Green Plains Q1 2025 Earnings Call Transcript

Quartr
Provided by Quartr
May 8, 2025

There are 14 speakers on the call.

Operator

Good morning, and welcome to the Green Plains Inc. First Quarter twenty twenty five Earnings Conference Call. Following the company's prepared remarks, instructions will be provided for Q and A. At this time, all participants are in a listen only mode. I will now turn the call to your host, Phil Boggs, Chief Financial Officer.

Operator

Mr. Boggs, please go ahead.

Speaker 1

Thank you, and good morning, everyone. Welcome to the Green Plains Inc. First Quarter twenty twenty five 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 Ossowski, Executive Vice President, Operations and Technology and Emre Haavasi, 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.

Speaker 1

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 ks, 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.

Speaker 2

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 sustain profitability and with that earning back your confidence.

Speaker 2

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 $50,000,000 in cost reductions. I am pleased to report we are well on track.

Speaker 2

We noted before we already achieved $30,000,000 annualized cost savings and our recently announced ethanol marketing partnership among other internal initiatives has unlocked another $15,000,000 in annualized savings. Beyond strengthening our working capital, the ECO 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 $5,000,000 of targeted savings, which we expect to come not only from SG and 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.

Speaker 2

As a result of this effort, we anticipate our consolidated SG and A run rate to decline meaningfully from the $118,000,000 recorded in 2024 to exit this year at an estimated $93,000,000 annualized run rate. Corporate and trade functions are expected to be reduced to 12,000,000 to $13,000,000 per quarter for the remainder of this year with the line of sight to reducing that to the low $40,000,000 range on an annualized basis by year end, which is much improved compared to the $73,000,000 of corporate and trade SG and 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 Ossowski to talk operations.

Speaker 3

Thanks, Michelle. Overall, our platform continues to perform operationally at a high level. Our nine active plants achieved a 100% utilization in Q1, our highest rate on record, driven by increased discipline, accountability, and daily measurement of key operating metrics. We were achieving an overall reduction in OpEx per gallon of more than 3¢ since q four of twenty twenty four. The sense of urgency across the organization is tangible, and it's making a difference.

Speaker 3

Looking ahead, the RTO project in Obayne is nearing completion. Once fully online, we expect protein yields to exceed 3.5 pounds per bushel with ethanol capacity returning to over 120,000,000 gallons annually. With q two 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.

Speaker 3

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.

Speaker 3

Second, cost ownership. Each cost is being scrutinized as if it was its own P and L. We're laser focused on reducing variable cost per gallon and improving our fixed cost absorption. Third, capital efficiency. All capital, both fixed and working, is being held to strict ROI standards.

Speaker 3

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. And then last, KPI driven execution.

Speaker 3

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.

Speaker 3

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 has prevented us from operating the asset continuously for refined product. Operating at our 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 $10,000,000 annualized positive impact on the Shenandoah site, but we remain fully committed to CST and expect to resume commissioning once the technical solution is in place currently projected for late fiscal twenty twenty six.

Speaker 3

Now I will pass the call over to Emre to talk about the commercial and market update.

Speaker 4

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.

Speaker 4

We expect that twenty twenty five volumes could surpass last year's record of nearly 2,000,000,000 gallons. 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 twenty twenty five-twenty twenty six corn planting anticipated to result in the largest acreage since 2013, currently estimated at 95,300,000 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.

Speaker 4

You have heard Michel 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.

Speaker 4

Commercial shipments of sequenced 60% protein have started. The product is starting to be included in salmon diet with our South American 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 tonnes in 2024 to over 80,000 tonnes 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.

Speaker 4

We're 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 twenty twenty six. We plan to increase our sales in the pet food segment from 60,000 tonnes today to over 100,000 tonnes in 2026.

Speaker 4

And with that, I'll hand the call to Phil for a financial update.

Speaker 1

Thanks, Hime. For the first quarter, we reported a net loss attributable to Green Plains of $72,900,000 or a loss of 1.14 per share, which included $16,600,000 in onetime restructuring charges tied to the closure of Fairmont, the exit of other noncore 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 $51,400,000 or $0.81 per share in Q1 of twenty twenty four. We are supremely focused on improving these numbers as they are not acceptable.

