Green Plains focuses on high-quality alcohol, protein products

By Erin Voegele | August 04, 2020

Green Plains Inc.’s efforts to transform its business are continuing as the company focuses on the production of high-protein ingredients and USP-grade alcohol. As part of that effort, Green Plains is supplying high-grade alcohol to the makers of Lysol.

Todd Becker, president and CEO of Green Plains, detailed the company’s efforts to transform its operations during a second quarter earnings call, held Aug. 4.  

Becker opened the call by expressing pride in the company’s employees, noting that Green Plains continued its high-quality alcohol donation program and partnership with the University of Nebraska-Lincoln during the quarter. Students, staff and professors at the university made hand sanitizers using alcohol provided by Green Plains. “This product was provided for free to various organizations ranging from day cares, to USDA offices, to local school districts—which we believe positively impacted Nebraska health and wellness during this pandemic,” Becker said. “The market value of this production from hand sanitizer program was significant, and a gratitude from those receiving this was simply something we could not have done without a facility like Green Plains, York, Nebraska. We never, ever said no to an organization in need.”

Becker said Green Plains produced approximately 149.9 million gallons of ethanol during the second quarter, which put the company at a utilization rate of approximately 53.5 percent. “We exercised our operational discretion to slow or shutdown plants as a result of the negative margin environment, but we did not furlough any employees during these slowdowns,” Becker continued. “We will continue to follow the data moving forward. While we have seen margins improve off their lows in April and the spot market remains slightly positive, margins are very inverted, which is clearly sending a signal to the market.”

Becker noted that the latest weekly data released by the U.S. Energy Information Administration shows production is now over 950,000 barrels per day, which he said the company believes is too high. Although weekly ethanol stocks are down to levels not seen in many years, they began to rise last week. “Clearly, this industry lacks discipline,” he said.

The consolidated crush margin for the second quarter was 9 cents per gallon, which Becker said was strongly influenced by high-grade alcohol sales. “Fuel ethanol margins were generally weak during the quarter,” he added.

During the call, Becker offered an update of Green Plains’ Project 24 initiative, which aims to reduce the company’s per-gallon operating expense to 24 cents. The Project 24 upgrade is now complete at the Fairmont, Minnesota, plant. “We are starting this plant back up and expect to see similar results to what we have realized at our previously reported Wood River facility as well as our Superior and Fergus Falls plants,” Becker said. Up next for Project 24 is our Mount Vernon location, which should be down by the late fourth quarter.” Project 24 activities have been delayed at the Madison, Illinois, facility and the York, Nebraska, plant. Becker attributed delays at the Madison facility to permitting issues with the state of Illinois.

Becker also discussed Green Plain’s recent announcement that it has secured credit approval for $75 million in financing to continue to fund its protein strategy. The company’s Wood River, Nebraska, plant will be the second facility add high protein production using Fluid Quip Technologies’ patented Maximized Stillage Co-Products system. The plant is expected to begin producing high protein ingredients during the second quarter of 2021. Engineering work is also beginning on a third facility. The company’s ethanol plant in Shenandoah, Iowa, already produces high protein products.

Regarding the production of high-quality alcohol, Becker noted that output from the company’s York, Nebraska, facility was previously exported to industrial markets. Now, that output is almost fully transitioned to domestic use, he said. The York plant is unique, Becker explained, because it was originally a beverage facility. The company plans to upgrade the facility to produce USP-grade alcohol. Becker said Green Plains has been able to redeploy some of the equipment from its dismantled facility in Hopewell, Virginia, as part of the upgrade.

Work is also underway to upgrade the Wood River plant to produce USP-grade alcohol. Once work at the York and Wood River plants is complete, Green Plains will have the capacity to produce approximately 75 million gallons of USP-grade alcohol annually.

Some of that high-quality alcohol production will be used by Reckitt Benckiser, the makers of Lysol. Green Plains on Aug. 4 announced it has executed an agreement through 2021 to supply high-grade alcohol to RB for use in the production of various disinfectants. Green Plains said it will supply the product from its York location.

Green Plains reported a net loss attributable to the company of $8.2 million, or 24 cents per share, for the second quarter, compared to a net loss of $45.3 million, or $1.13 per diluted share, for the same period of last year. Revenues were $418 million, down from $630.6 million during the second quarter of 2019.