Q1 2025 Green Plains Inc Earnings Call
Andrew Strelzik, David Driscoll, David Driscoll, David Driscoll, David Driscoll, David Driscoll
Thanks for watching!
Speaker Change: Good morning and welcome to the Green Plains Inc. 1st quarter, 2025, Ernie's company's call. Following the companies for paper marks instructions, we'll be provided for Q&A. At this time, our participants are in a listening mode.
Speaker Change: I will now turn the call to your host, Phil Boggs.
these financial officers. Mr. Boggs, please go ahead.
David Driscoll, David Driscoll, David Driscoll,
Speaker Change: Thank you and good morning everyone. Welcome to the Green Plains Inc First Quarter 2025 earnings call.
Speaker Change: Joining me on today's call are the members of our Executive Committee, Michelle Mates, Interim Principal Executive Officer and Chief Legal and Administration Officer, Jamie Herbert, Chief Human Resources Officer, Chris Osowski, Executive Vice President Operations and Technology, and Emory Havasi, Senior Vice President Head of Trading and Commercial Operations.
Speaker Change: There is a slide presentation available and you can find it on the investor page under the events and presentations link on our website.
Speaker Change: During this call, we will be making forward-looking statements which are predictions, projections, or other statements about future events
Speaker Change: These statements are based on current expectations and assumptions that are subject to risks and uncertainties [inaudible]
Speaker Change: Actual results could materially differ because of factors discussed in this morning's press release in the comments made during this conference call and in the risk factor section of our Form 10K, Form 10Q and other reports and filings with the Securities and Exchange Commission
Speaker Change: We do not undertake any duty to update any forward-looking statement. Now I'd like to turn the call over to Michelle Mapes.
Thank you, Phil.
Speaker Change: To be direct, our performance has not met the expectations of this investment community or our own, and that is changing As an executive committee and as a company, we are fully aligned and deeply committed to discipline execution supported by the clear and objective measure of our progress every day
Speaker Change: Our team members at Green Plains understand not only the strategic goals but their roles in delivering against them, we're focused on returning this company to sustain profitability and with that earning back your confidence.
Speaker Change: Over the past few months, we've executed a zero-based approach to cost structure.
leading to decisive actions across the organization.
Speaker Change: We've exited non-core operations, launched the sale of non-strategic assets, and focused on a culture of operational excellence throughout the platform. These changes are driving meaningful efficiencies that position us to compete with greater focus and agility.
Speaker Change: On our last call, we committed to $50 million in cost reductions. I'm pleased to report we are well on track. We noted before we already achieved 30 million annualized cost savings and are recently announced ethanol marketing partnership among other internal initiatives, has unlocked another 15 million annualized savings.
Speaker Change: Beyond strengthening our working capital, the ECO initiative delivers scale, market access, and logistics efficiencies that would have been very difficult to achieve on our own. We expect these gains to show up in the bottom line going forward, especially through transportation and marketing synergies.
Speaker Change: We also have a clear line of sight to the final five million of targeted savings which we expect to come not only from S-GNA but also for some process improvements and commercial execution. We are empowering our top performers with clear goals, metrics and accountability and they are delivering. [inaudible]
Speaker Change: Out of the results of this effort, we anticipate our consolidated S-GNA run rate to decline meaningfully from the 118 million recorded in 2024 to exit this year at an estimated 93 million annualized run rate
Speaker Change: Corporate and trade functions are expected to be reduced to 12 to 13 million per quarter for the remainder of this year
Speaker Change: With the line of sight to reducing that to the low 40 million range on an annualized basis by year-in, which has much improved compared to the 73 million of corporate and trade S-GNA incurred in 2024. This is a company that is focused, aligned, and committed to continuous improvement and return to profitability and we're just getting started. We're just getting started. We're just getting started. We're just getting started.
Speaker Change: Let me now hand it over to Christopher Salsky to talk operation.
Chris Ossowski: Thanks, Michelle. Overall, our platform continues to perform operationally at a high level. Our nine active plants achieved a hundred percent utilization in Q1, our highest rate on record driven by increased discipline, accountability and daily measurement of key operating metrics.
Chris Ossowski: We are achieving an overall reduction in op-ex per gallon of more than three cents since Q4 of 2024 but a sense of urgency across the organization is tangible and it's making a difference.
Chris Ossowski: Looking ahead, the RTL project in O'Brien is nearing completion. Once fully online, we expect protein yields to exceed three and a half pounds per bushel, with ethanol capacity returning to over 120 million gallons annually.
Chris Ossowski: With Q2 crushed margins strengthening, we're actively hedging our production to secure value. Execution and performance measurement remain daily imperative for our teams.
Chris Ossowski: We're institutionalizing a culture of operational excellence across Green Plains, where every process, cost and decision is underpinned by discipline and data. Our approach is very clear. Safety first, no waste anywhere, every dollar spent must earn a return and every role must justify its value. Our approach is very clear. Our approach is very clear. Our approach is very clear.
This mindset is being driven across five core areas, first.
Chris Ossowski: Commercial Discipline. We're actively and aggressively pushing price terms and volume across procurement logistics and sales while upholding standards.
Chris Ossowski: Second, cost ownership. Each cost is being scrutinized as if it was its own P&L where laser focused on reducing variable cost for gallon and improving our fixed cost absorption.
Chris Ossowski: Third, capital efficiency. All capital, both fixed and working, is being held to strict ROI standards. Value creation is the only justification for our investments
Chris Ossowski: Fourth, people accountability. We're applying a true zero based approach to roles and responsibilities. Every function is rebuilt from the ground up based on what the business needs today and what delivers measurable value. And then last, KPI driven execution. Thank you very much.