Speaker 1

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 $601,500,000 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.

Speaker 1

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-ninety percent utilization for the remainder of Q2 even with scheduled maintenance underway. Adjusted EBITDA excluding restructuring charges was $24,200,000 loss compared to a negative $21,500,000 in Q1 last year. These results reflect a transition period as we reset the cost base and scale new revenue streams.

Speaker 1

SG and A totaled $42,900,000 up 11,100,000 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 $133,000,000 in 2023 and January in 2024 and is on track to exit the year at approximately $93,000,000 annualized run rate, including a corporate and trade SG and A target in the low $40,000,000 range annually as we exit the year. Depreciation and amortization was $22,400,000 up modestly year over year. And interest expense was $8,900,000 an increase primarily driven by the absence of capitalized interest from prior year project construction.

Speaker 1

Income tax was $100,000 We continue to carry a federal net operating loss of $197,600,000 which provides future tax efficiency and our normalized tax rate going forward is expected to remain in the 23% to 24% range. On the balance sheet, our consolidated liquidity at quarter end included $126,600,000 in cash equivalents and restricted cash, dollars 204,500,000.0 in revolver availability, dollars 48,700,000.0 of unrestricted liquidity available to corporate. Since quarter end, we've delivered on our plan to strengthen liquidity. We executed and are continuing to execute on non core asset sales. We've enhanced credit capacity with a new $30,000,000 line of credit and we extended our $125,000,000 mezzanine notes by about three months while we actively pursue refinancing or a full payoff through additional asset sales.

Speaker 1

We are confident in resolving this in the coming months. Overall, we've improved our unrestricted liquidity at corporate as of May 7 to $89,200,000 Capital expenditures in Q1 were $16,700,000 including targeted growth, maintenance and regulatory investments. For the remainder of 2025, we expect capital expenditures to be in the range of about $20,000,000 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. And with that, I'll turn the call back to Michelle for an update on our strategic review, carbon initiatives and regulatory outlook.

Speaker 2

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.

Speaker 2

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 GREIT model. These policy shifts, if enacted, could significantly improve our CI scores and further enhance the value of our carbon platform.

Speaker 2

As it relates to our strategic review, we continue to work closely with BMO and Moelis. All potential paths 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 Furchage, Karl Grassi and Patrick Sweeney to our Board, and we thank Einar Knutson and Alain Trauer for their service as they step off the Board at the upcoming annual meeting.

Speaker 2

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 start up. Active monetization of our 45Z and Q credits is underway with an update expected next quarter.

Speaker 2

Operational excellence is driving measurable performance gains. Our $50,000,000 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 agriculture 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.

Speaker 2

The strategic review is active and ongoing to unlock long term value. Our executive committee is executing and the Board is refreshed and have strengthened governance, strategy and risk management oversight. With that, we'll now take questions.

Operator

Our first question comes from Pourin Sharma with the Company Stephens. Pourin, your line is now open.

Speaker 5

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 you took it off recently. So just would would like to, you know, hear the kind of the thesis as to, you know, why you're you're putting it back on. It it looks like you've booked about half of q two.

Speaker 5

That was actually gonna 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.

Speaker 4

Yes. 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.

Speaker 4

And so we did some of this before. And 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 historical data. And so 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 co products or whatever we see that opportunity.

Speaker 4

So I think it's just in general good practice to manage risk, reduce exposure if needed. And yes, we lock in Simple Crush. We potentially hedge DCO using soybean oil futures. We hedge in mill. Of course, we have strict limits and monitor value at risk.

Speaker 4

So it is a systematic approach supported by analytics and fundamentals, and we do it when when the opportunity is there.

Speaker 2

And I would just add that at the board level, the risk committee was formed here in the last forty five 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.

Speaker 5

Great. Thank you for the color there. And 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?

Speaker 5

Would just love to hear what type of attributes you're looking for in the next CEO? Thanks.

Speaker 2

Thanks for the question, Corinne. 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

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

Speaker 6

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 compression equipment construction underway and the 4Q start up date.

