Q4 2024 REX American Resources Corporation Earnings Call
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Operator: Good morning, and welcome to the REX American Resources fourth quarter and full fiscal year 2023 conference. As a reminder, today's call is being recorded, and at this time, all participants are in a listen-only mode. A brief question-and-answer session will follow the formal recess. I would now like to turn the call over to Mr. Doug Bruggeman, Chief Financial Officer of REX American. Please go ahead.
None: Good morning, and welcome to the Rex American resources fourth quarter and full fiscal year 2023 conference call.
None: As a reminder, today's call is being recorded and at this time all participants are in a listen only mode.
None: A brief question and answer session will follow the formal presentation.
None: I'd now like to turn the call over to Mr. Doug <unk>, Chief Financial Officer of Rex American. Please go ahead.
Douglas L. Bruggeman: Good morning, and thank you for joining REX American Resources' Q4 and full fiscal year 2023 conference call. I have joining me on the call Stuart Rose, Executive Chairman, and Zafar Rizvi, Chief Executive Officer. We'll get to our presentation and comments momentarily, as well as your questions and answer session, but first, I will review the Safe Harbor Disclosure. In addition to historical facts or statements of current conditions, today's conference call contains forward-looking statements that involve risk and uncertainties within the meaning of the Private Security 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.
Good morning, and thank you for joining Rex American Resources', Q4, and full fiscal year 2023 conference call.
Doug: I have joining me on the call Stuart Rose Executive Chairman and Zafar Rizvi Chief Executive Officer.
Get to our presentation and comments momentarily as well as your questions and answer session, but first I'll review the safe Harbor disclosure.
Doug: In addition to historical facts or statements of current conditions. Today's conference call contains forward looking statements that involve risks and uncertainties, but didn't have meeting other private Securities Litigation Reform Act of 1995.
Doug: 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.
Douglas L. Bruggeman: The risks and uncertainties associated with the forward-looking statements are described in today's news announcement and in the company's filings with the Securities and Exchange Commission, including the company's reports on Form 10-K and 10-Q. REX American Resources assumes no obligation to publicly update or revise any forward-looking statement. I would now like to turn the call over to Stuart Rose.
Doug: The risks and uncertainties associated with the forward looking statements are described in todays 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.
Doug: Rex American resources assumes no obligation to publicly update or revise any forward looking statements.
I would now like to turn the call over to Stuart Rose.
Stuart A. Rose: Good morning, and thank you again to everyone for joining us. Fiscal 2023 was a great year for REX American. Our core business of ethanol and co-product production was strong, with 285.9 million gallons of ethanol sold, an increase of more than 7% over 2022. Additionally, we kicked off construction of the One Earth Energy Carbon Capture and Sequestration Project at our Gibson City, Illinois location. We were also on track to complete the first phase of the ethanol production capacity expansion, the One Earth Energy facility. On the financial front, 2023 saw the most profitable quarter in the company's history from a net income per share perspective during the third quarter. I'm also proud to announce that our fourth quarter and full year 2023 were the second most profitable quarter and full year in REX's 39-year history as a public company.
Stuart A. Rose: Good morning, and thank you again to everyone for joining US fiscal 2023 was a great year for Rex American our core business as a bad thing at all.
Stuart A. Rose: And co product production was strong with $285 9 million gallons of ethanol, so an increase of more than 7% over 2022 we kicked off construction of the one <unk>.
Stuart A. Rose: Energy carbon capture and sequestration project at our Gibson City, Illinois location.
Stuart A. Rose: We're also on track to complete the first phase of that then all production capacity expansion the one Earth energy facility.
Stuart A. Rose: Financial front 2023, sorry, the most profitable quarter in the company's history from a net income per share perspective. During the third quarter also proud to announce about fourth quarter and full year 2023, we're the second most profitable quarter and full year and full year and Rex is 39 year history.
Stuart A. Rose: As a public company. This is quite an achievement for our company.
Stuart A. Rose: This is quite an achievement for our company. Across the board, during 2023, the team at REX American consistently looked ahead, identified and met challenges, and proactively drove success throughout the year. I'd like to thank everyone in our company for their hard work and dedication to making REX the successful and profitable company that it is. Our operational excellence has been the cornerstone of our success.
Stuart A. Rose: Well, that's the board during 2023 the team at Rex American consistent Lady luck over their rise in identified met challenges proactively drove success throughout the year.
None: Thank you everyone at our company for their hard work and dedication make him racks of successful and profitable company that is yes.
None: Our operational excellence has been the cornerstone of our success.
Stuart A. Rose: It is in the market every day, monitoring and optimizing our contract positions to continue producing ethanol and co-products efficiently and profitably. Our commitment to innovation and sustainability has never been stronger, as evidenced by the ongoing construction and permitting process for our carbon capture project, which, if successful, will reduce REX's carbon footprint and produce net income benefits. We expect the One Earth Energy CCS project to add significantly to our financial results once it is approved and up and running. This assumes we receive all necessary permits and approvals. As far as additional avenues of growth are concerned, we're always looking at facilities that come on the market, though at present, we do not see opportunities that fit within our standards of quality and which make economic sense for our portfolio.
