REX American Resources - Earnings Call - Q3 2025

Executive Summary

• As of Nov 20, 2025, REX has not yet published its fiscal Q3 2025 results; management indicated Q3 would “outperform the second quarter, but will not be as strong as last year’s third quarter,” with supportive tailwinds from ethanol exports and favorable corn supply.
• Q2 2025 delivered net sales of $158.6M and diluted EPS of $0.43; the Board approved a 2-for-1 stock split and the company ended the quarter with $310.5M of cash, cash equivalents, and short-term investments and no bank debt.
• The One Earth expansion and carbon capture projects remain on track for 2026, with total spend of ~$126.7M and budget of $220–$230M; EPA Class VI well permitting timeline pulled forward to March 2026.
• Prior two quarters (Q1 and Q2 2025) show sustained profitability: Q1 EPS $0.51 and Q2 EPS $0.43; management highlighted 19–20 consecutive profitable quarters and rising ethanol exports (+10% y/y through June).
• Near-term catalysts: Q3 2025 print (expected early Dec), ongoing 45Q/45Z support, and carbon capture permitting progress; stock split enhances liquidity and could broaden investor base.

What Went Well and What Went Wrong

What Went Well

• Strong balance sheet: $310.5M in cash, cash equivalents, and short-term investments; no bank debt.
• Operational consistency and profitability: management emphasized “20 consecutive quarters of positive earnings” and expects Q3 to outperform Q2, supported by export demand and corn supply.
• Co-product strength: corn oil volumes and pricing improved y/y, driving a ~46% increase in sales dollars in Q2; “corn oil continues to be very strong” (Stuart Rose).

What Went Wrong

• Margin compression: Q2 gross profit fell to $14.3M from $19.8M y/y due to lower dried distillers grain (DDG) prices and higher shipping costs recorded in COGS.
• DDG weakness: DDG export demand declined versus last year; Mexico buying less; management flagged DDG price pressure relative to corn.
• Lower interest/other income: Q2 interest and other income declined to $3.1M from $4.4M y/y, reflecting lower rates/investments; Q1 also saw reduced interest/other income y/y.

Transcript

Operator (participant)

Good morning and welcome to the REX American Resources Third Quarter 2024 Earnings Conference Call. As a reminder, today's call is being recorded, and at this time, all participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation. I would now like to turn the call over to Mr. Doug Bruggeman, Chief Financial Officer of REX American. Please go ahead.

Doug Bruggeman (CFO)

Good morning, and thank you for joining REX American Resources Q3 2024 conference call. With me on our call today are Stuart Rose, REX Executive Chairman, and Zafar Rizvi, the REX CEO. We'll get to our presentation and comments momentarily, as well as your questions, but first I will review the safe harbor disclosure. In addition to historical facts or statements of current conditions, today's conference call contains forward-looking statements that involve risk and uncertainties within the meaning of the Private Securities Litigation Reform Act of 1995. Such forward-looking statements reflect the company's current expectations and beliefs but are not guarantees of future performance. As such, actual results may vary materially from expectations. The risk and uncertainties associated with the forward-looking statements are described in today's news announcement and in the company's filings with the Securities and Exchange Commission, including the company's reports on Form 10-K and 10-Q.

REX American Resources assumes no obligation to publicly update or revise any forward-looking statements. I'd now like to turn the call over to our Executive Chairman, Stuart Rose.

Stuart Rose (Executive Chairman)

Good morning, and thank you again to everyone for joining us. During the third quarter, REX American Resources continued our progress on our three goals for 2024, setting the company up for success well into the future. As a reminder, these goals were to continue profitable operations, to complete the construction phase of our One Earth Energy carbon capture and compression facility, and to complete the capacity expansion of our One Earth Energy ethanol production facility to 175 million gallons per year and move toward the planned further permitting of the facility to 200 million gallons per year. To the first goal, we exceeded the mark. The third quarter was REX American Resources' second most profitable quarter in the company's history, behind only the third quarter of 2023.

