Q3 2024 REX American Resources Corp Earnings Call
Speaker 1: Greetings and welcome to the Rex American Resources Fiscal 2023 Third Quarter Conference call. During the presentation, all participants will be in the listen only mode. Afterwards, we will conduct a question and answer session. At that time, if you have a question, please press the one fall by the four on your telephone. If at any time during the conference, you need to reach an operator. Please press star zero.
Greetings and welcome to the Rex American resources fiscal 2023 third 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.
At any time during the conference you need to reach an operator, Please press star zero.
Speaker 1: I would now like to turn the conference over to Mr. Doug Brugumman, Chief Financial Officer. Please go ahead.
I'd now like to turn the conference over to Mr. Doug Bruggeman, Chief Financial Officer. Please go ahead.
Speaker 2: Good morning and thank you for joining Rex American Resources, Fiscal 2023, third 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 Disco.
Good morning, and thank you for joining Rex American Resources' fiscal 2023 third 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.
Speaker 2: In addition to historical facts or statements of current conditions, today's conference call contains forward-looking statements that involve risk and uncertainties within meetings of the private securities litigation reform act of 1995. Such forward-looking statements reflect the company's current expectations and beliefs that are not guarantees of future performance. As such, actual results may vary materially from expectations.
In addition to historical facts or statements of current conditions. Today's conference call contains forward looking statements that involve risks and uncertainties within meetings of the private Securities Litigation Reform Act of 1995 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.
Speaker 2: The risk and uncertainty associated with forward-looking statements are described in today's news announcement and in the company's filings with the Securities and Exchange Commission, including the company's reports on Form 10K and 10...
The risks and uncertainties associated with forward looking statements are described in today's news announcement and in the company's filings with the Securities and Exchange Commission, including the company's reports on Form 10-K and 10-Q.
Speaker 2: Rex American Resources assumes no obligation to publicly update or revise any forward-looking states.
Rex American resources assumes no obligation to publicly update or revise any forward looking statements.
Speaker 2: I have joining me on the call today Stuart Rose, executive chairman of the board, ends a far-reservee chief executive off.
I have joining me on the call today Stuart Rose Executive Chairman of the board and Zafar Rizvi Chief Executive Officer.
Speaker 2: First review our financial performance and then turn the call over to Stewart for his come.
I'll first review, our financial performance and then turn the call over to Stuart for his comments.
Speaker 2: We are very pleased to report these record net income and earnings per share court of results.
We are very pleased to report these record net income and earnings per share quarter results sale.
Speaker 2: sales for the third quarter increased slightly compared to the prior year. At the most sales for the quarter were based upon 73.2 million gallons this year versus 66.3 million lash.
Sales for the third quarter increased slightly compared to the prior year ethanol sales for the quarter were based upon $73 2 million gallons. This year versus $66 3 million last year. The increase in sales volume were offset by lower pricing across all categories, largely reflecting commodity pricing for this time period.
Speaker 2: The increase in sales volume are offset by lower pricing across all categories, largely reflecting commodity pricing for this time.
Speaker 2: We reported a $30 million increase in third quarter gross profit to $39.3 million this year versus $9.3 million in the prior year, as we benefit it from lower corn and natural gas pricing over the prior year of third quarter.
We reported a $30 million increase in third quarter gross profit to $39 3 million this year versus $9 3 million in the prior year as we benefited from lower corn and natural gas pricing over the prior year third quarter.
Speaker 2: SGNA increased from the third, increased for the third quarter from 5.8 million to 7.6 million, primarily due to incentive compensation leaked linked to the large increase in Earth.
SG&A increased from the third increased for the third quarter from $5 8 million to $7 6 million, primarily due to incentive compensation linked to the large increase in earnings.
Speaker 2: As mentioned in the second quarter, the company made a change in the method of accounting to begin classifying shipping and handling costs as cost of sales instead of within selling general administrative expense as historically presented. In order to improve the comparability of gross profit and SGE-Nay reported.
As mentioned in the second quarter. The company made a change in the method of accounting to begin classifying shipping and handling costs as cost of sales instead of within selling general and administrative expense as historically presented in order to improve the comparability of gross profit and SG&A reported.
Speaker 2: Company has applied a retrospective application of its new accounting policy.
The company has applied a retrospective application of its new accounting policy.
Speaker 2: This change only impacts cost of good salt and selling general administrative expense and has no impact on the earnings report.
This change only impacts cost of goods sold and selling general administrative expense and has no impact on the earnings reported.
Speaker 2: We had income of 4.7 million from our on consolidated equity investment in this year's third quarter versus 661,000 in the
We had income of $4 7 million from our unconsolidated equity investment in this year's third quarter versus 661000 in the.
Speaker 2: prior year, primarily reflecting the improved industry operating conditions for this time period.
Prior year, primarily reflecting the improved industry operating conditions for this time period.
Speaker 2: We reported interest and other income of 4.9 million versus two million in the prior year. The increased primarily reflects increased interest rates as well as 862,000 from COVID relief grants received from the USDA during this quarter.
We reported interest and other income of $4 9 million versus 2 million in the prior year. The increase primarily reflects increased interest rates as well as 862000 from Covid relief grants received from the USDA during this quarter.
Speaker 2: income before income taxes non-controlling interest was 41.3 million for the third quarter compared with 6.1 million in the comparable year ago.
Income before income taxes, and Noncontrolling interest was $41 3 million for the third quarter compared with $6 1 million in the comparable year ago period.
Speaker 2: We reported a tax provision of 9.6 million versus a provision of 1.2 million in the prior.
We reported a tax provision of $9 6 million versus a provision of $1 2 million in the prior year.
Speaker 2: These factors led to net income of trivial direct share holders of 26.1 million for this year versus 3.2 million in the prior year's third quarter.
These factors led to net income attributable to Rex shareholders of $26 1 million for this year versus $3 2 million in the prior year's third quarter net.
Speaker 2: Net income per share at two-vital wrecks share of orders was an all-time record, $1.49 for this year's third quarter versus 18 cents in the prior year.
Net income per share attributable to Rex shareholders was an all time record of $1 49 for this year's third quarter versus 18 cents in the prior year.
Stuart I'll now turn the call over to you.
Thank you Doug.
Speaker 3: Going forward, the business has continued to be strong and we expect our force quarter to be significantly better than last year's corresponding quarter. We're working hard on our carbon capture project and also making and also increasing the capacity of our one-hour plant. So far, we'll discuss the ethanol business and carbon capture.
Going forward. The business has continued to be strong and we expect our fourth quarter, it's insignificant to be significantly better than last years corresponding quarter. We're working hard on a carbon capture project and also making and also are increasing the capacity of our one of our plants at firewood.
The ethanol business and carbon capture business and his set but we have cash of 332 million on consolidated cash on our balance sheet at $332 million or earning interest on that.
Speaker 3: business and his segment. We have cash of $332 million on consolidate the cash on our balance sheet of $332 million. We're earning interest on that, which should be significantly better. Or we hope it should be significantly better than last year. The ethanol-
Which should be significantly better or we hope it could be significantly better than last year. The ethanol plants expansion will use some of that cash carbon capture project will also use some of that cash against a firewall discuss this on his is part of the call. We're always looking for other ethanol.
Speaker 3: expansion will use some of that cash. The Carbon Capture Project will also use some of that cash against the viral discusses on his part of the call. We're always looking for other ethanol-carbon capture businesses, other entities that can benefit from our expertise.
Carbon capture businesses, neither entities that could benefit from Iraq, where Ts so.
Speaker 3: So far we have nothing imminent on the acquisition front. We have our buybacks still available. We buy back on dips and currently we are not purchasing any shares. I'm out here in the conference call over it is a far risk.
So far we have nothing imminent.
On the acquisition front, we have are buybacks still available we buyback on dips and currently we are not purchasing any shares and now turn the conference call over it as a risk.