Speaker 6

Could you just give us any color at this point on when we should expect that construction and the lateral pipe construction from Tallgrass to be completed ahead of that start up date? Thank you.

Speaker 2

Sure. So 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. And we don't anticipate a major time lapse between construction completion and start up.

Speaker 2

And Chris, would you like to add anything more to that?

Speaker 3

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. And feel really strong about our team's readiness and the ability to operate and maintain those assets once they're up and running.

Speaker 6

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

Speaker 4

So far, no impact. I mean, where we would be we would be exposed as an industry, of course, if there were tariffs on ethanol exports into Canada or The UK. So that would be industry impact. We have not seen evidence of that, although Canada flagged that at one point. The other would be also industry level impact relative to China that would impact the soybean complex.

Speaker 4

So some of those things, they happen at the same time, they are offsetting impacts on tariffs. Some might lower cost 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.

Speaker 4

We were we're locking in contracts and prices down to Latin America with no actually no tariff discussions around it. So, so far, we have not seen any impact. And, of course, things are somewhat unpredictable when it comes to, to tariffs, so the things can change. But, you know, if I wanna be an optimistic, maybe there's a there's an upside there too in in in instead of the tariffs, you look at trade and see if if this administration can open up new markets for us. So if we were if we were able to sell more protein, vegetable protein into some of those deficit countries in in in Asia or down to South America through, some of these trade agreements, that would be actually an uplift for, for for our platform.

Speaker 4

So that can go both ways. Of course, everybody's rightfully so talking about the risk, which are which are probably, you know, have higher probability. But to summarize it, so far, have not seen, adverse, impact on on on our business.

Operator

Our next question comes from Sonia Jain with the company UBS. Sonia, your line is now open.

Speaker 7

Yes. 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 margin and margins given all that?

Speaker 4

Yeah. Sorry. It it was the line was breaking up. The that the was the end of the question? Just

Speaker 7

Yeah. Just about the tariff

Speaker 4

You go and impact on

Speaker 7

the question margins. Yeah. And how your how that's affecting your outlook for the year.

Speaker 4

Yeah. So, of course, the the the the components of how how our cash crush or or consolidated cash comes together, they it's in pieces. Right? And and and the impact of of DCO, which is driven by, you know, RVOs and and 45 z and and a couple of other things, is is a big component of our of our of our total margin. We're we're optimistic on DCO for two reasons.

Speaker 4

One is the premium it carries to to other feedstocks just in general because of the low CI score. And then secondly, the overall context, you know, with the restrictions on imported Yuko, the rumored or or anticipated higher RVO levels, they're going above 5,000,000,000 gallons. You know, there's a little tight little bit tighter soybean oil. S and D as soybean oil got became a discount or got the discount point early in the year, encouraging exports. So there's plenty of tailwind for our DCO product.

Speaker 4

We're putting together pricing and hedging structures to maximize that opportunity. But overall, for sure, going into q two, q '3, and maybe even q four, and and as long for sure as forty five z is around, we're very optimistic about the DCO market, and we're we're we consider that as significant contributor. Just that 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. So overall, DCO production should be up and with higher prices that we're anticipating that will contribute greatly to overall crush margins.

Speaker 7

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

Speaker 4

Did you say local or global or or total or I I did

Speaker 7

not both. I said local, but yeah. I said local.

Speaker 4

Okay. Yeah. So so protein, of course, is you know, it it has been protein's been weak and it's been under pressure just in general. Right? But that includes DDGs and and other vegetable proteins.

Speaker 4

Huge pressure from soybean meal. Q1, we've there was an abundance of soybean meal. We did I think the industry worked through that clot. But in general, the domestic protein market will be probably flat muted. Of course, when you look at oil share, that's part explained.

Speaker 4

Oil carries the premium and meal has to be formulated into diets both domestically, but we also need an export market to get rid of the surplus. Higher industry run rates, of course, increased DDG supplies as well in domestic markets. So when it comes to our own protein platform, of course, DDGs, we're extremely focused on our local customer base and enhance value that way. We're when warranted, we're putting on forward sales and stay ahead crush. That's part of risk management.

