REX: NYSE Stuart Rose, CEO Doug Bruggeman, CFO May 2014.
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Transcript of REX: NYSE Stuart Rose, CEO Doug Bruggeman, CFO May 2014.
REX: NYSE www.rexamerican.com
Stuart Rose, CEODoug Bruggeman, CFO
May 2014
This presentation contains forward-looking statements within the
meaning of Section 27A of the Securities Act of 1933 and Section
21E of the Securities Exchange Act of 1934. Such statements can
be identified by use of forward-looking terminology such as
“project,” “may,” “expect,” “estimate,” “anticipate,” or “continue”
or the negative thereof or other variations thereon or comparable
terminology. You are cautioned that there are certain risks and
uncertainties that could cause actual events or results to differ
materially from those referred to in such forward-looking
statements. These risks and uncertainties are described in our
filings with the Securities and Exchange Commission.
2
Safe Harbor
Successful alternative energy investor since 1998 Synfuel investments of $6M yielded ~$178M return over 10 years (~40% CAGR) Discontinued legacy retail operations in FY’09 to focus on alternative energy
Ethanol investments initiated in 2006 $24M profit in FY’07 on $14M early ethanol investment Alternative energy represented 99.9% of revenue and 85.9% of assets
Ownership in seven ethanol production facilities In aggregate, 750.2 million gallons of TTM annualized gallons shipped by seven plants REX effective ownership interest of TTM annualized gallons shipped = 262.8 million gallons Pre-tax ROI’s of 25% - 52% (trailing four fiscal years annualized) Revenues from ethanol, distillers grains & corn oil
Strong, liquid balance sheet (as of 4/30/14) (based on 8.2M diluted shares) Unrestricted cash $55.5M ~ $ 6.76 / share Net book value of retail real estate $4.6M ~ $ 0.56 / share Carrying value of ownership in seven plants $267.8M ~ $32.65 / share REX shareholders’ book value $302.4M ~ $36.87 / share
ROE-focused asset allocation discipline 10.7% average ROE since 1993 (despite low returns on high cash balances) Long-term/active share repurchase program Insider ownership approximately 23%
REX Overview
3
Disciplined investment criteria Invest only if project meets strategic and financial risk and return criteria
Align with farmers, farm cooperatives and farming communities as co-investors and owners of ethanol production facilities Facilitates access to grain supply, local community support
Locate plants close to rail access and feedstocks
Utilize state-of-the-art ethanol production technology Dry mill corn-processing All plants are highly efficient Fagen, Inc. constructed utilizing ICM, Inc. technology
Fagen is large, respected U.S. green energy design-builder
Seek to match grain prices with ethanol and distiller grain sales at consolidated plants Derivative contracts are generally not employed to hedge commodity price risks
Maximize ethanol plant returns via: Running plants efficiently, often above nameplate capacity Sell distillers grains as animal feed Production of corn oil Ongoing reduction of plant level debt
REX Ethanol Strategy
4
REX Corn Belt Ethanol Portfolio
5
Illinois
ONE EARTH ENERGY, LLCGibson City, IL
REX OWNERSHIP INTEREST74%
TTM GALLONS SHIPPED112.0 MILLION
REX’S EFFECTIVE OWNERSHIP OF TTM GALLONS SHIPPED
82.9 MILLION
Illinois
PATRIOT HOLDINGS, LLCAnnawan, IL
REX OWNERSHIP INTEREST27%
TTM GALLONS SHIPPED120.7 MILLION
REX’S EFFECTIVE OWNERSHIP OF TTM GALLONS SHIPPED
32.6 MILLION
Illinois
BIG RIVER RESOURCES, GALVA, LLC
Galva, IL
REX OWNERSHIP INTEREST10%
TTM GALLONS SHIPPED118.4 MILLION
