Yahoo Finance REX American Resources Corporation (NYSE:REX) Q4 2023 Earnings Call Transcript
REX American Resources Corporation (NYSE:REX) Q4 2023 Earnings Call Transcript March 28, 2024
REX American Resources Corporation beats earnings expectations. Reported EPS is $1.16, expectations were $0.68. REX isn't one of the 30 most popular stocks among hedge funds at the end of the third quarter (see the details here).
Operator: Good morning, and welcome to the REX American Resources Fourth Quarter and Full Fiscal Year 2023 Conference Call. 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 presentation. I would now like to turn the call over to Mr. Doug Bruggeman, Chief Financial Officer of REX American. Please go ahead.
Doug 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 question-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 risks and uncertainties within the meaning of the Private Securities Litigation Reform Act of 1995. Such forward-looking statements reflect the company's current expectations and beliefs but are not guarantees of future performance.
As such, actual results may vary materially from expectations. The risks and uncertainties associated with the forward-looking statements are described in today's news announcement and in the company's filings with the Securities and Exchange Commission, including the company's reports on Form 10-K and 10-Q. REX American Resources assumes no obligation to publicly update or revise any forward-looking statements. I would now like to turn the call over to Stuart Rose.
Stuart Rose: Good morning, and thank you again to everyone for joining with 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. We kicked off construction of the One Earth Energy carbon capture and sequestration project at our Gibson City, Illinois location. We are also on track to complete the first phase of ethanol production capacity expansion to 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 both 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.
This is quite an achievement for our company. Across the board during 2023, the team at REX American consistently looked over the horizon, identified met challenges, proactively drove success throughout the year. I'd like to thank everyone in our company for their hard work and dedication to making REX a successful and profitable company that it is. Our operational excellence has been the cornerstone of our success. Team 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 the additional avenues of growth, we're always looking at facilities that come in the market. Though at present, we do not see opportunities that fit within our standards of quality and which make economic sense to our portfolio. I'm proud of the work we have done and excited about the direction of our company, so 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.
Zafar Rizvi: Thanks, Stuart. 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 credit, which we plan to maximize with the related expansion of our Gibson City ethanol production facilities capacity to 200 million gallons per year. 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 so called alcohol to jet process, for sustainability aviation fuel products, as well as the potential for us to sequester carbon for other producers in our Class VI injection wells.
Both of these are additional business options we are exploring; however, the near-term focus is getting the facility up and running. To that point, we continue to make progress in construction of the CCS, and you can see picture of the in-process project in our updated investors 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 permitting completed. We continue to expect completion of construction of the carbon capture facility by the end of the second calendar quarter of 2024, and beginning of testing after additional power sources are in place. As far as permitting and approvals, 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 zoning 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 into the One Earth Carbon Capture project and associated ethanol production capacity expansion. This is compared to total budget amount of $165 million to $175 million for both the CCS projects and ethanol production expansion at Gibson City. This investment underlines our belief in the project's potential and our commitment to sustainable energy solutions. I would now like to hand the call to our CFO, Doug Bruggeman, to discuss our operational and financial results.
Doug Bruggeman: Thanks, Zafar. I'll begin with our operational results. REX's ethanol sales volume during fiscal year 2023 were 285.9 million gallons, an increase of 7.5% over fiscal year 2022 sales volumes of 265.8 million gallons. Average selling price for our consolidated ethanol volumes was approximately $2.22 per gallon for the full year. Dry distillers 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 fourth quarter 2022. Average selling price for DDG was approximately $213.55 per ton for the full year. Modified distillers grain sales volume were 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, increase of 7.3% over the same period in 2022. Average selling price for modified distillers grain was approximately $103.54 per ton for the full year. Corn oil sales volume in fiscal year 2023 were 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 fourth quarter 2022. Average selling price for REX corn oil products was approximately $0.60 per pound for the full year. 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. 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. 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 in fiscal year 2022. 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 2023, diluted net income per share was $1.16 per share compared to $0.47 per share 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 $280.9 million for fiscal year-end 2022. The cash build during 2023 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. Also related to this conservative approach, REX American ended the year without any bank debt. I'd now like to turn the call back to Zafar.
Zafar Rizvi: Thanks, Doug. I would now like to give some color around how we see ethanol market progressing through the remainder of the calendar 2024. Looking at the ethanol and co-product market, we anticipate continued changes in commodity market. However, 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, put us in better position no matter the market conditions. As far as the market for our most important inputs, corn and natural gas, so far during calendar year 2024, we are seeing pricing run more in our favor than a year ago. 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. Now, I would like to open the things up for questions. Operator?
Operator: Thank you. At this time, we'll be conducting a question-and-answer session. [Operator Instructions] Our first question comes from the line of Jordan Levy with Truist Securities. Please proceed with your question.
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