REX American Resources Q2 2026 Earnings Call Transcript

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August 27, 2025

Key Takeaways

  • Positive Sentiment: Passage of the One Big Beautiful Bill Act preserved both the 45Q and 45Z tax credits through 2029, materially enhancing the economics of REX’s carbon capture and sequestration project.
  • Neutral Sentiment: REX’s EPA Class VI injection well permit application timeline improved to March 2026 (from April), with county, state and ICC approvals still required before construction can begin.
  • Positive Sentiment: The Board approved a 2-for-1 stock split via a 100% dividend, aiming to reward shareholders and increase share liquidity as REX stock trades near all-time highs.
  • Negative Sentiment: Q2 volumes rose (70.6 M gallons vs. 65.1 M), but lower average ethanol prices ($1.75/gal vs. $1.79) and falling DDG prices drove gross profit down to $14.3 M (from $19.8 M) and net income to $7.1 M (from $12.4 M).
  • Positive Sentiment: Ethanol capacity expansion remains on schedule and within the $220–230 M combined budget, targeting 175 M gallon annual capacity in 2026, with $126.7 M invested to date.
AI Generated. May Contain Errors.
Earnings Conference Call
REX American Resources Q2 2026
00:00 / 00:00

There are 6 speakers on the call.

Operator

Greetings, and welcome to REX American Resource Corporation Second Quarter twenty twenty five Earnings Conference Call. At this time, all participants are in a listen only mode. A question and answer session will follow the formal presentation. As a reminder, this conference is being recorded. I would now like to turn the conference over to your host, Mr.

Operator

Doug Brageman. Thank you. You may begin.

Speaker 1

Good morning and thank you for joining REX American Resources quarter two twenty twenty five conference call. With me on our call today are Stuart Rose, REX Executive Chairman and Zafar Rizvi, the REX Chief Executive Officer. We will 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 risks and uncertainties within the meaning of the Private Securities Litigation Reform Act of 1995.

Speaker 1

Such forward looking statements reflect the company's current expectations and beliefs, but are not guarantees of future performance. As such, results may vary materially from expectations. The risks 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 ks 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.

Speaker 2

Good morning and thank you to everyone for joining us today. During the second quarter, REX extended our success in our core ethanol production business, moved our One Earth Energy expansion project forward and saw supportive near term tailwinds develop for our business as we head to the second half of the year. Overall, REX exited the second quarter in a great position to continue delivering value to our shareholders. Passage of the One Big Beautiful Bill Act during the quarter was very supportive of our carbon capture and sequestration project, The continuation of the 45Q tax credit extension of the 45Z tax credit through 2029 important to the economics of our project put us in good position. We wait on approvals from the county, state and EPA.

Speaker 2

We are pleased with these developments and believe they set up REX for long term success. During the quarter, we maintained our strong balance sheet and continue to have ample cash to complete our several growth initiatives as well as other opportunities which could arise. These include any potential acquisition opportunities that meet our strict operational and financial criteria or additional future organic growth. This morning, we announced that our Board of Directors has authorized a two for one stock split that would be affected by a 100% stock dividend. Their stock recently traded at all time highs.

Speaker 2

We saw this as an opportunity to reward our loyal shareholders and increase liquidity in our shares. Split will affect shareholders of record as of 09/08/2025. Overall, the REX team executed at a high level once again, delivering value to our shareholders and moving our business forward efficiently. We are very proud of the work the team does every day to ensure our company's success drive value for shareholders. I'll now turn the call over to CEO, Tafar Rizvi to provide updates on our ongoing projects.

Speaker 2

Thank you, Stuart.

Speaker 3

The one ARC facility expansion is progressing steadily. The previously mentioned energy efficiency initiative has been completed with a focus on optimizing the reduction of the expanded plants carbon intensity. Most of the previous expansion work is already complete, the initial capacity expansion, which will increase annual ethanol production capacity to 175,000,000 gallons is expected to be fully operational in 2026. Turning to carbon capture, the recently enacted Big Beautiful Bill Act has further strengthened the economics of REX proposed carbon capture and sequestration project by preserving both the 45Q and 45Z tax credits. While we also extended 45Z through 2029, with this outcome, we are positioned to maximize the benefit from the tax credit program through expansion of our ethanol production capacity to 175 and then to 200,000,000 gallons.

Speaker 3

The legislation also simplified 45Z requirements by removing mandates tied to climate smart farming practice. Also, thanks to the legislation, lean fuels produced with feedstock source outside The U. S, Mexico or Canada will not be eligible for the 45 credit pending final treasury guidelines. This supports our business as well as that of our former partners. As of today, the EPA estimate that our Class six injection well permit application will be finalized in March 2026, which has been moved forward from April 2026 as per the EPA website.

Speaker 3

Rex remains in active communication with the EPA on our application and we look forward to the final approval of this permit. As of the end of the second quarter, we have invested a total of approximately $126,700,000 in carbon capture and ethanol expansion projects. We remain within our revised combined budget range of $220,000,000 to $230,000,000 for both projects. I'll now hand the call over to Doug Bergman to discuss our financial results.

