Green Plains - Earnings Call - Q1 2025

Executive Summary

• Q1 2025 was weak on profitability despite stable revenues: net loss widened to $72.9M (−$1.14 EPS) vs $51.4M (−$0.81 EPS) YoY; Adjusted EBITDA of −$24.2M, impacted by lower crush margins and $16.6M restructuring costs.
• Management initiated decisive restructuring, Eco‑Energy marketing partnership, and formed a Risk Committee; guided to quarter‑by‑quarter positive EBITDA for the remainder of 2025 and to exit FY25 with ~$93M SG&A annualized run‑rate and corporate/trade SG&A in the low‑$40M annualized range.
• Carbon capture “Advantage Nebraska” compression and lateral pipeline construction are underway, targeting early Q4 2025 start‑up; active monetization plans for 45Z tax credits and voluntary offsets, with liquidity enhanced via a $30M Ancora facility and mezzanine notes maturity extension to May 15, 2026.
• Key trading catalysts: execution on cost reductions and hedging discipline, progress/milestones on carbon start‑up and credit monetization, and protein commercialization traction (aqua/pet), against a backdrop of improving ethanol margins into Q2–Q3 per management.

What Went Well and What Went Wrong

What Went Well

• 100% utilization across nine operating plants; OpEx per gallon down >$0.03 since Q4 2024; record operational discipline with KPI‑driven execution.
• Board/leadership actions: Risk Committee created; Executive Committee leading; Board refreshed with cooperation agreement with Ancora; SG&A cost program well ahead of plan toward $50M annualized savings.
• Strategic partnerships and commercialization: Eco‑Energy selected as exclusive ethanol marketer to reduce logistics costs and improve working capital (AR turns, inventory); UHP Sequence 60% shipments started; expanding aqua and pet food sales and bulk shipping from Q3.

What Went Wrong

• Ethanol crush margin and profitability deteriorated: consolidated crush margin −$14.7M vs −$9.3M YoY; Adjusted EBITDA −$24.2M vs −$21.5M, driven by lower segment margins and $16.6M restructuring costs.
• Q1 SG&A rose to $42.9M (+$11.1M YoY) on restructuring/severance; net loss widened to −$72.9M (EPS −$1.14) as interest expense increased due to lower capitalized interest.
• CST (Clean Sugar Technology) temporarily paused due to external wastewater constraints; Fairmont idled; protein markets remained pressured by soybean meal oversupply, delaying margin uplift.

Transcript

Operator (participant)

Good morning and welcome to the Green Plains First Quarter 2025 earnings conference call. Following the company's prepared remarks, instructions will be provided for Q&A. At this time, all participants are in a listen-only mode. I will now turn the call to your host, Phil Boggs, the Chief Financial Officer. Mr. Boggs, please go ahead.

Phil Boggs (CFO)

Thank you and good morning, everyone. Welcome to the Green Plains First Quarter 2025 earnings call. Joining me on today's call are the members of our Executive Committee: Michelle Mapes, Interim Principal Executive Officer and Chief Legal and Administration Officer; Jamie Herbert, Chief Human Resources Officer; Chris Osowski, Executive Vice President, Operations and Technology; and Imre Havasi, Senior Vice President, Head of Trading and Commercial Operations. There is a slide presentation available, and you can find it on the investor page under the Events and Presentations link on our website. During this call, we will be making forward-looking statements, which are predictions, projections, or other statements about future events. These statements are based on current expectations and assumptions that are subject to risks and uncertainties.

Actual results could materially differ because of factors discussed in this morning's press release, in the comments made during this conference call, and in the risk factors section of our Form 10-K, Form 10-Q, and other reports and filings with the Securities and Exchange Commission. We do not undertake any duty to update any forward-looking statement. Now I'd like to turn the call over to Michelle Mapes.

Michelle Mapes (Interim Principal Executive Officer and Chief Legal and Administration Officer)

Thank you, Phil. To be direct, our performance has not met the expectations of this investment community or our own, and that is changing. As an Executive Committee and as a company, we are fully aligned and deeply committed to disciplined execution, supported by the clear and objective measurement of our progress every day. Our team members at Green Plains understand not only the strategic goals but their roles in delivering against them. We're focused on returning this company to sustained profitability and, with that, earning back your confidence. Over the past few months, we've executed a zero-based approach to cost structure, leading to decisive actions across the organization. We've exited non-core operations, launched the sale of non-strategic assets, and focused on a culture of operational excellence throughout the platform. These changes are driving meaningful efficiencies that position us to compete with greater focus and agility.

On our last call, we committed to $50 million in cost reductions. I'm pleased to report we are well on track. We noted before we already achieved $30 million annualized cost savings, and our recently announced ethanol marketing partnership, among other internal initiatives, has unlocked another $15 million in annualized savings. Beyond strengthening our working capital, the EcoEnergy initiative delivers scale, market access, and logistics efficiencies that would have been very difficult to achieve on our own. We expect these gains to show up in the bottom line going forward, especially through transportation and marketing synergies. We also have a clear line of sight to the final $5 million of targeted savings, which we expect to come not only from SG&A but also from process improvements and commercial execution. We are empowering our top performers with clear goals, metrics, and accountability, and they are delivering.

As a result of this effort, we anticipate our consolidated SG&A run rate to decline meaningfully from the $118 million recorded in 2024 to exit this year at an estimated $93 million annualized run rate. Corporate and trade functions are expected to be reduced to $12-$13 million per quarter for the remainder of this year, with the line of sight to reducing that to the low $40 million range on an annualized basis by year-end, which is much improved compared to the $73 million of corporate and trade SG&A incurred in 2024. This is a company that is focused, aligned, and committed to continuous improvement and a return to profitability, and we're just getting started. Let me now hand it over to Chris Osowski to talk operations.