Chris Ossowski: We manage biometrics, not anecdotes, plants are measured daily against clear KPIs and best practices are being shared across our network.
Chris Ossowski: We're currently executing focused operational excellence initiatives based on maintenance cost control, enzyme and chemical optimization, and energy efficiency both with respect to price and usage. These actions are already showing impact and will drive both short term gains and long term margin improvement.
Chris Ossowski: As previously announced, we made a strategic decision in Q1 to pause our clean sugar technology initiative in Shenandoah. The technology has been proven and is capable of producing refined 95 dextrose, and we have received all of our necessary food safety certifications.
Chris Ossowski: However, wastewater challenges outside of our walls and commercial development timing has prevented us from operating the asset continuously for a fine product [inaudible]
Chris Ossowski: Operating at Epikar Partial Capacity, our campaigning, was not economically viable, so we redirected our efforts to maximize ethanol production at full rate.
Chris Ossowski: The temporary pause allows us to run a simplified fermentation recipe at the Shenandoah plant, which delivers improved ethanol oil and protein yields while further reducing op-x costs. [inaudible]
Chris Ossowski: This shift has had a $10 million annualized positive impact on the Shenandoah site, but we remain fully committed to CST and expect to resume commissioning once the technical solution is in place currently projected for late fiscal 2026.
Emory: Now, I will pass the call over to Imre to talk about the commercial and market update.
Emory: Thank you, Chris, and good morning, everyone. Let a no-market front of mental saw typical seasonal weakness through Q1, driven by the industry's high production levels and elevated inventory.
Emory: However, US ethanol exports continue to be a bright spot. We expect that 2025 volumes could surpass last year's record of nearly two billion gallons.
Emory: Encouragingly, ethanol margins have strengthened heading into Q2 and Q3 with positive contributions now forecasted for a network.
Emory: This improvement is supported by firmer corn oil fundamentals driven by widely anticipated increases in renewable volume obligations
Emory: Drawdowns in ethanol stocks due to the spring maintenance season, stronger seasonal blending demand and a good start to 2025-26 corn planting anticipated to result in the largest acreage since 2013, currently estimated at 95.3 million acres by the U.S. VA
Emory: We have secured a little more than half of our cute-to-crush margins at favorable levels. This is consistent with our new, disciplined and proactive approach to hedging and margin management.
Emory: You have heard me show and please talk about the strategic shift we are executing at the actions we are taking to significantly increase our productivity and cost competitiveness [inaudible]
Emory: As market conditions improve, along with our actions, Green Plains bottom line is showing notable improvement for ready in Q2.
Emory: Last month, we announced a long-term strategic marketing partnership with Ecoenergy
Emory: This collaboration enhances our scale, optimizes transportation and marketing economics, and positions us to fully capture the value of our future ultra-low carbon ethanol production.
Emory: For a protein business, we've also made great progress. Commercial shipments of sequence 60% protein have started. The product is starting to be included in semi-diad with our South American customer base.
Emory: We've also expanded our sales 50 protein ultra high protein product [inaudible]
Emory: to Ecuador for Schimpfe applications. Between these two products, we expect to have volume growth from 20,000 tons in 2024 to over 80,000 tons in 25 shipped to the South American market.
Emory: These new shipments will be aided by efficiency improvements gained through box shipping, which will start in Q3
Emory: We're also gaining momentum in Pat Food, which is a key strategic growth area. Trials are under way with two major manufacturers who are not yet customers [inaudible]
and Burley feedback is very promising.
Emory: Our high protein product works very well in pet food diets. We expect these opportunities to convert commercial sales by Q4 of this year, or early 2026. We plan to increase our sales into pet food segment from 60,000 tons today to over 100,000 tons in 2026.
Phil Boggs: And with that, I'll hand the call to Phil for a financial update.
Phil Boggs: Thanks, Emre. For the first quarter, we reported an at-loss attributable to Green Plains of $72.9 million or a loss of $1.14 per share.
Phil Boggs: which included 16.6 million in one-time restructuring charges tied to the closure of Fairmont, the exit of other non-core operations cost reduction programs and leadership transitions.
Phil Boggs: While these actions impacted the quarter, they were necessary steps to realign the business and accelerate our return to profitability. By comparison, we reported a net loss of 51.4 million or 81 cents per share in Q1 of 2024.
Phil Boggs: We are supremely focused on improving these numbers as they are not acceptable [inaudible]
Phil Boggs: These results are the reason why we have materially changed our go-to-market operating strategy and the human capital we are using to execute our plan
Phil Boggs: We are moving with a keen sense of urgency and precision to reshape our financial profile. We are executing a clear plan to improve operating leverage, lower our cross space and position the company to benefit fully from the carbon and protein opportunities in front of us.
Revenue for the quarter was 601.5 million, up 0.7% year-over-year .
Phil Boggs: While Q1 market conditions were challenged, we've taken proactive steps to secure better margin performance going forward, including reducing our costs, locking and favorable cross margins for Q2, and expanding our commercial reach through our partnership with Eco Energy.
Speaker Change: On operations, as Chris mentioned, we achieved a record 100% utilization rate across our nine operating plants demonstrating strong asset performance and operational discipline.
Speaker Change: Including the Fairmont asset, total fleet utilization was 87.7% compared to 92.4% last year.
Speaker Change: We anticipate maintaining a mid 90% utilization for the remainder of Q2, even with scheduled maintenance underway. Adjusted EBIDA in excluding restructuring charges was 24.2 million loss, compared to a negative 21.5 million in Q1 last year.