None: And the market every day monitoring and optimizing our contract positions.
None: When you're producing ethanol and co products efficiently and profitably.
None: Commitment to innovation and sustainability has never been stronger never.
None: As evidenced by the ongoing construction and permitting process for a carbon capture project, which if successful will reduce rexes carbon footprint per views that income benefits. We expect the one earth energy Ccs project to add significantly to our.
None: A brief thoughts once it is up and running it's it sounds we received all necessary permits and approvals.
None: Or is the additional avenues of growth, we're always looking at facilities that come on the market at present.
None: We do not see opportunities that fit within our standards of quality and which make economic sense to our portfolio.
Stuart A. Rose: I'm proud of the work we have done and excited about the direction of our company as we look into the next several years. I now turn things over to CEO Zafar Rizvi to discuss the ONE Earth project in greater detail. Thanks, Stuart.
The work, we have done and excited about the direction of our company.
None: Look into the next several years and now I'll turn things over to see so far recipe to discuss one nurse project in greater detail.
Recipe: Thanks, Stuart Oh, God, one <unk> project in Gibson City, Illinois is not only a testament to our commitment to the environment, but also our strategic foresight and positioning the company.
Zafar A. Rizvi: Our carbon capture and sequestration project in Gibson City, Illinois, is not only a testament to our commitment to the environment but also to our strategic foresight in positioning the company for profitability well into the future. As we have discussed with you before, the One Earth Energy Project, if all approvals are received and the facility is operational, should contribute to REX's bottom line through both 45Z and 45Q tax credits, which we plan to maximize with the related expansion of our Gibson City ethanol production facilities. We expect these two projects together could add significantly to our bottom line. The addition of CCS to our ethanol facility also opens up other potential business lines, such as production of low-carbon ethanol for use in the so-called alcohol-to-jet process for sustainable aviation fuel products, as well as the potential for us to sequester carbon for other producers in our Class 6 injection wells. Both of these are additional business options we are exploring. However, the near-term focus is getting the facility up and running.
Recipe: Well into the future.
None: As we have discussed with you before.
Recipe: Now do you project if all approvals are received and the facility is operational.
Recipe: So the country.
Recipe: Bottomline through 40.
Recipe: <unk> 45, and 45 fuel tax credit.
Recipe: Which we plan to maximize the related to the expansion of our Gibson city ethanol production facilities.
Recipe: Capacity to $200 million gallon, but yet we expect these two projects together could add significantly to our bottom line.
Recipe: The addition of Ccs.
Recipe: Facility also opens up.
Recipe: A lot of potential business lines that gas production of low carbon ethanol.
Recipe: While using so called alcohol to jet losses by sustainability, avs and fewer products as well as the potential for to ask those questions.
None: Got it.
None: Although the portfolio give us sort of in Alberta classics, Buffalo plastics indexes as well.
None: Both of these are additional business option.
None: We are exploring how it was that done our focus is getting the facility.
None: Yeah.
Zafar A. Rizvi: To that point, we continue to make progress in construction of the CCS, and you can see a picture of the in-process project in our updated investor presentation, which is available on our website as of this morning. Currently, the team is focused on completing construction of the carbon capture portion of the facility, preparation for emergency response plans, and getting all of the required permits completed.
None: To that point, we continue to make progress in construction.
None: Yes, and you can see we've stood up the in process projects in our updated investor presentation, which is available on our website as of this morning.
None: I believe the team is focused on completing construction of the carbon capture portion of the facility.
None: But I personally.
None: I'm not going to see response plans and getting all of them.
None: <unk> completed.
Zafar A. Rizvi: We continue to expect completion of the carbon capture facility by the end of the second quarter of 2024 and beginning of testing after additional power sources are in place. As far as permits and approvals are concerned, we continue to monitor our Class VI Injection Permit application for the Environmental Protection Agency, our pipeline application with the Illinois Commerce Commission, and obtaining our Special Use Dooning Permit for the county. We are very keen to ensure complete compliance with all regulatory requirements and are committed to working closely with all appropriate agencies to get the One Earth Energy Project approved and into service as fast and as safely as possible. As of year-end, we have invested approximately $38.6 million in the One-Art Carbon Capture Project and Associated Ethanol Production Capacity Expansion.
None: We continue to expect completion of construction of the carbon capture facility by the end of the second quarter.
None: 24 and.
None: And beginning of testing after additional power sources are in place.
None: As far as bundling and abroad, we continue to monitor our cloud six injection applications.
A lot of mental production agency, our pipeline application with the Illinois Commerce Commission and the banning all especially was doing it.
None: We are very keen to ensure complete compliance with all regulatory requirements and are committed to working closely with all appropriate agency get.
None: Often as you project approved and into service as fast and as safely as possible.
None: And we have.
None: Approximately $38 6 million into the one.
None: Yes.
None: And the associated ethanol production capacity expansion. This is compared to total budgeted amount.