Speaker 1

Thanks, Zafar. During the 2025, our ethanol sales volumes reached 70,600,000 gallons compared to 65,100,000 gallons Q2 twenty twenty four. The average selling price for ethanol was $1.75 per gallon during the quarter versus $1.79 in the prior year. Dry distiller grain sales volumes were approximately 148,000 tons for Q2 with an average selling price of $143.63 per ton compared to approximately 133,000 tons at price of $164.45 per ton in the prior year. Modified distillers grain volumes totaled approximately 19,000 tons, an average selling price of $64.41 per ton.

Speaker 1

Foreign oil sales volumes were approximately 23,100,000 pounds during the quarter with an average selling price of $0.54 per pound. Compared to the prior year, we sold approximately 14% more pounds in the second quarter and also experienced approximately a 26% increase in prices, which led to approximately a 46% increase in sales dollars. Gross profit for the second quarter was $14,300,000 compared to $19,800,000 in Q2 twenty twenty four. This primarily reflects lower sales prices for dry distiller grains as the average price dropped from $164.45 to $143.63 We also paid higher shipping cost, which is recorded as cost of goods sold and impacts gross profit, but does not impact sales. Selling, general and administrative expenses were approximately $6,200,000 for the quarter compared to $6,400,000 in Q2 twenty twenty four.

Speaker 1

Interest and other income totaled $3,100,000 for the quarter compared to $4,400,000 in quarter two twenty twenty four, reflecting lower rates and lower investments. Income before taxes and non controlling interest was approximately $12,100,000 compared to $19,500,000 in Q2 twenty twenty four. Net income attributable to REX shareholders was $7,100,000 or $0.43 per diluted share compared to $12,400,000 or $0.70 per diluted share in Q2 twenty twenty four. We ended the first quarter with cash, cash equivalents and short term investments of $310,500,000 REX continues to maintain the strong financial position with no bank debt. I'll now turn things back to Zafar.

Speaker 3

Thanks, Doug. REX strategy continued to be guided by the three Ps profit, position and policy. Profit, our dedicated team has delivered 20 consecutive quarters of the profitability, reflecting strength, discipline and commitment. Our third quarter for 2025 is on pace to outperform the second quarter, but will not be as strong as our last year's third quarter, which was our second best quarter on record. I'm particularly pleased with the increased yield of corn oil production, which reflects the consistent and efficient operation of the overall plants.

Speaker 3

This improvement demonstrate not only the effectiveness of our process, but also the dedication of the team in maintaining high standard of the performance. Position ethanol expansion and carbon capture initiative remains moving forward and within budget positioning REX for sustainable long term organic growth. Policy, 40 policies measures particularly the continuation of the 45Q tax credit and the extension of 45 gs tax credit through 2029, enhance the economics of our operation and strengthen future earning potential. Looking ahead, REX anticipates better performance in the 2025 compared to the first February of the year, supported by favorable corn supply trends and steady demand, particularly from rising ethanol exports. Exports are running about 10% ahead of 2024 levels through June, according to the Renewable Fuels Association, with 2024 already a record year, that expects 2025 to set a new export record.

Speaker 3

As far as feedstock supply, early estimates also suggest The U. S. Corn crops is on track for a potential record harvest, which should further benefit REX. We believe this favorable market dynamic sports margin expansion through year end with additional export upside once tariff related trade issues are resolved. Rex remains confident in the outlook for its core business and we are committed towards executing our growth strategy while continuing to deliver long term value to our shareholders.

Speaker 3

Now I would like to open things up for questions. Operator?

Operator

Thank you. At this time, we'll be conducting a question and answer you. Our first question comes from Peter Gastrich with Water Tower Research. Please proceed with your question.

Speaker 4

Good morning and thanks for taking my questions. For starters, congratulations on the results and another consecutive quarter of profitability. I've said it before, that's something that's alluded pretty much all of your peers. So congratulations on that. It's also great to see the regulatory tailwinds that are coming through in your favor.

Speaker 4

Just a few questions from me. The first one is just regarding an event that you held this summer at your rare earth or excuse me, your earth energy facility. It looks like it was very well attended with a couple of 100 of people. Could you talk about who turned up for that event and any implications for your state and local support for your growth projects, particularly for CCS?

Speaker 2

I was at the event, so I guess I'll answer that. This is Stuart. People that turned up were mostly local people, and it was the first time we did it at the One Earth facility. And it was, again, we're doing our best to to be a good citizen in the community. And almost all the local our many local officials turned up.

Speaker 2

Our, many shareholders we only own 75% of One Earth, so many shareholders turned up. A few government officials, representative and things like that, people like that showed up. Overall, it was a it was a big success. I think we accomplished what we were trying to do, which is to get some gratitude in our our have some favor have more favor in the local community. I think we're already a a major citizen of Gibson City, but this just made us a little bit better.

Speaker 4

Okay, thank you. Just in relation to the CCS component of the Earth Energy project, something that came up toward the end of last year was an issue with an interconnection from local utility. I may have missed the update, but can I just confirm whether that was resolved?

Speaker 3

Yes. That is resolved and now we are able to get the utility directly from Amarin and it's no problem anymore.