Our net income per share of $1.38 was an improvement of 97% over the second quarter of 2024, principally reflecting better corn pricing. Gross margin improved over the third quarter of 2023 by 1%, despite a 21% reduction in product revenue. As we have consistently said, we believe REX's facilities and personnel are among the best in the industry, which they prove quarter after quarter through their attention to detail and awareness of the markets. The focus on lean and efficient operations in our core ethanol business, we believe, will serve as a basis for future increases in profit levels once our One Earth plant expansion is up and running next year. It is this part of the business that has allowed REX to grow substantially debt-free, maintain strategic freedom, and move forward independently with additive growth projects.

As we always do, I want to say thank you to our team for the efforts this quarter and every day. And the second goal, to complete construction of the capture and compression portion of our One Earth Energy CCS project in Gibson City, Illinois, we have substantially realized this goal. I'll let Zafar Rizvi, our CEO, discuss the specifics with regard to the remainder of this project later in the call. Our third goal was to complete construction of the One Earth ethanol production capacity expansion to 175 million gallons per year to prepare for further permitting and production levels of 200 million gallons per year. Right now, we estimate the facility is on track for completion in the middle of 2025, based upon delays in delivery timelines for certain necessary components. As you can see, our efforts to support near and long-term growth are moving forward successfully.

The current time, the fourth quarter, continues to be profitable but trails last year's fourth quarter, which was a historically very strong quarter. I'd now like to turn things over to our CEO, Zafar Rizvi, to give further updates on our major projects.

Zafar Rizvi (CEO)

Thank you, Stuart. The expansion of our One Earth Energy ethanol facility to 175 million gallons per year of production is estimated to be complete by the middle of 2025. Currently, the electric interconnection from our local utility is moving ahead and should be complete by the first quarter of 2025. The timeline for completion of the ethanol production expansion has been extended from our previous target to the middle of 2025 due to delays recently communicated by one of our equipment suppliers for delivery of several necessary components. After completion of the expansion and emission certification, we then expect to begin the planned further permitting of the One Earth ethanol facility to allow it to produce 200 million gallons per year.

As I have said before, the regulatory steps, receiving an additional permit, is the only step necessary to allow for the expanded capacity from 175 million to 200 million gallons, as no major additional construction or capital spending is expected. The expansion will give REX additional earnings power, allow us to sell more product from our highly efficient consolidated plant in Gibson City. We expect that the expansion will provide even greater benefit to shareholders as well as support our ability to self-fund ongoing and future growth projects. As Stuart previously said, the carbon capture and compression portion of our One Earth Energy project in Gibson City, Illinois, is substantially complete. We are excited about reaching these milestones, and we are looking forward to the other portion of the project.

Just as with the expansion of our ethanol operation at the One Earth site, further work and testing in the capture and compression facilities are subject to completion of the utility interconnection to supply power to the project. Beyond waiting for power, we continue to wait on several regulatory issues to be resolved. Our permit application for Class VI injection wells is still under review, with anticipated final approval slated for July 2025, according to the EPA. As a result of these challenges, and as the capture and compression portion of the project is substantially complete, we plan to manage near-term major capital expenditure related to the CCS project in order to maintain budgetary flexibility and stay within project spend in light of the timeline for approval.

Given the new permitting reality, we are confident that pursuing the several ongoing portions of this project in this way is the right path. As of quarter end, we have invested approximately $103 million into the One Earth carbon capture project and ethanol production capacity expansion combined. Spending for the carbon capture and sequestration project stood at $52.9 million as of third quarter, while expenditure on the ethanol expansion stood at $50.2 million as of the same date. This is compared to the total combined budgeted amount of $165-$175 million for both the CCS project and ethanol production expansion at Gibson City. I would like to hand the call to our CFO, Doug Bruggeman, to discuss our operational and financial results.

