Largest US biodiesel producer REG reports Q2 financial results

By Ron Kotrba | August 05, 2014

The largest U.S. biodiesel producer, Renewable Energy Group Inc., announced its financial results for the second quarter ending June 30. Revenues for Q2 were $332.9 million. Compared to Q2 last year, REG sold 11 percent more gallons of biomass-based diesel, while revenue decreased by 13 percent and adjusted EBITDA decreased by 86 percent.

“Our second quarter results demonstrate the resilience of our business in the face of challenging market conditions,” said Daniel J. Oh, president and CEO of REG. “We believe the industry has worked through the excess inventory from year-end and we have seen demand increase since the first quarter. During second quarter, REG demonstrated its ability to operate an expanding business while also investing for future growth. On top of ramping up gallons sold 63 percent from first quarter, we executed a complex series of transactions in order to acquire Syntroleum and Dynamic Fuels. Integration of both is underway and we are excited about the new employees, technology and products added to REG. With these acquisitions, our total assets now exceed $1 billion.”

REG sold 77.2 million gallons of biodiesel in Q2, an increase of 11 percent compared to the Q2 2013. REG produced 56.2 million gallons of biodiesel during the quarter, a 1 percent decrease when compared to Q2 last year. The balance of the gallons sold consisted of 10.1 million gallons purchased from third parties and resold through the company’s distribution network and 10.9 million gallons from inventory.

The company said it is actively preparing for future production growth. REG’s two most recent biodiesel acquisitions, REG Mason City and REG New Boston, are now able to run at nameplate capacity. All upgrades are complete at REG Albert Lea, while previously announced upgrades to increase feedstock flexibility are progressing at REG Newton and REG Mason City. The company also prepared for future improvements at its Danville, Ill., facility with the acquisition and rezoning of adjacent land. Finally, REG maintains a toll manufacturing arrangement that offers additional production capacity flexibility.

As announced in early June, the company launched REG Synthetic Fuels LLC with the acquisition of Syntroleum Corp., which included Syntroleum’s 50 percent interest in Dynamic Fuels, a 75 MMgy renewable diesel facility located in Geismar, La. REG Synthetic Fuels acquired the remaining 50 percent of Dynamic Fuels from Tyson Foods a few days after the Syntroleum acquisition. Dynamic Fuels was renamed REG Geismar following the acquisition.

Revenues of $332.9 million decreased 13 percent when compared to Q2 2013. The decline is attributable to a reduction in average sales price and lower RIN prices, the company stated, which more than offset the 11 percent increase in gallons sold. The average price per gallon of biodiesel sold during Q2 was $3.67, 21.4 percent lower than in Q2 2013.

Gross profit was $15.2 million, or 4.6 percent of revenues, compared to gross profit of $50.2 million, or 13.0 percent of revenues, for Q2 last year. REG stated that the decrease in gross profit resulted from margin compression caused by lower selling prices.

Operating loss was half a million dollars, compared to operating income of $39 million for Q2 2013.

Net income attributable to common stockholders was $10.8 million, or $0.27 per share on a fully diluted basis. This compares to net income of $19.6 million, or $0.62 per share on a fully diluted basis in Q2 2013. For Q2 this year, a tax benefit of $11.9 million was recognized primarily from the release of a valuation allowance resulting from recording deferred tax liabilities related to the acquisitions of Syntroleum and Dynamic Fuels and the convertible debt offering.

At June 30, REG had liquid assets, which includes cash, cash equivalents and marketable securities, of $125.9 million, a decrease of $10.2 million during the quarter. REG raised $139.2 million in cash from the convertible debt financing. Of those funds, $101.3 million was put in escrow as restricted cash supporting REG Geismar’s obligation on $100 million of Gulf Opportunity Zone Bonds issued for Dynamic Fuels in 2008, $30 million was used to acquire Tyson Foods’s interest in Dynamic Fuels and $11.9 million to acquire a capped call relating to the convertible debt.

At June 30, accounts receivable were $48.4 million, or 13 days of sales, an increase of $17.4 million from March 31. Inventory was $70.2 million, or 20 days of sales, a decrease of $23.9 million during the quarter.

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