Speaker 4

In terms of the ultra high protein, we our strategy a few years ago when we built all these facilities was to supply higher margin markets. But unfortunately, a lot of production came to the market. So we had to sell our highest our protein to all sorts of species and with different kind of margin structures. So we're past that. And of course, customer development in some of the higher value the higher value segments like pet and aqua has been taking longer than just selling to poultry or swine.

Speaker 4

But those are coming to fruition. As I mentioned in my script, we're actually making a lot of breakthrough sales recently. And selling to Aqua and Pet are probably, I'm just going to throw out a number, about 45 to $60 per ton higher FOP margins when I add in the Supply Chain Solutions as well. So the strategy will remain 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

The next question comes from Salvador Tiano with the company Bank of America. Firstly,

Speaker 8

I want to ask on the ethanol commercial strategy. So you have the offtake agreement, which if I understood correctly, it's for pretty much all your volume unless I'm missing something. So why the change? And what does this mean for your own trading operations? I think you had pretty substantial trading team.

Speaker 8

And how should we think about how your realizations will move forward compared to ethanol margins? Will they track them more closely, the index? Or will there still be an opportunity to trade around it?

Speaker 4

Oh, absolutely, the latter. So we make all sales decisions, pricing decisions and risk management decisions. EcoEnergy is a marketing partner, so, they execute the they manage the customer relationship and they manage logistics. So all sales are basically back to back except for a few opportunities where eco would have infrastructure and that would apply to maybe the some of the California markets where they would support us with last minute logistics through a terminal. So it is the execution part, is what we outsource and not the risk management part.

Speaker 4

So we, manage all risk. What we, what we expect from this relationship other than a smooth operation, of course, on the logistics side is is leverage the scale. So we lost scale over the years, and that way that's why it made sense for us to combine our volumes with with Eco's volumes. So their volumes increased 50% through our contribution. And 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.

Speaker 4

And we expect to leverage that scale, leverage that scale in terms of market access, arbitrage opportunities, exports and improve our so where we expect the improvement is really on that basis level. We manage we're going to be managing, as I mentioned earlier, Simple Crush, co products, everything else. But where Eco can help us is that basis, improve the improve that basis by maybe a penny or 2 when it comes to logistics and supply chain opportunities or finding us us better maybe ship to locations or customers so we can we can optimize our portfolio. And, of course, the export opportunity is gonna be good. So So that's on the marketing side.

Speaker 1

Yes. And 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 $50,000,000 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. And so there's a working capital efficiency to this as well that will reduce our working capital revolvers.

Speaker 8

Thanks, Phil. And the second one is on liquidity of the balance sheet. So can you clarify a little bit the corporate liquidity you mentioned? I don't think that's something that has mentioned before in your press release. What's the difference or what's the cash there?

Speaker 8

And why is it just 49,000,000 including the any credit availability? And why get the $30,000,000 loan from Amcora that matures in, I guess, less than three months? What's the rationale for that?

Speaker 1

Well, Sal,

Speaker 9

so we we included the corporate liquidity numbers just

Speaker 1

to give some additional clarity. And we do have cash, across the organization and various subsidiaries that's not available to corporate. But this $30,000,000 loan from Ankora, I mean, one, it's it's a it demonstrates that we have a supportive shareholder who who not only has some some members on the board now, but is also putting, cash to work in support of the company. But that enhances our flexibility and really just allows us to to execute on our focus for maintaining liquidity. And, you know, we're focused on on cost reductions.

Speaker 1

We're focused on working capital efficiency. We're focused on exiting noncore assets. And really, this is all about maximizing our flexibility as we pursue various options.

Speaker 4

Thank you.

Operator

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

Speaker 10

Great. Thank you very much. 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? And what type of assets are these logistics assets?

Speaker 10

Or what general type of assets are you looking to sell here?

Speaker 1

So I mean, we're really looking at anything that's what we would call noncore. And so what is that? Mean, we have we've closed some businesses. So we have working capital and equipment in businesses that we've sold. So that's one of it.

