts and that was correct.

How far do you want to add to that yes, I think youre exactly right because unless EPA make this weekend.

We can sell it all year around no one is willing to invest but eight to nine months and then they have to shut down their pumps and then start over so this uncertainty is suddenly is creating a problem. So we need to we have got.

Biden administration should really tail.

Should be able to sell <unk> earlier around just like any other brand.

That's the only reason we can accept and he can increase this.

Demand more for the ethanol and otherwise otherwise, it's going to be continual problem.

Okay, and then just last question whats the latest on exports to China.

<unk> been a recurring conversation I guess for what four years now.

Export to China.

<unk> really not as much as we expect we will continue that lost.

Even market number we have not seen any export to China.

U S government and I think that it has to work together to somehow find a way to lift.

So.

<unk>.

Maybe as Biogen administration is saying some of the goods that will be importing from China. They are going to lift that data.

<unk> will lift the data to meet the inflation because that's one of the reason is that inflation is also happening.

Contrary to some politicians I believe that we are collecting tax actually.

Tax paid by the citizens because as George the data.

Price of the gold scores up and somebody has to pay for this so so that's one of the also reason the inflation we are facing that a lot of these imports, which we were getting from China.

Countries, they were cheaper price, but we put a tariff on it and it becomes more expensive for the citizen. So that data has to be eliminated and on the other hand also China showed also eliminated all other tax status, which they have.

You sort of be a fair trade.

That's great.

Alright, Thank you very much.

Thank you Pablo.

Yes.

Mr. Rose there are no further questions at this time I will turn the call back to you for closing remarks.

Great.

Thank you very much and we'd like to thank everyone for listening in and we'll look forward to talking to you at the.

Again at the end of next quarter. Thank you bye.

That concludes.

The conference.

Thank you for your product.

Can you please disconnect your lines.

Q1 2022 REX American Resources Corp Earnings Call

Request a DemoDemo

REX

REX American Resources

Earnings