Chris Osowski (EVP for Operations and Technology)

Thanks, Michelle. Overall, our platform continues to perform operationally at a high level. Our nine active plants achieved 100% utilization in Q1, our highest rate on record, driven by increased discipline, accountability, and daily measurement of key operating metrics. We are achieving an overall reduction in OPEX per gal of more than $0.03 since Q4 of 2024. The sense of urgency across the organization is tangible, and it's making a difference. Looking ahead, the RTO project in Obi is nearing completion. Once fully online, we expect protein yields to exceed 3.5 lbs per bushel, with ethanol capacity returning to over 120 million gal annually. With Q2 crush margins strengthening, we're actively hedging our production to secure value. Execution and performance measurement remain daily imperatives for our teams. We're institutionalizing a culture of operational excellence across Green Plains, where every process, cost, and decision is underpinned by discipline and data.

Our approach is very clear: safety first, no waste anywhere, every dollar spent must earn a return, and every role must justify its value. This mindset is being driven across five core areas. First, commercial discipline. We're actively and aggressively pushing price terms and volume across procurement, logistics, and sales while upholding standards. Second, cost ownership. Each cost is being scrutinized as if it was its own P&L. We're laser-focused on reducing variable costs per gal and improving our fixed cost absorption. Third, capital efficiency. All capital, both fixed and working, is being held to strict ROI standards. Value creation is the only justification for our investments. Fourth, people accountability. We're applying a true zero-based approach to roles and responsibilities. Every function is rebuilt from the ground up based on what the business needs today and what delivers measurable value. Last, KPI-driven execution.

We manage by metrics, not anecdotes. Plants are measured daily against clear KPIs, and best practices are being shared across our network. We're currently executing focused operational excellence initiatives based on maintenance, cost control, enzyme and chemical optimization, and energy efficiency, both with respect to price and usage. These actions are already showing impact and will drive both short-term gains and long-term margin improvement. As previously announced, we made the strategic decision in Q1 to pause our Clean Sugar Technology initiative in Shenandoah. The technology has been proven and is capable of producing refined 95 dextrose, and we have received all of our necessary food safety certifications. However, wastewater challenges outside of our walls and commercial development timing have prevented us from operating the asset continuously for refined product.

Operating at a partial capacity or campaigning was not economically viable, so we redirected our efforts to maximize ethanol production at full rate. The temporary pause allows us to run a simplified fermentation recipe at the Shenandoah plant, which delivers improved ethanol, oil, and protein yields while further reducing OPEX costs. This shift has had a $10 million annualized positive impact on the Shenandoah site, but we remain fully committed to CST and expect to resume commissioning once a technical solution is in place, currently projected for late fiscal 2026. Now I will pass the call over to Imre to talk about the commercial and market update.

Imre Havasi (SVP and Head of Trading and Commercial Operations)

Thank you, Chris, and good morning, everyone. Ethanol market fundamentals saw typical seasonal weakness through Q1, driven by the industry's high production levels and elevated inventory. However, U.S. ethanol exports continue to be a bright spot. We expect that 2025 volumes could surpass last year's record of nearly 2 billion gal. Encouragingly, ethanol margins have strengthened heading into Q2 and Q3, with positive contributions now forecasted for our network. This improvement is supported by firmer corn oil fundamentals driven by widely anticipated increases in renewable volume obligations, drawdowns in ethanol stocks due to the spring maintenance season, stronger seasonal blending demand, and a good start to 2025-2026 corn planting, anticipated to result in the largest acreage since 2013, currently estimated at 95.3 million acres by the USDA. We have secured a little more than half of our Q2 crush margins at favorable levels.

This is consistent with our new, disciplined, and proactive approach to hedging and margin management. You have heard Michelle and Chris talk about the strategic shift we are executing and the actions we are taking to significantly increase our productivity and cost competitiveness. As market conditions improve, along with our actions, Green Plains' bottom line is showing notable improvement already in Q2. Last month, we announced a long-term strategic marketing partnership with EcoEnergy. This collaboration enhances our scale, optimizes transportation and marketing economics, and positions us to fully capture the value of our future ultra-low-carbon ethanol production. For our protein business, we've also made great progress. Commercial shipments of Sequence 60% protein have started. The product is starting to be included in salmon diets with our South America customer base. We have also expanded our sales of 50 protein ultra-high protein product to Ecuador for shrimp feed applications.

Between these two products, we expect to have volume growth from 20,000 tons in 2024 to over 80,000 tons in 2025 shipped to the South American market. These new shipments will be aided by efficiency improvements gained through bulk shipping, which will start in Q3. We are also gaining momentum in pet food, which is a key strategic growth area. Trials are underway with two major manufacturers who are not yet customers, and early feedback is very promising. Our high-protein product works very well in pet food diets. We expect these opportunities to convert to commercial sales by Q4 of this year or early 2026. We plan to increase our sales in the pet food segment from 60,000 tons today to over 100,000 tons in 2026. With that, I will hand the call to Phil for a financial update.

Phil Boggs (CFO)

Thanks, Imre. For the first quarter, we reported a net loss attributable to Green Plains of $72.9 million, or a loss of $1.14 per share, which included $16.6 million in one-time restructuring charges tied to the closure of Fairmont, the exit of other non-core operations, cost reduction programs, and leadership transitions. While these actions impacted the quarter, they were necessary steps to realign the business and accelerate our return to profitability. By comparison, we reported a net loss of $51.4 million, or $0.81 per share in Q1 of 2024. We are supremely focused on improving these numbers as they are not acceptable. These results are the reason why we have materially changed our go-to-market operating strategy and the human capital we are using to execute our plan. We are moving with a keen sense of urgency and precision to reshape our financial profile.

