Title

Presentation

REX American Resources Corporation beats earnings expectations. Reported EPS is $0.63, expectations were $0.27.

Operator: Greetings, and welcome to REX American Resources Corporation Fourth Quarter and Full Fiscal Year 2024 Earnings Conference Call. At this time, all participants are in 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. Doug Bruggeman. Thank you. You may begin.

Doug Bruggeman: 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 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. 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 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-K and 10-Q. REX American Resources Corporation 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: 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 for 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 of the day-to-day, as we have in the past. We are concentrating on the things we can control and acting prudently as 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 were active in the fiscal fourth quarter, repurchasing approximately 373,000 shares, and we have 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 for 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, their plants 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. 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 a good position to make progress on 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: 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 waiting for approval of a Class VI injection well permit from the EPA. The EPA currently projects issuing this permit in October. We are hopeful that once we have obtained this permit that 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 Material Safety Administration, we are closely monitoring potential action to accelerate updating rules and regulations for the CO2 pipeline from the Trump administration and towards 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. This review is in keeping with our priority of maintaining efficiency and higher production levels at our facilities, and we believe 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 of fiscal year end, we have invested approximately $115.6 million into the One Earth carbon capture project and 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 $222-$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: Thank you, Zafar. I’ll begin with our operational results. REX’s ethanol sales volume during fiscal year 2024 was 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 compared to 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. Dry 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 grains 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 modified 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 was 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 44 cents 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 from 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, and 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 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 versus $32.5 million during the same period in 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 and for the fourth quarter of 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. So far, during the fiscal first quarter of 2025, REX has repurchased an additional 281,709 shares of our stock for 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: 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 nineteenth consecutive profitable quarter for a net income prospect. 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 US reached a record high of 1.9 billion gallons, supporting pricing throughout the year. We are particularly mindful of the tariff impact on Canada and Mexico, as Canada represents approximately 36% of US ethanol exports and Mexico represents approximately 21% of US 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 US 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’d like to open things up to questions. Operator?

Operator: Thank you. At this time, we will be conducting a question and answer session. You may press *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: 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 is kind of in flux as you kind of await approval from the EPA?

Zafar Rizvi: Sure, Jordan. As you know, we always concentrate on three things. Number one is profit. We have been able to produce 18 consecutive profitable quarters. We also have decided to see how we can position our company towards growth, and particularly organic growth. Number three, we always look at policies. So coming back to the growth, when we looked at it, different types of equipment, which were energy-efficient equipment, we realized some of those pieces of equipment would not be able to handle 200 to 220 million-gallon production. Because we wanted to position our plants so that way if in the future we try to grow further from 200 million gallons to 225 million, we do not have to spend extra money in the future.

So we decided to evaluate those and we decided to have equipment which can manage 200 to 220 million gallons per production. So when we looked at that, that’s one of the major reasons that we have to spend extra money for future growth. And that’s the main reason that our budget has increased and also the timeline has increased.

Jordan Levy: And 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, this is your first update since the new—

Zafar Rizvi: I’m sorry. Jordan, you were cut off. Could you repeat that question again, please?

Operator: We lost Jordan somehow.

Zafar Rizvi: I think if I understood correctly, you were probably talking about PHMSA rules. So 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-days public comment period and are currently under review by the new administration, making them invalid. We are waiting for the new administration to review those and then either eliminate some of the rules or repost them. So that’s where we are at this time for the PHMSA rules, if that was what your question was.

Jordan Levy: Yeah. Can you hear me now?

Zafar Rizvi: Yes, we can hear you.

Jordan Levy: Oh, okay. Yeah. No, I appreciate that. And then just lastly, I just wanted to see if you’ve had any direct dialogue with the EPA on plastics well permitting since the new administration took over and if there’s been any change in that dialogue.

Zafar Rizvi: Yes. Essentially, what happened is originally when the Biden administration took over in January twentieth, all communication was stopped. And later on, communication started again. We have had two conversations with the EPA and believe we will be able to answer all those questions they were previously asking. So communication has started.

Stuart Rose: Jordan, we cannot control the administration, but with the previous administration, they were very, very slow on everything. It appears the new administration, at least, is responsive and we’ll see how fast they are, but we do not know yet. We do not know what the legislation is going to include. It may be more favorable, maybe less favorable, when they come out with a tax bill. But in terms of responsiveness, it seems like we’re getting the communications opened up, and they seem to be going very well at this moment, at least with the EPA.

Jordan Levy: Yep.

Zafar Rizvi: Exactly. You know, just so you know, Jordan, as I mentioned, we are watching all these policies very closely. So that’s what Stuart is saying; some of these are beyond our control, but we are watching them closely.

Jordan Levy: Yeah, totally. I appreciate all the context. Thanks so much.

Operator: Thank you. 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: Thank you. We had another great year, I think it was the third-best in our history and really a terrific year. We have great plants. We are in a great area of the country with our plants. We have great growth prospects, which Zafar outlined. But most importantly, we have, in my opinion, the best people in the industry, including our CEO. There is no one that knows the ethanol business better than Zafar Rizvi, in my opinion. Between Zafar and the people he has assembled, as well as 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. Thank you.

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