Speaker 1

We have various smaller JVs from over the years that we're looking at exiting or in the process of exiting. So we're really focused on that from a noncore standpoint and looking at how do we narrow the focus of what it is that we're trying to do every day, and that's really focused on the core, which is running our assets well, lowering our costs and improving our margin capture through these efforts.

Speaker 10

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

Speaker 2

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.

Speaker 2

I'll let Emre touch a bit on the hedging piece of it, but we're pleased to be where we are and committed to doing all we can assuming what the market will give

Speaker 4

Yes. I mean, most of our hedges are obviously Q2. We started locking in margins for Q2 as those opportunities as crush margin improved at the March. So we entered the quarter with hedges already and added to it as those opportunities presented ourselves. There's a lot less liquidity in ethanol, especially when you go out to Q3, Q4.

Speaker 4

So Q3, Q4 are still very much open. Most of our hedges are in Q2.

Operator

Our next question comes from Laurence Alexander with the Company Jefferies. Laurence, your line is now open.

Speaker 11

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

Speaker 4

The current inventory level is, 25,000,000 barrels, and that's that's sort of a a point that we're looking at, you know, trying when we stay under that level and and we just came off of 27,000,000 barrels that we printed maybe six weeks ago. Of course, spring maintenance helped that. Export was we don't have March data yet, but census indicated a 95. And versus versus I mean sorry. Census data indicated a significant improvement in March.

Speaker 4

That has to be confirmed. So could say that, yes, we are on track on hitting the $2,000,000,000 mark for the year, but Q1 was very, very strong. And what we could say I mean, you could say that some people pulled forward some of these shipments because of tariff considerations. But as we expect tariffs to be sort of a lesser of a risk, we're going to hit over 2,000,000,000 gallons. Now That doesn't help if domestic consumption doesn't pick up.

Speaker 4

So inventory levels are sitting at 25,000,000,000 barrels today. We think they're going to drop towards 23 as the driving season and higher blending kicks in. Our risk there, of course, is that we'll maintain production. But if we enter a recession or we don't have that demand from the consumer, then those inventories will will not drop down towards those those 23, 20 two billion levels, but they will continue to, you know, stay around 25,000,000,000 and eventually build up as we head into the winter. So our risk today is lower blending demand and lower gas demand going into the summer.

Speaker 11

Thank you for that. And 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 for the year end?

Speaker 4

Corn oil?

Speaker 11

Yes. The profit contribution of corn and also protein Yes.

Speaker 4

And we touched on this one during 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 in the mid-40s, high-40s. We're at $0.55 fall back to our plans today. So that's a dime improvement per pound. We think those levels will hold throughout the year supported by a restriction on used cooking oil imports as a feedstock that's used in the biodiesel production.

Speaker 12

And

Speaker 4

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 0.1 per pound 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 upmarket.

Speaker 4

About 50%, give or take, depending on our market view, is index priced. So we're benefiting from an upmarket. And of course, if we that's within the quarter. And if we have a different bias, of course, we can hedge that and by selling soybean oil futures or through options there. But 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

Our next question comes from Andrew Sprelzik with the company BMO. Andrew, your line is now open.

Speaker 13

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. So not the strategic review, but 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 environments evolved, the regulatory environments evolved, and frankly, the conversations with the investment community have shifted from more high pro to more clean sugar and carbon.

Speaker 13

So 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?

Speaker 2

Sure. Appreciate the question. This is Michelle Mates. So you're right. The strategy has evolved over the years.

Speaker 2

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. And then 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've anticipated.

Speaker 2

It's been harder than what we previously communicated. But we're committed to making sure that we're executing going forward. And I think Emre 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. And as it relates to carbon, we are very bullish.

Speaker 2

We continue to be excited about where we are, where we're going. I think when you look at our company today, we're we're pausing a bit. Not that we don't 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. But we're going to take a few months here, and we're going to get things moving in the right direction.

Speaker 2

And that's really where our focus is now. It's not a shift in strategy.

Speaker 13

Okay. That's helpful context. And then 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 into subsequent quarters?