We are executing a clear plan to improve operating leverage, lower our cost base, and position the company to benefit fully from the carbon and protein opportunities in front of us. Revenue for the quarter was $601.5 million, up 0.7% year over year. While Q1 market conditions were challenged, we've taken proactive steps to secure better margin performance going forward, including reducing our costs, locking in favorable crush margins for Q2, and expanding our commercial reach through our partnership with EcoEnergy. On operations, as Chris mentioned, we achieved a record 100% utilization rate across our nine operating plants, demonstrating strong asset performance and operational discipline. Including the Fairmont asset, total fleet utilization was 87.7% compared to 92.4% last year. We anticipate maintaining a mid-90% utilization for the remainder of Q2, even with scheduled maintenance underway.

Adjusted EBITDA, excluding restructuring charges, was a $24.2 million loss compared to a negative $21.5 million in Q1 last year. These results reflect a transition period as we reset the cost base and scale new revenue streams. SG&A totaled $42.9 million, up $11.1 million from the prior year due to restructuring and severance charges. However, we expect this to trend down materially through the rest of the year. Our annualized run rate is already moving lower from the $133 million in 2023 and the $118 million in 2024 and is on track to exit the year at approximately $93 million annualized run rate, including a corporate and trade SG&A target in the low $40 million range annually as we exit the year. Depreciation and amortization was $22.4 million, up modestly year over year.

Interest expense was $8.9 million, an increase primarily driven by the absence of capitalized interest from prior year project construction. Income tax was $0.1 million. We continue to carry a federal net operating loss of $197.6 million, which provides future tax efficiency, and our normalized tax rate going forward is expected to remain in the 23%-24% range. On the balance sheet, our consolidated liquidity at quarter-end included $126.6 million in cash equivalents and restricted cash, $204.5 million in revolver availability, $48.7 million of unrestricted liquidity available to corporate. Since quarter-end, we have delivered on our plan to strengthen liquidity. We executed and are continuing to execute on non-core asset sales. We have enhanced credit capacity with a new $30 million line of credit, and we extended our $125 million mezzanine notes by about three months while we actively pursue refinancing or a full payoff through additional asset sales.

We are confident in resolving this in the coming months. Overall, we've improved our unrestricted liquidity at corporate as of May 7 to $89.2 million. Capital expenditures in Q1 were $16.7 million, including targeted growth, maintenance, and regulatory investments. For the remainder of 2025, we expect capital expenditures to be in the range of about $20 million, excluding the carbon capture equipment for Nebraska, which is already fully financed and on schedule. In short, we are taking decisive action across all fronts: cost, capital, liquidity, and strategy to position Green Plains for sustained profitability and long-term value creation. With that, I'll turn the call back to Michelle for an update on our strategic review, carbon initiatives, and regulatory outlook.

Michelle Mapes (Interim Principal Executive Officer and Chief Legal and Administration Officer)

Thank you, Phil. Let's start with carbon. Our carbon strategy remains on track and is central to unlocking our long-term value. Construction of carbon compression infrastructure to support our Advantage Nebraska initiative is advancing on pace. Equipment deliveries are on schedule and remain on track to initiate operations across all targeted sites later this year. Lateral pipeline construction is well underway, and all key milestones point to a startup in early Q4. In parallel, we're actively engaged in the marketplace to monetize our 45Z and Q credits with good interest and early momentum. We expect to provide a meaningful update on these efforts at our next quarterly call. We remain encouraged by ongoing policy discussions in Washington regarding a potential extension of 45Z and the possible elimination of the indirect land use change from the GREAT model.

These policy shifts, if enacted, could significantly improve our CI scores and further enhance the value of our carbon platform. As it relates to our strategic review, we continue to work closely with BMO and MOLUS. All potential PAZs remain active and under consideration, including a company sale, asset divestitures, or other material transactions. We firmly believe the market is undervaluing our platform, particularly the long-term opportunity associated with carbon monetization. We've also strengthened our board. We welcome Steve Furcich, Carl Grassi, and Patrick Sweeney to our board, and we thank Ejnar Knudsen and Alain Treuer for their service as they step off the board at the upcoming annual meeting. Our new directors are already contributing meaningfully to our strategic direction. In closing, here are some key takeaways I'd like to leave you with.

Based on current market conditions, actions we have taken, and our focus on execution, we are currently positive EBITDA for the remainder of the year. Our carbon platform construction is progressing as planned, with compression and pipeline infrastructure on schedule for early Q4 startup. Active monetization of our 45Z and Q credits is underway, with an update expected next quarter. Operational excellence is driving measurable performance gains. Our $50 million cost reduction target is nearly complete, with the remainder in sight. Our strategic marketing partnership with EcoEnergy is active, providing scale and logistics efficiencies for our ultra-low CI ethanol. Our sequence protein platform is scaling with expanded aquaculture and pet food demand, and we are executing disciplined risk management daily. Our non-core asset monetizations are progressing and supporting liquidity as well as improving our focus. The strategic review is active and ongoing to unlock long-term value.

Our executive committee is executing, and the board is refreshed and has strengthened governance, strategy, and risk management oversight. With that, we'll now take questions.

Operator (participant)

At this time, if you'd like to ask a question, it is star followed by one on your telephone keypad. If for any reason you would like to remove that question, it is star followed by two. Again, to ask a question, it is star one. As a reminder, if you're using a speakerphone, please remember to pick up your headset before I ask you a question. All questions are limited to one question and one follow-up. I'll pause briefly here as questions are registered. Our first question comes from Pooran Sharma with the company Stephens. Pooran, your line is now open.