Speaker 4: Thank you, Stuart. Good morning and thank you for joining us today for the third quarter of Nicole. As Stuart and Doug previously mentioned, our team successfully capitalized the opportunity in the commodity market and were able to achieve the best result in the history of the company.
Thank you Stuart.
And thank you for joining us today for the third quarter of any cause as Stuart previously mentioned our team successfully capitalize the opportunity in the commodity market and was able to achieve that.
In the history of the company.
Speaker 4: We have seen some decline in the crash margin in the fourth quarter compared to the third quarter, but we believe we still have been able to achieve significantly better results in comparison to last year's fourth quarter.
We have seen some decline in the crush margin in the fourth quarter compared to the third quarter, but we believe we still are.
Be able to achieve significantly better.
The comparison to last year's fourth quarter.
Speaker 4: According to the EPEIA and November 29th report, Athena Stark and production dropped during the week, we have also seen natural gas price drop considerably, which has positive impact on our financial results.
According to the EIA in November 29th report ethanol stock and production dropped during the week. We have also seen natural gas prices dropped considerably which has all that.
Wow.
Fact on our financials.
Speaker 4: The November 9, 2023 U.S. airport shows an expected output of 15.23 billion bushel of phone second highest on the record and 174.9 bushel per acre yield for the year 2020-24.
The normal <unk>.
But wanted to get a USDA report showed an expected all caught up with pinpoint 1 billion bushels of corn second highest on record and 174009 bushel per acre yield for that yet.
Paul.
Speaker 4: We are pleased the cone yields in Marion, South Dukera this year is estimated at 152 bushels for acre compared to 132 bushels last year. As you remember that we had the last couple of years drought in Marion South in South Dukera area.
We are pleased that going in yield and the median South Dakota. This year is estimated at 152 bushels per acre compared to 132 bushels last year.
You remember that we had the last couple of years dropped in <unk> in South Dakota area also approximately 580000 acres, 12% more acres of corn planted this graph.
Speaker 4: also approximately 580,000 acres.
Speaker 4: 12% more acres were quen were planted this year to last year. The quen, Gibson City, Illinois are less available at, at 200 and 3 bushels per acre compared to 214 bushels per acre last year. But almost 400,000 more acres were planted and, and increased the 4% were more were planted this year compared to last year.
Last year alone.
Cynthia doesn't always.
Less.
At 203 bushels per acre compared to 214.
But it got lost yet, but almost 400000 or more of it because we got planted and an increase of 4%, but more what planted this year compared to last year.
Speaker 4: Looking ahead, the drop in the ethanol and DDG, export could actively affect future results if this continued throughout the next year. Ethanol export through September , 2020, or approximately 1 billion gallons compared to 1.1 billion gallons in 2022 during the same period.
Looking ahead, the dropping that to an island D D D export neck.
Negatively affect fujitsu.
If this continue throughout the next year ethanol exports through September 2021.
One approximately 1 billion gallons compared compared to one 1 billion gallons in 2022 during the same period.
Speaker 4: DLG export through September 2023 was approximately 8 million metric tons compared to approximately 8.5 million metric tons at the increase of approximately 428,000 metric tons compared to the same period 2020.
DDG exports through September 2020, approximately $8 billion 8 million metric tons compared book Doximity Inflight Wi Fi.
Metric tons, a decrease of approximately 428000 metric tons compared to the same period.
Yeah.
Speaker 4: Considering all these sectors, we still believe our fourth quarter is expected to produce much better results compared to the same quarter last year as I mentioned previously.
Considering all these factors, we still believe our fourth quarter is expected to produce much better results compared to the same quarter last year as I mentioned previously.
Speaker 4: Let me give you some update about carbon, our carbon project.
Let me give you some update.
About bottom.
Olive Garden project.
Speaker 4: As I mentioned in our previous calls, we believe our carbon capture and sequestation project will further advance our sustainability goals and have a financial impact that will improve the company's performance for our sharehold.
As I mentioned in our previous calls we believe our carbon capture and sequestration project.
Part of the advance our sustainability goals and to have a financial impact that will improve the company's performance for our shareholders.
Speaker 4: We have budgeted approximately 165 million to build a carbon capture comparison and storage facility, expand the one-out energy plant, ultimately 200 million gallons annually and undertake other projects related to the reducing carbon intense.
We have budgeted approximately $165 million to build the government captive comparison and storage facility expanded to one another.
Now the plant ultimately 200 million gallons annually and undertake other project related.
Do think carbon intensity.
Speaker 4: The construction of the capture and compression facility has started and long-lead item have been ordered and...
The construction of the gas and compression facility has started.
And long lead items have been ordered.
All modular compression equipment for the facility is scheduled to be delivered by I believe next year. The construction of the facility is expected to be completed by the end of second quarter.
Speaker 4: All modular compression equipment for the facilities scheduled to be delivered by early next year. The construction of the facilities expected to be completed by the end of second quarter, at which time testing of the facility will begin. We continue to complete the paperwork of different government agencies, while we wait the EPA approval of the class six permit for carbon injections and for the Illinois Common Commissions approval to construct a $7.2 million.
At which time testing of the facility will begin we continue to complete the paperwork up different government agencies, while we read the EPA approval of the class six but much carbon in Jackson and club and club the Illinois Commerce Commission approval to construct a 712 million.
Speaker 4: 7.2 miles Garb and Python all these performance and approval depend on several local state federal agencies. Unfortunately we cannot predict when we will receive these permits from these various agents.
Seven two miles Ghadhban pipeline, all these months and approvals depends on several local state federal agencies. Unfortunately, we cannot predict when we will receive these blood Muslim these various agencies.
Speaker 4: In other updates, two other carbon pipeline companies recently withdrew their pipeline application. The Graver's sources have entered into an agreement with Navigator, which withdrew their carbon pipeline application.
And the other updates.
Other ghadhban pipeline companies recently withdrew their pipeline application.
We're able to solicit have entered in.
In agreement with navigator, which would do the government pipeline application.
Speaker 4: We are pleased about the big milestone we have reached so far and hope. Different government agencies will complete their approval early next year.
We are pleased about the about the big milestone we have reached full fodder and hold different government agency will complete their approval early next year.
Speaker 4: We will also continue to evaluate other projects that would improve our energy efficiencies, reduce carbon intensity. If we successfully achieve our goals, we will be prepared to provide low-carbon ethanol and byproducts with a social impact of reducing carbon in the atmosphere and a financial impact that improves the company's performance for our shareholders.
We will also continue to evaluate other projects that will improve.
Do you ever sense is reduce carbon intensity. If we successfully successfully achieve out of God, we will be prepared to provide low carbon ethanol and by products with our social impact of reducing god willing in the atmosphere and the financial impact that improve the company's performance for our shareholders and <unk>.
Speaker 4: In summary, we are pleased to announce the most profitable quarter in our history and we believe our fourth quarter is expected to be produced much better as a adult compared to the same period last year. We continue to make progress on our carbon sequestration project and a plan to increase ethanol production of one-alternergy ultimately to 200 million gallons to maximize 45-D tax credit banning.
We are pleased to announce the most profitable quarter in our history and we believe our fourth quarter is expected to be produce much better results compared to the same period last year, we continue to make progress on our carbon sequestration projects and are planned to increase ethanol production or whatnot.
The 200 million gallons to maximize fortifies, the ex <unk> ex glad that benefit.
Speaker 4: Once again, we could not achieve these milestones without the hard work and dedication of our colleagues. We are very appreciative of their efforts in achieving these positive results.
Once again, we could not achieve these milestones without the hard work and dedication of our colleagues. We are very appreciative of their efforts in achieving these positive.
Speaker 4: I will give back the floor to Stuart Rose for additional comments.
I will give back the floor to Stuart rose for additional comments.
