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01/11 16:18
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Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
The earnings call reveals a decline in key financial metrics, including gross profit and net income, despite increased sales volumes. While there is optimism about future projects and partnerships, unresolved issues such as the CI score and reliance on external approvals introduce uncertainty. The Q&A highlighted management's evasive responses, raising concerns about transparency. The 2-for-1 stock split is positive, but overall, the financial decline and uncertainties suggest a negative sentiment, likely leading to a stock price drop between -2% to -8%.
Ethanol Sales Volumes 70.6 million gallons in Q2 2025, compared to 65.1 million gallons in Q2 2024, reflecting an increase in production capacity.
Average Selling Price for Ethanol $1.75 per gallon in Q2 2025, compared to $1.79 per gallon in Q2 2024, showing a slight decrease due to market conditions.
Dried Distiller Grain Sales Volumes 148,000 tons in Q2 2025, compared to 133,000 tons in Q2 2024, with an average selling price of $143.63 per ton in Q2 2025 versus $164.45 per ton in Q2 2024. The price drop reflects market pricing pressures.
Corn Oil Sales Volumes 23.1 million pounds in Q2 2025, reflecting a 14% increase in volume and a 26% increase in average selling price ($0.54 per pound) compared to Q2 2024, leading to a 46% increase in sales dollars.
Gross Profit $14.3 million in Q2 2025, compared to $19.8 million in Q2 2024, primarily due to lower sales prices for dried distiller grains and higher shipping costs.
Selling, General and Administrative Expenses $6.2 million in Q2 2025, compared to $6.4 million in Q2 2024, reflecting a slight decrease.
Interest and Other Income $3.1 million in Q2 2025, compared to $4.4 million in Q2 2024, reflecting lower rates and lower investments.
Income Before Taxes and Noncontrolling Interest $12.1 million in Q2 2025, compared to $19.5 million in Q2 2024, reflecting lower gross profit and other income.
Net Income Attributable to REX Shareholders $7.1 million or $0.43 per diluted share in Q2 2025, compared to $12.4 million or $0.70 per diluted share in Q2 2024, reflecting lower gross profit and other income.
Cash, Cash Equivalents, and Short-term Investments $310.5 million at the end of Q2 2025, reflecting a strong financial position with no bank debt.
Ethanol Production Expansion: The One Earth facility expansion is progressing steadily, with an expected increase in annual ethanol production capacity to 175 million gallons by 2026.
Carbon Capture and Sequestration: The project is supported by the Big Beautiful Bill Act, preserving 45Q and 45Z tax credits, and is expected to benefit from these credits through 2029.
Ethanol Exports: Exports are running about 10% ahead of 2024 levels through June, with 2025 expected to set a new export record.
Corn Supply: Early estimates suggest a potential record U.S. corn harvest, which is expected to benefit REX's operations.
Corn Oil Production: Corn oil sales volumes increased by approximately 14%, with a 26% rise in prices, leading to a 46% increase in sales dollars.
Operational Efficiency: The energy efficiency initiative at the One Earth facility has been completed, optimizing carbon intensity reduction.
Stock Split: A 2-for-1 stock split was authorized to reward shareholders and increase share liquidity.
Financial Position: REX maintains a strong financial position with $310.5 million in cash and no bank debt, enabling flexibility for growth initiatives and acquisitions.
Carbon Capture and Sequestration Project: The project is dependent on approvals from the county, state, and EPA, which introduces regulatory risks. Delays or denials in obtaining the Class VI injection well permit could impact the project's timeline and financial returns.
Ethanol Expansion Project: The expansion to increase ethanol production capacity to 175 million gallons by 2026 and eventually to 200 million gallons is capital-intensive, with a combined budget of $220-$230 million. Any cost overruns or delays could strain financial resources and impact profitability.
Market Prices for Ethanol and Byproducts: The company experienced a decline in gross profit due to lower sales prices for dried distiller grains and higher shipping costs. Fluctuations in market prices for ethanol and its byproducts could continue to impact financial performance.
Shipping Costs: Higher shipping costs have already impacted gross profit and could continue to be a challenge, especially if fuel prices or logistical issues persist.
Dependence on Government Policies: The company's operations and future earnings are heavily reliant on government policies, such as the 45Q and 45Z tax credits. Any changes or discontinuation of these policies could adversely affect the economics of their projects.
Feedstock Supply and Tariff Issues: While the company anticipates a favorable corn supply, any disruptions in feedstock availability or unresolved tariff-related trade issues could impact margins and export growth.
Ethanol Production Expansion: The One Earth facility expansion is progressing steadily, with an expected increase in annual ethanol production capacity to 175 million gallons by 2026. Plans are in place to further expand capacity to 200 million gallons, supported by favorable tax credits.
Carbon Capture and Sequestration Project: The project is strengthened by the continuation of the 45Q and 45Z tax credits through 2029. The EPA estimates final approval of the Class VI injection well permit by March 2026, earlier than previously expected. The project remains within the revised budget range of $220 million to $230 million.
Third Quarter 2025 Performance: REX anticipates better performance in Q3 2025 compared to the first two quarters, driven by favorable corn supply, strong ethanol demand, and rising exports, which are 10% ahead of 2024 levels. The company expects 2025 to set a new export record.
Market Dynamics and Margins: Early estimates suggest a potential record U.S. corn harvest, which is expected to benefit REX by supporting margin expansion through year-end. Additional export upside is anticipated once tariff-related trade issues are resolved.
Stock Dividend: The Board of Directors has authorized a 2-for-1 stock split, which will be effected by a 100% stock dividend. This will apply to shareholders of record as of September 8, 2025.
The earnings call presents mixed signals: while there's optimism about ethanol production expansion and potential record exports, financial metrics show declines in gross profit and net income. The Q&A reveals uncertainties in tax credits and partnerships, impacting sentiment. Positive elements include increased ethanol sales volume and strong cash reserves. However, lower selling prices and unclear guidance on tax credits and partnerships temper enthusiasm. Considering these factors, along with the lack of market cap data to gauge stock volatility, the stock price is likely to remain stable in the short term, resulting in a neutral rating.
Despite some positive elements like increased ethanol sales volumes and a promising strategic plan for expansion, there are significant uncertainties, particularly around the 45Z tax credits and declining distiller grain sales. The Q&A revealed management's lack of clarity on key issues, which may cause investor concerns. The overall financial performance shows mixed results, with a slight decrease in net income but an increase in earnings per share. These factors combined suggest a neutral impact on the stock price.
The earnings call reveals a decline in key financial metrics, including gross profit and net income, despite increased sales volumes. While there is optimism about future projects and partnerships, unresolved issues such as the CI score and reliance on external approvals introduce uncertainty. The Q&A highlighted management's evasive responses, raising concerns about transparency. The 2-for-1 stock split is positive, but overall, the financial decline and uncertainties suggest a negative sentiment, likely leading to a stock price drop between -2% to -8%.
The earnings call reflects mixed signals: while there are positive aspects like ongoing share buybacks and stable ethanol demand, there are also several concerns. These include reduced financial metrics such as EPS and net income, potential regulatory risks, and unclear management responses. The market may react cautiously due to these uncertainties, leading to a neutral stock price movement in the short term.
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