Green Plains to focus on high-protein feed products

By Erin Voegele | February 17, 2020

Green Plains Inc. officials announces plans to transform into an ag tech-focused company that produces sustainable high-protein and novel feed ingredients in addition to biofuels during a fourth quarter earnings call held Feb. 11.

“As 2019 continued to be a very challenging year for the company, we have launched our Total Transformation Plan to become a leading sustainable high protein and novel feed ingredient producer, while returning to being a low cost, low carbon, closed loop and sustainable biofuels producer,” said Todd Becker, president and CEO of Green Plains, in a statement. “This was made possible by the completion of our Portfolio Optimization Plan where we reduced our debt by almost $1 billion and sold approximately $780 million of assets. Our sustainable high protein feed project at Shenandoah is in the final stages of completion and will begin commissioning in February, with full production expected during March. We have increased our offtake quantities with our customers, further validating the economic impact of this project as we embark on a plan to roll out this technology across our platform.”

During the company’s fourth quarter earnings call, Becker noted Green Plains produced approximately 239 million gallons of ethanol during the quarter, operating at a utilization rate of approximately 84.5 percent. “This was lower than our stated goal of 90 percent,” he said, but noted it was the highest utilization rate in two years. In December, the utilization rate reached 94 percent.

The company’s ethanol plants in Wood River, Nebraska, and Madison, Illinois, were shut down for a portion of the fourth quarter to complete Project 24 upgrades. Green Plains’ Project 24 Initiative aims to reduce the company’s per-gallon operating expense to 24 cents. Becker said both plants came back to full rates in December and are expected to continue to operate well during 2020.

According to Becker, the consolidated cost margin for the fourth quarter was 2 cents per gallon. He said the spot crush continued to decline during the quarter as industry production edged higher. While over supply continues to impact the ethanol industry, Becker said Green Plains will continue to focus on things within its control. This includes reducing operating expenses through the Project 24 Initiative and extracting value through new sustainable feed ingredients by capitalizing on investments in protein technology.

Becker said the first Project 24 modification at its Wood River plant continues to exceed expectations and has left the company excited about completing the rollout across its remaining non-ICM plants. In December and January, Becker said the OpEx at the Wood River plant averaged 21 cents per gallon. According to Becker, the Wood River plant operated at a similar cost structure to its ICM plants in December. Those results show that the company’s Project 24 modifications can make Green Plains’ Delta-T and Vogelbusch plants competitive with its best ICM plants.

Becker said Green Plains is making progress with its next three Project 24 upgrades, and expects them to be running in March or April. The remaining Project 24 upgrades to non-ICM plants are expected to be complete during the second and third quarters of 2020.

With the completion of its Project 24 Initiative expected before the end of the year, Becker said the company thinking about its next step to drive platform costs even lower in the future. “The key here is that in order to be successful in our transformation to protein, we must continue to reduce our operating costs so we can run in any environment,” he said.

Becker said that the company’s ethanol plant in Shenandoah, Iowa, began commissioning the company’s first high-protein production facility in early February. “We expect the dryer to come online 30 days later to achieve maximum production shortly thereafter,” he said, noting that for all intents and purposes, Shenandoah’s production output is already spoken for. “We have begun the engineering for our second and third high-protein locations and expect one more unit to be fully constructed before the end of the year,” he added. The final decisions on the next locations to add the high-protein feed technology are expected to be announced soon.

Becker also discussed Green Plains’ partnership with Novozymes, noting the company believes it will be able to increase the value of its products and provide solutions for nutritional partners, with the possibility of utilizing advanced biology with potential pathways up to 60 percent protein. He said a 60 percent protein product could add as much as 57 cents per gallon at prices near $1,200 per ton. “We are on a path to transform this company to be an ag tech-focused company, maximizing the value of the assets in coming years—and it begins now,” Becker said.

In addition, Becker announced that Green Plains was recently awarded a patent for the novel process of using thin stillage from an ethanol plant to produce algae oil and protein-rich biomass. The company has been quietly and successfully scaling that technology at its York, Nebraska, pilot and research facility, he added. The bolt-on technology is now in full trials for use in aquaculture feeds, Becker said, noting the technology could be applied to any corn-based ethanol plant.

Green Plains reported a net loss attributable to the company of $39.7 million, or $1.13 per diluted share, for the fourth quarter, compared to net income of $53.5 million, or $1.13 per diluted share, for the same period of 2018. Revenues were $715.5 million, compared to $583.5 million for the same period of last year.

Revenues attributable to the company were $2.4 billion for the full year 2019, compared to $3 billion in 2018. Net loss attributable to the company for 2019 was $166.9 million, or $4.38 per diluted share, compared to a net income of $15.9 million, or 39 cents per diluted share, for 2018.