[noise] steward.
Yeah.
Speaker 3: In conclusion, we completed the best quarter in our 39 year history as a public company. We drastically outperform the industry. As Elon Musk said, we don't, as he said yesterday for people who are listening to his conference call, the difference, he has no patents or his patents are all open patents. We have no...
So in conclusion, we completed the best quarter in our 39 year history as a public company we drastically.
Perform the industry.
Eli much said, we don't as he said yesterday for people who are listening to this conference call. The difference. He has he has no patents or his patents are all open patents we have no.
Speaker 3: super patent or anything like that, but we better execute in our competitors and our people are the real reason for that.
Super pattern or anything like that but we but we better execute in our competitors and our people are the real reason for that.
Speaker 3: They're the best people. We feel we have the best people in the industry. We feel that they know what they're doing. In carbon capture, for example, everyone else has these big pie in the sky projects.
The best people, we feel we have the best people in the industry.
They know what Theyre doing and carbon capture for example, everyone else has these big pie in the Sky projects. We've focused on a project that we believe is very doable and at the moment I believe we're in the lead in the ethanol business in our carbon pipe.
Speaker 3: We focused on a project that we believe is very doable.
Speaker 3: And at the moment, I believe we're in the lead in the SNL business.
Speaker 3: in our carbon capture project to head of any other carbon capture project that I know of.
Capture project to head up any other carbon carbon capture project that I know of in the ethanol business.
Speaker 3: in the ethanol business, other than our ADM, which was done long ago. So we're, again, gonna show we believe.
Other than our ATM, which was done long ago. So we're again going to show we believe that execution is way more important than anything else. We feel we're better at that than anyone else. So I said earlier.
Speaker 3: that execution is way more important than anything else. We feel we're better at that than anyone else.
Speaker 3: So I said earlier, we know we have good plants.
We feel we know we have good plants, we know we have good locations, but the most important thing we have is good people and our.
Speaker 3: We know we have good locations, but the most important thing we have is good people. And our people are just terrific and they get all the credit for this quarter. It's just a terrific job and they deserve it. And now leave the forum open for questions.
Our people are just terrific and they get all the credit for this quarter is just a terrific job and they deserve it.
Leave the forum open for questions.
Thank you.
Speaker 1: If you would like to register a question, please press the one four on your telephone. You will hear a three-tone prompt to acknowledge your request. If your question has been answered and you would like to withdraw your registration, please press the one, fall, back to three. One moment, please, for the first question.
If you would like to register a question. Please press the one four on your telephone you will hear it III tone prompt 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.
Yeah.
Speaker 1: Our first question comes from Jordan Levy with truth securities. Please proceed.
Our first question comes from Jordan Levy with Trust Securities. Please proceed.
Speaker 2: Hey guys, it's Henry on for Jordan here. Congrats for staying in the quarter. Start off, and I mentioned the 2Q date before. I just wanted to have you have any more color around some of the different benchmarks, both on the construction site and then from the EPA around the CCS build that we should be looking for the next 12 to 18 months.
Hey, guys, it's Henry on for Jordan here, Congrats first in the quarter start off I know you mentioned that the <unk> date for I was wondering if you have any more color on some of the different benchmarks. Both on the construction side and then from the EPA around.
The Cts build out we should be looking for over the next 12 to 18 months.
Speaker 4: I'll take that as far as concern about the EPA, I think, is under technical review. And we have no idea how long that will take.
As far as concern about the EPA I think is under technique.
Technical review.
We have no idea how long that technical review will take but as far as construction of the facility.
Speaker 4: But as for as construction of the facility is already started as I mentioned previously and the Marjol are you
He started as I've mentioned previously and the modular unit, which will be.
It will be a diving in February and we believe that our facility will be up completed by the July by July 31st.
Speaker 4: be arriving in February and we believe that our facility will be completed by July 31st.
Speaker 4: that is nothing will be in business. July 31st it may take a little longer because we still might be waiting for permits that the construction of the facility will be completed but we cannot operate unless we receive the EPA permit and pipeline permit which I mentioned earlier but as far as concern the compressor facilities
That does not mean, we will be even business.
July 31st it may take a little longer because we still might be waiting for permits.
I felt that contract.
In Asia.
Section of the facility will be completed, but we cannot operate unless we receive the EPA button.
And pipeline, but but but much of which I mentioned earlier, but as far as consultants.
The facility will be completed.
Speaker 5: Thank you. And then just looking ahead to next year, how are you guys looking at the FNL landscape shaping up kind of compared to this year? And then you guys haven't started having conversations with any of the nearby operators on potential carbon off the given kind of where you're at, you know, the advanced timeline for your current carbon capture projects.
Thank you and then just looking ahead to next year. How are you guys looking at the ethanol landscape shaping up kind of compared to this year. I know you. All have you guys had started having conversations with any of the nearby operators on potential carbon optic given kind of where youre at.
Vance timeline for your current carbon capture projects.
Okay.
So far.
Speaker 4: I'm sorry, could you repeat that question again? I'm not sure what exactly you're asking.
I'm, sorry could you put a European data collection again, I wasn't I'm not sure what exactly you're asking please.
Speaker 5: Just a quick one on the ethanol landscape how you're seeing that shape it up for next year. And then just anything you have on any conversations if you have begun having them with nearby operators for a potential carbon opting given where you're at with the CCS buildout.
Just a quick one on kind of the ethanol landscape, how youre seeing that shaping up for next year.
And then just anything you have on any conversations have begun having them with nearby operators for a potential carbon I think given where youre at with the Ccs Buildout.
I think as far as concern ethanol looking forward as Ive mentioned that we are in a commodity business.
Speaker 4: I think as for as concern, ethanol, looking forward, as I mentioned that, we are in a commodity.
Speaker 4: I think it's very hard to predict more than even a couple of months or three months. So at this stage, I really cannot predict what happened with the commodity market and it's changed every single day or every month. But when we're going to see any opportunity, we will be there to materialize.
I think it's very hard to predict more than even a couple of months three months. So.
So at this stage.
I really cannot predict what happened with the commodity market and exchange every single day at every month and but we when we're going to see any opportunity we will be there to materialize that so I really cannot predict what will happen next year, but I can as I mentioned the fourth quarter.
Speaker 4: So I really cannot predict what happened next year. But I can, as I mentioned, the fourth quarter, certainly we believe that it would be a...
Certainly we believe that it would be.
Speaker 4: will be much better than last year's same photo.
It will be much better than last year.
Fourth quarter, but as far as concerned about the card one I think.
Speaker 4: But as far as concerned about the carbon, I think once we complete the facilities, we...
Once we complete complete facilities.
Speaker 4: That will be probably by the end of 2025. At that time, we will see exactly that if there is other sources of the carbon is available from anybody else. Otherwise, our expansion of the ethanol facility will be still will be a very feasible project with that using 45Z and even 45Q. Return of return on investment is much higher than we.
That will be probably by the end of 2025 at that time, we will see exactly that if there is other sources of the guard when it's available from anybody as otherwise.
Expansion of that facility will be still.
Still will be a very feasible project with using 45 Z and even 45.
Our investment is much higher than we expect.
Speaker 3: Thank you. One thing on your question, I think you should probably realize you've been following us back for a long time. The Foreigners team have proven quarter after quarter after quarter that they know the commodity business and are really good at it. Other people with all their futures contracts and the big floors of commodity traders and everything.
Thank you.
One thing one thing on your question I think you should you probably realize you can follow me and I stopped for a long time, so far and his team have proven quarter after quarter after quarter that they know the commodity business and are really good at it other people.
With all their futures contracts and a big floor, its a commodity traders and everything.
Speaker 3: I have drastically under-performed what's the far and as team have done. And there's no reason, if it happened in the past, there's no guarantees it's gonna happen in the future, but when you look at that team and what they have done, I think you have to say that we know this business and that we're better, again, as I said, in my call, better executing than everyone else.
