REX American Resources - Earnings Call - Q4 2025

Executive Summary

• Q4 FY2024 (quarter ended January 31, 2025) delivered $158.2M net sales, $17.6M gross profit, and $0.63 diluted EPS; profitability declined YoY on lower pricing but remained positive, with cash/short-term investments of $359.1M and no bank debt.
• Management extended the One Earth ethanol expansion timeline beyond mid‑2025 and raised combined project budget to $220–$230M, citing equipment upgrades to support higher future capacity; EPA Class VI well permit for CCS was expected October 2025 per EPA timeline.
• The Board authorized a new 1.5M‑share buyback (in addition to prior authorization), with 654,276 shares repurchased since December 2024 through Q1 FY2025; later increased post 2‑for‑1 stock split.
• Near‑term narrative hinges on weaker crush spreads and potential export tariff risks (Canada DDG/Mexico ethanol), offset by operational efficiency, disciplined repurchases, and anticipated benefits from 45Z/45Q once CCS is permitted.
• Trend: Q3 FY2024 was exceptionally strong ($1.38 diluted EPS), followed by a softer Q4; Q1–Q2 FY2025 remained profitable with $0.51 and $0.43 diluted EPS respectively as pricing pressure persisted.

What Went Well and What Went Wrong

What Went Well

• Strong balance sheet: $359.1M cash/short‑term investments, no bank debt at FY year‑end; continued interest income ($4.2M in Q4) supporting earnings.
• Shareholder returns: FY2024 repurchased ~372,567 shares ($15.5M); subsequent ~281,709 shares ($11.9M) in Q1 FY2025; new authorization for up to 1.5M additional shares approved Mar 25, 2025.
• Operational steadiness: Q4 ethanol volumes rose to 74.7M gallons vs 72.1M in Q4 FY2023; management emphasized “18th consecutive profitable quarter” and efficiency focus despite weaker spreads.

What Went Wrong

• Pricing headwinds: Q4 net sales fell to $158.2M from $187.6M YoY; gross profit declined to $17.6M from $30.4M YoY on lower selling prices (partially offset by lower corn/nat gas).
• Margin compression: Q4 income before taxes dropped to $17.9M from $32.5M YoY; diluted EPS down to $0.63 from $1.16 YoY.
• Project delays/capex increase: Ethanol expansion timeline extended beyond mid‑2025; combined expansion+CCS budget raised from $165–$175M (Q3 FY2024) to $220–$230M due to equipment upgrades and inflation.

Transcript

Operator (participant)

Welcome to REX American Resources Fourth Quarter and Full Fiscal Year 2024 Earnings Conference Call. At this time, all participants are on a listen-only mode. A question-and-answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. I would now like to turn the conference over to your host, Mr. Doug Bruggeman. Thank you. You may begin.

Doug Bruggeman (CFO)

Good morning, and thank you for joining this morning's call. Joining us today is Stuart Rose, Executive Chairman, and Zafar Rizvi, Chief Executive Officer. We'll get to our presentation and comments momentarily, as well as your questions. 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 in Form 10-K and 10-Q.

REX American Resources assumes no obligation to publicly update or revise any forward-looking statements. I would 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. Fiscal 2024 saw a continuation of the positive results from REX's time-tested approach to our core ethanol business. Sales of ethanol grew over 2023 levels with 289.7 million gallons of ethanol sold. Despite lower prices, our management of the overall business remained as focused as ever, and total net income and income per share remained strong, along with gross profit. REX continues to be among the best in the industry in our core ethanol business line. As far as our several growth projects, during 2024, we substantially completed construction of the capture and compression portions of our planned carbon capture facility. Additionally, we progressed our capacity expansion project at the One Earth Energy ethanol facility. Our overall business saw great financial results and good operational progress during 2024.

As we move forward through 2025, the REX team is bringing the same attention to detail, close management, the day-to-day as we have in the past. We are concentrating on the things we can control and acting prudently as and when conditions change. Aside from our steadfast focus on efficient and profitable operations, REX has had a long-standing commitment to delivering value to our shareholders through a well-considered share repurchase program. We are selective in how we apply this authorization from our board of directors and act when we see value in our share price. To this way of thinking, we are active in the fiscal fourth quarter, repurchasing approximately 373,000 shares, and we've been active in fiscal quarter one with repurchases totaling 282,000 shares. As of yesterday, REX's board of directors authorized an additional 1.5 million shares to be available for repurchase.

