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DATE
Wednesday, May 28, 2025 at 11 a.m. ET
CALL PARTICIPANTS
Executive Chairman — Stuart Rose
Chief Executive Officer — Zafar Rizvi
Chief Financial Officer — Doug Bruggeman
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TAKEAWAYS
Share Repurchase Activity: Repurchased approximately 822,000 shares for $32.7 million at an average price of $39.80 per share, reducing outstanding shares by about 6.8% since December 2024.
Remaining Buyback Authorization: Authority remains to repurchase approximately 1,182,000 additional shares, representing roughly 7% of current shares outstanding.
Ethanol Sales Volume: 70.9 million gallons sold, down from 74 million gallons in the prior-year period, primarily due to shipment timing.
Average Ethanol Selling Price: $1.76 per gallon.
Distillers Grain Sales: 153,000 tons of dried distillers grains at $145.65 per ton and 22,000 tons of modified distillers grains at $73.44 per ton.
Corn Oil Sales: 21.4 million pounds sold at $0.46 per pound.
Gross Profit: $14.3 million, compared to $14.5 million in the prior-year period, reflecting lower dried distillers grain prices offset by higher ethanol prices.
Selling, General, and Administrative Expenses: $5.9 million, down from $6.1 million in the prior-year period.
Interest and Other Income: $4.2 million, compared to $5.9 million in the prior-year period, reflecting lower cash balances and interest income.
Net Income Attributable to Shareholders: $8.7 million, or $0.51 per diluted share, compared to $10.2 million, or $0.58 per diluted share, in the prior-year period; reduction driven mainly by lower cash balances and interest income.
Cash, Cash Equivalents, and Short-Term Investments: $315.9 million at quarter-end, down from the previous quarter due to capital projects and share buybacks.
Capital Investment in Projects: Combined investment in carbon capture and ethanol expansion projects reached $122.7 million to date, within the revised $220 million–$230 million total budget range.
Regulatory Progress: EPA anticipates a final Class VI injection well permit decision by January 2026; proposed injection well sites are approximately six miles outside the Mahomet Sole Source Aquifer boundary defined by Illinois Senate Bill 1723.
Profitability Track Record: Nineteenth consecutive profitable quarter achieved.
Ethanol Export Growth: U.S. ethanol exports increased 23% in March 2025 and were nearly 19% higher cumulatively through March 2025.
Plant Expansion: Ongoing Gibson City plant expansion targets a roughly 33% increase in production capacity.
Balance Sheet: Company remains free of bank debt, supporting funded organic growth initiatives.
SUMMARY
REX American Resources Corporation (REX 2.40%) reported lower sales volume and net income, primarily due to shipment timing and reduced interest income from a lower cash balance. Management confirmed ongoing progress in the Gibson City plant expansion and carbon capture projects within budget, supported by a strong balance sheet with zero bank debt. Key project locations avoid new regulatory aquifer restrictions. The company repurchased approximately 822,000 shares for $32.7 million, reducing outstanding shares by about 6.8% since December 2024, while buyback authorization remains available for future deployment.
Chief Executive Officer Rizvi said, "Q1 FY2025 marked REX's nineteenth consecutive profitable quarter," highlighting consistent performance amidst volatility.
Management cited industry data showing a sustained increase in ethanol exports, with March 2025 volumes up 23% and year-to-date exports up 19% compared to the same periods in 2024.
Company leadership identified immediate market drivers as stable ethanol demand, progress on federally relevant tax credits (45Q and 45Z), and monitoring export tariff scenarios.
Management is "closely monitoring potential changes to the Inflation Reduction Act," specifically amendments to tax credit provisions that could affect project economics.
INDUSTRY GLOSSARY
Class VI injection well permit: EPA authorization required for underground carbon dioxide sequestration as part of carbon capture projects.
45Q / 45Z tax credits: U.S. federal tax incentives for carbon oxide sequestration (45Q) and for producing low-carbon transportation fuels (45Z).
Distillers grains: Byproduct of ethanol production used as animal feed, available in dried or modified forms.
