REX repurchases shares, to increase capital investments

By Matt Soberg | October 24, 2011

REX American Resources Corp., an investor with interests in six ethanol plants, authorized repurchase of an additional 500,000 common shares of stock on Oct. 20, taking advantage of investor position and favorable market conditions. The company has repurchased 747,696 shares in this year’s third quarter alone.

Rex will use the purchased shares for future capital ventures, which is something it has been preparing to do over time according to Joe Jaffoni, principal at Jaffoni & Collins Inc., an outside firm providing investor relations for REX. REX plans to leverage its financial position by expanding ownership in existing ethanol facilities and exploring additional investments in other ethanol operations

Due to its strong balance sheet and capital position, REX is able to lower outstanding market shares by investing in itself, according to Jaffoni. He explained that a repurchase reduces the total outstanding shares that are publicly held. As a result, earnings per share increase if the market and profits stay the same, thereby being economically advantageous to the company. To date, REX has approximately 8.69 million shares of common stock outstanding. 

REX’s ability to reinvest is not surprising, considering its history of strong financial results. For example, the company’s investments were successful for the 2010 fiscal year, with increased net sales and revenue in the fourth quarter by nearly 22 percent compared to 2009. REX has had some difficulty on some ethanol fronts, however, but has been able to stay afloat due to timely and strategic transactions. 

“As of July 31, 2011, REX had approximately $84 million of cash at the parent company as well as legacy retail real estate assets (27 stores and one distribution facility) with an approximate net carrying value of $20 million. The company’s intention is to monetize its real estate assets via leases and property sales, as market conditions allow,” according to REX.

With its interest in ethanol, REX has established an operating model where all facilities are located in the Corn Belt near rail transportation. The facilities use proven technology from ICM Inc./Fagen Inc. with a target annual capacity of 100 MMgy per plant. REX’s interests encompass approximately 169 MMgy of the 592 MMgy of total ethanol produced with its ownership stake varying from 5 percent to 74 percent. The plants are One Earth Energy LLC and Patriot Renewable Fuels LLC in Iowa, NuGen Energy LLC in South Dakota, Big River Resources LLC-West Burlington and Big River United Energy LLC in Iowa and Big River Resources LLC, Galva, Ill.