Drastically underperform, what supplier and his team have done and Theres No reason, if it's happened in the past. So there's no guarantees that's going to happen in the future, but when you look at that team and what they have done.
Do you have to say that we know this business and they were better again as I said in my call better executing them and everyone else.
Speaker 3: And again, on the carbon capture, we hope to have a completed width permits by the end of next year, which would be.
And again on the on the carbon capture I, we hope to have a completed with permits by the end by the end of next year, which would be which would be with 45 Z you tradition potentially to earnings per share. So we'll see what happens.
Speaker 3: which would be with 45-Z, a huge, huge addition potentially to ironing per share.
Speaker 3: So we'll see what happens and that's the thing that we are putting so far in as steam is putting.
That's the thing that.
We have put in so far and this team is putting in the growth area. Most efforts into and again if he does that like if they did that like they've done ethanol business. We're in really good shape.
Speaker 3: in the growth area the most efforts into. And again, if they do that, like they've done ethanol business, we're in real.
Speaker 4: And I add to that since we are increasing our production to 200 million gallons.
Yes.
<unk>.
Add to that since we are at.
Increasing our production to $200 million CASM.
Speaker 4: So every reduction from point for 50 to reduction every gallon.
No.
The reduction from one.
52 reduction.
Lynn.
Two cents a gallon so.
Speaker 4: So if we, and the carbon sequestration is approximately somewhere 30 to 35 cents, 32, 35 points. So if we are able to reduce our carbon footprint.
If we and the carbon sequestration.
Approximately somewhere 30 to 35.
30 to 35 points.
So if we are able to.
Our carbon footprint.
Footprint, our intensity and as we are working on several other project.
Speaker 4: So we can generate with a 200 million gallon ethanol.
So we can generate with the 100 million gallon ethanol facility.
Speaker 4: over three years somewhere 500 to 600 million dollars.
Three years, some we had a $500 million to $600 million tax credit.
Speaker 3: Again, that would be the most we can generate. So that's right. We don't want people putting that in their numbers, but that's what we're working so hard to get to. And if we even get to half of that, that's all increased in earnings per share. So we have a big bogey out there, and we're going to work hard to get as much of it as we can.
Again that would be the most we can generate so that's good.
Right, we don't want people, putting that in their numbers, but that's working so hard to get to and if we even get to have for that that's all that's all of the increase in earnings per share. So that's we have a big bogey out there and we're going to work hard to get us as much as we can.
Speaker 4: That's the reason we are allocating $165 million to ESM.
Yes.
And we are allocating $165 million.
Major investment.
Speaker 4: that needs the risk, but we believe that return is much better and much higher.
Certainly as the risk, but we believe that have done much better and much higher.
Thank you guys.
Speaker 1: Our next question comes from Chris Sakai with a singular research. Please proceed.
Our next question comes from Chris Sakai with singular research. Please proceed.
Speaker 6: Hi good morning, just the question, where are you seeing the most demand for ethanol?
Hi, good morning, just.
Yes.
Where you're seeing the most demand for ethanol.
Well, we see the most demand and thats not.
Speaker 4: where we see the most dependent ethanol in the human export side.
You mean, the export side.
Right.
Speaker 4: I think the mostly right now we see the Canada and we have recently seen the United Kingdom, Netherlands, South Korea, Colombia. So those are the top five. We have seen some India also. So certainly is the...
I think the mostly.
Right now we are seeing in Canada, and we have recently seen see that United Kingdom, Netherlands, South Korea, Colombia. So those are the top five.
We have seen some India also.
So suddenly is.
Speaker 4: If a lot of these countries are importing, so that Canada is always on number one.
A lot of these companies are countries are importing so.
Canada is always on number one.
Okay.
Okay, Great how are you guys thinking.
Speaker 6: The price is corn and dried the silver's grain and and modified the silver's grain heading into The next quarter
The price of corn, and dry distillers grain and modified distiller grain heading into.
The next quarter.
Speaker 4: I think the whole is generally speaking, as you can see, they're trading about $4. Yesterday it was $4.49 and today is some increase.
I think that.
Paul.
Generally speaking as you can see that trading about $4.
Yesterday, it was $4 49.
Two days some increase so I think that as I mentioned previously.
Speaker 4: So I think that as I mentioned previously, in a South Dukera area, certainly we have seen some minus bases.
In our South Dakota area.
We have seen some minus basis and.
Speaker 4: And we have seen some bases in overall, in Illinois, gone up a little bit. We have seen bases in minion applets and some other part where it was.
We have seen some bases in overall in Illinois has gone up little bit we have seen this in.
Minneapolis, and some other part where it was.
Speaker 4: not as good production as it compared to last year is plus basis but otherwise most of the area is the minus.
Not as good production as it.
Compared to last year.
Plus basis, but otherwise most of the Adi is the minus basis.
Speaker 6: And what about the price of natural gas, which they had into the wind?
And what about the prices of natural gas as we head into the winter.
Speaker 4: The natural gas price has considerably dropped as I mentioned that we have seen that it's less than a $5 for January February and we have seen that about for March as low as $2.56 or $2.67.
The natural gas price has considerably dropped as I mentioned that we have seen that is less than a five dollar for January February and we have seen that about March as low as $2 56, a $2 67.
Speaker 4: So that will be a major impact as I mentioned that in my previous prepare remarks that we have seen the drop in natural gas pricing.
So that will be a major impact as I've mentioned that in my previous prepared remarks.
<unk> seen the drop in natural gas pricing.
Okay, great. Thanks.
Our next question comes from David Lock with old Mammoths investments. Please proceed.
Speaker 1: Our next question comes from David Locke with old MyMet investments. Please proceed.
Hey, guys, how you doing.
Good.
Speaker 5: Hey, first off, I'd really like to thank you guys for taking questions. There are some...
Hey, first off I'd really like to thank you guys for taking questions. There are some.
Speaker 5: Some teams out there that teams sort of afraid to take questions from their investors in a public forum. So thanks for your time and your candor in doing this. Thank you. Thank you for asking.
So teams out there that seems sort of afraid to take that.
Take questions from their investors in a public forum so.
For your time and your candor and doing this.
Thank you thank you for asking questions.
Speaker 5: So my my first question is like the industry overall has been beset by a ton of operational problems.
[laughter].
So my.
My first question is like.
The industry overall has been beset by a ton of operational problems.
Speaker 5: the last few months, explosions, fires, et cetera. To what extent has that contributed to the good financial margin environment for the last half year or so? And how have you guys managed to sidestep all of that? And I, relatedly, how old are your plans relative to industry average?
Last few months explosions fires, etc.
To what extent has that contributed to the good financial margin environment for the last half year or so and how.
How have you guys managed to sidestep all of that and Relatedly, how how old are your plants relative to industry average.
We have some of the newest plants in the industry there.
Speaker 3: We have some of the newest plants in the industry. They're under, I believe, under 10 years old. Some of these older plants just should be shut down to be honest with you. The fires and all that stuff may be helped us a little bit. I don't know.
I believe under 10 years old some of these older plants, just should be shut down to be honest with you.
The fires and all that stuff, maybe helped us a little bit I don't know.
Speaker 3: They had commitments where they had to buy. I'm not sure of the situation where they had to buy product on the open market, on the spot market. That's certainly if they did, that would help. But I think you have not, and we have, we have a number of plants, some we only own a small part of, but we have many plants. And these are all newer plants we made a, in the beginning, we made a decision to go with the best built, during the best plants. And I don't know of,
They had commitments, where they had to buy I'm not sure if the situation where they had to buy product on the open market on the spot market that certainly if they did that would help but I think you have not and we have.
You have a number of plants. Some we only own a small part of but we have many plants and these are all newer plants were made.