Zafar A. Rizvi: This is compared to a total budget amount of one hundred and sixty five million to one hundred and seventy five million dollars for both the CCS projects and ethanol production expansion at Gibson City. This investment underlines our beliefs in the project's potential and our commitment to sustainable energy solutions. I would now like to hand the call to our CFO, Douglas Bruggeman, to discuss our operational and financial results. Thanks, Zafar.
None: And $65 million.
None: $175 million for both the Ccs.
None: And ethanol production expansion at Gibson City.
None: This investment underlines our beliefs in the projects and.
None: And our commitment to sustainable solutions.
None: Solutions.
None: I would now like to hand, the call to our CFO.
CFO: I'll come on to discuss our operational and financial results.
CFO: So far.
Douglas L. Bruggeman: I'll begin with our operational results. REX's ethanol sales volume during fiscal year 2023 was 285.9 million gallons, an increase of seven and one half percent over fiscal year 2022 sales volumes of 265.8 million gallons. The average selling price for our consolidated ethanol volumes was approximately $2.22 per gallon for the full year.
CFO: I'll begin with our operational results.
CFO: Ethanol sales volume during fiscal year, 2023, or $285 9 million gallons, an increase of 71, 5% over fiscal year 2022 sales volumes up 265 8 million gallons.
CFO: Average selling price for our consolidated ethanol volumes was approximately $2.22 per gallon for the four year.
Douglas L. Bruggeman: Dry distilled grain sales volume during fiscal 2023 totaled 652,000 tons, a 9% increase over fiscal 2022 volumes. Volumes during the fourth quarter were approximately 169,000 tons, an increase of 13.4% over the fourth quarter of 2022. The average selling price for DDG was approximately $213.55 per ton for the full year.
CFO: Dry distiller grain sales volume during fiscal 2023 totaled 652000 tons, a 9% increase over fiscal 2022 volumes volumes. During the fourth quarter were approximately 169000 tonnes, an increase of 13, 4% over fourth quarter 2020.
CFO: Two.
CFO: Average selling price for DDG was approximately $213 in Pittsburgh.
CFO: Per ton for the four year.
Douglas L. Bruggeman: Modified distilled grain sales volume was 54,000 tons in fiscal year 2023, compared with approximately 94,000 tons in fiscal year 2022. For the fourth quarter, MDG volumes totaled approximately 18,000 tons, an increase of 7.3% over the same period in 2022. The average selling price for modified distilled grain was approximately $103.54 per ton for the full year.
CFO: Modified distiller grain sales volume for 54000 tons in fiscal year 2023.
CFO: Paired with approximately 94000 tonnes in fiscal year 2022 for the fourth quarter MTGE volumes totaled approximately 18000 tons.
CFO: Increase of seven 3% over the same period in 2022.
CFO: Average selling price for modified distiller grain was approximately $103 54 per ton for the four year.
Douglas L. Bruggeman: Corn oil sales volume in fiscal year 2023 was approximately 87.5 million pounds, compared to 77.8 million pounds sold in fiscal year 2022, an increase of approximately 12.5%. For the fourth quarter, corn oil sales totaled approximately 22 million pounds, an increase of 7% over the fourth quarter of 2022. The average selling price for REX corn oil products was approximately $0.60 per pound for the full year.
CFO: Corn oil sales volume in fiscal year, 2023 were approximately 87 5 million pounds compared to $77 8 million pounds sold.
CFO: For year 2022, an increase of approximately 12, 5%.
CFO: For the fourth quarter corn oil sales totaled approximately 22 million pounds, an increase of 7% over fourth quarter 2022.
CFO: Average selling price for Rex coronary products was approximately <unk> 60 per pound for the four year.
Gross profit for fiscal year, 2023 was $98 $2 million versus gross profit of approximately $48 $6 million for fiscal year 2022 more.
Douglas L. Bruggeman: Gross profit for fiscal year 2023 was $98.2 million, versus gross profit of approximately $48.6 million for fiscal year 2022. The more than 100% increase in gross profit was due to improved production levels and lower corn and natural gas prices. Gross profit in Q4 2023 was $30.4 million, compared to $13.3 million in Q4 2022. The increase was due to similar dynamics as seen for the full year.
CFO: More than 100% increase in gross profit was due to improved production levels and lower corn and natural gas prices.
CFO: Gross profit in Q4, 2023 was $34 million compared to $13 $3 million in Q4 2022.
CFO: The increase was due to similar dynamics as seen for the full year.
CFO: Our SG&A expenses increased to $29 4 million for fiscal year 2023 versus $22 $8 million in 2022.
CFO: SG&A in the fourth quarter increased to approximately $7 $4 million versus $5 $1 million in the fourth quarter of 2022.
CFO: In each case, the increase was primarily due to higher incentive compensation related to the company's performance.
Douglas L. Bruggeman: Our SG&A expenses increased to $29.4 million for fiscal year 2023 versus $22.8 million in 2022. SG&A in the fourth quarter increased to approximately $7.4 million versus $5.1 million in the fourth quarter of 2022. In each case, the increase was primarily due to higher incentive compensation related to the company's performance.