Pooran Sharma (Managing Director)

Thanks for the question. Just, you know, I thought it was interesting in the release, you talked about the risk committee and the hedging framework, and I know that you've had hedging practices in the past, and you've, you know, you took it off recently. Just would like to, you know, hear the kind of the thesis as to, you know, why you're putting it back on. It looks like you've booked about half of Q2. That was actually going to be one of my questions. In this hedging practice, are you layering in longer dated positions or kind of expanding the type of instruments being used? Any kind of color you could share about how you're approaching hedging would be helpful.

Imre Havasi (SVP and Head of Trading and Commercial Operations)

Yeah. This is Imre. I'm going to start with the answer, others can add to it. I mean, in general, hedging or managing risk for a business like this is good practice, and you do these things when the market opportunity presents itself. You do some of this before, and, you know, with my background, we reestablished some of these processes. We do a lot of analysis, supply and demand fundamentals, technical analysis. We're looking at our business needs, of course, policy changes, and, you know, historical data. As we go through that analysis day by day, when there's a market opportunity, we do lock in some of those margins, both at the simple crush, the board crush level, as well as some of the, you know, co-products or whatever we see that opportunity.

I think it's just, in general, good practice to manage risk, reduce exposure if needed. Yes, we, you know, we lock in simple crush. We potentially hedge DCO using soybean oil futures. We hedge in meal. Of course, we have strict limits and monitor value at risk. It is a systematic approach supported by analytics and fundamentals, and we do it when the opportunity is there.

Michelle Mapes (Interim Principal Executive Officer and Chief Legal and Administration Officer)

I would just add that at the board level, the risk committee was formed here in the last 45 days or so. We have very seasoned and experienced folks on our board that are on that committee, and they're actively meeting with the team monthly, if not more frequently.

Pooran Sharma (Managing Director)

Great. Thank you for the color there. My follow-up would be just in regards to the CEO search. Just wanted to ask how, you know, how that's going, if you can give us an update. Should we expect someone with a background in biofuels, maybe somebody in industrial transformation, or maybe somebody with a bit of a finance background? Would just love to hear what type of attributes you're looking for in the next CEO. Thanks.

Michelle Mapes (Interim Principal Executive Officer and Chief Legal and Administration Officer)

Thanks for the question, Pooran. At this point in time, the process is ongoing. It's what I would call a pretty standard process for a public company looking at all candidates who have applied, but we are nearing the final stages of that process, and we hope to have something that we can announce here in the near future.

Operator (participant)

Next question comes from Jordan Levy with the company Truist Securities. Jordan, your line is now open.

Jordan Levy (VP for Equity Research)

Hi all. It's Henry on for Jordan here. Thanks for taking my questions. Maybe to start with on carbon capture, it's great to see, you know, compression equipment construction underway and the 4Q startup date. Could you just give us any color at this point on when we should expect, you know, that construction and the lateral pipe construction from Tallgrass to be completed ahead of that startup date? Thank you.

Michelle Mapes (Interim Principal Executive Officer and Chief Legal and Administration Officer)

Sure. We are working closely with the Tallgrass team. We have weekly calls, and we are very engaged on the process. That team is indicating that all signs point to early Q4 and actually late Q3 in terms of finalizing construction in a couple of the locations. We do not anticipate a major time lapse between construction completion and startup. Chris, would you like to add anything more to that?

Chris Osowski (EVP for Operations and Technology)

Yeah. I think we feel really good that we have construction in progress at all locations going in parallel. The major compression equipment has been built and is just waiting to be delivered when we get foundations put in place for the buildings to house that equipment. I feel really strong about our team's readiness and the ability to operate and maintain those assets once they're up and running.

Jordan Levy (VP for Equity Research)

Great. Thank you for that. Maybe just a quick one on tariffs. Could you just talk to any, you know, impacts for potential retaliatory tariffs on any of your product exports? Do you see this as a meaningful risk kind of moving forward?

Imre Havasi (SVP and Head of Trading and Commercial Operations)

So far, no impact. I mean, where we would be exposed as an industry, of course, if there were tariffs on ethanol exports into Canada or the U.K. That would be industry impact. We have not seen evidence of that, although, you know, Canada flagged that at one point. The other would be also industry-level impact, you know, relative to China that would impact the soybean complex. Some of those things, you know, if they happen at the same time, they're offsetting impacts on tariffs. You know, some might lower costs domestically, but also restrict markets for us. In terms of our protein exports, that would be specific to us. Those exports are happening. Our shipments are going to Asia. We're locking in contracts and prices down to Latin America with actually no tariff discussions around it. So far, we have not seen any impact.

Of course, things are somewhat unpredictable when it comes to tariffs, so things can change. But, you know, if I want to be optimistic, maybe there is an upside there too. Instead of tariffs, you look at trade and see if this administration can open up new markets for us. If we were able to sell more protein, vegetable protein, into some of those deficit countries in Asia or down to South America through some of these trade agreements, that would be actually an uplift for our platform. That can go both ways. Of course, everybody is rightfully so talking about the risks, which are probably, you know, have higher probability. To summarize it, so far, we have not seen adverse impact on our business.

Operator (participant)

Next question comes from Saumya Jain with UBS. Saumya, your line is now open.

Saumya Jain (Equity Research Associate)

Yeah. How are you guys looking at tariffs, particularly with used cooking oil and Chinese biodiesel in mind, and what's your outlook for ethanol crush and margins given all that? Thank you.

Imre Havasi (SVP and Head of Trading and Commercial Operations)

Yeah. I'm sorry. The line was breaking up. Was that the end of the question? Just.

Saumya Jain (Equity Research Associate)

Yeah. Just about the tariffs.

Imre Havasi (SVP and Head of Trading and Commercial Operations)

UCO and impact on compression margins?

Saumya Jain (Equity Research Associate)

Yeah. Yeah. How that's affecting your outlook for the year.

