Green Plains announces positive second quarter, restarts plant

By Holly Jessen | August 02, 2013

Green Plains Renewable Energy Inc. announced positive results in its second quarter, which ended June 30. The company purchased its tenth ethanol plant in the quarter, completing restarting it last week, said Todd Becker, president, CEO and director of the company, during a July 31 conference call.

A purchase agreement for the former NEDAK Ethanol LLC ethanol plant located in Atkinson, Neb., was signed in June. The 44 MMgy facility, which Green Plains expects will add about 50 MMgy to its annual ethanol production totals, was temporarily idled in June 2012 and purchased at foreclosure auction by the senior lenders of the facility in January. “We bought the plant with the expectation we can get it up and running very quickly, and we have achieved that with very little additional capital needed,” Becker said during the financial results call. “The plant was a very familiar size and technology to our operators and engineers.” He added that corn oil extraction will be installed at the facility by the end of 2013.

The company’s outlook for the third quarter is positive, considering the “steady improvement” in ethanol margins in the last 90 days, Becker said. Still, there’s work to do, especially considering the recently volatile margins. “The corn basis moves alone have not been for the faint for heart,” he said, adding that the current margin environment was much improved over a year ago.

Looking back at second quarter results, all business segments made a contribution to profits in the quarter, Becker said. The company is on pace to pay more than $50 million in principal on its term debt this year and has plans to do the same in 2014. “More importantly, the stock price has been trading above the price on the convertible debt outstanding,” he said. “And if we stay there, we will have another $90 million of debt fall off in 2015 not including other scheduled principal payments. We feel our goal of zero net term debt in three years is attainable absent additional growth opportunities that may arise.”

Jerry Peters, CFO and treasurer, said, on a consolidated basis, revenues for the second quarter were $805 million, down 8 percent from a year ago. That was primarily a result of lower sales in grain, agronomy and lower volumes of ethanol sold. However, that was partially offset by higher average prices for both ethanol and distillers grains. Looking specifically at the ethanol production segment, $18 million more in operating income was generated compared to the second quarter of 2012.

The company produced 172 million gallons of ethanol in the second quarter, which brought in $7 million in operating income. Production numbers were at about 93 percent of the company’s full operating capacity. “We anticipate running our nine legacy plants at a slightly higher level in the third quarter,” he said.

Also of note was the $9.2 million in operating income generated in the marketing and distribution segment, up significantly from the $2.9 million in operating income in the same time period last year. “Similar to the first quarter of 2013,” Peters said, “the increase between the two periods is mainly due to our railcar initiative, a strong contribution from the Birmingham unit-train terminal, which began operation in December of 2012 and increased trading and logistics activities.”  

Looking at the corn situation, Becker reported that the company’s corn needs are covered through August and most of September. Although Green Plains typically breaks up planned maintenance throughout the year, with the end of the crop year coming, plans are to go into maintenance downtime at all of its plants in late August and September. “Between planned downtime and beginning of harvest, we are in very good shape to finish the crop year,” he said, adding that this year’s corn crop looks good so far and could potentially shape up to be the largest ever harvested.

The company’s efforts to expand its grain storage capacity is on track. Becker called it excellent timing considering the potential for a large crop this fall. “We continue to work on further development plans in our agribusiness segment as grain storage and handling is essential to the operation of our business,” he said.

Ethanol yield in the second quarter was at 2.83 gallons of ethanol per bushel of corn, including some scheduled maintenance that had a small impact on yield. The trailing 12-month average yield is 2.84. Green Plains is installing fine grind technology at its plants as a part of its yield-improvement efforts. The first installation was at its worst yielding plant, with the next step being the company’s best yielding plant, Becker said. “By rolling them on both of those places, the results were … good enough for us to say now we can deploy it in all the ones in between,” he added.

In answer to a reporter’s question, Peters said the capital expenditure for installing fine grind at one plant was less than $2.5 million. Jeff Briggs, chief operating officer, expanded on that by saying that total investment would be about $15 million. The strategy for roll out would be much like how the company installed corn oil extraction. “We're working on that project as we speak and that's something that we do anticipate as kind of the major capital item over the next 12 to 18 months,” he said.

Green Plains produced 0.65 pounds of corn oil per bushel of corn in the second quarter. Over the last 12 months, total production added up to 151 million pounds and generated $30 million in operating income, Becker said. Speaking specifically about the second quarter, Peters said corn oil operating income was $7.8 million. He also said corn oil production contributes about 5 cents for every gallon of ethanol produced.