Rex reports profitable Q2, expects more challenging Q3

By Erin Voegele | August 30, 2022

Rex American Resources on Aug. 30 released financial results for its fiscal second quarter, the three months ended July 31, reporting increased net sales and revenue. Moving into the third quarter, operations currently remain profitable but the company is facing increased challenges, according to statements made by company officials during an earnings call.

Douglas Bruggeman, chief financial officer at Rex, said sales for the second quarter were up 23 percent. He primarily attributed the increase to higher pricing for ethanol, distillers grains and corn oil. Improved selling prices for these products, however, were partially offset by higher corn and natural gas pricing. Ethanol sales for the quarter were based upon 71.4 million gallons, compared to 69 million during the same quarter of 2021, according to Bruggeman.

Zafar Rizvi, CEO of Rex, said the company experienced some improvement in operating environment during the beginning of the second fiscal quarter. Since that time, however, the company has faced increased challenges, including serious railroad logistics problems that resulted in shipment delays. With an increase in inventory, Rizvi said the company was forced to reduce production. High corn and natural gas prices are also negatively impacting profit margins and production, he added. Despite these challenges, the company currently expects to be profitable during the current quarter.

Rizvi also offered an update of the carbon capture and sequestration project Rex’s One Earth Energy facility is developing in partnership with the University of Illinois. The first test well for that project has already been drilled. Class VI permit documents are near the final draft stage and are expected to be complete soon, Rizvi said.

Rex currently holds ownership interest in six ethanol plants, including 75.8 percent ownership interest in Gibson City, Illinois-based One Earth Energy LLC and a 99.5 percent ownership interest in Marion, South Dakota-based NuGen Energy LLC. The company also holds 10.3 percent ownership interest in Rig River Resources LLC, a company that owns four ethanol plants, including West Burlington, Iowa-based Big River Resources West Burlington LLC; Galva, Illinois-based Big River Resources Galva LLC; Dyersville, Iowa-based Big River United Energy LLC; and Boyceville, Wisconsin-based Big River Resources Boyceville LLC.

Rex reported $240.3 million in net sales and revenue for the fiscal second quarter, up from $195.7 million during the same period of last year. Gross profit was $16.6 million, up from $14.2 million. During the second fiscal quarter, the One Earth Energy and NuGen Energy facilities received approximately $7.8 million in COVID relief from the USDA. The company also recognized approximately $1.6 million in income related to its equity share of relief grants received by the Big River Resources facilities. As a result, Rex reported second quarter income before income taxes and non-controlling interests of $19.2 million, compared to $9.8 million during the same period of last year.

Net income attributed to Rex shareholders from continuing operations was $11.2 million, compared to $5.7 million during the same three-month period of 2021. Basic and diluted net income per share attributable to Rex common shareholders was 63 cents, compared to 44 cents during the same period of last year.