Speaker Change: These results reflect the transition period as we reset the cost base and scale new revenue streams.
Speaker Change: S-GNA totaled 42.9 million, up 11.1 million from the prior year due to restructuring and severance charges.
Speaker Change: However, we expect this to trend down materially through the rest of the year. Our annualized run rate is already moving lower from the 133 million in 2023 and 118 million in 2024 and is on track to exit the year at approximately 93 million annualized run rate. [inaudible]
Speaker Change: including a corporate trade estimate target in the low 40 million range annually as we exit the year.
Speaker Change: Depreciation and amortization was 22.4 million, up modestly year-over-year .
Speaker Change: An interest expense was $8.9 million and increased primarily driven by the absence of capitalized interest from prior year project construction construction.
Income Tax With 0.1 Million
Speaker Change: We continue to carry a federal net operating loss of $197.6 million, which provides future tax efficiency, and our normalized tax rate going forward is expected to remain in the 23-24% range.
Speaker Change: On the balance sheet, our Consolidated Liquidity Accordor Inn included 126.6 million cash equivalence and restricted cash, 204.5 million revolver availability availability.
48.7 million of unrestricted liquidity available to corporate.
Speaker Change: Since quarter end, we've delivered on our plan to strengthen liquidity. We executed and are continuing to execute on non-core asset sales.
Speaker Change: We've enhanced credit capacity with a new $30 million line of credit, and we extended our 125 million mezzanine notes by about three months while we actively pursue refinancing or a full payoff through additional asset sales. We are confident in resolving this in the coming months.
Speaker Change: Overall, we've improved our unrestricted liquidity at corporate as of May 7th to 89.2 million.
Speaker Change: Capital expenditures in Q1 were 16.7 million, including targeted growth, maintenance and regulatory investments
Speaker Change: For the remainder of 2025, we expect capital expenditures to be in the range of about 20 million dollars, excluding the carbon capture equipment for Nebraska, which is already fully financed and on schedule.
Speaker Change: In short, we are taking decisive action across all fronts, cost, capital, liquidity and strategy to position Green Plains for sustained profitability and long-term value creation.
Michelle Mapes: With that, I'll turn the call back to Michelle for an update on our Strategic Review, Carbon Initiatives, and Regulatory Outlook
Michelle Mapes: Thank you, Phil. Let's start with carbon. Our carbon strategy remains on track and is central to unlocking our long-term value. Construction of carbon compression infrastructure to support our Advantage Nebraska initiative is advancing on pace.
Michelle Mapes: Equipment deliveries are on schedule and remain on track to initiate operations across all targeted sites later this year. Lateral pipeline construction is well underway and all key milestones point to a start-up in early Q4.
Michelle Mapes: In parallel, we're actively engaged in the marketplace to monetize our 45Z and Q credits with good interest in early momentum. We expect to provide a meaningful update on these efforts at our next quarterly call.
Michelle Mapes: We remain encouraged by ongoing policy discussions in Washington regarding a potential extension of 40 privacy and the possible elimination of the indirect land use change from the great model. These policy shifts, if enacted, could significantly improve our CI scores and further enhance the value of our carbon platform.
Michelle Mapes: As it relates to our strategic review, we continue to work closely with BeMo and Moly. All potential paths remain active and under consideration, including a company sale, asset divestitures, or other material transactions.
Michelle Mapes: We firmly believe the market is undervaluing our platform, particularly the long-term opportunity associated with carbon monetization.
Michelle Mapes: We've also strengthened our board. We welcome Steve Furchage, Carl Grassie, and Patrick Sweeney to our board. And we thank Einer Knutson and Alon Trauer for their service as they step off the board at the upcoming annual meeting. Our new directors are already contributing meaningful to our strategic direction.
Michelle Mapes: and closing. Here are some key takeaways I'd like to leave you with. Based on current market conditions, actions we have taken, and our focus on execution, we are currently positive EBITDA for the remainder of the year. Our carbon platform construction is progressing as planned with compression and pipeline infrastructure on schedule for early Q4 startup.
Michelle Mapes: Active monetization of our 45Z and Q credits is underway with an update expected next quarter. Operational excellence is driving measurable performance gains.
Michelle Mapes: R 50 million cost reduction target is nearly complete with the remainder in sight. [inaudible]
Michelle Mapes: Our Strategic Marketing Partnership with Eco Energy is active, providing scale and logistics efficiencies for our ultra-low CIS and all [inaudible]
Michelle Mapes: Our sequence protein platform is scaling with expanded agriculture and pet food demand and we are executing discipline risk management daily. Our non-core asset monetizations are progressing and supporting liquidity as well as improving our focus.
Michelle Mapes: The strategic review is active and ongoing to unlock long-term value. Our executive committee is executing and the board is refreshed and has strength in governance, strategy and risk management oversight.
Speaker Change: At this time, if you'd like to ask a question, it is stopped followed by one or your telephone keypad. If you're anything you'd like to remove that question, it is stopped followed by two. Again, to ask a question, it is star one. As a reminder, if you're using a speaker phone, please remember to pick up your headset before I ask you a question. All questions are limited to one question and one follow up. I'll pause briefly here as questions are registered.
Thank you very much.
Speaker Change: The first question comes from Lauren, Sharma with the company Stevens. Lauren, the align is not open.
Dr.
Speaker Change: Thanks for the question. Just, you know, I thought it was interesting in the release, we talked about the risk committee and the hedging framework and I know that you've had hedging practices in the past and you've, you know, you took it off recently. So just would, would like to, you know,
Speaker Change: Here's a kind of thesis as to why you're putting it back on. [inaudible]
Speaker Change: It looks like you've booked about half of Q2. That was actually going to be one of my questions.