Doug Bruggeman (CFO)

Thanks, Zafar. I'll begin with our operational results. REX's ethanol sales volume during the third quarter of 2024 was 75.5 million gallons, an increase of approximately 3% versus third quarter 2023 sales volume of 73.2 million gallons. Average selling price for our consolidated ethanol volume was $1.83 per gallon for the third quarter, compared to $2.32 per gallon in the third quarter of 2023. Dried distillers grain sales volume during the third quarter of 2024 totaled 170,116 tons, a 5% decrease over third quarter 2023 volumes. Average selling price for the dried distillers grains was $147.14 per ton for the third quarter 2024, compared to $194.94 per ton in the third quarter of 2023. Modified distillers grain sales volumes were 18,392 tons in the third quarter 2024, compared with approximately 13,500 tons in the third quarter of 2023.

The average selling price for modified distillers grains was $63 per ton for the third quarter versus $85.86 in the prior year third quarter. Corn oil sales volume in the third quarter 2024 were approximately 23.4 million pounds, compared to 24.1 million pounds sold in the third quarter of 2023. The average selling price for REX's corn oil products was $0.44 per pound for the third quarter of 2024, compared to $0.61 per pound in the third quarter of 2023. Gross profit for third quarter 2024 was $39.7 million versus gross profit of $39.3 million for the third quarter of 2023. The 1% increase in gross profit was achieved despite lower average selling prices for all products, which were more than offset by lower corn and natural gas input prices.

Our selling general and administrative expenses increased to $8.4 million for the third quarter of 2024 versus $7.6 million in the third quarter of 2023. The increase was primarily due to rail car leasing cost increases and certain donations to local first responders related to the carbon capture at the One Earth facility. Interest and other income totaled $4.6 million in the third quarter of 2024, compared with $4.9 million for the third quarter of 2023. Prior year amounts included $900,000 of COVID-related grants from the USDA. Income before taxes and non-controlling interest for the third quarter of 2024 was approximately $39.5 million, compared to $41.3 million for the third quarter of 2023. Net income attributable to REX shareholders for the third quarter was $24.5 million, compared to $26.1 million in the third quarter of 2023.

On a per-share diluted basis for the third quarter of 2024, this amounts to $1.38 per share of net income, the second-best results in the history of the company, only exceeded by net income generated in the third quarter of 2023. We ended the third quarter with total cash, cash equivalents, and short-term investments of $365.1 million, compared with $378.7 million as of January 31, 2024. The uses of cash during the first nine months of the fiscal year were primarily related to our ongoing construction projects at the One Earth Energy facility. REX American also ended the quarter without any bank debt, and now I'd like to turn things back to Zafar.

Zafar Rizvi (CEO)

Thanks, Doug. I would now like to discuss how we see the end of the fiscal year shaping up. As Stuart stated earlier, our plans continue to run with positive earnings into the fourth quarter, but not at the level of last year's fourth quarter. Corn input prices have improved compared to a year ago, and given the bumper crop of corn in the Midwest, we expect adequate supply for our plants for this growing season. As we have mentioned before, we do see sporadic dynamics for ethanol pricing for the export market. Ethanol exports through the first nine months of the calendar year were approximately 33% higher than at the same point in calendar 2023, according to the U.S. Energy Information Administration. This level returns U.S. export to their pre-pandemic levels and puts the U.S. on pace to exceed 2018 export volumes. Currently, the all-time high year for export.

Looking ahead to 2025, we are particularly excited about the completion of our ethanol production expansion and the anticipated increase in profitability this will allow for. We will still expect approval of our Class VI permit from the EPA in the near term and to continue making progress on our CCS facility, which we expect would bring additional profitability once in operation. Looking further down the road, the projects we are working on today are laying the groundwork for further potential growth into sustainable aviation fuel and third-party carbon sequestration. We are excited about the future as we grow organically and are confident in our team's ability to rise to the challenges at every turn. Now, I would like to open things up to questions, operator.

Operator (participant)

Thank you. We will now be conducting a question-and-answer session. If you would like to ask a question, please press Star 1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press Star 2 if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the Star keys. One moment, please, while we pull for questions. Thank you. Our first question comes from a line of Jordan Levy with Truist. Please proceed with your question.

