Rex idles NuGen plant, explores carbon sequestration project

By Erin Voegele | March 26, 2020

Rex American Resources Corp. released fiscal fourth quarter financial results on March 26. The company discussed a potential carbon capture and sequestration project under development at its One Earth Energy plant in Illinois and discussed the impact of COVID-19 on plant operations.

During an earnings call, Stuart Rose, executive chairman of Rex, said the company’s entire operation is running at a loss, mostly due to its ethanol operations. He said a bad corn harvest last fall, low oil prices, and the COVID-19 outbreak are causing problems for the ethanol industry.

Zafar Rizvi, CEO of Rex, said the company’s NuGen facility in South Dakota has struggled to obtain an adequate supply corn. He said the facility produced no ethanol in October due to a lack of corn availability. In response to COVID-19 and the current challenging industry environment, he said Rex made the decision last week to keep the plant at hard idle until the threat of COVI-19 is reduced and gross margin increases. Similar steps may be taken at the One Earth Energy plant since the governor of Illinois has issued stay-at-home orders and the gross margin has declined, Rizvi continued. As a result, Rizvi said Rex is expecting to report a loss for its ethanol segment for the first fiscal quarter of 2020, and likely the second fiscal quarter as well, if the threat of COVID-19 doesn’t diminish and market conditions do not improve.

According to Rizvi, Rex is following Center for Disease Control recommendations and state and federal guidelines regarding COVID-19 in an effort to keep employees safe.

While operations are being negatively impacted by market conditions and COVID-19, Rex is also working on improvement projects. Rizvi said the company is working with the University of Illinois to explore a carbon sequestration project at the One Earth Energy plant. Geological mapping, characterization and modeling have demonstrated the potential to store carbon dioxide captured at the plant in Mount Simon Sandstone, a local geological formation. He cautioned, however, that the project is in the very early stages.

During the call, Rose also briefly discussed the possibility of purchasing new ethanol plants. He said if a very good ethanol plant is offered for a bargain price, Rex would consider pursuing an acquisition.

Rex currently holds 75.2 percent ownership interest in Gibson City, Illinois-based One Earth Energy LLC, 99.5 percent ownership interest in Marion, South Dakota-based NuGen Energy LLC, 10.3 percent ownership interest in West Burlington, Iowa-based Big River Resources West Burlington LLC, 10.3 percent ownership interest in Galva, Illinois-based Big River Resources Galva LLC, 5.7 percent ownership interest in Dyersville, Iowa-based Big River United Energy LLC, and 10.3 percent ownership interest in Boyceville, Wisconsin-based Big River Resources Boyceville LLC.

Rex also operates a refined coal segment.

The company reported $120.9 million in net sales and revenue for the fiscal fourth quarter of 2019, the three-month period ending Jan. 31, up from $113.3 million reported for the same period of 2018. The increase is attributed to higher ethanol pricing, which more than offset lower distillers grains prices and a 9.2 percent decrease in ethanol gallons sold.

Gross profit for the company’s ethanol and byproducts segment reached $8.1 million for the quarter, up from $5.4 million in the fourth quarter of fiscal year 2018.

Net income attributable to Rex shareholders reached $4.4 million for the quarter, up from $1.1 million for the same period of 2018. Basic and diluted net income per share attributable to Rex common shareholders was 70 cents, compared to 17 cents in the fourth quarter of 2018.