Mahomet Sole Source Aquifer: Principal drinking water source in parts of Illinois, subject to special protection legislation affecting underground projects.
Full Conference Call Transcript
Stuart Rose: Good morning, and thank you to everyone for joining us today. The first quarter of 2025 demonstrated REX's continued operational excellence and strategic execution. We maintained our position as one of the industry's most resilient in the face of uncertain and evolving regulatory and market conditions. During the quarter, we saw stable ethanol demand and managed our production as we have in the past to capitalize on market conditions as we see them. The strength of our balance sheet continues to provide us with flexibility to pursue strategic opportunities while maintaining our disciplined approach to capital allocation. As always, we continue to evaluate potential acquisition opportunities that meet our strict operational and financial criteria.
Both of our organic growth initiatives, carbon capture, and expansion of ethanol production capacity at One Earth continued to progress. For the remainder of the year, we anticipate moving these projects forward, controlling what we can. Beyond operations, one of the duties we take very seriously at REX is delivering consistent value to our shareholders. To this end, we have continued the share buybacks that we've talked about on our last call. During the first quarter, we repurchased approximately 822,000 shares for total consideration of $32.7 million during a period when our share price, we believe, was undervalued. The average purchase price for the repurchased shares was $39.80.
This brings our buyback activity to approximately 6.8% of our shares since reinitiating purchases in December 2024. Currently, we have approximately 1,182,000 shares remaining on the buyback authorization, which represents an additional approximately 7% of our shares. We plan to continue executing on the remaining share purchase authorization when and where we see value. I'll now turn the call over to our CEO, Zafar Rizvi, to provide updates on our ongoing projects.
Zafar Rizvi: Thank you, Stuart. Regarding our ethanol facility expansion in Gibson City, we are continuing a technical review of several key project components. This ongoing evaluation has already yielded valuable insights that we believe will enhance the long-term operational efficiencies of the expanded facility when materialized. During the first quarter, we maintained close coordination with the EPA regarding our Class VI injection well permit. The EPA currently anticipates issuing a final permitting decision on our application by January 2026. In parallel, we are closely monitoring potential changes to the Inflation Reduction Act, particularly regarding tax credit provisions for carbon capture projects, specifically 45Q and 45Z, which is related to low carbon fuel.
The bill includes several proposed amendments that could impact our planning and future economic decisions. In the 2025 Illinois legislative session, Senate Bill 1723 was introduced with an amendment defining the term "sole source aquifer." Under this definition, the bill would prohibit carbon sequestration activities above, below, or through such aquifers. The legislation is now under consideration by the governor. But most importantly, our proposed injection well sites, including our initial well and two additional locations, are situated approximately six miles outside the mapped boundary of the Mahomet Sole Source Aquifer as defined in the bill. We view this as a positive development for our project.
From the beginning, we have supported measures to protect vital drinking water resources and are committed to ensuring safety for our operations and the broader community. As of the end of Q1, our total investment in the carbon capture and ethanol expansion projects stands at approximately $122.7 million. We remain within our revised combined budget range of $220 million to $230 million for both projects. I'll now hand the call over to Doug Bruggeman to discuss our financial results.
Doug Bruggeman: Thanks, Zafar. During the first quarter of fiscal 2025, our ethanol sales volumes reached 70.9 million gallons compared to 74 million gallons in the first quarter of 2024. The average selling price for ethanol was $1.76 per gallon during the quarter. Lower ethanol sales volumes in Q1 2025 were mostly attributable to the timing of shipments as our production was relatively stable between periods. Dry distillers grain sales volumes were approximately 153,000 tons for Q1 with an average selling price of $145.65 per ton. Modified distillers grain volumes totaled 22,000 tons, with an average selling price of $73.44 per ton.