Jordan Levy (VP of Equity Research)

Good morning, all.

Stuart Rose (Executive Chairman)

Hi, Jordan.

Jordan Levy (VP of Equity Research)

Congratulations on the solid quarter. I wanted to get your thoughts here. There was just an article I saw from Reuters that was saying the Biden administration won't finalize 45Z guidance ahead of the January inauguration. So I want to get your thinking as it relates to the growth initiatives on the expansion and on the CCUS effort. Should the incoming administration fail to finalize 45Z or just let it kind of slip to the side? How does this all look under 45Q, and how do you think about that more broadly?

Stuart Rose (Executive Chairman)

This is Stuart. I'll answer first, and Zafar can follow up, but we also believe they won't finalize 45Z by the end of the term, and we don't know what the Trump administration will do. We don't know their feelings on the 45Q or Z, and so we remain wary of what they will do. We don't know, and in reality, it's going to be really hard to get 45Z without any regulations and without an EPA permit. Right now, it's going to be really hard for us to benefit in the next two years from 45Z, so hopefully, we can benefit, at least get one year of 45Z, but it's going to be very difficult right now because they have not finalized the regulations, and we don't know what the new Trump administration is going to do. Zafar?

Zafar Rizvi (CEO)

Yeah. I think the only hope Jordan and I see, because in the Midwest is basically the farmers and corn growers, and there's a lot of support we see from farmers and corn growers because they are also looking to see how they can benefit from 45Z as crops which they plan to use, different method and no-till and others, and they can also benefit from 45Z. So we certainly see some support from all these states, and hopefully, that will make some difference when the Trump administration will take over and be able to convince that. But on the other hand, the period is very short. That was only 2025 to 2027, and we see some movement to extend that period to 12 years, but at this time, we have no really solid knowledge of what exactly is going to happen.

Stuart Rose (Executive Chairman)

One other thing, Jordan. At this time, Jordan, at this time, 45Q is in effect, and that's cut and dried. It's $85 a ton, and that has passed legislatively. So if we don't get 45Z the way the law is written today, we would get 45Q, which is $85 a ton, which would still make our project very profitable as long as I keep that.

Zafar Rizvi (CEO)

Yeah, and I think I'll add to that is, as you know, Jordan, you have to be in service by 2032. And so we have enough time, '34, actually, 2034. So we have enough time to really be in service before time expires. But 45Z was only three years, so that's the difference between 45Q and 45Z that we can take advantage of 45Q.

Jordan Levy (VP of Equity Research)

Got it. And then y'all have always been very prudent allocators of capital. Stuart, Zafar, looking at the incoming, whatever you expect for the incoming policy landscape and recognizing that you've got a significant amount of cash on the balance sheet right now that's on nice uptick from last quarter. If you look at the areas of opportunity for you all in terms of deploying that cash, I think you noted managing costs on the CCUS side of things as you figure out kind of what things look like. But where do you see the most attractive opportunities for allocating the cash at this point?

Stuart Rose (Executive Chairman)

One thing we've always done, Jordan, as you know, when the stock drops, if the stock ever drops significantly, we are keen to buybacks. We bought back probably more shares percentage-wise than any other company I know. So that's one thing. The other thing is we always are looking for opportunities, whether it's new ethanol plants. There are a few that we're looking at, but that doesn't mean anything. They're in the very, very preliminary stages, and who knows if anything will happen. Generally, today, the prices people want is way above what we're willing to pay, so that's an issue. But that's always an opportunity. And thirdly, we're not afraid to go into other things that are either related or sometimes even unrelated to our business that we think our management skills will work with.

We haven't done that in a while, but as you know, we were retailers at one time, and now we're ethanol producers. So we're very good at, if it comes to that, of looking if we see great opportunities of jumping on those if they become available.