In the beginning we made a decision to go with the best built during the best plants.
I don't know of any.
Speaker 3: I don't know of any operational problems in these plants. They're just better built. We service. And we, at semi-annually, we do an extensive service in these.
I don't know if any operational problems that these plants are just better built with service.
Semi annually, we do an extensive surveys on these things and they're just.
Speaker 3: and they just stated the art better plants. It's all I can say. They're fake and ICM plants.
The art better plants, that's all I can say, they're fake and ICM plants.
Speaker 3: When you see a hundred million gallon fake and I see them plant.
100 million gallon take an ICM plant there.
Speaker 3: Very seldom do you see anything materially go wrong with those plants. There can always be a tornado or something, but the plants themselves are built terrifically.
Very seldom do you see anything materially go wrong with those plants, there can always be a tornado or something but the plants themselves or built terrifically.
Speaker 3: And we take in our case, we take extremely good care of those plants.
And we take in our case, we take extremely good care at those plants.
Speaker 4: I will add to that is I think the safety is our number one poor.
Yes, I will add to that is I think the safety is our number one priority. We always review that every month the safety procedures God forgive some anything can happen to anybody, but we are making sure all the safety procedures are followed and dairy.
Speaker 4: We always review that every month, the safety procedure, God forgives anything can happen to anybody.
Speaker 4: But we are making sure all the safety procedures are followed and drills are happening and other very closely monitored are the safety thing. And as Stuart mentioned, there's a couple of plants which have happened that thing. I think if you ring, there's one plant in a happen. In a south to Kera, that was about only 70 million gallon plant. They were shut down for a while.
It's happening in other.
Very closely monitored.
And as Stuart mentioned, there's a couple of plants, which have happened that thing I think.
Yeah.
One plant didn't happen in <unk> that was about 170 million gallon plant that was shut down for a while.
Speaker 4: ADM plants were shut down for maybe a couple of weeks or more. And so I think there is, Stuart has mentioned that there is maybe a minor impact, but I think the overall if you look at the commodity market.
ADM plants were shut down for maybe a couple of weeks up mode.
So I think there is as Stuart has mentioned that there is maybe a minor impact, but I think the overall if you look at the commodity market.
Speaker 4: You know, that also makes difference when you have an October .
That is also makes a difference when you have an October <unk>.
Speaker 4: a second on coin worth trading $4.88 and ethanol was trading $2.36. There is plenty margin at that time to look at it, to make sure that this is the time to lock in and moving forward. I think as Stuart mentioned, it all depends when and what time you exit.
Second on corn, what trading $4.88 and ethanol was $32 36.
So there is plenty margin at that time to look at it to make sure that this is the time to lock in and moving forward. So I think as Stewart mentioned is all depends what when and what time you execute.
Execute your profit and consider that this is good enough and less locking and move on.
Speaker 3: Let me add. Thank you. We believe strongly we I'm sorry. We believe strongly we have the best commodity trading team. Not just the best plants, but I really believe we have the best commodity trading team led by so far in the ethanol business.
Let me add.
Hey.
Strongly.
We believe strongly we have the best commodity trading team not just the best plants, but.
I really believe we have the best commodity trading team led by so far.
And our business.
Our consolidated planning for built between 2007 and 2009, if I can just add that one yes.
Speaker 3: Oh, thank you. I church a little more. Yes, thank you. Oh, so.
Yes.
Thank you catch a little more yes. Thank you.
So.
As you guys.
Continue to sort of like scour, the M&A market, but not find anything thats worthwhile.
Are you are you looking for.
Speaker 5: Are you looking for plants that look like the ones that you have or is there, like, are there dumpster diving opportunities for you to bring your management expertise and maybe fix up one of these older ones?
Are you looking for plants that look like the ones that you have or is there like are there dumpster diving opportunities for you to bring your management expertise and maybe six up one of these older ones.
Speaker 3: We don't dump their dive, so that won't be us. We're not fix up artists, not saying that we couldn't do it, but we have come very close to buying plants that are...
We haven't we don't dumpster dive.
That won't be us, we don't we're not fix up artist that saying that we couldn't do it but.
We have come very close to buying plants that are.
Speaker 3: Similar to ours, Fagan, ICM plants, and that was 100 million gallon. And for one reason or another, it hasn't worked out, but that would be our preference. And that would be what we would look for. Unfortunately, or fortunately, whatever you want to say, must have, plants did really really, are doing really, really well. And the price has gone.
Alert ours Fagan ICM plants in that 100 million gallon.
For one reason or another it hasnt worked out but that would be our preference in that way that would be what we would look for.
Unfortunately, or Fortunately whatever you want to say it must supplant it really are doing really really well and the price has gone.
Speaker 3: very, very much up on those plants. So I don't see anything coming, imminently, but in this industry, you never know what might happen.
Very very much up on those plants, so I don't see anything coming imminently, but in this industry you never know what might happen.
Speaker 5: How do you guys feel generally about the broad supply demand environment for ethanol right now? I mean, we've been...
Okay.
How do you guys feel generally about the broad supply demand environment for ethanol right now I mean, we've been.
We've been oversupplied for the better part of a decade and a half it feels like although we've had sort of just consistently decent margins all year. This year with some really high ones over the summer and early fall so.
Speaker 5: We've been oversupplied for the better part of a decade and a half. It feels like, although we've had sort of just consistently decent margins all year this year, with some really high ones over the summer and early fall. So, like, have we finally managed to make it to...
Or have we finally managed to make it.
Speaker 5: balance with a little bit of increased demand and some supply coming off line.
Balance with a little bit of increased demand and some supply coming offline.
Okay.
Go ahead Stuart.
Speaker 3: I was going to say my opinion is a commodity and you never, what'll happen is there'll be one where another we're expanding our plans. There always, if it does continue this demand, it will be something expansion. And then the supply will keep up with it, but we have hope as an industry.
Okay.
Terry in my opinion, it's a commodity and you never know what will happen.
There'll be one way or another we're expanding our plants.
There are always if it does continue this demand and it will be something expansion.
And then.
The supply will keep out keep up with it but we have hoped as an industry.
Speaker 3: And it may or may not happen, the government has given a lot of support to it happening, of supplying things like jet fuel. We also would be, have hopes of being a very, very low carbon fuel, which creates the man for our fuel.
And it may or may not happen in a couple of minutes, giving a lot of support to what happening of supply things like jet fuel. We also would be have hopes of being a very very low carbon fuel, which which creates demand for our fuel.
Speaker 3: in addition to what it is now across the country. And there are more, more pumps, I see them in Dayton, I see them.
In addition to what it is now across the country and there are more and more pumps vaccine mandate and I see them.
Speaker 3: Even I assume around the country more and more pumps that are greater than 10% SNL.
I see them around the country more and more pumps that are greater than 10% ethanol and <unk>.
Speaker 3: and cars today that are manufactured today can run on 15% ethanol. So then that would be 50% increase in the gas stations, make more money on 15% ethanol. So they haven't sent them. So there's hopes that that will increase demand. Today into your question, it's a commodity business, but a lot of things are moving and not direct.
Cars today that are manufactured today can run on 15% ethanol.
That would be 50% increase in the gas stations make more money.
On 15% ethanol. So they have incentives there's hopes that that will increase demand. So to answer your question, it's a commodity business, but a lot of things are moving in that direction.
Okay and then my last question is on the pipeline in Illinois do you Guy.
As need.
Any eminent domain rulings to make that happen and it seems like there have been some problems in <unk>.
Iowa recently with that and the Clown show Vivek is sort of like actually campaigning in Iowa about that whole issue. So.
I'm just sort of curious what.
What the gating items are for getting that installed.
Speaker 4: I can answer that a little bit. I think if you look at the Illinois, Illinois law is clearly state. Regardless of we plan to use it or not, am in and of me.
Yes, I can.