CFO: Interest and other income grew by approximately 21% 2023 totaling $15 $7 million compared with approximately $13 million for fiscal 2022.
CFO: We reported interest and other income for the fourth quarter of approximately $4 8 million versus $2 $6 million for the same period in 2022.
CFO: Income before taxes and Noncontrolling interest for 2023 was approximately $98 $5 million, a significant increase from $47 $5 million in 2022.
Douglas L. Bruggeman: Interest and other income grew by approximately 21% in 2023, totaling $15.7 million, compared with approximately $13 million for fiscal 2022. We reported interest and other income for the fourth quarter of approximately $4.8 million versus $2.6 million for the same period in 2022. Income before taxes and non-controlling interest for 2023 was approximately $98.5 million, a significant increase from $47.5 million in 2022. During the fourth quarter, we reported approximately $32.5 million in this metric versus $13.3 million during the same period during the previous year. As Stuart mentioned at the beginning of the call, 2023 was the second best year from a net income perspective in our company's history. Net income attributable to REX shareholders for the year was $60.9 million compared to $27.7 million for fiscal year 2022.
CFO: In the fourth quarter, we reported approximately $32 $5 million in this metric versus $13 $3 million during the same period during the previous year.
CFO: As Stuart mentioned at the beginning of the call 2023 was the second best year from a net income perspective in our company's history.
CFO: Net income attributable to Rex shareholders for the year was $60 9 million compared.
CFO: Compared to $27 $7 million fiscal year 2022 for.
CFO: For the fourth quarter 2023, this equaled 26.
CFO: $6 million compared with $8 $2 million for the fourth quarter 2022.
CFO: On a per share diluted basis for the full year. This amounts to $3 47 per share of net income in 2023 compared to $1 57 per share in 2022 and for the fourth quarter 2023 diluted net income per share was $1 16 per share compared to 47 per share.
CFO: For the same period in the previous year.
We ended the year with total cash cash equivalents and short term investments of $378 $7 million compared with $289 million for fiscal year end 2022.
Douglas L. Bruggeman: For the fourth quarter 2023, this equaled $20.6 million compared with $8.2 million for the fourth quarter 2022. On a per-share diluted basis for the full year, this amounts to $3.47 per share of net income in 2023 compared to $1.57 per share in 2022. And for the fourth quarter of 2023, diluted net income per share was $1.16 per share compared to $0.47 per share for the same period in the previous year.
Our cash build during 'twenty two 'twenty three was reflective of our conservative fiscal approach anticipated capital expenditures related to the one Earth energy Ccs project and ethanol production capacity expansion at our Gibson City location.
CFO: Also related to this conservative approach Rex American ended the year without any bank debt.
CFO: Now I'd like to turn the call back to Zafar.
Zafar A. Rizvi: Thanks, Doug I would now like to give some color around how we see ethanol market progressing through the remainder of the Glenda 1024.
Zafar A. Rizvi: Looking at the ethanol and co product market, we anticipate continued changes in the commodity market.
Zafar A. Rizvi: All right.
Zafar A. Rizvi: As we have seen over the years, our incredible good capable team that is in the market everyday.
Douglas L. Bruggeman: We ended the year with total cash equivalents and short-term investments of $378.7 million, compared with $280.9 million for fiscal year-end 2022. The cash bill during 2023 was reflective of our conservative fiscal approach and anticipated capital expenditures related to the One Earth Energy CCS project and ethanol production capacity expansion at our Gibson City location. Also, relating to this conservative approach, REX American ended the year without any bank debt.
Zafar A. Rizvi: Blocking these markets adjusting our positions and looking at our forward contracting strategy.
Zafar A. Rizvi: In a better position no matter the market conditions.
Zafar A. Rizvi: As far as the market part of our most important inputs grown in Idaho gas profile during calendar year 2020 for what we are seeing pricing on more than a year ago. It has resulted in the ethanol profitability currently running slightly ahead of the same period a year ago.
None: In closing I want to thank already dedicated implies what was the hard work and innovation have driven our success.
None: We are excited about the future and confident in our strategy to deliver value to our shareholders.
None: You have your continued support.
None: Like two hours on these things.
None: Operator.
None: Thank you at this time, we'll be conducting a question you man.
Zafar A. Rizvi: I'd now like to turn the call back to Zafar. Thanks, Doug. I would now like to give some color around how we see the ethanol market progressing through the remainder of the calendar year 2024. Looking at the ethanol and co-product market, we anticipate continued changes in the commodity market. However, as we have seen over the years, our incredible capable team that is in the market every day, watching these markets, adjusting our positions, and looking at our forward contracting strategy puts us in a better position no matter the market conditions. As far as the market for our most important inputs, coal and natural gas, so far during the calendar year 2024, we are seeing pricing run more in our favor than a year ago.
None: If you would like to ask a question. Please press star one on your telephone keypad.
None: A confirmation tone will indicate your line is in the question queue.
None: You May press Star two if you would like to remove your question from.
None: For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star stock.
None: One moment please.
None: More questions.
None: Yeah.