Jordan Levy (VP of Equity Research)

Got it. I'll take the rest offline. Thank you all for the time.

Stuart Rose (Executive Chairman)

Thank you, Jordan.

Operator (participant)

As a reminder, if you would like to ask a question, press Star 1 on your telephone keypad. Our next question comes from a line of Pavel Molchanov with Raymond James. Please proceed with your question.

Pavel Molchanov (Investment Strategy Analyst)

Yes, thank you for taking the question. Following up on the discussion you just had about kind of future federal policy, it's probably going to be three months, six months before Congress moves forward with tax reform, which may well include some changes to the Inflation Reduction Act, for example, Section 45Q. Are you going to postpone any kind of decisions on the carbon capture project until you get clarity that 45Q will remain in place?

Stuart Rose (Executive Chairman)

At this point in time, Pavel, at 45Q goes away, this is only what I would, and again, this is not a board of directors decision. It's Stuart Rose talking. But we would continue on. We would continue on with carbon capture because we'll get a greater, if no one else is doing carbon capture, we're doing it, we'll get a much greater price for, I believe we'll get a much greater price for our ethanol. And I believe there'll still be a market to sell our credits to companies that want to become carbon neutral. So I don't think that we would end our project if there was, and at this point in time, we don't expect them to end 45, but anything is possible with the Trump administration, and we're well aware of that.

But my personal opinion, and it's only my personal opinion, would be we would continue on with the project. And I think it would still be a good project. We wouldn't get government help, but there's definitely a market for low-carbon jet fuel, and I can go on in California, a few places. There's a good market for low-carbon ethanol. We would be one of the few producers. So my personal opinion would be to continue on with that. Zafar, do you want to add anything?

Zafar Rizvi (CEO)

Yeah. I think I will add to that. If you remember, we started this project in 2018. At that time, there was no Inflation Reduction Act there, and it was approximately $50 was tax credit, and that tax credit was also gone through Trump administration during that. So I don't really see that there are going to be major changes to 45Q, and also, you are aware of that several other facilities are already working on this 45Q carbon sequestration, including the project for $7-$8 billion worth for the carbon pipeline. So these people have invested a lot of money on these projects, and certain changes will probably not be implemented because these projects are already in pipeline, and changes can happen, but I personally don't anticipate that there are going to be any changes in 45Q.

Pavel Molchanov (Investment Strategy Analyst)

Okay. Maybe a follow-up on the ethanol front. You have a long history of operating ethanol plants, including, of course, under Trump's first term. Can you just give some historical perspective on how the EPA went about setting the blending mandates between kind of 2017 and 2021 and how you managed around that?

Stuart Rose (Executive Chairman)

At that time, Pavel, I believe it was legislatively set, and there were a number of gallons that were in the law that the RFS required. Nowadays, I believe that the EPA can set that level wherever they want, and that could be an issue going forward. We don't know, but again, if they set it at a lower level, that could be a problem. If he really wants to be energy independent like he claims, they could set it at a higher level. We have no idea what they're going to do, but I believe today he had the ability to set it at whatever level they choose.

Pavel Molchanov (Investment Strategy Analyst)

Okay. Understood. Thank you, guys.

Stuart Rose (Executive Chairman)

Thank you, Pavel.

Operator (participant)

Thank you. We have no further questions at this time. I would like to turn the floor back over to management for closing comments.

Stuart Rose (Executive Chairman)

I just wanted to thank everyone for listening. Again, we had another very good quarter, outperforming most, if not all, of the industry. We have the best plants, great locations, even a great location for a carbon capture project, which we hope to implement sometime in the next couple of years, hopefully sooner than that, and most importantly, we feel and we really feel we have the best people in the industry, and that's what sets us apart, and again, with the best people, our CEO, I consider the best in the industry. I think most other people do too. We're well set up for the future. Thank you very much for listening to the call. Bye.

Operator (participant)

Ladies and gentlemen, this does conclude today's teleconference. You may disconnect your lines at this time. Thank you for your participation and have a wonderful day.