Speaker 4

Okay, that's great. Thank you. So thanks for the update in terms of the ethanol margins. It looks like we're in a better place today versus earlier this year. But going into the second half, it'd be great to hear your thoughts on the outlook for your co products as well.

Speaker 4

Thank you.

Speaker 3

As you know, already mentioned that we believe that our third quarter will be better than second quarter, but it will not be as good as last year because last year was our second best quarter. But as we also see the bumper crops not only in the South Dakota, but also pretty good crops in Illinois, particularly in McLean County is the record corn this year in Illinois and we see that will be very beneficial to our both of our locations. And we also see a bumper crops in Iowa where we have minority shareholders company Big River, which we own approximately 10%. So they have also the record crops this year. So we certainly see that there are going to be plenty feedstock available.

Speaker 3

And also as you know the export is increasing of ethanol and we are very pleased with that. And not only Britain is buying plan to buy ethanol from U. S, but also Japan also plan to buy this year also due to the tariff negotiation. So we certainly see that if this continue, we will be really in a pretty good shape in our core business.

Speaker 2

Terms of the byproducts, corn oil continues to be very strong. DDG is a little weak relative to corn prices. And with the bumper crop, I don't know if that's going to continue or not. But DDG has not been as strong relative to corn prices as it has in the past. Hopefully that will turn around.

Speaker 3

Yes. I think that's correct, Stuart, because I think the export of DDG has dropped compared to last year. So that's the one of the things which we can see even Mexico is buying less than last year. So first six months, so that's certainly some concern.

Speaker 4

Okay. That's great. Thank you very much. Congratulations again and I'll get back in the queue.

Operator

Our next question comes from Jared Ellin with South Dakota Investment Office. Please proceed with your question.

Speaker 5

Hey guys, thanks very much for the opportunity to ask question and great quarter. I just wanted to see if you could comment on the overall CI score of your two main plants given the change in the recent legislation relating to 45Z and if you would qualify for any credits without a carbon pipeline?

Speaker 3

Subhana, do you want me to take that?

Speaker 2

Yes, why don't you take it, Subhana?

Speaker 3

Yes, I think we have not really compared to other few companies have declared their CI score. As you know, there is no clear guideline at this time. So that's the one of the reason we have not really discussed publicly what exactly is our CI score at this time until we have clear guideline that what will be our CI score. But we're certainly very happy to see that Smart Farming is no longer is part the calculation and that will give us four to six points and that could help us to really able to go below 50 or close to that number where we will be able to get some CI score reduction without CI score and will be beneficial to us.

Speaker 2

Also as part of the One Earth project, we also are doing things to make our plant more energy efficient, which should help our CI score. And there's a chance even without carbon capture, but like so far said, we can't get we don't know the guidelines, so we're not gonna say that it's gonna happen. But there's a chance we could get some some tax credits even without carbon cap even before our carbon capture project is ready to go. But we are not we don't feel we're in a position to say anything about that right now.

Speaker 5

Excellent. Thank you. And given the Illinois moratorium on carbon pipelines which appears to expire in July, if your Class six well is approved, would you believe that you'd be able to build that soon after that expiration?

Speaker 3

That's what our goal is. But as you know, we still have after we that's approved, we plan to get from the local county special use permit and then we also have to have IEPA permit. And we have discussion with Illinois EPA and we also have discussion with ICC, Illinois Commerce Commission. They are also working on legislations or the guideline, whichever they wanted to have to, we should follow that. So we certainly if those guidelines are issued and all those approvals are received, then we certainly will be able to operate in 2026.

Speaker 3

But naturally this depends on all of those permits once we receive those.

Speaker 5

Excellent. And my final question is related to the short distance that the pipeline is, what's the build time once approvals come to first carbon injection?

Speaker 3

I think once we receive we have to apply it's less than 6.5 miles pipeline. The honest answer is we built that pipeline. The reason because we from the very beginning we wanted to make sure that we are away from Aqua fire. Otherwise we can have built that well right next to our ethanol facility, but we decided we want to be away from the aqua fire. So that way in future there is no concern about the drinking water.

Speaker 3

And that's what exactly happened later on. The legislation was issued that there should not be any over or under that carbon sequestration where the aquifer is. So we are 6.5 miles away from aquifer and that's what that. So it depends how quickly we can get permission from ICC. Once we receive the permission from ICC that takes about couple of months to build the pipeline.

Speaker 5

Great. Thanks so much guys.

Speaker 2

Thank you.

Operator

We have reached the end of the question and answer session. I'd now like to turn the call back over to Stuart Rose for closing comments.

Speaker 2

I'd like to thank everyone for listening. Again, we outperformed most in the industry this quarter, and we currently expect an even better quarter next quarter. It's all due to having great locations for our plants, great plants, most importantly, the top people in the industry. And that goes from our CEO all the way to Everett to all the teams in our plants. And that's really what makes us special and what makes us outperform the industry quarter after quarter.

Speaker 2

We look forward to talking to everyone after the end of our next quarter, and thank you again for listening.

Operator

This concludes today's conference. You may disconnect your lines at this time and we thank you for your participation.

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