Green Plains reports positive impacts of improvement initiatives

By Erin Voegele | August 06, 2019

Green Plains Inc. released second quarter financial results Aug. 6, reporting a net loss of $45.3 million. During an earnings call Green Plains President and CEO Todd Becker discussed progress with the company’s Project 24 initiative, criticized President Trump’s EPA and trade policies for harming the ethanol industry and indicated the company continue to explore the sale of additional production assets.

According to Becker, Green Plains produced 224 million gallons of ethanol during the quarter, representing an 80 percent utilization rate. The company’s Madison plant did not restart during the second quarter as the planned upgrade took longer than expected. Becker said the Madison plant resumed operations last week. “We anticipate achieving a 90 percent run-rate in the coming weeks which will get our ethanol production back to a minimum 90 percent utilization rate for the rest of 2019 across the platform,” he said, noting the company will also continue to drive down its operating cost per gallon.

“We continue to be in a strong financial and strategic position as a result of executing our portfolio optimization plan launched in May 2018…” he said. “We have significantly reduced our controllable expenses, we sold assets, improving the value of our business, and with the recent financing we repurchased almost 10 percent of our shares outstanding, which was another commitment we made to our shareholders as part of the portfolio optimization plan. We do continue to work with interested parties on monetizing additional production assets, and hopefully can achieve this before the end of 2019.”

Referencing the company’s portfolio optimization plan, Becker noted that without all the work Green Plains has already done over the past 18 months, Green Plains “would be having a very different discussion about the future of the company.”

Green Plains reported a consolidated crush margin of negative 9 cents per gallon for the second quarter.  He also noted that if the company had completed Project 24, which aims to achieve an operating expense of 24 cents per gallon, and added protein production across its entire platform prior to the start of the second quarter, the company would have earned 11 cents EBITDA instead of a negative 9 cents.

 “The ethanol industry continued to be impacted by overproduction versus current demand, an overzealous EPA that issued a ridiculous amount of small refinery exemptions, and a trade war that has dragged on too long for this industry,” Becker said. Even with all these negative influences, we are seeing about a break-even EBITDA margin in the first part of the fourth quarter.”

Green Plains exported approximately 75 million gallons of ethanol during the second quarter, which was 33 percent of the company’s total production. Top destinations were Brazil, India, Canada, Saudi Arabia and Korea. While Green Plains originally predicted the U.S. ethanol industry would export 1.7 billion gallons of ethanol this year, a slowdown over the past 90 days has caused the company to revise that estimate to 1.5 million gallons.

During the earnings call, Becker criticized Trump’s trade polies and the EPA for harming the ethanol industry. “Green Plains and the ethanol industry have been hit hard by both policy and geopolitics,” he said. “While the RVP waiver for E15 was a victory that was long overdue, higher blends is the long-term solution for ethanol demand growth. Small refinery exemptions issued by the EPA have absolutely hurt this industry as domestic blending is lower than last year. While the EPA says blending is not being impacted, they are dead wrong and are not doing their work while obviously being influenced by the oil industry. So, here’s the quick math. The oil refining industry obligated parties are not being held accountable by this administration to the 15 billion gallon renewable volume obligation. The benefit of the 2,000 or so stations which sell E15 has been lost in the 2 billion gallons the refinery exemptions given over the last few years. So, with blending down year-over-year by 0.1, which will equate to 145 million gallons annually, the fact that E15 sales are tracking toward 200 million gallons for the year, and with the rest from not needing to comply with the RVO you can find over 1 billion gallons of real demand loss and we’re just getting started.  It is dumbfounding that the EPA, who is responsible for clean air, favors oil over biofuels. Ethanol has proven time and time again to reduce greenhouse gas emissions by 59 percent versus gasoline.”

“Make no mistake, the industry is negatively impacted by this administration’s trade policies and the EPA’s distain for biofuels in general,” Becker continued. “The president needs to understand that the RVP was a long-term need, and we appreciate this, but his EPA needs to be reined in and held accountable for short-term problems in agriculture.”

Green Plains reported a net loss attributable to the company of $45.3 million, or a loss of $1.13 per diluted share, for the second quarter, compared to a net loss of $1 million, or a loss of 2 cents per share, for the same period of 2018. Revenues were $895.9 million, up slightly from $986.8 million during the second quarter of 2018.