These are in addition to the remaining 222,510 shares still available for repurchase under the previous buyback authorization. As far as additional avenues for growth, we are always looking for facilities that come on the market that meet our operational and financial criteria. Our ability to do so is always thanks to the incredible team we have at REX, whether operating the facilities that are planned to high efficiency or monitoring corn and natural gas markets and taking advantage of beneficial conditions to lower our cost base. The people we have at REX are second to none in the industry, and I want to take a moment, as always, to thank them for the work they do on a daily basis. All of this is to say that REX is in good position to make progress in our strategic goals during 2025, delivering value to our shareholders.

I'd now like to turn things over to our CEO, Zafar Rizvi, to discuss the progress of our growth projects at REX.

Zafar Rizvi (CEO)

Thank you, Stuart. During fiscal year 2024, we made steady progress on our carbon capture and sequestration project in Gibson City, Illinois. During the year, we substantially completed construction on the capture and compression portion of the facility. During 2025, we anticipated moving forward in the sequestration portion of the project. Currently, we are awaiting approval of Class VI injection well permit from the EPA. The EPA currently projects issuing of this permit in October. We are hopeful that once we have obtained this permit, we will be able to move forward with other required state and local permitting. Given proposed rulemaking earlier in the year by the Pipeline and Hazardous Materials Safety Administration, we are closely monitoring potential action to accelerate updating rules and regulations for CO2 pipeline from the Trump administration and toward getting the project moving forward.

Once all approvals are received and the facility is operational, the One Earth carbon capture and sequestration facility should contribute to REX's bottom line through both 45Z and 45Q tax credits. These tax credit impacts would be maximized through the related expansion of our Gibson City ethanol production facility's capacity once it is completed and in operation. During 2024, REX moved forward on construction of the ethanol facility expansion project and made substantial progress. Currently, management is undertaking a review of certain elements of the project plan. The review is in keeping with our priority of maintaining efficiency and a higher production level at our facilities, and we believe we will ultimately benefit the long-term operation and profitability of the capacity expansion.

However, as a result of the review, we do anticipate the timeline for the completion of the expansion to extend past the previous target of the middle of 2025. As the fiscal year ends, we have invested approximately $115.6 million into the One Earth Carbon Capture project and the associated ethanol production capacity expansion. Due to the anticipated impacts of the ongoing review of certain elements of the expansion projects and inflation, we have now budgeted a total of $220 million to $230 million for both projects combined. I would like to hand the call to our CFO, Doug Bruggeman, to discuss our operational and financial results.

Doug Bruggeman (CFO)

Thank you, Zafar. I'll begin with our operational results. REX's ethanol sales volume during fiscal year 2024 were 289.7 million gallons, a slight increase over fiscal year 2023 sales volumes of 285.9 million gallons. Volumes in the fourth quarter of 2024 were 74.7 million gallons versus 72.1 million gallons in the fourth quarter of 2023. Average selling prices for our consolidated ethanol volumes were approximately $1.71 per gallon for the full year 2024 and $1.64 for the fourth quarter. Dried distillers grain sales volumes during fiscal year 2024 totaled 632,000 tons, a 3% decrease over fiscal 2023 volumes of 652,000 tons. Volumes during the fourth quarter were approximately 166,000 tons, a decrease of approximately 2% over the fourth quarter of 2023. Average selling price for DDGs was approximately $160.37 per ton for the full year and $143.81 per ton for the fourth quarter.

Modified distillers grain sales volumes were 70,000 tons in fiscal 2024, compared with approximately 54,000 tons in fiscal year 2023. For the fourth quarter, modified distillers grain volumes totaled approximately 19,500 tons, an increase of approximately 11% over the same period in 2023. The average selling price for modifieds was approximately $69.93 per ton for the full year and $72.84 per ton for the fourth quarter. Corn oil sales volume in fiscal 2024 were approximately 88.1 million pounds, compared to 87.5 million pounds sold in fiscal year 2023, an increase of approximately 1%. For the fourth quarter, corn oil sales volumes totaled approximately 23.5 million pounds, an increase of 7% over the fourth quarter of 2023. The average selling price for REX's corn oil product was approximately $0.44 per pound for the full year and the fourth quarter of 2024.