Speaker Change: In this hedging practice, are you layering in longer dated positions or kind of expanding the type of instruments being used? Any kind of color you could share about how your ear approaching hedging would be helpful? No.
Ibrahim: Yeah, this is Imram, gonna start with the answer, others can add to it.
I mean, in general...
Ibrahim: Heading or managing risk for a business like this is good practice and you do these things when the market opportunity presents itself.
And so we...
Ibrahim: We did some of this before, and with my background, we reestablished some of these processes.
Ibrahim: We do a lot of analysis, supply and demand fundamentals, technical analysis, we're looking at our business needs.
Ibrahim: Of course, policy changes and historical data. And so as we go through that analysis day by day when there's a market opportunity, we do lock in some of those margins.
Ibrahim: some of the co-products or whatever we see that opportunity. So I think it's just in general good practice.
Ibrahim: to manage risk, reduce exposure if needed. And yes, we lock in simple crush, we potentially hatch DCO using soybean.
Ibrahim: Monitor Value at Risk. So it is a systematic approach supported by analytics and fundamentals, and we do it when the opportunity is there.
Speaker Change: And I would just add that at the board level the risk committee was formed here in the last 45 days or so. We have very seasoned and experienced folks on our board that are on that committee and they're actively meeting with the team monthly, if not more frequently.
Speaker Change: Great, thank you for the color there, and my follow-up would be just in regards to the CEO's search, just wanted to ask how, you know...
Speaker Change: How that's going, if you can give us an update. Should we expect someone with background in biofuels?
Speaker Change: maybe somebody in industrial transformation or maybe somebody with a bit of a finance background would just love to hear what type of attributes you're looking for in the next CEO . Thanks.
Speaker Change: Thanks for the question, Lauren. At this point in time, the process is ongoing. It's what I would call a pretty standard process for a public company looking at all candidates who have applied. But we are nearing the final stages of that process and we hope to have something that we can announce here in the near future. Thank you.
Speaker Change: And next question comes from Jordan Levy with the company, Troy Securities. Jordan Yalan is not open.
Speaker Change: Hi, all. It's Henry, I'm for Jordan here. Thanks for taking my questions. Maybe to start with on carbon capture. It's great to see compression equipment construction under way and the 4-2 start update. Can you just give us any color at this point on when we should expect into that construction and the lateral pipe construction from polygraphs to be completed ahead of that start update? Thank you.
Sure. So we are working closely with the tall graph team. We have...
Speaker Change: Weekly calls, and we are very engaged on the process. That team is indicating that all signs point to early Q4 and actually late Q3 in terms of finalizing construction in a couple of the locations in terms of construction.
Speaker Change: and we don't anticipate a major time lapse between construction completion and start-up and Chris, would you like to add anything more to that?
Chris Ossowski: Yeah, I think we feel really good that we have construction in progress at all locations going in parallel. The major compression equipment has been built and is just waiting to be delivered when we get foundations put in place for the buildings to house that equipment.
Chris Ossowski: and feel really strong about our teams readiness and the ability to operate and maintain those assets once they're up and running.
Speaker Change: Great, thank you for that. And then maybe just a quick one on tariffs. If you do talk to any impacts for potential retaliatory tariffs on any of your product exports, and here do you see this as a meaningful risk kind of moving forward.
Speaker Change: So far, no impact. I mean, we would be exposed as an industry, of course, if there were tariffs on ethanol exports into Canada or the UK.
Speaker Change: Relative to China, that would impact the soybean complex. Thanks.
Speaker Change: So some of those things, if they happen at the same time, there are offsetting impacts on tariffs, some might lower cost domestically but also restrict markets for us [inaudible]
Speaker Change: in terms of our protein exports that would be specific to us. [inaudible]
Speaker Change: Those exports are happening, our shipments are going to Asia, we were locking in contracts and prices down to Latin America with no actually no tariffs.
Discussions around it [inaudible]
Speaker Change: So far we have not seen any impact and of course things are somewhat unpredictable when it comes to tariffs so things can change [inaudible]
Speaker Change: So, if we were able to sell vegetable protein into some of those deficit countries in Asia or down to South America through some of the trade agreements that would be actually an uplift for our platform, so that can go both ways, of course, everybody is...
Speaker Change: Rightfully so talking about the risk which are probably have higher probability but to summarize it so far we have not seen an adverse impact on our business.
Sonya James: Next question, concerns Saumya Jain with the company UBS. Saumya, your line is out open.
Sonya James: Yeah, how are you guys looking at Tesla's particularity with these cooking oil and Chinese biodiesel on mine and then with your outlook for up-and-off cash margin and margins given on that point in the world? [inaudible] I'm sorry, I'm sorry, I'm sorry, I'm sorry
Yeah.
Sonya James: Sorry, the line was breaking off the question. Was that the end of the question?
Yeah, just about the paraphrase. You go on in fact, don't worry about things.
Yeah, and Heather Perfetti, her outlook for the year. [inaudible]
Sonya James: Yeah, so of course, the components of how our cash crush or consolidated cash crumbs together, it's in pieces, right, and the impact of PCO, which is driven by...
Sonya James: RVOs and 45Z and a couple of other things. He's a big component of our total margin. We're optimistic on DCO for two reasons. One is the premium it carries to other free stocks.
Sonya James: Just in general, because of the low CNI score. And then secondly, the overall context, you know, with the restrictions on imported Yuko.