Speaker 13

Are you going to be targeting a roughly 50%? Will it depend on kind of what the market environment looks like? And that will be more variable, this is part number one. And number two, the pacing of the SG and A declines to that run rate that you talked about, if you just kind of give us the cadence? Thanks.

Speaker 4

Yes. I'll take the first one. It depends on market opportunity. We're obviously looking at business need and our EBITDA margins, our cash flow, our OpEx. It's a there's a lot of things that going in there that would make us pull the trigger.

Speaker 4

The 50% is not a mark. It might be zero. It may be a little more. We're not gonna be a % hedged. It's not executable in in just, you know, in the futures markets.

Speaker 4

So it is it is a it is a a risk assessment driven decision coupled with what the business needs. So it can be zero to I I don't know what the top end would be, but, you know, maybe 57 to 70% that we can actually execute. But there's no there's no script for that.

Speaker 1

Yeah. And, Andrew, this is Phil. So in terms of SG and A pacing, I mean, we are on track. We executed those reductions here in the second quarter. So you won't see it fully baked in the second quarter because of the timing of when we announced ECO and when we took some of those actions to further reduce our SG and A.

Speaker 1

But here in third quarter and fourth quarter, you'll see it coming through. Most of that SG and A is immediate. And while we're still chasing things, we still have contracts that are going to expire that might not be renewed, and we're still working on some things to further reduce that number. Most of that, Michelle mentioned in her comments that we corporate trade SG and A in that 12,000,000 to $13,000,000 range for Q3 and Q4. So it's coming fast.

Operator

Our next question comes from Eric Stine with the company Craig Hallum. Eric, your line is now open.

Speaker 12

Good morning, everyone.

Speaker 4

Good morning. Hey.

Speaker 12

So I'm just jumping around calls, I apologize if I'm covering something that already was earlier. So I did hear, you know, talking about just pausing a bit on on other things, and and 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? And do you look at that still as having, you know, significant long term potential?

Speaker 12

I mean, is this something where you're you're pausing to say, hey. Do we really wanna push hard here? Or is it potentially something that you just kinda say, hey. Let's focus on our base.

Speaker 3

This is Chris Ossowski, and I and I covered this a little bit in the initial commentary. Yeah. We are we are parsing the CST initiative, and and 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 better margin environment here in q two. At the same time, we're able to run a a simpler fermentation recipe that lowers OpEx and helps us improve the protein and oil yields out of that plant.

Speaker 3

And that plant is is leading our fleet in terms of the protein yield at over four pounds per bushel. So 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. And we wanna make sure that we have a very good plan in place, before, restarting that effort. And we're thinking end of twenty twenty six as target.

Speaker 12

Got it. Okay. And yeah, and I know that the wastewater issue, that's been an issue for some time. Good color on that. I I guess, maybe lastly, just on

Speaker 5

the cost cuts. So you called out

Speaker 9

the $50,000,000 You

Speaker 12

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 I don't wanna 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?

Speaker 3

Well, I would I would add on the operational excellence initiatives. You know, we're focused on a couple different areas where we see opportunity, specifically on r and m management, repair and maintenance. So, you know, our teams are committed to doing more predictive and preventative maintenance as opposed to breakdown type fix at work, and that opportunity is anywhere from 8 to $10,000,000 that's in front of us, and we're starting to see realize some of that now. And then on the chemicals, yeast, and ingredient 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 our chemical, yeast, and enzyme costs, and that opportunity is somewhere in the 4,000,000 to $6,000,000 range.

Speaker 2

And I would just add to that, some things just take a little more time. Phil mentioned like our contractual commitments. As we exited the ECO 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.

Speaker 2

We're working on that, but those things just take a little bit longer. And 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

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

Speaker 9

Great. Thank you. Good morning.

Speaker 1

Good morning, David.

Speaker 9

I just wanted to thank you. I want to make a statement and then a couple of questions. So I followed the ethanol industry for twenty five 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.

Speaker 9

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 two point zero idea was put out there. Bottom line, when this doesn't happen, the stock can dislodge to exceptionally low levels, which is what I think is happening today. So to the questions, balance sheet liquidity is the topic. Phil, I just wanted to hear your thoughts here.