Imre Havasi (SVP and Head of Trading and Commercial Operations)

Yeah. Of course, the components of how our cash crush or consolidated crush comes together, it is in pieces, right? The impact of DCO, which is driven by, you know, RVOs and 45Z and a couple of other things, is a big component of our total margin. We are optimistic on DCO for two reasons. One is the premium it carries to other feedstocks, just in general, because of the low CI score. Secondly, the overall context, you know, with the restrictions on imported UCO, the rumored or anticipated higher RVO levels, they are going about 5 billion gal. There is a little bit tighter soybean oil. S&D, as soybean oil became a discount or got the discount point early in the year, encouraging exports. There is plenty of tailwind for our DCO product. We are putting together pricing and hedging structures to maximize that opportunity.

Overall, for sure, going into Q2, Q3, and maybe even Q4, and as long for sure as 45Z is around, we're very optimistic about the DCO market, and we're, you know, we consider that as a significant contributor. Just as, and I know this was not part of your question, but the operations team is very focused on maximizing DCO yields, not just through the core operation, but also where we have these MSC plants, we have a significant uplift of DCO. Overall, DCO production should be up, and with higher, you know, prices that we're anticipating, it will contribute greatly to overall crush margins.

Saumya Jain (Equity Research Associate)

Great. Thank you. I guess, how are you guys looking at the local protein markets as well, or how about protein margins?

Imre Havasi (SVP and Head of Trading and Commercial Operations)

Did you say local or global or total or?

Saumya Jain (Equity Research Associate)

I said both. I said local, but yeah, I said local.

Imre Havasi (SVP and Head of Trading and Commercial Operations)

Okay. Yeah. So protein, of course, is, you know, it has been, protein's been weak and it's been under pressure just in general, right? That includes VDGs and other vegetable proteins, huge pressure from soybean meal. You know, Q1, there was an abundance of soybean. I think the industry worked through that clot. In general, you know, the domestic protein market will be probably flat, muted. Of course, you know, when you look at oil share, that's part explained. Oil carries the premium, and meal has to be formulated into our diets, both domestically, but we also need an export market to get rid of the surplus. Higher industry run rates, of course, increase VDG supplies as well in domestic markets. When it comes to our own protein platform, you know, of course, VDGs, we're extremely focused on our local customer base and enhance value that way.

We're, you know, when warranted, we're putting on forward sales and stay ahead crush. That's part of risk management. In terms of the ultra-high protein, we, in our strategy, a few years ago when we built all these facilities, was to supply higher margin markets. Unfortunately, a lot of production came to the market, so we had to sell our protein to all sorts of species and with different kinds of margin structures. We're past that. You know, of course, customer development in some of the higher value, in the higher value segments like pet and aqua has been taking longer than just, you know, selling to poultry or swine. Those are coming to fruition. As I mentioned in my script, we're actually making a lot of breakthrough sales recently.

Selling to AQUA and PET are probably, I am just going to throw out a number, about $45-$60 per ton higher FOB margins when I add in the supply chain solutions as well. The strategy will remain, you know, protein in itself is going to be flat going forward, but our book will, and our margins will improve as we execute those higher margin segment sales.

Operator (participant)

Next question comes from Salvator Tiano with Bank of America. Salvator, your line is now open.

Salvator Tiano (Equity Research Analyst)

Yes. Good morning. Firstly, I want to ask from the ethanol commercial strategy. You have the OFTEC agreement, which, if I understood correctly, is for pretty much all your volume, unless I'm missing something. Why the change and what does this mean for your own trading operations? I think you had a pretty substantial trading team. How should we think about how your realizations will move forward compared to ethanol margins? Will they track them more closely, an index, or will there still be an opportunity to trade around it?

Imre Havasi (SVP and Head of Trading and Commercial Operations)

Oh, absolutely, the latter. We make all sales decisions, pricing decisions, and risk management decisions. EcoEnergy is a marketing partner, so they execute, they manage the customer relationship, and they manage logistics. All sales are basically back to back, except for a few opportunities where Eco would have infrastructure, and that would apply to maybe some of the California markets where they would support us with last minute logistics through a terminal. It is the execution part that we outsource and not the risk management part. We manage all risk. What we expect from this relationship, other than a smooth operation, of course, on the logistics side, is leverage the scale. We lost scale over the years, and that is why it made sense for us to combine our volumes with Eco's volumes. Their volumes increased 50% through our contribution.

They also, of course, have a very good infrastructure in the country for, as I mentioned earlier, for distribution in California, but also for exports. We expect to leverage that scale, leverage that scale in terms of market access, arbitrage opportunities, exports, and improve our. Where we expect the improvement is really on that basis level. We manage, we are going to be managing, as I mentioned earlier, simple crush, co-products, everything else. Where Eco can help us is that basis, improve that basis by maybe a penny or two when it comes to logistics and supply chain opportunities or finding us better maybe ship-to locations or customers so we can optimize our portfolio. Of course, the export opportunity is going to be good. That is on the marketing side.

Phil Boggs (CFO)

Yeah. Sal, this is Phil. I would just like to add that the Eco relationship also improves our working capital efficiency levels. With one customer, we believe that we will be able to reduce our working capital by somewhere in the neighborhood of $50 million through faster AR turn times and lower inventory levels because of the relationship of when Eco buys that ethanol inventory from us out of our tanks. There is a working capital efficiency to this as well that will reduce our working capital revolvers.

Salvator Tiano (Equity Research Analyst)

Thanks, Phil. The second one is on liquidity on the balance sheet. Can you clarify a little bit the corporate liquidity you mentioned? I do not think that is something that has been mentioned before in your press releases. What is the difference or what is the cash there? Why is it just $49 million, including any credit availability? Why get a $30 million loan from Ancora that matures in, I guess, less than three months? What is the rationale for that?

