Green Plains investor call highlights export demand, MLP IPO

By Erin Voegele | July 29, 2015

Green Plains Inc. has announced second quarter financial results, reporting net income of $7.8 million, or 19 cents per diluted share, compared to $32.3 million, or 82 cents per diluted share, during the same quarter of 2014.

"Strong U.S. ethanol demand, due primarily to lower gasoline prices, resulted in an improvement in our second quarter results compared to the first quarter," said Todd Becker, president and CEO of Green Plains. "While ethanol margins remain variable, we believe, based on the current forward curve, our diversified platform will generate profitable results for the full year of 2015. Our strong balance sheet provides us with significant flexibility in capital deployment and allocation for the remainder of the year."

"Demand for ethanol remains robust both domestically and globally. Our expansion projects are progressing to meet the demand growth we expect from E15 in the U.S. and expanding blend rates in foreign markets," Becker continued. "The long-term picture is very exciting for our company and industry."

During an investor call, Becker noted the company’s daily average ethanol production rate was 93.9 percent of capacity during the second quarter. The company produced approximately 238.7 million gallons of ethanol during the three-month period. Becker indicated Green Plains’ ethanol plants achieved yields of 2.84 gallons per bushel of corn during the quarter, up from 2.81 during the same period of the prior year.

In addition to ethanol, the company produced 631,000 tons of distillers grains and 62.4 million pounds of corn oil during the quarter. According to Becker, Green Plains achieved record yields of 0.74 pounds of corn oil per bushel of corn during the second quarter.

Becker indicated approximately 13.5 percent of Green Plains’ ethanol production was exported during the second quarter, a significant increase over the 2.5 percent of production that was exported during the same quarter of last year. “We continue to see strong export interest for U.S. products, both in the spot and forward markets,” he said.

Becker estimated industry-wide ethanol exports reached 377 million gallons through the end of May. He said Green Plains continues to predict the U.S. ethanol industry will export between 800 million and 1 billion gallons this year. He noted 18 percent of Green Plains’ July production and 21 percent of its August production is already slated for export. Strong demand for exports is expected to continue, with 8 percent of the company’s February 2016 production already sold to export customers.

During the call, Becker also addressed the recently completed initial public offering (IPO) of Green Plains Partners LP. Green Plains basically spun its terminal assets and rail car fleet into the new entity, he explained, noting that it qualifies as a master limited partnership (MLP). “The MLP equity market will allow us to finance our downstream ethanol storage and transportation more efficiently through this favorable and well-tested market,” he said. “We firmly believe this structure will benefit both the partnership and Green Plains. The one business unit that has had the slowest growth over the last seven years was our downstream business. While we are certainly happy with the downstream assets we have built and acquired, it was hard to compete for acquisitions with other MLPs. This new entity will allow us to accelerate our growth plans in that segment of our business. As we have told many of our new investors, we are the baseload volumes at many terminals with many products, which allows us to view these assets in a distinctly different way from an acquisition standpoint than many of our competitors.” Becker also noted that the MLP can be used to revalue part of the ethanol facility. “We believe this is a good start to revaluing our assets over time and is the first MLP based primarily on ethanol cash flows,” he continued. “We are very proud of this accomplishment and it puts the company in a very strong position for growth and financial flexibility.”

In addition, Becker addressed Green Plains’ expansion plans, noting the company continues to make progress on its 100 million gallon ethanol expansion project and has added 20 million bushels of additional grain storage adjacent to its ethanol plants over the past year years.