Answer that a little bit I think if you look at that.
Illinois Law is clearly state regardless of we plan to use it or not eminent domain.
Speaker 4: But regarding the pipeline, Illinois law clearly state that we can use a minute to move.
Regarding the pipeline, Illinois law, clearly state that we can use them in a domain, but as far as our attention. We at this stage, we do not believe that we have to use eminent domain because we have approximately four months pipeline well number one and by the time.
Speaker 4: But as far as our attention, we at this such stage, we do not believe that we have to use Omin and Domain because we have approximately four miles pipeline to the well number one. And by the time we reach to well number two and three, the last well is only 7.2 miles pipeline.
Well number two and three the last well, it's only seven two miles of pipeline.
Speaker 4: And so we may have some difficulties, we do not know. But as far as concern, which we have, primary indication which we have, we do not believe that we will be using any image.
And so we may have some difficulties, we do not know, but as far as concern, which we have a preliminary indication, which we have we do not believe that we will be using any imminent domain, but the law is still there exist.
Speaker 4: But the law is still there exist. And in case of we have no choice whatsoever that maybe we consider, but that's not what our attention.
And in case of we have no choice whatsoever that maybe we'd consider it but that's not that's not what our attention is at this stage.
Speaker 3: And keep in mind as the Fargeist said, we're only going four miles, and a lot of that four miles is overland, farmland where these are helping the people that we're dealing with for these four miles are selling their corn to us. So in some of them are sure there's a belief. So they have a big incentive to make this happen because in both cases.
And keep in mind that so far just said, we're only going for miles and it's a lot of that for meiosis overland farmland, where these are helping.
Yep.
The people that we're dealing with for these four miles are selling their corn to us so and.
And some of them are shareholders separately. So so there so they have a big incentive to make this happen because in.
In both cases, they are better off having us do well and do well and it's been a great partnership for <unk> for many many years as Doug said since at least 2009. So so we have done.
Have been they've done good for us I believe I know we've done good for them and these are the and it's not a you were thinking when you think these other pipelines C&I or what theyre going hundreds of miles were going for miles. So it's not we don't think it's going to be.
Any issue if it is Illinois law Abaxis up, but we don't believe there will be an issue at this time.
Exactly.
I think.
So what is exactly right.
As you mentioned that people are going out there.
You know that that's going to happen, we cannot stop them their opinion and.
Certainly.
People go almost every state in Illinois.
South Dakota and debt that debt.
That's what the values that tank.
And.
But as far as we're concerned we continue to concentrate but we have to provide and what we have to do.
Okay. Thanks, a bunch for the clarification of nuance on that that's all I've got and thanks for another excellent quarter and congratulations on kicking everybody's butt.
Thanks, and thanks for the questions.
Mr. Rose there are no further questions at this time I will now turn the call back to you.
Well, we'd like to thank everyone for listening and we look forward to talking to you at the end of the next quarter. Thank you bye. Thanks.
That does conclude the conference call for today, we thank you for your participation and ask that you. Please disconnect. Your line have a great day everyone.
Yeah.
Sure.
Okay.
Yes.
Right.
Okay.
Uh huh.
Yes.
[music].
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Yeah.
[music].
[music].
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 Mr. Doug Bruggeman, Chief Financial Officer. Please go ahead.
Good morning, and thank you for joining Rex American Resources' fiscal 2023 third 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 meetings 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 forward looking statements are described in today's news announcement and in the company's filings with the Securities and Exchange Commission, including the company's reports on Form 10-K and 10-Q.
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.
We are very pleased to report these record net income and earnings per share quarter results sale.
Sales for the third quarter increased slightly compared to the prior year ethanol sales for the quarter were based upon $73 2 million gallons. This year versus $66 3 million last year. The increase in sales volume were offset by lower pricing across all categories, largely reflecting commodity pricing for this time period.
We reported a 30 million dollar increase in third quarter gross profit to $39 3 million this year versus $9 3 million in the prior year as we benefited from lower corn and natural gas pricing over the prior year third quarter.
SG&A increased from the third increased for the third quarter from $5 8 million to $7 6 million, primarily due to incentive compensation league linked to the large increase in earnings.
As mentioned in the second quarter. The company made a change in the method of accounting to begin classifying shipping and handling costs as cost of sales instead of within selling general and administrative expense as historically presented in order to improve the comparability of gross profit and SG&A reported.
The company has applied a retrospective application of its new accounting policy.
This change only impacts cost of goods sold and selling general administrative expense and has no impact on the earnings reported.
We had income of $4 7 million from our unconsolidated equity investment in this year's third quarter versus 661000 in the.
Prior year, primarily reflecting the improved industry operating conditions for this time period.
We reported interest and other income of $4 9 million versus $2 million in the prior year. The increase primarily reflects increased interest rates as well as 862000 from Covid relief grants received from the USDA during this quarter.
Income before income taxes, and Noncontrolling interest was $41 3 million for the third quarter compared with $6 1 million in the comparable year ago period.
We reported a tax provision of $9 6 million versus a provision of $1 2 million in the prior year.
These factors led to net income attributable to Rex shareholders of $26 1 million for this year versus $3 2 million in the prior year's third quarter.
Net income per share attributable to Rex shareholders was an all time record of $1 49 for this years third quarter versus 18 cents in the prior year.
Stuart I'll now turn the call over to you.
Thank you Doug.
Going forward. The business has continued to be strong and we expect our fourth quarter, it's insignificant to be significantly better than last years corresponding quarter. We're working hard on a carbon capture project and also making.
And also are increasing the capacity of our one of our plants and firewall or discuss the ethanol business and carbon capture business and his set but we have cash of 332 million on consolidated cash on our balance sheet of $332 million or earning interest on that.
Which should be significantly better or we hope it could be significantly better than last year.
The ethanol plants expansion will use some of that cash carbon capture project will also use some of that cash against firewall discuss this on his is part of the call. We're always looking for other ethanol carbon capture businesses, neither entities that could benefit from <unk>.
So far we have nothing imminent.
On the acquisition front, we have are buybacks still available we buyback on dips and currently we are not purchasing any shares I'll turn the conference call over it as a risk.
Thank you Stuart and good morning, and thank you for joining us today for the third quarter of any cause.
And Doug previously mentioned our team successfully capitalize the opportunity in the commodity market.
To achieve that.
The history of the company.
We have seen some decline in the crush margin in the fourth quarter compared to the third quarter, but we believe we still have it.
To achieve significantly better.
In comparison to last year's fourth quarter.
According to the EIA in November 29th aboard ethanol stock and production dropped during the week. We have also seen natural gas price dropped considerably which had.
A positive impact on our financials.
The normal <unk>.
<unk> did a poll showed an expected output after pinpoint 1 billion bushels of corn second highest on record and 174009 bushel per acre yield.
Without those 'twenty three 'twenty four.
We are pleased that go into yielding maryanne.
This year is estimated at 152 bushels per acre compared to 132 bushels last year.
As you would remember that we had the last couple of years dropped in <unk> in South Dakota area also approximately 580000 acres, 12% more acres corn was planted this graph here.
Last year alone.
Gibson TD, Illinois.
It will add at book at 203 bushels per acre compared to 214.
But it got lost yet, but almost 400000 more acres planted and an increase of 4% what mode. What planted this year compared to last year.
Looking ahead, the up into ethanol and D. D D export would negatively affect future.
There's continued throughout the next year.
Exports through September 21.
Approximately 1 billion gallons compared compared to $1 1 billion gallons in 2022 during the same period.
DDG exports through September 2020, approximately $8 billion 8 million metric tons compared to approximately 8515.
Metric tons, a decrease of approximately 428000 metric tons compared to the same period.
Considering all these factors, we still believe our fourth quarter is expected to produce much better results compared to the same quarter last year as I mentioned previously.
Let me give you some update.
About bottom.
