REX AMERICAN RESOURCES Corp Q1 FY2025 earnings call

• First quarter 2025 demonstrated continued operational excellence and strategic execution, maintaining resilience in uncertain regulatory and market conditions.
• Stable ethanol demand was managed, with the balance sheet providing flexibility for strategic opportunities and capital allocation.
• Share buybacks continued, with approximately 822,000 shares repurchased for $32.7 million in Q1, representing 6.8% of shares since reinitiating purchases in December 2024.
• Organic growth initiatives, including carbon capture and ethanol production capacity expansion at One Earth, continued progress.
• REX maintained its nineteenth consecutive profitable quarter, focusing on profit, position, and policy, with organic growth funded by the strong balance sheet.

In the first quarter of fiscal 2025, ethanol sales volumes were 70.9 million gallons at an average selling price of $1.76 per gallon. Dry distillers grain sales were approximately 153,000 tons at $145.65 per ton. Modified distillers grain volumes totaled 22,000 tons at $73.44 per ton. Corn oil sales were approximately 21.4 million pounds at $0.46 per pound. Gross profit was $14.3 million compared to $14.5 million in Q1 2024. Selling, general, and administrative expenses were $5.9 million vs. $6.1 million in Q1 2024. Interest and other income totaled $4.2 million vs. $5.9 million in the prior year. Net income attributable to REX shareholders was $8.7 million or $0.51 per diluted share vs. $10.2 million or $0.58 per diluted share in Q1 2024. Ethanol sales volumes were lower due to timing of shipments, but production was relatively stable.

• Anticipate moving forward with organic growth projects like ethanol expansion and carbon capture throughout the year.
• Plan to continue share repurchases when value is seen, with approximately 1,182,000 shares remaining on the buyback authorization.
• Expect stable performance in the second quarter and another profitable result.

• Regulatory uncertainties including EPA permitting delays for the Class VI injection well (initially anticipated to be decided by January 2026 but extended to April 30th).
• Changes to the Inflation Reduction Act provisions, particularly for carbon capture tax credits (45Q and 45Z).
• Illinois Senate Bill 1723, which defines 'sole source aquifer' and could impact carbon sequestration activities, though REX's sites are outside the mapped boundary.
• Federal pipeline regulations and EPA permit processes being in limbo and outside direct control.

Q: 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?

A: Stuart Rose mentioned the top CEO and good locations/people; Zafar Rizvi emphasized the great team, communication, and monitoring of market movements to lock in profit.

Q: 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?

A: Zafar Rizvi and Stuart Rose discussed regulatory uncertainties, including EPA permit delays, Illinois Senate Bill 1723, and federal pipeline regulations being in limbo, with some measures like 45Z extension being positive but many outcomes outside control.

Q: Just a final—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?

A: Zafar Rizvi stated ethanol margins are cautiously positive, expecting record corn due to strong planting, positive export trends, but monitoring natural gas prices as a major expense factor.