Green Plains talks improved margins, diversification efforts

By Holly Jessen | May 07, 2013

Green Plains Renewable Energy Inc. experienced significant financial improvement from the first quarter of 2012 to the first quarter of 2013, the company reported during a May 1 conference call.  “Our performance over the last 12 months shows the great opportunity that we have in front of us, coming out of the most difficult industry environment we have seen in our history,” said Todd Becker, president and CEO.

The company’s first quarter, which ended March 31, resulted in net income of $2.6 million, or 8 cents per diluted share. In the first quarter of 2012 the company saw a net loss of $12.7 million or negative 39 cents per diluted share. (Green Plains noted that a one-time charge of $2.4 million, after taxes, happened in quarter one of 2012, the result of a legal settlement.) On the revenue side, Green Plains brought in $765 million in the first quarter of 2013, compared to $775.4 million in the same time period of last year. “The benefits of our multi-year diversification strategy, combined with operational excellence and risk management were all factors that contributed to the positive results, with nearly a $24 million increase in operating income year over year,” Becker said.

The company sold about 170 million gallons of ethanol, or about 92 percent of its total production capacity, in the first quarter. Ethanol margins have improved and Green Plains expects that will continue to improve in the second quarter. “Margins started to expand in the last four weeks of the quarter, which positively influenced the end of Q1, but more importantly, allowed us to lock in Q2,” Becker said. He added that the company has a goal of bringing in $60 million of non-ethanol operating income in 2013 and he believes that is on track.

Ethanol yield averaged 2.85 gallons per bushel of corn, Becker said, adding that Green Plains has been running slower with the goal of fermenting more starch for higher yields. The company constantly monitors the situation on whether to go for maximum yield or production volumes. Later on in the call, Jerry Peters, the company’s chief financial officer, said Green Plains expects to run at closer to 95 percent of total capacity through 2013.

The non-ethanol operating segment brought in record operating income of $21.2 million in the first quarter compared to $9 million for the same period last year. That includes corn oil production, agribusiness, and marketing and distribution segments.

Peters also highlighted the company’s very strong performance in its marketing and distribution segment. Revenues were up $43.5 million compared to the first quarter of 2012. Comparing the same time periods, gross profit and operating income increased $12.9 million and $12.5 million, respectively. The increases were primarily due to the company’s commodity trading and logistics work, its railcar leasing program and Birmingham unit-train terminal, Peters said.

The company’s railcar leasing program, for which it leases out railcars to transport crude oil, brought in $4.6 million in operating income in the first quarter. The company expects that income to continue fairly consistently throughout the year, Becker said, although he added Green Plains may scale back somewhat if ethanol margins continue to improve, so more railcars can be used to transport ethanol.

The 96-car unit train terminal in Birmingham, Ala., which is operated by BlendStar LLC, a wholly-owned subsidiary of Green Plains, also contributed positively to the strong performance in the marketing and distribution segment. The terminal opened earlier than expected in December, Becker said.

Finally, Becker talked about the company’s work to expand its trading and logistical activities, one of its two key growth initiatives. (The other one is rebuilding its agra-business segment.) Green Plains is investing $5 million to build about 8 million additional bushels of storage, a project that is expected to be complete by September. The initiative will put the company in a good position to compete for corn this fall, he said. The plan is to add more storage capacity in 2014. The storage infrastructure will be used to serve the company’s own internal demand but in some locations will also give the company the ability to sell grain externally.