Corn oil sales volumes were approximately 21.4 million pounds during the quarter, with an average selling price of $0.46 per pound. The gross profit for the first quarter was $14.3 million compared to $14.5 million in Q1 2024. This primarily reflects lower sales prices for dried distillers grains, somewhat offset by improved ethanol pricing. Selling, general, and administrative expenses were approximately $5.9 million for the quarter compared to $6.1 million in Q1 2024. Interest and other income totaled $4.2 million for the quarter, compared to $5.9 million in the first quarter of the prior year. Income before taxes and non-controlling interest was approximately $13.6 million compared to $16 million in Q1 2024.
Net income attributable to REX shareholders was $8.7 million or $0.51 per diluted share compared to $10.2 million or $0.58 per diluted share in Q1 2024. The reduction was primarily attributable to lower cash balances and interest income rather than operations. We ended the first quarter with cash, cash equivalents, and short-term investments of $315.9 million, a reduction from the previous quarter, primarily reflecting our ongoing capital investments in growth projects and share repurchases. As previously announced, we remained active in our share repurchase program during Q1, acquiring approximately 822,000 shares for total consideration of $32.7 million. This reflects our ongoing commitment to delivering shareholder value and our confidence in REX's future prospects.
REX continues to maintain a strong financial position with no bank debt. I'll now turn things back to Zafar.
Zafar Rizvi: Thank you, Doug. The REX team continues to execute on the three P's I discussed on our last call. First, profit. Our ongoing goal is to run a profitable business despite market ups and downs. Our team has consistently demonstrated their ability to overcome challenges and deliver strong financial results quarter after quarter for our shareholders. Notably, the first quarter marked REX's nineteenth consecutive profitable quarter. Second, position. We have strategically positioned ourselves for organic growth funded entirely by our own strong balance sheet, our ethanol expansion, and carbon capture and sequestration projects. We are focusing on what we can control and making investments to optimize our future operations. We are committed to building REX's long-term strength. Finally, policy.
On the policy front, we continue to monitor developments closely at both the federal and state levels. While many outcomes remain uncertain and outside our control, we believe we are well-informed and well-prepared to respond to any policy shifts that do arise. Our overall market conditions, particularly those that supported the ethanol sector in 2024, remain favorable. Ethanol exports in March 2025 were up 23% compared to March 2024. Cumulatively, US ethanol exports through March 2025 were nearly 19% higher than during the same period in 2024, according to the Renewable Fuel Association. Following a strong first quarter, we are seeing stable performance in the second quarter and expect another profitable result.
Now I would like to open things up for questions. Operator?
Operator: Thank you. It may be necessary to pick up your handset before pressing the star keys. One moment, please, while we poll for questions. And our first question comes from the line of Peter Dastreich with Water Tower Research. Please proceed.
Peter Dastreich: Good morning, gentlemen, and thanks for taking my questions. It's great to hear the progress on the share repurchase program. For starters, congratulations on your results and on your nineteenth consecutive quarter of profitability. That consistent profitability is something that has eluded some of your peers, and it's not just profit. You've been generating superior returns on capital as well. I'd just like to ask what drives REX's ability to consistently deliver this performance, and could you please discuss what it is about your strategy? Is it the cost control, logistics, or other factors at play? Thank you.
Stuart Rose: You want me to answer that? Our CEO has a lot to do with this. We have the top CEO, in my opinion—this is Stuart talking—in the industry who watches everything very, very closely. He watches the corn prices. He watches the ethanol. Very few CEOs, very few people at his level, get down to the details that he does. Then on top of that, we have good locations and very, very good people that we have set up in each of our plants that have, I think, separated us from the pack. Let Zafar expand on what I'm saying, but the big difference is our people.
Zafar Rizvi: Yes, I agree. I think the big difference is our people. We have a team that communicates well. We exactly know what's happening day to day. We have spreadsheets to monitor how the market is moving up and down, and we try to reach our targets. We try to lock in profit. That's basically it, but I think we cannot be successful without the great people and without the great team. And we are very fortunate that we have those people who support us, our ideology, and mission, and we continue to produce for our shareholders.
Peter Dastreich: Okay. Thank you. My second question is a regulatory question. Could you talk about what specific deregulation measures you'd like to see from the Trump administration that could help to smooth your runway, for example? Now, where are we on federal pipeline regulations or other relevant areas?