Olive Garden project.
As I mentioned in our previous calls we believe our carbon capture and sequestration project.
To advance our sustainability goals and to have a financial impact that will improve the company's performance for our shareholders.
We have budgeted approximately $165 million to build the government captive comparison and storage facility expanded or whatnot.
Ultimately 200 million gallons annually and undertake other project related to reducing carbon intensity.
The construction of the gas and compression facility has started and long lead items have been ordered and.
All modular compression equipment for the facility is set to be delivered by early next year. The construction of the facility is expected to be completed by the end of second quarter.
At which time testing of the facility will begin we continued to complete the paperwork up different government agencies, while we read the EPA approval of the class six but Mike.
Jackson and club and club, the Illinois, Commerce Commission approval to construct a $7 2 million.
Seven two miles garden pipeline.
This bottomless and approvals depends on several local state federal agencies. Unfortunately, we cannot predict when we will receive these blood much from these various agencies.
And the other updates to other Ghadhban pipeline companies recently withdrew their pipeline application.
<unk> has entered into an agreement with navigator.
Do the government pipeline application.
We are pleased about the about the big milestone we have reached so far and hold different government agency will complete their approval early next year.
We will also continue to evaluate other projects that would improve.
<unk>.
<unk> carbon intensity, if we successfully successfully achieve out of God, we will be prepared to provide low carbon ethanol and by products with the social impact of reducing god willing in the atmosphere and the financial impact that improve the company's performance for our shareholders.
In summary, we are pleased to announce the most profitable quarter in our history and we believe our fourth quarter is expected to be produce much better results compared to the same period last year, we continue to make progress on our carbon sequestration projects and are planned to increase ethanol production of one offs.
Ultimately the 200 million gallons to maximize 45 X X.
Benefit once again, we could not achieve these milestones without the hard work and dedication of our colleagues. We are very appreciative of their efforts in achieving these positive.
I will give back the floor Stuart rose for additional comments.
Sure.
Yeah.
So in conclusion, we completed the best quarter in our 39 year history as a public company, we drastically outperformed the industry.
Eli mindset as he said yesterday for people who are listening to this conference call. The difference. He has he he has no pat or his patents are all open patents we have no.
Super pattern or anything like that but we but we better execute in our competitors and our people are the real reason for that.
The best people, we feel we have the best people in the industry.
They know what Theyre doing and carbon capture for example, everyone else has these big pie in the Sky projects. We've focused on a project that we believe is very doable and at the moment I believe we're in the lead in the ethanol business.
Our carbon capture project to ahead of any other carbon carbon capture project that I know of in the ethanol business other than our ATM, which was done long ago. So we're again going to show we believe that execution is way more important than anything else, we feel were better.
That than anyone else, so I said earlier.
We feel we know we have good plants, we know we have good locations, but the most important thing we have is good people and RP.
People are just terrific and they get all the credit for this quarter. It's just.
Terrific job and they deserve it and that leads to a forum open for questions.
Thank you.
If you would like to register a question. Please press the one four on your telephone.
Here at <unk> prompt 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.
Okay.
Our first question comes from Jordan Levy with Trust Securities. Please proceed.
Hey, guys, it's Henry on for Jordan here, Congrats first in the quarter start off I know you mentioned that the <unk> date for I was wondering if you have any more color on some of the different benchmarks. Both on the construction side and then from the EPA.
<unk>.
On the Ccs build out we should be looking for over the next 12 months to 18 months.
I'll take that as far as concern about the EPA I think is under <unk>.
Technical review.
And we have no idea how long that technical review will take.
But as far as construction of the facility is already started as I mentioned previously and the modular unit, which will be.
It will be a diving in February and we believe that our facility will be up completed by the July by July 31st.
That does not mean, we will be even business July 31st it may take a little longer because we still might be waiting for permits.
I built the contract starting with Asia.
Construction of the facility will be completed, but we cannot operate unless we receive the EPA, but mud and.
Pipeline, but but but much of which I mentioned earlier, but as far as the compressed.
Compression facility will be completed.
Thank you and then just looking ahead to next year. How are you guys looking at the ethanol landscape shaping up kind of compared to this year.
Have you guys had started having conversations with any of the nearby operators on potential carbon I'll take given kind of where youre at.
You advance timeline for your current carbon capture projects.
Yes, hi.
I'm sorry could you repeat that question again, I wasn't I'm not sure what exactly you're asking please.
Just a quick one on kind of the ethanol landscape, how youre seeing that shaping up for next year.
And then just anything you have on any conversations if you'd have begun having them with nearby operators for potential carbon I think given where youre at with the Ccs Buildout.
I think as far as concern ethanol looking forward as Ive mentioned that we are in a commodity business.
I think it's very hard to predict more than even a couple of months three months. So.
So at this stage.
I really cannot predict what happened with the commodity market.
Change every single day at every month and what we when we're going to see any opportunity we will be there to materialize that so I really cannot predict what will happen next year, but I can as I mentioned, the fourth quarter, certainly we believe that it would be.
It will be much better than last year.
Fourth quarter, but as far as concerned about the God, one I think.
Once we complete complete facilities.
That will be probably by the end of 2025 at that time, we will see exactly that if there is other sources of the guard when it's available from anybody as otherwise our expansion of that facility will be still.
Still will be a very feasible project with using 45 Z and even 45.
Danone investment is much higher than we expect.
Thank you.
And one thing on your question I think you should you probably realize you can follow and I stopped for a long time, so far and his team have proven quarter after quarter after quarter that they know the commodity business and are really good at it other people.
Futures contracts in the pit floor, its a commodity traders and everything.
Drastically underperform, what supplier and his team have done and Theres No reason, if it's happened in the past there's no guarantees that's going to happen in the future, but when you look at that team and what they have done I think.
You have to say that we know this business and they were better again as I said in my call better executing them and everyone else.
<unk>.
Again on the on the carbon capture I, we hope to have a completed with permits by the end by the end of next year, which would be which would be with 45 Z you tradition potentially to earnings per share. So we'll see what happens.
That's the thing that where.
We have put in so far and this team is putting in the growth area. Most efforts into and again if he does that like if they did that like they've done ethanol business. We're in really good shape.
Yes.
<unk>.
Add to that since we are at.
Increasing our production to $200 million gatlin.
No.
The reduction from 152 reduction.
Gatland.
Two cents a gallon so if we and the carbon sequestration is.
Approximately somewhere 30 to 35.
30 to 35 points.
If we are able to reduce our carbon footprint.
<unk> footprint, our intensity and as we are working on several other project.
So we can generate with a $200 million gallon ethanol facility.
Some we had a $500 million to $600 million tax credit.
Again that would be the most we can generate so that's good.
Right, we don't want people, putting that in their numbers, but that's what we're working so hard to get to and if we even get to after that that's all that's all of the increase in earnings per share. So that's we have a big bogey out there and we're going to work hard to get us as much as we can.
Yes, that's the reason we are allocating $165 million.
Major investment and certainly as the rest.
We believe that have done much better and much higher.
Thank you guys.
Sure.
Our next.
She comes from Chris Sakai with singular research. Please proceed.
Yeah.
Hi, good morning, just.
Yes.
Where are you seeing the most demand for ethanol.
Well, we see the most demand in ethanol exports.
Export side.
Right.
I think the most leading right now we are seeing the Canada and we have recently seen see that United Kingdom, Netherlands, South Korea, Colombia. So those are the top five.
We have seen some India also.
Suddenly is.
A lot of these companies and countries.
Forwarding so.
Canada is always our number one.
Okay.
Okay, Great how are you guys thinking.
The price of corn, and dry distillers grain and modified distiller grain heading into.
The next quarter.
I think that.
One is generally speaking as you can see that trading about $4.
Yesterday, it was $4 49.
Two days some increase so I think that as I mentioned previously.