Phil Boggs (CFO)

Sal, we included the corporate liquidity numbers just to give some additional clarity. We do have cash across the organization in various subsidiaries that is not available to corporate. This $30 million loan from Ancora, I mean, one, it demonstrates that we have a supportive shareholder who not only has some members on the board now, but is also putting cash to work in support of the company. That enhances our flexibility and really just allows us to execute on our focus for maintaining liquidity. You know, we are focused on cost reductions. We are focused on working capital efficiency. We are focused on exiting non-core assets. Really, this is all about maximizing our flexibility as we pursue various options.

Salvator Tiano (Equity Research Analyst)

Thank you.

Operator (participant)

Next question comes from Matthew Blair with the company TPH. Matthew, your line is now open.

Matthew Blair (Managing Director of Refiners, Chemicals, and Renewable Fuels Research)

Great. Thank you very much. You know, Phil, maybe just to stick on that, you mentioned that you're executing on non-core asset sales. Could you give us some more details here and a sense of the scale of the opportunity? What type of assets? Are these logistics assets? Or what general type of assets are you looking to sell here?

Phil Boggs (CFO)

I mean, we're really looking at, you know, anything that's what we would call non-core. And so what is that? I mean, we have closed some businesses. We have working capital and equipment in businesses that we've sold. That's one of it. We have various smaller JVs from over the years that we're looking at exiting or in the process of exiting. We're really focused on that from a non-core standpoint and looking at, you know, how do we narrow the focus of what it is that we're trying to do every day. That's really focused on the core, which is running our assets well, lowering our costs, and improving our margin capture through these efforts.

Matthew Blair (Managing Director of Refiners, Chemicals, and Renewable Fuels Research)

Sounds good. Mary, I think you mentioned that you're currently EBITDA positive for the remainder of the year. Does that apply to each quarter? Is that based fully on what you've hedged, or is that a combination of the hedges and the futures?

Michelle Mapes (Interim Principal Executive Officer and Chief Legal and Administration Officer)

Let me just first address the quarterly part. Yes, it does mean quarter by quarter. We are currently EBITDA positive. Much of that is from the actions we have taken. It's a combination of cost reductions, disciplined risk management, obviously market conditions. I'll let Imre touch a bit on the hedging piece of it, but we're, you know, pleased to be where we are and committed to doing all we can, assuming what the market will give us.

Imre Havasi (SVP and Head of Trading and Commercial Operations)

Yes. I mean, most of our hedges are obviously Q2. We started locking in margins for Q2 as those opportunities, as crush margins improved at the end of March. We entered the quarter with hedges already and added to it as those opportunities presented themselves. There is a lot less liquidity in ethanol, especially when you go out to Q3, Q4. Q3, Q4 are still very much open. Most of our hedges are in Q2.

Operator (participant)

Next question comes from Laurence Alexander with Jefferies. Lawrence, your line is now open.

Carol Jiang (Analyst)

Good morning. Thank you for taking my question. This is Carol Jiang for Laurence Alexander. Could you help us understand the current ethanol inventory level and the dynamic of the export demand?

Imre Havasi (SVP and Head of Trading and Commercial Operations)

The current inventory level is 25 million bbl. That is sort of a point that we are looking at, you know, trying when we stay under that level, and we just came off of 27 million bbl that we printed maybe six weeks ago. Of course, spring maintenance helped that. Export was, we do not have March data yet, but census indicated 195 versus, I mean, sorry, census data indicated a significant improvement in March. That has to be confirmed. You know, you could say that, yeah, we are on track on hitting the 2 billion mark for the year, but Q1 was very, very strong. What we could say, I mean, you could say that some people pulled forward some of these shipments because of tariff considerations. As we expect tariffs to be sort of a lesser of a risk, we are going to hit over 2 billion gal.

Now, that does not help if domestic consumption does not pick up. Inventory levels are sitting at 25 billion bbl today. We think they are going to drop towards 23 as the driving season and higher blending kicks in. Our risk there, of course, is that we will maintain production. If we enter a recession or we do not have that demand from the consumer, then those inventories will not drop down towards those 23-22 billion levels, they will continue to, you know, stay around 25 and eventually build up as we head into the winter. Our risk today is lower blending demand and lower gas demand going into the summer.

Carol Jiang (Analyst)

Thank you for that. Can you add a bit more color on the corn business, like the profit contribution of corn oil and protein platform year to date and how you expect that to evolve through the year end?

Imre Havasi (SVP and Head of Trading and Commercial Operations)

Corn oil?

Carol Jiang (Analyst)

Yes, the profit contribution of corn and also protein platform.

Imre Havasi (SVP and Head of Trading and Commercial Operations)

Yeah. And, you know, we touched on this one during, you know, the previous question or the answer to the question earlier in the call. We started the year, corn oil was at very low levels, right? In the low, you know, in the mid-40s, high 40s were at $0.55 far back to our plans today. So that's a dime improvement per pound. We think those levels will hold throughout the year, supported by restriction on used cooking oil imports as a feedstock that's used in the biodiesel production. And, you know, as we also mentioned, that corn oil carries a premium because of the lower CI score relative to soybean meal. So we're very, we're friendly. That contribution has increased, of course, with this $0.10 per lbs improvement over the last three months. So that is supporting our margins going forward.

Some of our, the way we sell corn oil also allows us to capture margins in an up market. About 50%, but give or take, depending on our market view, is index priced. So we're benefiting from an up market. Of course, if we, that's within the quarter. If we have a different bias, of course, we can hedge that by selling soybean oil futures or through options there. We remain friendly corn oil, and it's been very beneficial to the overall margin structure for sure for Q2, but we expect that to continue in Q3 and Q4.