Gross profit for fiscal year 2024 was $91.5 million versus gross profit of approximately $98.2 million for fiscal year 2023. Gross profit in Q4 2024 was $17.6 million, compared to $30.4 million in the fourth quarter of 2023. The decrease was due to lower selling prices across all categories, slightly offset by lower corn and natural gas prices. Our selling general administrative expenses decreased to $27.1 million for fiscal year 2024 versus $29.4 million in 2023. SG&A in the fourth quarter decreased to approximately $6.2 million versus $7.4 million in the fourth quarter of 2023. The fourth quarter decrease was primarily due to lower incentive bonuses based on company profitability levels. Interest and other income grew by approximately 22% in 2024, totaling $19.2 million, compared with approximately $15.7 million for fiscal year 2023.

We reported interest and other income for the fourth quarter of approximately $4.2 million versus $4.8 million for the same period in 2023. Income before taxes and non-controlling interest for 2024 was approximately $92.9 million, a 6% decrease from $98.5 million in 2023. During the fourth quarter, we reported approximately $17.9 million in this metric versus $32.5 million during the same period during the previous year. Net income attributable to REX shareholders for the year was $58.2 million, compared to $60.9 million in fiscal year 2023. For the fourth quarter of 2024, this equaled $11.1 million, compared with $20.6 million for the fourth quarter of 2023. On a per-share diluted basis for the full year, this amounts to $3.30 per share of net income in 2024, compared to $3.47 per share in 2023.

For the fourth quarter 2024, diluted net income per share was $0.63 per share, compared to $1.16 per share for the same period the previous year. During the fourth quarter of 2024, REX repurchased approximately 373,000 shares of our common stock for total consideration of approximately $15.5 million. During the fiscal first quarter of 2025, REX has repurchased an additional 281,709 shares of our stock for a total consideration of $11.9 million. Total share repurchases equaled 654,276 shares, or approximately 3.7% of REX's outstanding shares. We ended the fiscal year with total cash, cash equivalents, and short-term investments of $359.1 million, compared with $378.7 million for fiscal year-end 2023. This net reduction in cash was primarily due to capital expenditures related to the projects at the One Earth Energy facility, as well as the share repurchases mentioned earlier. REX American ended the year without any bank debt.

I'd now like to turn things back over to Zafar.

Zafar Rizvi (CEO)

Thanks, Doug. I would like to give some color around our priorities for 2025 and the several factors that will influence our business for the remainder of the calendar year. Overall, we are pleased with Q4 and how we managed through some challenges and are now focused on a profitable 2025. Q1 is already off to a good start, and we are expecting a profitable Q1, which would be our 19th consecutive profitable quarter from a net income perspective. Against this positive current financial and operational backdrop, we are maintaining a focus on properly positioning our business for the future and executing on our several growth projects during the year. Importantly, we are carefully watching the policy forces that could impact our business and the overall market for our products. Chief among these is the possibility of tariffs on ethanol and co-product exports, which could be imposed by foreign governments.

During 2024, total ethanol exports from the U.S. reached a record high of 1.9 billion gallons, supporting pricing throughout the year. We are particularly mindful of the tariff impact on the Canadian and Mexican market, as Canada represents approximately 36% of U.S. ethanol exports and Mexico represents approximately 21% of U.S. DDG exports in 2024. Both of these were the top export markets for the respective products. Second is the debate around year-round E15 blending. We believe this proposed policy change, part of the nationwide Consumer and Fuel Retailer Choice Act introduced to Congress in February, would be beneficial not just to ethanol producers, but to U.S. consumers as well, creating increased demand while also lowering fuel prices for drivers. We are closely monitoring developments in the market, as well as on Capitol Hill, to continue making informed and prudent decisions for our business.

In closing, I want to say that the entire REX team looks forward to what is to come for our business in 2025. Thank you to all our stakeholders for your continued support. Now I would like to open things up to questions. Operator.

Operator (participant)

Thank you. At this time, we'll be conducting a question-and-answer session. If you'd 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'd 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 poll for questions. Our first question comes from Jordan Levy with Truist Securities. Please proceed with your question.

Jordan Levy (Vice President and Equity Research Analyst)

Good morning, all, and thanks for taking my questions. Nice quarter again. Can you maybe just provide a little detail, Zafar, around what went into the higher capital budget on the expansion project, recognizing that the timeline kind of is in flux as you kind of await that approval from the EPA?