The
Sonya James: Rumored or anticipated higher RVO levels that are going about 5 billion gallons, you know, there's a little tighter soybean oil, S&D, as soybean oil got...
and became a discount, or got the discount point, early in the year, encouraging exports. So there's plenty of tailwind for our DCO product.
Sonya James: We're putting together pricing and hedging structures due to maximizing the opportunity by the overall.
Sonya James: for sure going into Q2, Q3 and maybe even Q4. And as long for sure as 45Zs around, we're very optimistic about the DCO market and we're...
Sonya James: We consider that as a significant contributor. And I know this was not part of your question, but
The Operation Steam is very focused on maximizing DC or yields [inaudible]
Sonya James: Not just through the court operation, but also where we have these MSC plants, we have a significant uplift.
Sonya James: of DCO, so overall DCO production should be up and with higher prices that were anticipating it will contribute greatly to overall fresh margins.
Speaker Change: Great, thank you, and then I guess how are you guys looking at the local protein markets as well or how about protein margins?
David Driscoll, David Driscoll, David Driscoll,
Speaker Change: Did you say local or global or total or I didn't know? I didn't know, I could look all but...
Speaker Change: Yeah, I can look old. Okay, yeah, so protein, of course, is...
Speaker Change: You know, it has been protein's been weak and it's been under pressure just in general, right? But that includes VDGs and other vegetable proteins, huge pressure from soybean meal.
Speaker Change: Q1, there was an abundance of, sorry, I think they interesting work through that class, but in general,
Speaker Change: You know, the domestic protein market will be probably flat muted, of course, you know, when you look at oil share [inaudible]
Speaker Change: That's part explained, oil carries the premium, and Meel has to be formulated into diets both domestically, but we also need an export market to...
get rid of the surplus.
Speaker Change: Higher industry run rates, of course, increased DDG supplies as well in domestic markets so when it comes to our own protein platform, of course DDGs, we're extremely focused on our local customer base [inaudible]
Speaker Change: A few years ago when we built all these facilities was to... [inaudible]
Speaker Change: Supply Higher Margin Markets, but unfortunately a lot of production came to the market, so we had to sell our protein to all sorts of species and we different kind of margin structures.
Speaker Change: We're past that and of course customer development in some of the higher value segments like bed and aqua has been taking longer than just selling to poultry or swine.
Speaker Change: But those are coming to fruition. As I mentioned in my script, we're actually making a lot of breakthrough sales recently and selling to Aqua and Pat are probably, I'm just going to throw out a number
Speaker Change: About $45 to $60 per ton higher, Bob Margens, when I add in the supply chain solutions as well. So the strategy will remain, you know, protein in itself is going to be flat.
Speaker Change: going forward, but our book in our margins will improve as we execute those high-margin segment sales.
Speaker Change: The next question comes from Salvator Tiano with the company Bank of America. Salvator Yalan is not open.
Salvador Atiano: Yes, good morning. Firstly, I want to ask from the SNL commercial strategy. So you have the, the oath that agreement. Thank you very much.
Salvador Atiano: which if understood correctly, it's for pretty much all your volume unless I'm missing something so why the change and what does this mean for your own trading operations I think you had pretty substantial trading team and how should we think about
Salvador Atiano: How the realizations will move forward compared to accidental margins? Will they track them more closely and index or will there still be an opportunity to trade around it?
Salvador Atiano: or absolutely the latter. So we make all sales decisions, pricing decisions, and risk management decisions. Ecoenergy is a marketing partner, so they execute, they manage the customer relationship, and they manage logistics.
Salvador Atiano: All sales are basically back-to-back except for a few opportunities where equal would have infrastructure and that would apply to maybe some of the California markets.
where they would... [inaudible]
Salvador Atiano: to support us with last-minute logistics through a terminal. So it is the execution part, is what we outsource, and not the risk management part. So we manage all risk, what we...
Salvador Atiano: What we expect from this relationship other than a smooth operation, of course, under logistic side, is leverage the scale. So we lost scale over the years, and that's why it made sense for us.
Salvador Atiano: to combine our volumes with Ecos' volumes, so their volumes increased 50% through our contribution.
Salvador Atiano: They also, of course, have a very good infrastructure in the country for, as I mentioned earlier, for distribution in California but also for exports.
Salvador Atiano: and we expect to leverage that scale, leverage that scale in terms of market access.
Salvador Atiano: Arbitrage Opportunities, exports, and we expect improvement is really on that basis level. We are going to be managing, as I mentioned earlier, simple crash.
Co-Products
Everything else? [inaudible]
Salvador Atiano: But where Eco can help us is that basis, improves that basis by maybe a penny or two.
Salvador Atiano: when it comes to logistics and supply chain opportunities, or finding us better, maybe shift to locations of customers so we can optimize our portfolio.
Salvador Atiano: With one customer, we believe that we will be able to reduce our working capital by somewhere in the neighborhood of $50 million through faster AR turn times and lower inventory levels because of the relationship of when eco buys that ethanol inventory from us out of our tanks.
Salvador Atiano: and so there's a working capital efficiency to this as well that will reduce our working capital revolvers.
Thanks so, and the second one please sir.
On the Equipment of the Baller C, so...
Salvador Atiano: Can you clarify a little bit, the corporate equity you mentioned, I don't think that's something that hasn't mentioned before your press release, what's the difference, or what's the cash there, and why is it just 49 million, including any craze of availability? And why get the 30 million low from a corner that matches in, I guess, 11 or 3 months? What's the rationale for that? What's the rationale for that? What's the rationale for that? What's the rationale for that?