Operator (participant)

Next question comes from Andrew Strelzik with BMO. Andrew, your line is now open.

Andrew Strelzik (Senior Equity Research Analyst)

Hey, good morning. Thanks for taking the question. I guess I kind of wanted to zoom out, and I was hoping that maybe you could reflect on the existing strategy that's been in the works over the last several years. Not the strategic review, but kind of just the existing strategy that's been put in place over the last several years. Over that time, you know, the operating environment's evolved, the regulatory environment's evolved, and frankly, the conversations with the investment community have shifted from, you know, more high pro to more clean sugar and carbon. When you kind of take a step back, I just would love to get your perspective on the strategy at a high level and your confidence kind of in the different pieces of the plan to drive the EBITDA build over time.

Michelle Mapes (Interim Principal Executive Officer and Chief Legal and Administration Officer)

Sure. Appreciate the question. This is Michelle Mapes. You're right. The strategy has evolved over the years. As we originally talked about some years ago when we launched upon our protein strategy and our pillars of corn oil in particular, we were very focused there. Along came, to our surprise, the IRA, which then did cause us to pivot slightly and add the carbon pillar to our focus. We remain very constructive on protein. It's taken longer than we had anticipated. It's been harder than we anticipated. It's been harder than what we previously communicated. We're committed to making sure that we're executing going forward. I think Imre has shared with us some numbers that are reflective of we are now getting that penetration, and our products are turning the corner there. We obviously still remain constructive on corn oil.

As it relates to carbon, we are very bullish. We continue to be excited about where we are, where we're going. I think, you know, when you look at our company today, we're pausing a bit. Not that we do not support all the initiatives. We are cleaning some things so that we can be positioned for profitability to move this company forward on solid footing, executing on those same pillars and those same strategies. We are going to take a few months here, and we are going to get things moving in the right direction. That is really where our focus is now. It is not a shift in strategy.

Andrew Strelzik (Senior Equity Research Analyst)

Okay. That's helpful context. Maybe just two follow-ups. One on hedges that you have already talked about a little bit. I guess, how should we just be thinking about your approach over time as we go, you know, into subsequent quarters? Are you going to be targeting a roughly 50%? Will it depend on kind of what the market environment looks like? That will be more variable is part number one. Number two, the pacing of the SG&A declines to that run rate that you talked about. If you could just kind of give us the cadence. Thanks.

Imre Havasi (SVP and Head of Trading and Commercial Operations)

Yeah, I'll take the first one. It depends on market opportunity. We're obviously looking at business need and, you know, our EBITDA margins, our cash flow, our OPEX. There are a lot of things that are going in there that would make us pull the trigger. The 50% is not a mark. It might be zero. It may be a little more. We're not going to be 100% hedged. It's not executable just, you know, in the futures markets. It is a risk assessment-driven decision coupled with what the business needs. It can be zero to, I do not know what the top end would be, but, you know, maybe 50-70% that we can actually execute. There is no script for that.

Phil Boggs (CFO)

Yeah. Andrew, this is Phil. In terms of SG&A pacing, I mean, we are on track. We executed those reductions here in the second quarter. You will not see it fully baked in the second quarter because of the timing of when we announced EcoEnergy and when we took some of those actions to further reduce our SG&A. Here in third quarter and fourth quarter, you will see it coming through. Most of that SG&A is immediate. While we are still chasing things, we still have contracts that are going to expire that might not be renewed. We are still working on some things to further reduce that number. Most of that, Michelle mentioned in her comments, that we corporate and trade SG&A in that $12 million-$13 million range for Q3 and Q4. It is coming fast.

Operator (participant)

Next question comes from Eric Stine with Craig-Hallum. Eric, your line is now open.

Eric Stine (Senior Research Analyst)

Good morning, everyone.

Michelle Mapes (Interim Principal Executive Officer and Chief Legal and Administration Officer)

Good morning.

Eric Stine (Senior Research Analyst)

Hey. I'm just jumping around calls, so I apologize if I'm covering something that already was earlier. I did hear, you know, talking about just pausing a bit on other things. You did list high pro corn oil and carbon as being what you're committed to. I mean, clean sugars obviously has been a huge topic over time. Am I right in assuming that that is one of the initiatives that is being paused? Do you look at that still as having, you know, significant long-term potential? I mean, is this something where you're pausing to say, "Hey, do we really want to push hard here?" Or is it potentially something that you just kind of say, "Hey, let's focus on our base"?

Chris Osowski (EVP for Operations and Technology)

This is Chris Osowski. I covered this a little bit in the initial commentary. Yeah, we are pausing the CST initiative. Really what it's about right now is maximizing the profitability of the Shenandoah site. We're able to run at higher throughput rates on the ethanol side and take advantage of a better margin environment here in Q2. At the same time, we're able to run a simpler fermentation recipe that lowers OPEX and helps us improve the protein and oil yields out of that plant. That plant is leading our fleet in terms of the protein yield at over 4 lbs per bushel. That's really the focus there. We also have some outside our fence issues with respect to wastewater management that'll take additional potential CapEx to resolve.

We want to make sure that we have a very good plan in place before, you know, restarting that effort. We are thinking, you know, end of 2026 as a target.

Eric Stine (Senior Research Analyst)

Got it. Okay. Yeah, and I know that the wastewater issue, that's been an issue for some time. Good color on that. I guess maybe lastly, just on the cost cuts, you called out the $50 million. You also talked about that you're looking at further opportunities. I mean, at what point is that? It seems like what you're doing, I don't want to say it's easy, but it might be more of low-hanging fruit. Are there areas where it would be harder, you know, but you certainly would go down that road if necessary?