Zafar Rizvi: You want to answer that, or do you want me to? You know the answer? I don't know. I think we're—
Stuart Rose: I'll answer it, but everything's in limbo right now until this bill passes. We've worked with—we definitely have contacts in Washington that we're working with, and we have very, very good contacts in Illinois. But right now, we're trying to know exactly what the target is. It's a moving target every day with what's going on in Washington, so I can't—it's very hard right now to give anyone any indication of when a ref will ever—or when—and hopefully, it's not if, but it could be if we ever get our carbon cap project going. Things in Washington are in great limbo right now.
Zafar Rizvi: But I think I add to that is the big bill at this time stage still includes 45Q and 45Z. And actually, 45Z is extended to up to 2031. And I think that's very positive. And recently, Illinois passed this bill 1723, which we believe is also very positive for our ethanol location because we are six miles away from the aquifer. Compared to some other facilities, maybe very close to the aquifer, and they banned that. The over, under, and any pipeline or any carbon sequestration where the aquifer is close to that area. So we believe that's very positive. As Stuart mentioned, FISMA rules are still under review.
We had some contacts with them, and they are still saying they are trying to review. And that will build that rules make Trump administration may just leave it as it is as those were passed two days before the Biden administration left. And if that's the case, then I think we should get those rules very soon. As Stuart mentioned, some of these are beyond our control, as you can see, my prepared remarks, I mentioned that January 31st will be issuing the EPA permit. And today, this morning, they extended that date to April 31st. So some of these things are beyond our control, how the governments move forward. And when they finalize their reviews.
So those are just moving targets. So we are watching them very closely.
Peter Dastreich: Okay. Thank you. Yeah. That sounds generally like some good momentum on the regulatory side. Just a final—
Stuart Rose: The other thing that you should remember is no matter what, we are expanding our plant. And it's a great plant already. And we're adding roughly 33% once we finish greater capacity in that plant. So no matter what, we will be growing.
Peter Dastreich: Okay. That's great. Thank you very much. Just one final question, just a macro question. It'd be great to hear your thoughts on the industry fundamentals. Where are ethanol margins trending as we approach this summer, and what are the drivers and outlook there? Thank you.
Zafar Rizvi: I think we cautiously see that the ethanol margins are still very positive. And for the first second quarter, we see it still is positive, as I mentioned in our prepared remarks, and we expect the record corn is expected this year, thanks to strong planting in states like South Dakota and Illinois and good weather so far. If this continues, it could boost our profit for the rest of the year. We are also pleased with our export at this time, ethanol, as I mentioned previously, it's approximately 19% up compared to last year.
And also, if the dust settles with Canada and Mexico, and there is no tariff, then we believe that the Trump administration's will may help us to eliminate those tariffs on the different countries, which they have on ethanol or DDGs. And if that market opens up, we believe that will be great for the ethanol industry. But at the same time, we're cautiously looking at natural gas. If natural gas is exported greater than we expect, then it can negatively affect our business.
But because natural gas and corn and those are the major expenses we have in our ethanol business, so we are monitoring very closely, but we believe at this time, there is a positive outlook for 2025.
Peter Dastreich: Okay. Thank you very much. Appreciate it. I'll get back in the queue.
Zafar Rizvi: Thank you.
Operator: Thank you. There are no further questions at this time. I'd like to turn the call back to Stuart Rose for closing remarks.
Stuart Rose: Okay. I'd like to thank everyone for listening. Again, we feel we have among the best plants in the industry. We have great locations in the Corn Belt. We have what we feel is the best technology. But most importantly, as I said during the call, we, in my opinion, have the best people in the industry, and that's what sets us apart. We have very, very high hopes that these same people and the other people that we've hired will do the exact same thing in carbon capture that we've done in ethanol. Very much look forward to the future.
Thank you very much for listening, and we'll talk to you at the end of next—or the conference call for next quarter. Thank you. Bye.
Operator: This concludes today's conference. You may disconnect your lines at this time. Enjoy the rest of your day.