None: Our first question comes from the line of Jordan Levy with Securities. Please proceed with your question.
None: Hi, guys, it's Henry on for Jordan here, Congratulations firstly on another excellent quarter.
Henry: With on the regulatory side are there any incremental.
Henry: Incremental updates or color you can give us on the discussions with the EPA and the Illinois Commerce Commission.
Henry: So far.
Henry: Sure.
None: Let me give you some information where do we stand today.
None: Carbon facility is under construction as you know.
None: Due to complete by the end of July beginning of August.
Zafar A. Rizvi: This has resulted in ethanol profitability currently running slightly ahead of the same period a year ago. In closing, I want to thank our very dedicated employees whose hard work and innovation have driven our success. We are excited about the future and confident in our strategy to deliver value to our shareholders. Thank you for your continued support. I would like to open these things up for questions. Operator.
None: One <unk> for the classics by mothers.
None: The review by the EPA.
None: We have no knowledge when they will approve but it is under technical review.
None: We also filed for the pipeline.
None: Two.
None: ICSC and we are waiting.
None: That process is we.
None: We are going through the process and expected to complete by the end of July.
None: August.
None: And we also able to hubs.
None: Well number one and number two and number three we all the easement is signed by them.
Operator: Thank you. At this time, we'll be conducting a question. If you would like to ask a question, please press star 1 on your telephone. A confirmation tone will indicate your line is in the queue. You may press start to if you would like to remove your question.
None: Up to the U S. We also have 91% of the port area at this time for the World number one we also have Fox immediately at 62% of the easement was a six mile pipeline, which will take us to well number one is completed.
Zafar A. Rizvi: For participants using speaker equipment, it may be necessary to pick up your handset before pressing the start button. One moment, please, while we poll for questions. Our first question comes from the line of Jordan Levy with True Security. Please proceed with your question. Hi guys, it's Henry Young for Jordan here.
None: And we also have new agenda facility signed agreements with US Amit last year. It's also some of it is also improving that are able to successfully able to get some.
None: Legislation passed in the South Dakota, so asphalt basically coming back to Gordon again that suddenly.
Zafar A. Rizvi: Congratulations, first and another excellent quarter. Just to start with, on the regulatory side, are there any incremental updates or color you can give us on the discussions with the EPA and the Illinois Commerce Commission? Zafar.
None: Process is a long process and as the government agencies, and we have no knowledge when when and when they will approve that.
None: Okay great.
None: You add that Henry when I add nine.
None: 91% is an incredible number to get that much a lot of people a lot of.
Zafar A. Rizvi: Sure, let me give you some information on where we stand today. Our carbon facility is under construction, as you know, it's expected to be completed by the end of July or beginning of August. It is under review by the EPA, which we have no knowledge when they will approve, but it is under technical review. We have also filed for the pipeline with the ICC, and we are going through the process and expect it to be completed by the end of July or early August. And we are also able to have well number 1 and well number 2 and well number 3, all the easements are signed for all three wells.
None: Virtually everyone else has less in that era holes and they tried for things like cabinet the maintenance stuff like that it's our hope that we won't have to do anything like that we have an incredible amount of support from our pharma partners to get this project done.
None: And that's we think something that separates us from a lot of the other people that might be a little more troubled that nuts.
None: Yep.
None: Okay. Thank you guys for all that color just a quick follow up around capital allocation I know you mentioned in the call.
None: You're not you haven't seen anything in the ethanol ethanol asset space.
None: I guess worthy.
None: Purchasing at this point I'm just wondering if there is in terms of thinking about use of cash outside of your current one earth and carbon capture projects.
Stuart A. Rose: We also have 91% of the pore area at this time for well number 1. We also have approximately 62% of the easement for the 6-mile pipeline, which will take us to wells number 1 and 2 when completed. We also have a New Zealand facility signed an agreement with the Summit last year. The Summit is also improving there, able to successfully get some legislation passed in South Dakota. So as far as basically coming back to Jordan again, this process is a long process, and it's a government agency, and we have no knowledge of when and when they will approve it. Henry, I want to add that 91% is an incredible number to get that much.
None: You guys are thinking about or looking at for users.
None: That's a that's a good question we have looked at a couple up there.
None: And so far to date, we haven't found anything that we're so focused.
None: This carbon capture but there could be a lot of uses for our capital for example.
None: This is way in the future way way in the future and just just talk at this point, but let's say jet fuel, let's say.
None: Yes, I see a F. C O two can be made it there there's a number of power plants nearby that Betty a lot of C. O. Two we have a car, but we have carbon capture holes were getting permitted Matt there's chances to be partners with that cement plants.
Stuart A. Rose: A lot of people, a lot, virtually everyone else has less than that in their pockets, and they try for things like cabinet domain and stuff like that. It's our hope that we won't have to do anything like that. We have an incredible amount of support from our farmer partners to get this project done, and that's, we think, something that separates us from a lot of the other people that might be having a little more trouble than us. Robert Maltbie, Stuart Rose, Zafar Rizvi, Douglas Bruggeman, Jordan Levy, David Locke, Joichi Sakai, REX American Resources Corp. I guess worthy of purchasing at this point. I'm just wondering if there's any other things you guys are thinking about or looking at for uses outside of, you know, your current One Earth and carbon capture projects? Are there any other things you guys are thinking about or looking at for uses? That's a good question.