REX’S EFFECTIVE OWNERSHIP OF TTM GALLONS SHIPPED
11.8 MILLION
South Dakota
NUGEN ENERGY, LLCMarion, SD
REX OWNERSHIP INTEREST99%
TTM GALLONS SHIPPED114.2 MILLION
REX’S EFFECTIVE OWNERSHIP OF TTM GALLONS SHIPPED113.1 MILLION
Iowa
BIG RIVER RESOURCES WEST BURLINGTON, LLCWest Burlington, IA
REX OWNERSHIP INTEREST10%
TTM GALLONS SHIPPED107.4 MILLION
REX’S EFFECTIVE OWNERSHIP OF TTM GALLONS SHIPPED
10.7 MILLION
Iowa
BIG RIVER UNITED ENERGY, LLCDyersville, IA
REX OWNERSHIP INTEREST5%
TTM GALLONS SHIPPED121.7 MILLION
REX’S EFFECTIVE OWNERSHIP OF TTM GALLONS SHIPPED
6.1 MILLION
Wisconsin
BIG RIVER RESOURCES BOYCEVILLE, LLCBoyceville, WI
REX OWNERSHIP INTEREST10%
TTM GALLONS SHIPPED55.8 MILLION
REX’S EFFECTIVE OWNERSHIP OF TTM GALLONS SHIPPED
5.6 MILLION
REX AMERICAN RESOURCES
TTM GALLONS SHIPPED BY PLANTS IN WHICH IT HAS INTERESTS750.2 MILLION
REX’S EFFECTIVE OWNERSHIP OF TTM GALLONS SHIPPED262.8 MILLION
Figures as of 4/30/14
6
Plant Investment Timeline
REX Total Investment
Cumulative Earnings (4/30/14)
REX TrailingFour Year Annualized
ROI (1/31/14)*
One Earth (1) Oct. ’07 $51M $62M 25%
NuGen June ‘10 ($12.3M)Nov. ’11 ($19.7M)
$32M $68M 52%
Patriot (2) Dec. ’06 ($16.0M)Jan. ‘12 ($1.9M)
$18M $24M 28%
Big River Oct. ’06 ($5.0M)Jan. ‘07 ($5.0M)
July ‘07 ($10.0M)Sept. ‘09 ($0.03M)
$20M $34M 27%
Total $121M $188M
High Return Ethanol Investments
* Calculated based upon the weighted average capital invested and pre-tax returns generated over the time period1 Production commenced in July ’092 Production commenced in Sept. ‘08
Ethanol Industry Considerations
7
The ethanol industry produced approximately 13.3 billion gallons of ethanol in 2013, thereby reducing U.S. reliance on foreign oil
Helps U.S. balance of trade Helps U.S. move towards energy independence Over 462M barrels of imported oil displaced
Approximately 1/3 of corn used in ethanol production is returned to feed market in the form of distiller grains, corn gluten meal and corn oil*
National benefits Government payments to corn growers have fallen from nearly $9
billion in 2006 to less than $2 billion in 2013* Land transitioned away from “land bank” Ethanol production generates higher tax revenues
Ethanol production added over $44B to GDP* Ethanol production increased household income by ~$31B*
Industry receives no tax subsidies Farm states are less impacted by challenged economic environment
Ethanol estimated to have supported over 387,000 jobs, including across ancillary industries, from agriculture to manufacturing to the service sector*
On a life cycle basis, corn-based ethanol reduces greenhouse gas emissions (GHGs) by ~34% compared to gasoline – 13.3 billion gallons of ethanol reduced GHG emissions by 38 million metric tons, the equivalent of taking 8 million cars off the road*
$8.3B paid in federal, state and local taxes*Sources:* Renewable Fuels Associations
Corn USDA Crop Production Forecast:
2013 (January 2014 report) 13.9 billion bushels(average acre yield of 158.8 bushels)
2012 (November 2012 report) 10.7 billion bushels(average acre yield of 122.3 bushels)
Ethanol Federal EPA ethanol purchasing mandates(1) :
Year Target 2013 13.8 BGY2014 13.0 BGY(2)
Efficient plants expected to operate near capacity levelsYear Capacity
2013 14.8 BGY (14.0 in operation at Jan. 2014)
Distillers Grains / Corn Oil Allows for the recovery of approximately 1/3 of the cost of corn
Expense/Demand/Pricing Drivers
8
1 Mandates can be partially met by use of available RINS from the prior years toward the current year requirements and/or to carry forward a deficit into the next compliance year.
