Green Plains explains Q2 decision to idle portion of its capacity

By Erin Voegele | August 03, 2017

Green Plains Inc. recently released second quarter financial results, reporting it idled approximately 50 million gallons of production capacity during the quarter due to low margins, increased corn prices and other factors.

The company reported a net loss attributable to the company of $16.4 million, or 41 cents per share, for the quarter, compared to a net income of $8.2 million, or 21 cents per diluted share, during the same period of last year. Revenues were $886.3 million, compared to $887.7 million during the third quarter of 2016.

During an investor call, Todd Becker, president and CEO of Green Plains, explained the ethanol margin turned negative to break even following the company’s first quarter conference call, as industry stocks did not draw as compared to previous years. The company generated a consolidated crush margin of 7 cents per gallon, he said, which was 8 cents less than Green Plains generated during the second quarter of 2016. Becker attributed weakness in the ethanol margin to too much ethanol being produced by the industry, compounded by high ethanol inventories. He also said the price of corn was being impacted by less-than-ideal weather conditions, noting that factor is starting to temper itself. As a result, Becker said Green Plains made the decision to idle nine of its plants, reducing production for the quarter by approximately 50 million gallons between May 25 and July 5. “We believe our actions had a positive effect in bringing industry ethanol stocks into a more stable supply and demand balance,” he said.

“While we have returned to full production, we will remain disciplined in our response to supply/demand imbalances,” Becker said.

Becker also said Green Plains has completed the transition of its 50 MMgy facility in York, Nebraska, to industrial B-grade production. In addition, he indicated the company’s 100 MMgy facility in Hopewell, Virginia, is down for upgrades for a couple of months.

"Both U.S. and global demand remain strong for ethanol. U.S. ethanol exports are 48 percent ahead of last year through May, putting us on pace to export between 1.1 to 1.3 billion gallons this year," Becker said. "We are encouraged by the recent change allowing 10 percent ethanol blends in a large portion of Mexico and the momentum we are seeing with E15 station adoption, which has increased demand for higher blends in the U.S."

Green Plains produced 275.5 million gallons of ethanol during the second quarter, compared to 274.3 million gallons during the same period of 2016. The consolidated crush margin was $18.9 million, or 7 cents per gallon, compared to $42.3 million, or 15 cents per gallon, during the second quarter of last year.