Speaker 9

In the fourth quarter, your cash balance was over $2.00 $9,000,000 Hereafter the first quarter, it's down to $126,000,000 fell by around $80,000,000 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 25,000,000 but this is really vague and it really plays into this cash question. And 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.

Speaker 1

No, I appreciate the question, David. You know, it and it's a great question. I appreciate the the comments. You know, we are focused on maintaining liquidity. Like we've gone through on this call, we're focused on on a disciplined hedging program, disciplined cost reduction programs, and returning to consistent profitability.

Speaker 1

So we did lose some cash in the first quarter as a result of the EBITDA losses, the CapEx, the interest and the restructuring charges. But it's 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. And as we look out into Q3 and Q4, crush still has some work to do. I mean it's probably still ethanol crush by itself is still probably in the low to mid single digits and all in in terms of consolidated crush.

Speaker 1

And we've got carbon coming in the fourth quarter as well. So there are opportunities for this to continue to move higher, but we've taken these steps to liquidate noncore assets and put facilities in place and extend loans so that we can maximize our flexibility and really focus on returning its overall thing to profitability.

Speaker 9

And then just as a follow-up and somewhat related here, is this asset value and replacement cost and how to get better recognition of it. So specifically, how do you guys think about the replacement cost of the asset base with the stock trading at, I mean, yesterday $3.8.05 $70,000,000 of gross debt. I believe that the implied value of these assets on a per gallon basis is less than $1 If these assets were built today, what would be a good ballpark figure to use as replacement cost per gallon? $2.5 a gallon, dollars 3.5 a gallon, where do you guys peg it?

Speaker 2

Well, I mean, 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 cost in the probably $2 to $3 a gallon range depending upon the asset, depending upon what we choose to rebuild and where, those types of things. One of the reasons for our strategic review process is to ensure that we're getting and maximizing value for our shareholders and getting out there in the market to identify what's available, one, on a whole company basis, on an asset basis.

Speaker 2

And that is ongoing, and we are committed to ensuring that we're not leaving that value on the table for our shareholders. Chris, would you like to add something that relates to the detail on plants?

Speaker 3

Yeah. Specifically related to plants and asset values, we have three different engineered designs of plants, that being ICM plants, plants that were built by Delta t, and finally, Vogtlebush. And each of those plants performs a little bit different in terms of their energy consumption and total OpEx and throughput. And 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 hundred million gallon plant.

Speaker 3

You see it in our total throughput numbers, and you see it in our reduced OpEx per gallon results coming out of here out of q one. And that puts us in a good spot with respect to taking advantage of better margins in q two and in the rest of the year. And I think it's important to to 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

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

Speaker 2

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. And if you do have follow-up questions, please don't hesitate to reach out, and we'll find a time to connect. Thanks, and have a great day.

Operator

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

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Key Takeaways

  • Green Plains has executed a zero-based cost approach, achieving $45 million of its $50 million annualized savings target and expects consolidated SG&A to fall from $118 million in 2024 to a $93 million run rate by year-end.
  • The operations platform hit a record 100% utilization across nine plants in Q1, drove OpEx per gallon down over 3¢ since Q4 2024, and is on track to boost protein yields above 3.5 lb/bu and ethanol capacity to 120 million gallons with the Obayane RTO project.
  • A strategic marketing partnership with EcoEnergy has unlocked $15 million in annual savings, delivers scale and logistics efficiencies, and is expected to reduce working capital by about $50 million via faster AR turns.
  • Construction of carbon compression and pipeline infrastructure for the Advantage Nebraska initiative remains on schedule for early Q4 startup, and Green Plains is actively monetizing 45Z and Q credits amid favorable policy discussions.
  • The Sequence Protein platform is scaling rapidly, with South American shipments rising from 20,000 tonnes in 2024 to over 80,000 tonnes in 2025 and pet food trials poised to drive volumes above 100,000 tonnes by 2026.
A.I. generated. May contain errors.
Earnings Conference Call
Green Plains Q1 2025
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