In our South Dakota area, certainly we have seen some minus basis and we have seen some bases in overall in Illinois has gone up little bit we have seen.
Minneapolis, and some other part where it was.
Not as good production as it.
Compared to last year.
Plus basis, but otherwise most of the Adi is the minus basis.
And what about the prices of natural gas as we head into the winter.
The natural gas price has considerably dropped as I mentioned that we have seen that is less than a five dollar but January February and we have seen that about as low as $2 56, a $2 67.
So that will be a major impact as I've mentioned that in my previous.
Remarks that we.
<unk> seen the drop in natural gas pricing.
Okay, great. Thanks.
Our next question comes from David Lock with old Mammoths investments. Please proceed.
Hey, guys, how you doing.
Good.
Hey, first off I'd really like to thank you guys for taking questions. There are some.
So teams out there that seems sort of afraid to take.
I'll take questions from their investors in a public forum so.
Thanks for your time and your candor and doing this.
Thank you thank you for asking questions.
[laughter].
So my.
My first question is like.
The industry overall has been beset by a ton of operational problems.
The last few months explosions fires et cetera.
To what extent has that contributed to the good financial margin environment for the last half year or so and how.
How have you guys managed to sidestep all of that and Relatedly, how how old are your plants relative to industry average.
We have some of the newest plants in the industry there.
I believe under 10 years old some of these older plants, just should be shut down to be honest with you.
The fires and all that stuff, maybe helped us a little bit I don't know.
They had commitments, where they had to buy I'm not sure if the situation where they had to buy product on the open market on the spot market that certainly if they did that would help but I think you have not and we have we have a number of plants. Some we only owned a small part of but we have many plants.
Are all newer plants, we made in the beginning we made a decision to go with the best built here and the best plants.
I don't know of any.
I don't know if any operational problems that these plants are just better built with service.
Semi annually, we do an extensive service on these things and they're just.
The yard better plants, that's all I can say, they're fake and ICM plants.
100 million gallon take an ICM plant very seldom do you see anything materially go wrong with those plants, there can always be a tornado or something but the plants themselves or built terrifically.
And we take in our case, we take extremely good care at those plants.
Yes.
I will add to that is I think the safety is our number one priority. We always review that every month.
If the proceeds you have got forgive some anything can happen to anybody, but we are making sure. All the safety features are followed and.
<unk> drilled sort of happening in other.
Very closely monitored.
And as Stuart mentioned, there's a couple of plants, which have happened that thing I think.
There's one plant didn't happen in <unk> that was about 170 million gallon plant that was shut down for a while.
ADM plants were shut down in Florida, maybe a couple of weeks up mode and so I think there is as Stuart has mentioned that there is maybe a minor impact, but I think the overall if you look at the commodity market.
That is also makes a difference when you have in October.
On corn, what trading $4.88 and ethanol was $32 36.
So there is plenty margin at that time to look at it to make sure that this is the time to lock in and moving forward. So I think as Stewart mentioned is all depend what when and what time you execute.
Execute your profit and consider that this is good enough and less locking and move on.
Let me add.
Are we talking like.
Strongly we I'm sorry, we believe strongly we have the best commodity trading team not just the best plants, but.
I really believe we have the best commodity trading team.
Led by so far.
And our business.
Our consolidated plan for built between 2007 and 2009, if I can just add that one yes.
Yes.
Thank you catch a little more yes. Thank you Scott.
So as.
As you guys.
Continue to sort of like scour, the M&A market, but not find anything thats worthwhile.
Are you are you looking for.
Are you looking for plants that looked like the ones that you have or is there like are there dumpster diving opportunities for you to bring your management expertise and maybe fix up one of these old ones.
We haven't we don't dumpster dive.
That won't be us, we don't we're not fix up artist, Matt, saying that we couldn't do it but we.
We have come very close to buying plants that are similar to ours fagen ICM plants in that 100 million gallon.
For one reason or another it hasnt worked out but that would be our preference in that way.
That would be what we would look for.
Unfortunately, or Fortunately whatever you want to say I must supplant it really are doing really really well and the price has gone.
Very very much up on those plants, so I don't see anything coming imminently, but in this industry you never know what might happen.
Okay.
How do you guys feel generally about the broad supply demand environment for ethanol right now I mean, we've been.
We've been oversupplied for the better part of a decade and a half it feels like although we've had sort of just consistently decent margins all year. This year with some really high ones over the summer and early fall so.
Like are we finally managed to make it.
Balance with a little bit of increased demand and some supply coming offline.
Okay.
Go ahead Stuart.
I was going to say my opinion.
Commodity and you never know what will happen.
There'll be one way or another we are expanding our plants.
There are always if it does continue this demand that will be something expansion.
And then.
The supply will keep out keep up with it but we have hoped as an industry.
And it may or may not happen in a couple of minutes, giving a lot of support to what happening of supply things like jet fuel. We also would be have hopes of being a very very low carbon fuel, which which creates demand for our fuel.
In addition to what it is now across the country and there are more and more pump tax payment date and I see them.
I see them around the country more and more pumps that are greater than 10% ethanol and <unk>.
Cars today that are manufactured today can run on 15% ethanol.
That would be 50% increase in the gas stations make more money.
On 15% ethanol. So they have incentives there's hopes that that will increase demand. So to answer your question, it's a commodity business, but a lot of things are moving in that direction.
Okay and then my last question is on the pipeline in Illinois do you.
Guys need.
Any eminent domain rulings to make that happen and it seems like there have been some problems in that.
Iowa recently with that and the Clown show Vivek is sort of like actually campaigning in Iowa about that whole issue. So.
I'm just sort of curious what.
What the gating items are for getting that installed.
Yes, I can.
Answer that a little bit I think if you look at that.
Illinois Law is clearly state regardless of we plan to use it or not eminent domain.
Regarding the pipeline, Illinois law, clearly state that we can use a minute duane but as far as our attention. We at this stage, we do not believe that we have to use a mainland domains. Because we have approximately four months pipeline well number one and by the time.
Reached well number two and three the last well is only seven two mile pipeline.
And so we may have some difficulties, we do not know, but as far as concern, which we have a preliminary indication, which we have we do not believe that we will be using any imminent domain, but the law is still there exist.
In the case of we have no choice whatsoever that maybe we'd consider it but that's not that's not what our attention is at this stage.
And keep in mind that so far just said, we're only going for miles and it's a lot of that for meiosis oberland farmland, where these are.
The people that we're dealing with for these four miles are selling their corn to us so.
Some of them are shareholders separately, so so there.
Have a big incentive to make this happen because it.
In both cases, they are better off having us do well and they will do well and it's been a great partnership for <unk>.
For many many years as Doug said since at least 2009. So so we have done.
We have been they've been good for us I believe I know we've done good for them.
These are the and it's not your thinking when you think at these other pipelines C&I or what theyre going hundreds of miles were going for miles. So it's not we don't think it's going to be.
Any issue if it is Illinois law Abaxis up, but we don't believe it'll be an issue at this time.
Exactly.
I think.
Florida is exactly right.
As you mentioned that people are going out there.
You know that that's going to happen, we cannot stop them their opinion and they.
Certainly.
People go almost every state in Illinois.
No.
South Dakota and debt that debt.
That's what the values that tank they have and.
But as far as we're concerned we continue to concentrate what we have to provide and what we have to do.
Okay. Thanks, a bunch for the clarification of nuance on that that's all I've got and thanks for another excellent quarter and congratulations on kicking everybody's butt.
Thanks, and thanks for the questions.
Mr. Rose there are no further questions at this time I will now turn the call back to you.
Well, we'd like to thank everyone for listening and we look forward to talking to you at the end of the next quarter. Thank you bye. Thanks.
That does conclude the conference call for today, we thank you for your participation and ask that you. Please disconnect. Your line have a great day everyone.