Speaker Change: Well, south, so we included the corporate liquidity numbers just to give some additional clarity when we do have cash across the organization and various subsidiaries that's not available to corporate.
Sal: But this $30 million loan from Ancora, I mean, one, it's a—
It demonstrates that we have a support of...
Speaker Change: Sherholder, who not only has some members on the board now, but is also putting...
Speaker Change: We're focused on cross-reductions, we're focused on working capital efficiency, we're focused on
Speaker Change: Exiting non-quarter assets, and really this is all about maximizing our flexibility as we pursue various options.
Thank you
Matthew Blair: The next question comes from Matthew Blair with a company TPH. Matthew Yehline is not open.
Matthew Blair: Great, thank you very much. Phil, maybe just a stick on that, you mentioned that you're executing on non-core asset sales, and you give us some more details here in the sense of the scale of the opportunity and what type of assets are these logistics assets or what general type of assets are you looking to sell here?
Matthew Blair: So, I mean, we're really looking at, you know, anything that's, what we would call non-core, and so what is that? I mean, we have...
Matthew Blair: We've closed some businesses, so we have working capital and equipment in businesses that we've sold, so that's one of it. We have various smaller JVs from over the years that we're looking at exiting or in the process of exiting. Thank you so much.
So we're really focused on...
Matthew Blair: That from a non-core standpoint and looking at, how do we? [inaudible]
Matthew Blair: Nero, the focus of what it is that we're trying to do every day and that's really focused on the core, which is...
Running our assets well.
Speaker Change: Sounds good. And then Mary, I think you mentioned that you're currently able to positive for the remainder of the year. Does that apply to each quarter? And is that based fully on what you hedged, or is that a combination of the hedges and the food squares?
Speaker Change: Let me just first address the quarterly part. Yes, it does mean quarter by quarter. We are currently even positive. Much of that is from the actions we have taken. It's a combination of cost reduction, discipline risk management, obviously market conditions. I'll let Emory touch a bit on the hedging piece of it, but we're pleased to be where we are and committed to doing all we can and assuming what the market will give us.
Speaker Change: Yes, I mean most of our hedges are obviously Q2, we started locking in margins for Q2 as those opportunities as Crush margins improved at the end of March, so we...
Speaker Change: entered the quarter with Hedges already and added to it as those officers presented ourselves.
Speaker Change: There is a lot less liquidity in ethanol, especially when you go out to Q3, Q4, so Q3, Q4 are still very much open, most of our edges are in Q2.
And I'll be right back. I'll be back.
Lawrence: Anna's question comes from Laurence Alexander, with a company Jeffries. Laurence, Yelonne, is that open?
Lawrence: Good morning. Thank you for taking my question. This is Carol Jones for Laurence Alexander. Could you help us enter the current astronaut inventory level and the dynamic of the export demand?
Lawrence: The current immaterial level is 25 million barrels, and that's sort of it.
Lawrence: A point that we're looking at when we stay under that level, and we just came off of 27.
and Tom Hanks. Thank you. Thank you.
Lawrence: and I mean, sorry, if that's the state indicated as significant improvement in March, that has to be confirmed. So, you know, you could say that, you could say that, yeah, we aren't track on hitting the 2 billion mark.
for the year, but Q1 was very, very strong. [inaudible]
Lawrence: And what we could say, I mean, you could say that some people pulled forward some of these shipments because of tariffs considerations but as we expect tariffs to be sort of a
Lawrence: Lazarof Erisk, we're going to hit over two billion gallons now. That doesn't help if domestic consumption doesn't pick up.
So, even three levels are sitting at 25 bearing barrels today [inaudible]
Lawrence: We think they're going to drop towards 23 as the driving season and higher blending kicks in.
Lawrence: Our risk there, of course, is that we'll maintain production, but if we enter a recession or we don't have that demand from the consumer,
Lawrence: Then those inventories will not drop down towards those 23-22 billion levels, but they will continue to stay around 25 and eventually build up as we head into the winter. So our risk today is...
Lawrence: Lore Blending Demand and Lore Gas Demand going into the summer.
Speaker Change: Thank you for that. Can you add a bit more color on the corn business, like the cross-contribution of corn oil and protein platform? You're today, and how you expect that to evolve through the year end?
Corn Oil, Neil,
Speaker Change: Yes, the perfect contribution of Cornel also brought him along. We touched on this one during the previous question or the answer to the question earlier in the call of the call.
Speaker Change: We started the year corner, it was a very low level, right in the mid-40s, high-40s were at 55 cents, far back to our plans today, so that's a dime improvement to pound. We think those levels will fold.
Speaker Change: throughout the year, supported by a restriction on use cooking oil imports as a feedstock that
Speaker Change: You know, as we also mentioned that corn oil carries a premium because of the low CI score relative to soybean meal, so we're very we're friendly that contribution has increased of course with this 10 cent per pound improvement over the last step.
Speaker Change: 3 months, so that is supporting our margins going forward. Some of our, the way we sell corn oil also allows us to capture margins in an out market.
Speaker Change: About 50% but give or take, depending on our market view is index priced.
Speaker Change: So, we're benefiting from an off-market and of course if we that's within the quarter [inaudible]
Speaker Change: and if we have a different bias, of course we can hedge that and by selling us, or you know, futures or through options there.
Speaker Change: But we remain friendly Corn Oil and it's been very beneficial to the overall margin structure for sure for Q2, but we expect that to continue in Q3 and Q4 [inaudible]
Andrew Strelzik, David
Speaker Change: Next question comes from Andrew, Strelzik with the company BMO. Andrew Yelena is out open.