Zafar Rizvi (CEO)

Sure.

Stuart Rose (Executive Chairman)

Zafar?

Zafar Rizvi (CEO)

Yeah. Sure, Jordan. As you know, we always concentrate on three things. Number one is we look at what is our profit. We have been able to produce 18 consecutive profitable quarters. We also have decided to see how we can position our company towards the growth and particularly organically growth. We looked at that. Number three, we always look at the policies. Coming back to the growth, when we looked at our equipment, different kinds of equipment, which was energy-efficient equipment, which we looked at, we realized that some of those equipment did not be able to handle 200 to 225 million gallon production. Because we wanted to position our plants so that way, if we in the future, we try to grow further from 200 million gallon to 225 million, then we don't have to spend extra money in the future.

We decided to evaluate those, and we decided to have equipment which can manage 200 to 200 million gallon production. When we looked at that, that's one of the major reasons that we have to spend extra money for the future growth. That's the main reason that our budget is increased. Also, due to that same reason, the timeline is also increased.

Jordan Levy (Vice President and Equity Research Analyst)

I appreciate that transparency. I think it makes a lot of sense. Maybe just moving over to the regulatory side, the permitting side of things. Can you just talk? You guys, is this your first update since the new administration?

Zafar Rizvi (CEO)

I'm sorry, Jordan, you were cut off. Could you repeat that question again, please?

Stuart Rose (Executive Chairman)

We lost Jordan somehow.

Zafar Rizvi (CEO)

I think if I understood correctly, probably you were talking about PHMSA rules. As you know, PHMSA issued new regulations two days before the end of the Biden administration. However, these were not posted for the required 60-day public comments period and are currently under review by the new administration, making them invalid for implementation. We are waiting for the Trump administration to review those and then reposted it, either eliminate some of the new rules. That is where we are at this time for the PHMSA rules, if that is what your question was.

Jordan Levy (Vice President and Equity Research Analyst)

Yeah. Can you hear me now?

Zafar Rizvi (CEO)

Yes. We can hear you. Yes.

Jordan Levy (Vice President and Equity Research Analyst)

Okay. Yeah. Yeah. No, I appreciate that. Lastly, I just wanted to see if you've had any direct dialogue with the EPA on Class VI well permitting since the new administration took over, if there's been any change in that dialogue.

Zafar Rizvi (CEO)

Yes. Actually, what happened is originally when the Trump administration took over in January 20, by January 28, all the communication was stopped. Later on, now the communication is started already. We have, in March, two conversations with the EPA, and then we believe that we will be able to answer all those questions which previously they were asking. There is communication is started.

Stuart Rose (Executive Chairman)

Jordan, we can't control. Jordan, I was going to say we can't control the administration, but with the Biden administration, they were very, very slow on everything. It appears the Trump administration, at least, is responsive, and we'll see how fast they are, but we don't know yet. We don't know what the legislation's going to include, and maybe more favorable, maybe less favorable when they come out with the tax bill. In terms of responsiveness, it seems like we're getting or the communications have opened up, and they seem to be going very well at this moment, at least with the EPA.

Zafar Rizvi (CEO)

Yeah. Exactly. You know, Jordan, as I mentioned, we're watching all these policies very closely. That is what Stuart is saying, that some of these are behind our control, but we are watching them, how we can really make sure that we stay ahead of that.

Jordan Levy (Vice President and Equity Research Analyst)

Yeah. Totally. Appreciate all the context. Thanks so much.

Stuart Rose (Executive Chairman)

Thank you.

Operator (participant)

As a reminder, if you'd like to ask a question, please press Star 1 on your telephone keypad. One moment, please, while we poll for questions. There are no further questions at this time. At this point, I'd like to turn the call back over to Stuart Rose for closing comments.

Stuart Rose (Executive Chairman)

Thank you. We had another great year. I think it was third best in our history and really a terrific year. We have great plants. We're in great areas of the country with our plants. We have great growth prospects, which Zafar outlined. Most importantly, we have, in my opinion, the best people in the industry, including our CEO. There's no one that knows the ethanol business, in my opinion, better than Zafar. Between Zafar and the people he's assembled and the rest of the team, that's what makes REX so much better, I believe, than the rest of the industry. Again, we thank you for listening, and we'll talk to you when we have our first quarter conference call. Bye. Thank you.