Rex reports strong Q3, but cautions margins are deteriorating

By Erin Voegele | December 03, 2020

Rex American Resource Inc. reported a significant increase in gross profit during a third quarter earnings call, held Dec. 3, with the One Earth Energy LLC and NuGen Energy LLC plants running at capacity. The company cautioned, however, that crush spreads are deteriorating.

Douglas Bruggeman, chief financial officer at Rex, said sales increased 43 percent during the quarter, primarily due to increased production levels. Ethanol sales for the quarter were based on 74.6 million gallons, compared to 47.6 million gallons during the same period of last year.

Bruggeman confirmed Rex operated its consolidated plants at full capacity during the three-month period. The company’s consolidated plants include the One Earth Energy facility in Gibson City, Illinois, and the NuGen Energy plant in Marion, South Dakota. The NuGen plant ran a reduced rate during the third quarter of 2019 due to tight corn supplies in the region.

Moving into the fourth quarter, Stuart Rose, executive chairman of Rex, said that the company is still profitable, but cautioned that crush spreads have deteriorated rapidly over the last 30 days. Zafar Rizvi, president and CEO, attributed the decline in crush margin to higher corn prices.

Rizvi also offered an update of the carbon sequestration project under development by the University of Illinois and One Earth Energy. He said the University of Illinois is in the process of evaluating a permit application to drill a test well and expects to receive a permit in the first quarter of next year and drill the test well within the first half of 2021.

Rex currently holds ownership interest in six ethanol plants, including 75.3 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.

Rex reported $124.22 million in sales for its ethanol and byproducts segment for its fiscal third quarter, which ended Oct. 31, up from $86.6 million during the same period of last year. Total net sales were at $124.25 million, up from $86.67 million.

Gross profit for the ethanol and byproducts segment was $18.93 million, up from $28,000. Total gross profit was $17.68 million, compared to a gross loss of $1.76 million during the third quarter of 2019.

Net income attributable to Rex shareholders was $8.8 million, compared to a net loss of $2.1 million. Basic and diluted net income per share attributable to Rex common shareholders was $1.44, compared to a net loss per share of 32 cents during the same period of last year.