2 Proposed – not final EPA number.
REX TTM Sales Mix
9
Revenue Mix TTM 4/30/14 Revenue Mix TTM 4/30/13
Ethanol$510.0M
74.6%
Ethanol$474.4M
76.4%
Syrup$0.2M0.1%
Corn Oil$17.7M
2.6%
Corn Oil$17.6M
2.8%
Total TTM 4/30/14 Revenue of $620.6M Total TTM 4/30/13 Revenue of $683.8M
TTM 4/30/14 TTM 4/30/13Ethanol $474,356,813 76.4% $509,962,933 74.6%Distiller Grains 128,553,994 20.7% 154,159,507 22.5%Corn Oil 17,557,790 2.8% 17,716,241 2.6%Syrup 161,771 0.1% 1,987,450 0.3%
TOTAL $620,630,368 100.0% $683,826,131 100.0%
TTM Sales Mix
Distiller Grains$128.6M
20.7%
Distiller Grains
$154.2M22.5%
Syrup$2.0M0.3%
$ in millions, except per share dataThree Months
Ended April 30,Twleve Months
Ended January 31,2014 2013 2014 2013
Alternative Energy $155.8 $178.3 $665.6 $656.1Real Estate 0.1 0.1 0.5 0.5Total net sales and revenue $155.9 $178.4 $666.1 $656.6
Gross profit $36.6 $9.0 $64.2 $13.6
Segment profit (loss)Alternative energy $38.9 $6.6 $63.2 $(1.0)Real estate (0.1) (0.1) (0.4) (0.5)Corporate expense, net (0.8) (0.7) (3.1) (2.3)
Amounts Attributable to REX Common ShareholdersNet income (loss) from continuing operations $21.7 $3.2 $33.9 $(2.9)
Diluted net income (loss) from continuing operations per share $2.66 $0.39 $4.15 $(0.35)
Net income (loss) $21.7 $3.5 $35.1 $(2.3)
Diluted net income (loss) per share $2.67 $0.43 $4.29 $(0.28)
Weighted average diluted shares outstanding 8.1 8.2 8.2 8.3
10
Operating Results
$ in millions April 30, January 31,2014 2014
Cash and cash equivalents $ 125.6 $ 105.1Total current assets 168.5 148.8Property & equipment, net 198.4 202.3Equity method investments 74.4 71.2Total Assets $ 446.9 $ 427.9
Current portion of long-term debt $ 10.1 $ 12.2Total current liabilities 31.0 32.1Long term debt 58.1 63.5Total REX Equity (excludes non-controlling interests) $ 302.4 $ 279.3
11
Strong Balance Sheet
Ethanol plants and other industrial investments Repay debt at existing facilities Energy projects using our commodity experience and state-of-the-art technology focus
Share repurchases below book value ~1.7M shares repurchased over the last three fiscal years at average price of $17.82 ~2.8M shares repurchased over the last five fiscal years at average price of $16.00
Repurchased 137,015 shares in FY’13 at average price of $25.44 280,006 shares remaining under current repurchase authorization
8.2 million common shares outstanding
12
Capital Allocation Priorities
FY08 FY09 FY10 FY11 FY12 FY13 $-
$5
$10
$15
$20
$25
$30
$35
$40
$23.51 $25.82
$24.93
$30.06
$34.06
$10.82 $10.82
$15.99 $17.02 $17.82
$25.44
Growth in Book Value Per Share vs.Annual Average Price of Shares Repurchase
$30.04
Much of the world’s oil reserves are in the form of heavy oil in deposits at depths below 2,000 feet
Heavy oil is too viscous to flow to the well at a reasonable rate under ordinary conditions, so technology is needed to help extract it
The most practical method developed so far is to inject steam into the reservoir, to raise the temperature thereby reducing the oil's viscosity
Current methods are limited by the heat losses on the surface and in the well bore as the steam is sent down the injection well. For any particular heavy oil reservoir and price of oil, there is a maximum depth of the reservoir that can be economically exploited
13
Deep Heavy Oil Technology Investment
REX invested in patented technology with potential to steam oil at depths currently unattainable
Current technology allows for injecting steam below grade to ~2,000 feet to extract heavy oil
New downhole steam generator technology seeks to create steam at depths below 2,000 feet to produce deep heavy oil
Modest investment / high potential returns REX has invested ~$1.2M (through 4/30/14) for 60% equity
stake in technology developer, to secure patents, and to pursue commercialization of the downhole steam generation technology
Presently seeking sites/opportunities to test and prove technology
Successful alternative energy investor since 1998 Interests in seven ethanol production facilities with annualized sales of ~750 million gallons (TTM)
REX effective ownership interest of annualized TTM gallons sold = ~263 million gallons Pre-tax ROI’s of 25% - 52% (trailing four year annualized)
Industry leading ethanol production skill and plant efficiencies REX ethanol operations are among best performing plants Alternative energy segment profit of $63.2M in in FY’13 and $38.9M in Q1’14
Growth opportunities in ethanol and other industrial sectors Repay debt at existing facilities and expand ownership of existing facilities Invest in new ethanol plants or industrial projects requiring similar skill sets
Proven management team with asset allocation discipline 10.7% average ROE since 1993, despite low returns on high cash balances Long-term program of share repurchases below book value Insider ownership of approximately 23%
Strong asset base (at 4/30/14): Shareholders’ equity $302.4M (~$36.87 per share) Consolidated cash $125.6M
8.2M diluted shares outstanding
14
REX Summary
One Earth Energy, LLCGibson City, IL
Doug Bruggeman Joseph Jaffoni, Norberto AjaREX JCIRChief Financial Officer (212) 835-8500(937) 276 3931‑ [email protected]