None: We also as you probably know when our stock drops were prolific bypass people. So so theres always.
None: The opportunity to use of cash for that so we're excited about the future after carbon capture or our combined Iraq carbon capture combined with other peoples carbon capture there's so many things we can do it in the future.
None: Yeah and also as you know that we were going to have approximately $165 million to $175 million plus Cts and.
None: Expansion of the plant, which is expected to complete by the end of this year.
None: At least 2025, so I think that will be also be.
None: Taking a lot of cash, which we have at this stage and then it still leaves us to fund our future expansion at future.
Stuart A. Rose: We have looked at some plants, and so far, to date, we haven't found anything that we're so focused on at the moment on this carbon capture, but there could be a lot of uses for our capital. For example, I mean, this is way in the future, way, way in the future, and just talk at this point, but let's say jet fuel. Let's say CO2 can be emitted. There are a number of power plants nearby that emit a lot of CO2.
None: Joseph any other properties available as Stuart mentioned.
Yes.
Joseph: Thank you.
None: Our next question comes from them.
None: And our next question comes from the line of Oh.
Raymond James: Raymond James. Please proceed with your question.
Thanks for taking the question good to connect as always.
Raymond James: <unk>.
Oh: Kind of poke pose this question before.
Stuart A. Rose: We have carbon capture holes. We're getting permits now. There are chances to be partners with them. There are cement plants.
Speaker Change: Get your latest thoughts on this.
Raymond James: You're extremely cash rich to state the obvious for a company of your size.
Stuart A. Rose: As you probably know, when our stock drops, we're prolific buyback people, so there's always the opportunity to use the cash for that. We're excited about the future after carbon capture, or our carbon capture combined with other people's carbon capture. There are so many things we can do in the future. Yeah, and also, as you know, that we're going to have approximately $165 to $175 million for CTS. [inaudible] Thank you.
Raymond James: There are ethanol assets that periodically come up for sale, maybe not as good as yours.
Raymond James: But they are for sale is there any.
Raymond James: Opportunity to add to your existing.
Raymond James: Production asset base.
We are active.
Raymond James: But we're always looking.
Raymond James: We.
Raymond James: We are looking but at this time, we have nothing imminent, what we would ideally want which is hard to find this a.
Raymond James: Large fagan ICM plant.
Pavel S. Molchanov: Our next question comes from... And our next question comes from the line of Pavel Molchanov with Raymond James. Please proceed with your question. Thanks for taking the question, good to connect as always. You know, I've kind of posed this question before, you know; I thought I'd get your latest thoughts on this.
Raymond James: Okay, letting the lawyer here somewhere at some places near carbon capture because we have the potential at least for the next few years to make as much in carbon capture and these plants as we can at the ethanol business so that would be ideal.
Raymond James: We would look at something that wasn't ideal.
Raymond James: If it was a good plant where they have to be a really good plan.
Pavel S. Molchanov: I mean, you're extremely cash rich, to state the obvious, for a company of your size. There are ethanol assets that periodically come up for sale, maybe not as good as yours, but they are for sale. Is there any opportunity to add to your existing production asset base? We are always looking.
Raymond James: Yes, good corn supply.
None: That's relatively no.
None: Preferably Fagan ICM.
None: We're pretty we're pretty stringent on what we look for and we have things so.
None: How much plan right now that if we'd never found one with carbon capture.
Stuart A. Rose: We are looking, but at this time, we have nothing imminent. What we would ideally want, which is hard to find, is a large Fagan ICM plant that's near Illinois or some place that's near carbon capture, because we have the potential, at least for the next few years, to make as much in carbon capture on these plants as we can in the ethanol business. So, that would be ideal. We would look at something that wasn't ideal if it was a good plant. It would have to be a really good plant that has a good corn supply and is relatively new, preferably Fagan ICM.
None: We have great plans for the future.
Okay.
None: Add to that is I was hopeful that we are organically also growing so as you can see that originally these plants was 100 million gallon then we expanded to 125 million <unk> hundred 50, and now we are expanding this one <unk> to $200 million guidance. So I think we're certainly.
None: <unk> is we believe that our clients at <unk>.
Zafar A. Rizvi: We're pretty stringent on what we look for, and we have things. So much planned right now that if we never found one with carbon capture, we have great plans for the future. And I add to that also, Pavel, we are also organically growing. So as you can see, originally these plants were 100 million gallons. Then we expanded to 125 million gallons each, then 150. And now we are expanding this one earth energy plant to 200 million gallons. So I think we certainly are; we believe that our plants.
None: The best location possible Ccs project and they have produced much better than any other location.
None: I think that look ethanol location. So we are trying to make sure that we reinvest also in our locations and grow organically before we also try to buy something which may not fit our collect data yet.