Andrew Sprosik: Hey, good morning. Thanks for taking the question. I guess I kind of wanted to zoom out and I was hoping that maybe you could reflect on...
Andrew Sprosik: The existing strategy that's been in the works of the last several years, so not the strategic review but kind of just the existing strategy that's been put in place over the last several years .
Andrew Sprosik: Over that time, the operating environments evolved, the regulatory environments evolved.
Andrew Sprosik: and frankly, the conversations with the investment community have shifted from, you know, more high-prote to more clean sugar and carbon. So when you kind of take a step back, I just would love to get your perspective on the strategy at high level and your confidence kind of in the different pieces of the plan to drive the EBITDA build over time.
Sure. Appreciate the question. This is Michelle Mayt.
Speaker Change: So, you're right, the strategy has evolved over the years as we originally talked about some years ago when we launched upon our protein strategy and our pillars of corn oil in particular, we were very focused there and then along came to our surprise the IRA, which then did cause us to pivot slightly and add the carbon pillar to our focus.
Speaker Change: We remain very constructive on protein. It's taken longer than we had anticipated. It's been harder than we've anticipated. It's been harder than what we previously communicated.
Speaker Change: But we're committed to making sure that we're executing going forward and I think Emory has shared with us some numbers that are reflective of we are now getting that penetration and our products are turning the corner there.
Speaker Change: We obviously were still remaining constructive on Cornwell, and as it relates to carbon, we are very bullish. We continue to be excited about where we are, where we're going.
Speaker Change: I think, you know, when you look at our company today, we're pausing a bit. Not that we don't support all the initiatives
Speaker Change: We are cleaning some things so that we can be positioned for profitability to move this company forward on solid footing, executing on those same pillars and those same strategies, but we're going to take a few months here, and we're going to give things moving in the right direction. And that's really where our focus is now, it's not a shift in strategy. [inaudible]
Speaker Change: Okay, that's that's a full context and then maybe just two follow ups. One on hedges that you have already talked about a little bit. I guess, how should we just be? Okay.
Speaker Change: Thinking about your approach over time, as we go into subsequent quarters, are you going to be targeting a roughly 50 percent? Will it depend on kind of what the market environment looks like? And that'll be more variable. This part number one and number two, the pacing of the SD data clients to that run rate that you talked about if you could just kind of give us the cadence. Thanks. Thank you.
Speaker Change: I'll take the first one. It depends on market opportunity. We're obviously looking at business
David DeMargians, our cash flow.
Speaker Change: R.R.O.P.X. So there's a lot of things that are going in there that would make us pull the trigger.
Speaker Change: The 50% is not marked. It might be zero. It may be a little more. We're not going to be 100% hatched. It's not executable.
Speaker Change: in the futures markets. So it is a risk assessment driven decision coupled with what the business
Speaker Change: So it can be zero to I don't know what the top end would be but you know maybe 57 to 70% that we can actually execute but there's no there's no script for that [inaudible]
Phil Boggs: Yeah, and Andrew, this is Phil. So in terms of SG&A pacing . . .
Speaker Change: We are on track, we executed those reductions here in the second quarter, so you won't see it.
Speaker Change: Fully baked in the second quarter because of the timing of when we announced ECO and when we took some of those actions.
Speaker Change: to further reduce our SGNA, but here in third quarter and fourth quarter, you'll see it coming through. Most of that, SGNA is immediate, and while we're still chasing things, we still have contracts that are going to expire that might not be renewed and we're still working on some things. [inaudible]
Speaker Change: to further reduce that number. Most of that that Michelle mentioned in her comments that we're corporate trade S&A in that $12 to $13 million range for Q3 and Q4, so it's coming fast.
Speaker Change: And this question comes from Eric Stine with a company Craig Holland. Eric Hermann is not open.
Good morning everyone.
Thank you.
Speaker Change: Hey, so I'm just jumping around call, so I apologize if I'm covering something that already was earlier So I did hear, you know, talking about just pausing a bit on other things and you did list
Speaker Change: Hypro Corn Oil and Carbon is being what you're committed to. I mean, clean sugars, obviously, it's been a huge topic over time. Am I right in assuming that that is one of the initiatives that is being paused? [inaudible]
and you look at that still as having...
Speaker Change: You know, significant long-term potential. I mean, is this something where you're just... You're pausing to say, hey, do we really want to push hard here? Or is it potentially something that you just kind of say, hey, let's focus on our base?
Speaker Change: This is Chris Estoski, and I covered this a little bit in the initial commentary. Yeah, we are parsing the CST initiative and really what it's about right now is maximizing the profitability of the Shenandoah site.
Speaker Change: We're able to run at higher throughput rates on the ethanol side and take advantage of better margin environment here in Q2.
Speaker Change: At the same time, we're able to run a simpler fermentation recipe that lowers OPEX and helps us improve V.
Speaker Change: Protein and oil use out of that plant and that plant is leading our fleet in terms of the
Protein Yield at over four pounds
Speaker Change: You know, restarting that effort and we're thinking, you know, end of 2026 as a target.
And I, I, I, I
Thanks for watching!
Speaker Change: Got it. Okay, and yeah, and I know that the wastewater, that's been an issue for some time. Good color on that, I guess.
Speaker Change: You also talked about that you're looking at further opportunities, I mean at one point is that it seems like what you're doing, I don't want to say it's easy but it might be more of low hanging fruit are there areas where it would be harder, but you certainly would go down that road if necessary.
Speaker Change: Well, I would add on the operational excellence initiatives. You know, we're focused on a couple different areas where we see opportunity specifically on R&M management, repair and maintenance.
