Rex: South Dakota plant negatively impacted by corn availability

By Erin Voegele | September 04, 2019

Rex American Resources Corp. released financial results for its second fiscal quarter of 2019 on Aug. 29, reporting continued challenging conditions for its ethanol operations. Production at the company’s South Dakota plant has been interrupted due to corn availability, according to company officials.

During an earnings call, Zafar Rizvi, president and CEO of Rex, said the company’s ethanol operations are facing a number of issues due to weather-related problems, including the delayed planting of corn, uncertainty with regard to expected corn yields, and an expected delay in corn harvesting. “We have struggled to obtain adequate supply for corn at our facility in South Dakota,” he said, referring to the 100 MMgy NuGen Energy LLC facility in Marion, South Dakota.

“Our plant production continued to be interrupted due to corn availability at this facility,” Rizvi continued, noting the company will be facing a financial loss for the third quarter of fiscal year 2019.

Rizvi also discussed continued uncertainty resulting from trade disputes and small refinery exemptions (SREs) and the resulting negative impacts to the ethanol industry.

Stuart Rose, executive chairman of Rex, said corn supply and low renewable identification number (RIN) prices are going to negatively impact the company’s profitability in the third quarter. He also noted the company still has large cash balances, which could allow it to take advantage of opportunities.

While Rex continues to look for opportunities to expand its presence in the ethanol industry, no transactions are imminent. Rose said profits are going down a lot faster than the price of the plants the company would be interested in. He noted the company’s cash is currently being invested in short-term securities, which has brought some income to the company’s balance sheet.

Rex reported net sales and revenue of $105.9 million for its second quarter, which is the three-month period ended July 31, down from $128.8 million for the same period of last year. The company’s gross profit for its ethanol and byproducts segment was $6.2 million, down from $13.7 million during the second quarter of 2018. The company also has a refined coal operation, which incurred a $2.2 million gross loss and a $2 million loss before income taxes for the quarter, compared to a $4.3 million gross loss and a loss before taxes of $4.8 million for the second quarter of last year. Rex reported income before income taxes and non-controlling interests of $700,000 for the quarter, down from $4.9 million during the same period of 2018.

Net income attributable to Rex shareholders in the second quarter was $2.3 million, down from $9.2 million during the same period of last year. Basic and diluted net income per share was 36 cents, compared to $1.43 per share during the second quarter of 2018.

Rex currently holds 75.1 percent ownership interest in Gibson City, Illinois-based One Earth Energy LLC, 99.5 percent ownership interest in Marion, South Dakota-based NuGen Energy LLC, 10.3 percent ownership interest in West Burlington, Iowa-based Big River Resources West Burlington LLC, 10.3 percent ownership interest in Galva, Illinois-based Big River Resources Galva LLC, 5.7 percent ownership interest in Dyersville, Iowa-based Big River United Energy LLC, and 10.3 percent ownership interest in Boyceville, Wisconsin-based Big River Resources Boyceville LLC.