Green Plains Renewable Energy Inc. (



Q1 2011 Earnings Call

April 28, 2011 11:00 AM ET


Jim Stark – IR

Todd Becker – President and CEO

Jerry Peters – CFO

Jeffery Briggs – COO


Mike Ritzenthaler – Piper Jaffray

Laurence Alexander – Jefferies

Eric Gottlieb – Stephens Inc

Matt Farewell – Imperial

Brent Rystrom – Feltl & Company

Ian Horowitz – Rafferty Capital Management

Matthew Farwell – Imperial Capital

Farha Aslam – Stephens Inc



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Good day, ladies and gentlemen, and welcome to the Green Plains Renewable Energy First Quarter 2011 Conference Call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session and instructions will follow at that time. (Operator Instructions) As a reminder, this conference is being recorded.

I would now like to introduce your host for today’s conference, Mr. Jim Stark. You may begin.

Jim Stark

Thanks, Amy. Welcome to our first quarter 2011 earnings call. On the call today is Todd Becker, President and Chief Executive Officer; Jerry Peters, our Chief Financial Officer; Jeff Briggs, Chief Operating Officer, and Steve Bleyl, Executive Vice President of Ethanol Marketing. We are here to discuss our first quarter 2011 financial results and recent developments for Green Plains Renewable Energy.

There is a slide presentation for you to follow along with as we go through our comments today. You can find the presentation on our website on the Investor page under the Events and Presentations link.

Our comments today will contain forward-looking statements are any statements made that are not historical facts. These forward-looking statements are based on the current expectations of Green Plains’s management team and there can be no assurance that such expectations will prove to be correct. Because forward-looking statements involve risks and uncertainties, Green Plains’ actual results could differ materially from management’s expectations.

Please refer to page two of the website presentation and our 10-K and other periodic SEC filings for information about factors that could cause different outcomes. The information presented today is time-sensitive and is accurate only at this time. If any portion of this presentation is rebroadcast, retransmitted, or redistributed at a later date, Green Plains not be reviewing or updating this material.

Now, I would now like to turn the call over to Todd Becker.

Todd Becker

Thanks, Jim. Good morning and thanks for joining us today. We produced solid financial results for the first quarter of 2011, considering the market dynamics, the industry space at the start of the year.

For the first quarter, we generated $812 million of revenues, $7.7 million of net income and $0.20 in diluted earnings per share. That extended our swing of profitable quarters now to eight, all at the same time we more than a doubled our ethanol production and then increased our grain storage capacity by over 70%.

All of our segments were profitable in the quarter and we reported $24.6 million of operating income before corporate expenses. Total EBITDA for the quarter was approximately $32 million.

We sold and produced 172 million gallons of ethanol, I would say successful close of the Otter Tail ethanol acquisition at the end of March. We are now producing at slightly over 2 million gallon per day rate or 740 million gallons on an annual basis. That is equivalent to more than 1,400 gallons of motor fuel per minute or enough to fuel three drivers average driving for year. Every single minute is a day.

We saw a $1.4 million positive swing operating income for our Agribusiness segment in first quarter compared to last year. Over the $0.5 million operating loss in the first quarter of last year was turned around to $900,000 operating income for the first quarter of this year. We are making progress in reducing costs and improving profitability in this segment. We are still on track to hit operating income for this segment of between $8 million and $10 million for 2011, as indicated previously.

As we indicated in our earnings release, we are investing capital to expand grain storage capacity by 3.6 million bushel this year. These construction projects should be completed by the fall harvest and will allow us to originate more harvest bushels directly from our farmer customers. Once completed, we will on a total of over 43 million bushels of grain storage, with 33 million bushels at our Agribusiness operations and the reminder at our nine ethanol plants.

We continue to explore additional internal expansion projects as well as actively looking for acquisition opportunities. I want to give you a few numbers that outline our presence as an agriculture processer and handler. If you combine the grain at our production facilities with the handler on our elevators over the next 12 months, we will process over 300 million bushels of corn or approximately 2% of the U.S. corn crop.

We also produce and distribute more than 2 million tons of animal feed. We believe that the combination of grain handling processing and animal feed production and marketing firmly places us as one of the leaders in the U.S. agriculture value chains.

Marketing and distribution operating income was up 250% quarter-over-quarter for the first quarter of 2011. This segment significant growth and operating income is primarily the result of producing and selling 10 million pounds of corn oil in the first quarter of this year.

We now have six plants producing corn oil and expect two more plants on line by the end of second quarter, and the extraction technology will be installed at Otter Tail in the third quarter of this year. As a reminder, corn oil typically trade that it just have the soy oil and we do not expect that relationship to change, yet we are still achieving better than expected returns on this investment. Operating income related to corn oil should double again in the second quarter, as we ramp up production. When fully implemented, we expect to produce at least 25 million pounds per quarter.

We have continued to focus on our operating cost and efficiencies, remaining a low-cost operators important for a commodity processing business particularly in light of the current dynamic margin environment.

The ethanol margin curve is compressed currently in the middle of year with little visibility of acceptable margins. This pattern is similar to last year at this time and we have needed to be patient, particularly with the third quarter. Our best opportunities for locking margins have been within the second and the fourth quarters of 2011.

Let me give you some data that demonstrates the results of our margin management strategy for Q1 production. We often go back and compare the daily average spot crush for our platform with the actual realized crush during the quarter.

During the first quarter, the daily average platform crush was in the high single-digit. Here we achieved 18 tons per gallon as represented in our financial performance for the quarter. The main reason for this outperformance was our ability to lock margins away long before we got to start of the quarter. We have good visibility for Q1 margins during the third and fourth quarters of last year and we moved quickly to lock these margins away. Our strong balance sheet allows us to use all the instruments available on the typical markets as well as using financial markets as well. As we focus on finishing up the second quarter, we have seen the daily average platform crush continue to trend lower.

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