Chris Osowski (EVP for Operations and Technology)

I would add on the operational excellence initiatives. You know, we're focused on a couple of different areas where we see opportunity, specifically on R&M management, repair and maintenance. You know, our teams are committed to doing more predictive and preventative maintenance as opposed to breakdown-type fix-it work. That opportunity is anywhere from $8 million-$10 million that's in front of us. We're starting to see, realize some of that now. On the chemicals, yeast, and ingredients side of things, you know, we're focused on improving our front-end processes in our fermentation plants to drive higher yields and lower our chemical, yeast, and enzyme costs. That opportunity is somewhere in the $4 million-$6 million range.

Michelle Mapes (Interim Principal Executive Officer and Chief Legal and Administration Officer)

I would just add to that, some things just take a little more time. Phil mentioned like our contractual commitments. As we exited the EcoEnergy transaction, there are contracts and services that we may no longer need. We're winding out of some of those things. We're in obviously some very large space here. We're working on that. Those things just take a little bit longer. Those are the kinds of things that we know we can and are executing on, just going to take a few quarters to make that happen.

Operator (participant)

Next question comes from David Driscoll with the company DD Research. David, your line is now open.

David Driscoll (CEO and Founder)

Great. Thank you. Good morning.

Phil Boggs (CFO)

Good morning, David.

David Driscoll (CEO and Founder)

I just wanted to thank you. I want to make a statement and then a couple of questions. I followed the ethanol industry for 25 years as a sell-side analyst and now running a family investment office. I do appreciate the comments that the results are not acceptable. I suggest that you do more to highlight the value of your assets and the company's earnings potential. Clear earnings guidance should be given to the street for both near-term and longer-term financial expectations. This was done back in 2021 when the Green Plains 2.0 idea was put out there. Bottom line, when this does not happen, the stock can dislodge to exceptionally low levels, which is what I think is happening today. To the questions, balance sheet liquidity is the topic. Phil, I just wanted to hear your thoughts here.

In the fourth quarter, your cash balance was over $209 million. Here after the first quarter, it's down to $126 million, fell by around $80 million bucks. Can you talk about how you see the cash balance over the remainder of the year? You commented on "positive EBITDA for the remainder of 2025," but this is really vague. It really plays into this cash question. My fundamental point here is to get at the financial stability of Green Plains with the stock price suggesting great concerns by the investment community. Thanks, Phil.

Phil Boggs (CFO)

No, I appreciate the question, David. You know, and it's a great question. I appreciate the comments. You know, we are focused on maintaining liquidity. Like we've gone through on this call, we're focused on a disciplined hedging program, disciplined cost reduction programs, and returning to consistent profitability. We did, you know, lose some cash in the first quarter as a result of the EBITDA losses, the CapEx, the interest, and the restructuring charges. It is our goal that we start to minimize that and we turn this back to a cash-generating company. We should be cash positive, cash-generating positive here in the second quarter. As we look out into Q3 and Q4, you know, crush still has some work to do.

I mean, it's probably still, you know, ethanol crush by itself is still probably in the low to mid-single digits, and all in in terms of consolidated crush. We have carbon coming in the fourth quarter as well. There are opportunities for this to continue to move higher. You know, we've taken these steps to liquidate non-core assets and put facilities in place and extend loans so that we can maximize our flexibility and really focus on returning this overall thing to profitability.

David Driscoll (CEO and Founder)

Just as a follow-up, and it's somewhat related here, is this asset value and replacement cost and how to get better recognition of it. You know, specifically, how do you guys think about the replacement costs of the asset base with the stock trading at, I think it was yesterday, $3.80, $570 million of gross debt? I believe that the implied value of these assets on a per gal basis is less than a dollar. If these assets were built today, what would be a good ballpark figure to use as replacement cost per gal? $2.50 a gal, $3.50 a gal? Where do you guys peg it?

Michelle Mapes (Interim Principal Executive Officer and Chief Legal and Administration Officer)

Thanks for the question, David. This is Michelle. Not all assets are created equal, albeit it is expensive to rebuild, as you are well identifying. We would peg replacement costs in the probably $2-$3 a gal range, depending upon the asset, depending upon, you know, what we choose to rebuild and where, those types of things. You know, one of the reasons for our strategic review process is to ensure that we are getting and maximizing value for our shareholders and getting out there in the market to identify what is available, one, on a whole company basis, on an asset basis. That is ongoing. We are committed to ensuring that we are not leaving that value on the table for our shareholders. Chris, would you like to add something that relates to the detail on plants?

Chris Osowski (EVP for Operations and Technology)

Yeah. Specifically related to plants and asset value is, you know, we have three different engineered designs of plants, that being ICM plants, plants that were built by Delta-T, and finally Vogelbusch. Each of those plants performs a little bit different in terms of their energy consumption and total OPEX and throughput. One of the things I wanted to highlight is the improvement specifically related to our Delta-T platform over the past, let's just say, six to nine months. Our Wood River, Otter Tail, and Superior plants are performing right now very close to, if not as good as, an ICM-designed 100 million gal plant. You see it in our total throughput numbers, and you see it in our reduced OPEX per gal results coming out of here out of Q1.

That puts us in a good spot with respect to taking advantage of better margins in Q2 and the rest of the year. I think it's important for the industry to start changing the narrative around those Delta-T assets and proving that they can perform and create value like those that were built by ICM.

Operator (participant)

I'd now like to turn the conference over to Michelle Mapes for closing remarks.

Michelle Mapes (Interim Principal Executive Officer and Chief Legal and Administration Officer)

Thank you. I want to assure you, we are deeply committed to earning back your trust and executing on our strategy. We thank you all for your participation in today's call. If you do have follow-up questions, please do not hesitate to reach out, and we will find a time to connect. Thanks and have a great day.

Operator (participant)

That will conclude today's conference call. Thank you for your participation and enjoy the rest of your day.