Speaker Change: So, you know, our teams are committed to doing more predictive and preventative maintenance as opposed to breakdown type fix at work and that opportunity is anywhere from $10 million dollars that's in front of us and we're starting to see realize some of that now So, we're starting to see some of that now.
Speaker Change: And then on the chemicals yeast and ingredient side of things, we're focused on improving our front end processes in our fermentation plants to drive higher yields and lower our chemical yeast at enzyme costs and that opportunity is somewhere in the $4 to $6 million range.
Phil Boggs: And I would just add to that, some things just take a little more time. Phil mentioned like our contractual commitments. As we exited the eco-transaction, there are contracts and services that we may no longer need. We're winding out of some of those things. We're in obviously some very large space here. We're working on that, but those things just take a little bit longer, and those are the kinds of things that we know we can and are executing on just going to take a few quarters to make that happen. We're working on that. We're working on that. We're working on that.
Speaker Change: Alex question comes from David, just go with the company DD research. David, you're going on if that's open.
Great. Thank you. Good morning.
David Driscoll: Good morning, Dave. I just wanted to thank you. I want to make a statement and then a couple of questions. So I followed the ethanol industry for 25 years as a cell site analyst and now running a family investment office.
David Driscoll: I do appreciate the comments that the results are not acceptable. I suggest that you do more to highlight the value of your assets and the company's earnings potential.
Speaker Change: This was done back in 2021 when the Green Plains 2.0 idea was put out there. Bottom line, when this doesn't happen, the stock can dislodge to exceptionally low levels, which is what I think is happening today today.
Speaker Change: So, to the questions, balance sheet liquidity is the topic. Phil, I just wanted to hear your thoughts here. In the fourth quarter, your cash balance was over 209 million.
Speaker Change: Care after the first quarter, it's down to $126 million fell by around $80 million bucks.
Speaker Change: with the stock price suggesting great concerns by the investment community.
Thank you.
No, I appreciate the question, David! David!
Speaker Change: You know, it's a great question and appreciate the comments. You know, we are focused on maintaining
Speaker Change: Like we've gone through on this call, we're focused on a Discipline Hedging Program, Discipline Cost Reduction Programs, and returning to consistent profitability.
Speaker Change: So, we did, you know, lose some cash in the first quarter as a result of the EBITL losses, the catbacks, the interest and the restructuring charges.
Speaker Change: But it's our goal that we start to minimize that and we turn this back to a cast generating.
Speaker Change: Company, we should be cash positive, cash generating positive here in the second quarter. And as we look out into Q3 and Q4, you know, crushed don't have some work to do. I mean, it's probably still, you know, ethanol crushed by itself is still probably in the low to mid single digits and all in in terms of consolidated crush. [inaudible]
Speaker Change: and we've got Harbin coming in the fourth quarter as well. So there are…
Speaker Change: Opportunities for this to continue to move higher, but we've taken these steps to liquidate 9-4 assets and put facilities in place and extend loans so that we can maximize our flexibility and nearly focus on returning its overall thing to profitability. Thank you very much for your time.
and then just as a follow-up...
Speaker Change: So what related here is this asset value and replacement cost and how to get better recognition of it. So specifically, how do you guys think about the replacement cost of the asset base with the stock trading at? [inaudible]
at least yesterday, $3.80, $570 million in gross debt.
I believe that the implied...
Speaker Change: Value of these assets on a per gallon basis is less than a dollar. If these assets were built today, what would be a good ballpark figure to use as replacement cost per gallon? Two-fifty a gallon, three-fifty a gallon? Where do you guys peg it? [inaudible]
Speaker Change: Well, thanks for the question, David. This is Michelle. Not all assets are created equal, albeit is expensive to rebuild as you are well identifying.
Speaker Change: We would pay replacement costs in the probably two to three dollar a gallon range, depending upon the asset, depending upon what we choose to rebuild and where those types of things.
Speaker Change: You know, one of the reasons for our strategic review process is to ensure that we're getting and maximizing value for our shareholders and getting out there in the market to identify what's available one on a whole company basis on an asset basis and that is ongoing and we are committed to ensuring that we're not leaving that value on the table for our shareholders.
Speaker Change: Chris, would you like to add something that relates to the detail on plants? Yeah, specifically related to plants and asset values. You know, we have three different...
Engineer Designs of Plants, that being ICM Plants
Speaker Change: plants that were built by Delta T. And finally, Vogue Bush. And each of those plants performs a little bit different in terms of their energy consumption in total op-ex and throughput.
Speaker Change: And one of the things I wanted to highlight is the improvements specifically related to our Delta T platform over the past, let's say, six to nine months.
Speaker Change: Our Wood River Otter Tail and Superior Plants are performing right now very close to, if not as good as an ICM designed 100 million gallon plant.
You see then our total throughput numbers.
Speaker Change: and you see it in our reduced OPEX per gallon results, here out of Q1.
Speaker Change: And that puts us in a good spot with respect to taking advantage of better margins than Q2 in the rest of the year. And I think it's important for the industry to start changing the narrative around those Delta T assets and proving that they can perform and create value like those that were built by ICM.
Speaker Change: I'm now at the time of the conference over to Michelle Maid for closing remarks.
Michelle Mates: Thank you. I want to assure you we are deeply committed to earning back your trust and executing on our strategy. We thank you all for your participation in today's call. And if you do have follow-up questions, please don't hesitate to reach out and we'll find a time to connect. Thanks and have a great day.
Michelle Mates: That will conclude today's conference call. Thank you for your participation and enjoy the rest of the day.