None: And to be honest, that's been less expensive than some of the transactions that have taken place.
Zafar A. Rizvi: The best location possible, the CCS project, and they have produced much better than any other location, any other ethanol location. So we are trying to make sure that we reinvest in our locations and grow organically before we also try to buy something which may not fit our criteria. And to be honest, that's been less expensive than some of the transactions that have taken place when smaller plants have changed hands.
None: Lesser plants have changed hands.
None: Okay. So.
None: Earlier this year.
None: First.
None: Ethanol to or I guess alcohol to jet.
None: <unk> in the World to open up in Georgia of course as this is the <unk>.
Pavel S. Molchanov: Okay, so earlier this year, the first ethanol to, or I guess, alcohol to jet facility in the world opened up in Georgia. Of course, this is the Lanzajet project. And I'm, you know, I'm curious if at any of your existing ethanol sites, or potentially.
None: Vantage yet project.
None: I'm curious if any of your existing ethanol sites or potentially at.
None: Some future M&A opportunity.
You would be interested in.
Zafar A. Rizvi: Some, you know, future M&A opportunity, you would be interested in, you know, running this kind of conversion project to produce SAS. Yeah, well, I was at the SAF conference earlier this week, actually last Thursday and Friday, hearing about some of the dynamics and projections for this market. There was expected to be approximately 30 billion gallons of the market there. And the one thing is very consistent; there is no different kind of aviation fuel. Aviation fuel is only one kind of aviation fuel that everyone uses, and there is approximately 7 million barrels a day demand. There was American Airlines, United Airlines, and Southwest Airline was also there.
Winning this kind of conversion.
None: Project to produce SaaS.
None: Yes.
None: I will let the Scf conference earlier this week actually lost Us day on Friday.
None: You know, we're hearing about some of the dynamics and the projection for this market approximately.
None: As expected to be approximately $30 billion 30 billion gallons market is dead.
None: But one thing is very consistent there is no different kind of way.
Aviation fuel aviation fuel is only one kind of aviation fuel, which everyone use that.
And there is approximately 7 million barrels a day of demand there was American Airlines, United Airlines and southwest Airlines, but also so we are currently looking into how that could participate and what and what may make the most sense on this path. However, right now we are.
Zafar A. Rizvi: So we are currently looking into how REX could participate and what and what may make the most sense on this part. However, right now we really are focused on getting the One Earth plant up and running, which means permitted build and in operation. We are looking at option for CCS behind sequestration of our own carbon, but are concentrating on making our first, ethanol plants successful and first and most importantly CCS project successful at this time but there is great market there is you know in the future that will be the right things to do maybe in pivot in maybe two or three or four years from now but at this time there is only when I learned from that SAF conference there's only 50 million gallons are produced and there is not enough market but it's expected to grow by 2032 approximately 30 billion, Gallant.
None: Clearly our focus on North Park.
None: The one that plant up and running which means.
Fundamentally build and.
None: And in operation, we are looking at options for Ccs behind square station of our own carbon, but Arkansas concentrating on making out of trust.
None: Ethanol plants successful and fast and most importantly, ccs projects successful at this time, but there is great market bid.
None: In the future.
Will be the right thing to do but maybe you can pivot in the maybe two or three or four years from now but at this time there is only.
None: When I learn from that SaaS gone first there's only 50 million gallons produced and there is not enough market, but it's expected to grow by 2032.
None: Similarly 30 billion.
None: <unk>.
Zafar A. Rizvi: So yes, there is a great future, but at this time, there isn't really enough market demand. One of the keys to our success, Pavel, has not been to be the pioneer but to have the best technology and wait for the best technology and see who has the best technology out there. So we're not jumping into it. We'll let someone else be the pioneer and take the arrows, but we'll come in as soon as someone shows that this is a profitable business. Or we'll at least look at it very seriously as soon as someone shows that this can be a profitable business. Thanks very much.
None: Yes, there is a great future, but at this time, there isn't really enough market demand yet.
None: So one of the key one of the keys to our success to Val has not been to be the pioneer but to have the best technology and wait for the best technology and see who has the best technology out. There. So we are we're not jumping into it well, we'll let someone else be this.
None: He is a pioneer and take the aero since but will come in as soon as someone shows that this is alright, well at least look at it very seriously as soon as someone shows that this can be a profitable business.
None: Thanks very much.
Operator: Any other questions? Thank you. Our next question comes from the line of B.J. Cook with Cingulate Research.
None: Any other questions.
None: Thank you. Our next question comes from the line of D. J code, which seemed to their research. Please proceed with your question.
B.J. Cook: Please proceed with your question. Hey guys, thanks for taking my call. Just quick, do you guys have any new info or updates on the capacity expansion in Gibson City? I'm sorry, I didn't hear your question. Could you repeat that again, please? Yeah, sorry.
D. J: Hey, guys. Thanks for taking my call. Just quick is there you guys have any new info or update on that.
D. J: Capacity expansion at Gibson City.
None: I'm sorry.
D. J: Your question could you repeat that again please.
None: Yes, sorry.
