Renewable Energy Group reports Q4, full year 2014 financials

Renewable Energy Group Inc. announced its financial results for the fourth quarter and full year ended Dec. 31.

For the fourth quarter of 2014, REG increased gallons sold of biomass-based diesel, which includes biodiesel and renewable hydrocarbon diesel (RHD), by 2 percent compared to the fourth quarter of 2013. Revenue decreased by 14 percent while Adjusted EBITDA decreased by 6 percent in the fourth quarter of 2014 compared to the same period in 2013.

For the full year 2014, REG sold 11 percent more gallons of biomass-based diesel, although revenue and Adjusted EBITDA decreased by 15 percent and 27 percent, respectively, compared to 2013, as a result of lower selling prices.

“This past year we delivered solid results despite a rapidly declining energy market and market uncertainty,” said Daniel J. Oh, president and CEO. “Our business model has enabled us to grow consistently, invest in adjacent opportunities, maneuver through market challenges and do so profitably. Our business is proving itself to be durable, reliable and profitable.”

Oh continued, “In 2014, we expanded our product lines by entering the renewable hydrocarbon diesel and renewable chemical markets, we extended our geographic reach and asset base into Europe with our Petrotec investment and we improved distribution capabilities with the establishment of our Energy Services division. Looking forward, we continue to see accretive investment and growth opportunities.”

Fourth Quarter Operating Highlights

REG sold 74 million gallons of biomass-based diesel, an increase of 2 percent compared to the fourth quarter of 2013. Gallons sold in the quarter included 10.4 million gallons of RHD and 7.8 million gallons purchased from third parties and resold through the company’s extensive distribution network.

REG produced 74 million gallons of biomass-based diesel during the quarter, a 12 percent increase over the fourth quarter of 2013. The growth in production resulted from REG Geismar ramping up which contributed 10.8 million gallons of RHD, as well as the completion of the upgrades at Mason City and Newton, which further expanded feedstock flexibility. The company utilized contract or tolled manufacturing, which contributed 4.8 million gallons in the quarter.

In October 2014, REG Geismar began producing and selling RHD, restarting the plant the company acquired in June. The 75-million gallon nameplate capacity biorefinery had been in stand-by mode since December 2012.

In December, the company expanded its business to Europe by acquiring a majority interest in the German biodiesel producer Petrotec AG. Petrotec’s nameplate production capacity is 55.5 MMgy, produced predominantly from used cooking oil. The company has also made a tender offer to acquire the remaining shares in Petrotec, which is not yet complete.

Fourth Quarter 2014 Financial Results

All figures refer to the quarter ending Dec. 31, 2014, unless otherwise noted.

Revenue of $337.6 million decreased 14 percent when compared to the fourth quarter of 2013. The drop in revenue was driven by lower biomass-based diesel prices caused by lower energy market prices, which more than offset volume growth of 2 percent. The average price per gallon sold (including RINs) for B100 was $3.03, a decrease of 29 percent from the same period in 2013.

Gross profit was $111.2 million, compared to $44.7 million for the fourth quarter of 2013. Gross margin was 33 percent, compared to 11 percent in the year-earlier quarter. The increase in gross profit was primarily due to the recognition of the full year net effect from the 2014 federal biodiesel tax credit reinstated on Dec. 19, as well as slightly lower feedstock prices. Market participants were acting as if the biodiesel tax credit would be reinstated throughout the year and entered into agreements to capture the credit when or if reinstated. In addition, as a result of the widespread expectation that the credit would be reinstated, production volumes continued that otherwise might not have occurred and demand for feedstock persisted, supporting prices.

Operating income was $81.9 million, compared to $32.1 million for the fourth quarter of 2013.

Net income attributable to common stockholders was $69.4 million, or $1.61 per share on a fully diluted basis. This compares to a net income of $30.1 million, or $0.80 per share on a fully diluted basis in the fourth quarter of 2013.

Adjusted EBITDA (including adjustments for the allocation of the retroactive reinstatement for the first three quarters of 2014) was $34 million, a 6 percent y/y decrease. Fourth quarter 2013 adjusted EBITDA was $36.1 million. Adjusted EBITDA is defined as earnings before interest, taxes, depreciation and amortization and further adjusted for certain items.

At Dec. 31, REG had cash and equivalents of $63.5 million, a decrease of 6 percent during the quarter. For the year, the company's cash balance decreased by $89.7 million as a result of the investments in facility upgrades and acquisitions and cash set aside as collateral for debts assumed from the Geismar acquisition and other borrowings. At Dec. 31, accounts receivable were $294.7 million, an increase of $259.2 million from Sept. 30, mainly as a result of all of the 2014 federal biodiesel tax credit being recorded in the fourth quarter. Inventory was $97.5 million, an increase of $48.1 million during the quarter.

Full Year 2014 Results

All figures refer to the full year ending Dec. 31, 2014, unless otherwise noted.

REG sold 287.3 million gallons of biomass-based diesel, an increase of 11 percent compared to 258.6 million gallons in 2013. The average B100 price per gallon (including RINs) sold by REG was $3.62, compared to $4.58 in 2013.

REG produced 235.9 million gallons of biomass-based diesel, compared to 219.2 million gallons in 2013. The growth in production resulted from REG Geismar ramping up and the completion of the upgrades at Mason City and Newton, which further expanded feedstock flexibility. The company utilized contract or tolled manufacturing, which contributed 15.9 million gallons.

Revenue was $1.27 billion, a 15 percent decrease versus 2013 revenue of $1.50 billion. The decrease was due to a sharp decline in biomass-based diesel prices throughout 2014 as compared to 2013 resulting from the decrease in energy prices, the 2012 biodiesel tax credit recognized in 2013 and reduction in revenue from separated RINs inventory, offset by an 11 percent increase in gallons sold.

Gross profit was $160.6 million, compared to $239.4 million in 2013.

Operating income was $85.5 million, compared to $193.3 million in 2013.

Adjusted EBITDA was $107.8 million, compared to $148.4 million in 2013, resulting in an Adjusted EBITDA margin of 8 percent. Net income attributable to common stockholders was $81.6 million as compared to $165.3 million in 2013.

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