Zafar A. Rizvi: Is there any new information or update on the capacity expansion at Gibson City? I think, as I mentioned previously, that we are expanding that plant. The ethanol facility is going to be 200 million gallons, and construction is in progress. And for the ethanol facility, we expect that to be completed before the end of this year. And then CCS project is also the construction of the building. The compressor facility building is almost complete. Equipment is arriving every single day.
None: Is there any new information or update on the capacity expansion at Gibson City.
None: I think as I mentioned previously.
None: We are expanding that plant.
None: It's an opportunity is going to be a 200 million gallon and construction is in progress and by the ethanol facility. We expect that will be completed before the end of this year and then Ccs project is also the construction of the building is compression facility building is almost complete and equipment.
None: Every single day, and we expect that by the end of July.
Zafar A. Rizvi: And we expect that by the end of July or early August, the CCS facility will be completed. But we still have to wait for the pipeline permit and the EPA Class 6 permit before we start any kind of carbon sequestration. So those are the main things we are waiting for the permits. But as far as concerns go, it's going very well. This is Doug.
None: <unk> Ccs facility will be completed, but we still have to wait but the pipeline.
None: But the pipeline.
None: And and the EPA cloud six but before we start any.
None: Any kind of God when sequestration. So those are the main things we are waiting for the <unk>, but as far as concern about the facility is employing very bad.
Douglas L. Bruggeman: Let me add, when we expand that facility, the construction will be to take us to 200 million gallons. Initial plans ought to run at 175 million gallons. And once we achieve that and get EPA further approval, then we can go to 200 million gallons. Fantastic, thanks.
None: This is Doug let me add.
Doug: When we expand that facility the construction will be to take us to 200 million gallons yet initial plans at a run out of $175 million down.
Doug: And once we achieve that and get EPA. Further approval then we can go to 200 million gallons yep.
None: Fantastic. Thanks.
Zafar A. Rizvi: How are you guys looking at capacity utilization? It's kind of a moving target, I get it, but for the remainder of the year, guys expect to run it up. The question was capacity utilization. We were assuming that we would get a decent corn crop.
None: How are you guys looking at our capacity utilization is kind of a moving target I get it but for the remainder year, okay as expected.
None: Run it up.
None: Okay.
None: Uh huh.
None: Question, what's the capacity utilization, we will gentlemen that we'd get a decent corn crop we plan on running pretty much full capacity. The only time, we've ever cut back there'll be times, when we cut back from maintenance there'll be times, when we cut back.
Stuart A. Rose: We plan on running pretty much full capacity. The only time we've ever cut back, there'll be times when we cut back for maintenance. There'll be times when we cut back just because we're doing with the CCS where we can't quite run as much as we usually do.
None: Because as we're doing with it.
None: Ccs, what we can't quite run as much as we as we usually do but basically it will be full capacity. We'll go we'll go all out and we always go all out when it's a profitable market.
Zafar A. Rizvi: But basically, we'll be at full capacity. We'll go all out, and we always go all out when it's a profitable market. Yeah. We have not really slowed down, you know; our slowdown process is sometimes it's maintenance, unexpected, some kind of shutdown, so we try to use the full capacity practically possible. Yeah, because we are basically in Illinois in a cone belt area, and South Dakota's crops were great last year and expected to be the same this year.
None: Yes.
None: We have not really a slowdown.
None: Our slot on his processes sometime.
Maintenance.
None: On expected some kind of.
None: Sat down so.
None: We try to use the full capacity practically possible.
None: Because we are in a basically in Illinois in the corn belt area and South Dakota collapse was great last year and expect it to be this year. The same so we have no plan to really.
Zafar A. Rizvi: So we have no plan to really slow down at this stage. Okay, thank you very much. Thank you. And we have reached the end of the question and answer session, and I'll now turn the call back over to Stuart Rose for a closed. Okay, I'd like to thank everyone for listening. We, as you have heard, have great plans, terrific plans, and great, great growth prospects. And the key to everything is the execution of our employees. We feel we have the best employees in the industry, the best people working for us. We think that's what really makes a difference between REX and everyone else in our industry.
None: <unk> at this stage.
None: Okay. Thank you very much.
None: Thank you.
None: Okay.
None: <unk> reached the end of the question and answer session I'll now turn the call back over to Stuart those for closing remarks.
Stuart A. Rose: Okay, well I'd like to thank everyone for listening we as you have heard we have great plans terrific plants, great great growth prospects and the.
Stuart A. Rose: Key to everything is the execution of our employees, we feel we have the best employees in the industry. The best people working for US we think that's where it really makes a difference between Brexit and everyone else in our industry.
Stuart A. Rose: And we just want to thank them. And we also want to thank you for listening to the call. We appreciate it very much. Talk to you next quarter. Bye. And this concludes today's conference, and you may disconnect your lines. Thank you for your participation.
None: We just want to thank them and we also want to thank you for listening to the call. We appreciate it very much talk to you next quarter.
None: Yeah.
None: And this concludes today's conference and you may disconnect. Your lines at this time. Thank you for your participation.
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