Green Plains Inc. — Q3 2021 Form 10-Q
Reporting period: Three and nine months ended September 30, 2021. Green Plains produces ethanol and related ingredients, markets agricultural and energy commodities, and operates fuel storage and transportation assets. It is pursuing a shift toward higher-value products, including Ultra-High Protein.
Financial performance and position
| Metric | Q3 2021 | Q3 2020 | Nine months 2021 | Nine months 2020 |
|---|---|---|---|---|
| Revenue | $746.8 million | $424.1 million | $2,024.8 million | $1,445.0 million |
| Operating income (loss) | $(44.7) million | $(14.2) million | $17.7 million | $(87.9) million |
| Net loss attributable to Green Plains | $(59.6) million | $(34.5) million | $(56.4) million | $(59.1) million |
| Adjusted EBITDA | $(14.8) million | $6.8 million | $55.4 million | $27.4 million |
| Cash from (used in) operations | Not separately stated for the quarter | $(27.9) million | $76.4 million |
Q3 cost of goods sold was $730.2 million, leaving gross profit of $16.6 million, versus $30.1 million a year earlier. The filing attributes the sharp quarterly earnings decline mainly to weaker ethanol production margins, including historically high corn basis costs. Higher selling prices drove revenue growth but did not offset increased input costs.
At September 30, cash and cash equivalents were $589.8 million and restricted cash was $131.1 million. Total debt was approximately $711.4 million, including short-term borrowings and current maturities; total liabilities were $995.6 million and stockholders’ equity was $1.12 billion. Management reported $312.6 million available under committed revolving credit and term loan agreements, subject to restrictions and lending conditions. The company was in compliance with debt covenants at quarter-end.
Year-to-date investing cash outflow was $43.5 million, including $123.7 million of capital expenditures, partly offset by asset-sale proceeds. Financing cash inflow was $517.4 million, primarily reflecting common-stock and debt offerings. The company reported $174.4 million of subsidiary net assets restricted from transfer to the parent.
Material changes versus the prior comparable period
- Q3 revenue rose 76% year over year, principally because of higher prices for ethanol, distillers grains and corn oil, and increased commodity trading revenue. Q3 adjusted EBITDA moved from positive $6.8 million to a loss of $14.8 million.
- For the first nine months, revenue rose 40% and operating results improved from a loss to income. The comparison benefited from a $31.2 million asset-sale gain in 2021 and a $24.1 million goodwill impairment charge in 2020; adjusted EBITDA increased to $55.4 million.
- YTD operating cash flow declined from $76.4 million provided to $27.9 million used, with management citing working-capital changes.
- Ethanol sold in Q3 declined 4.2% to 181.2 million gallons. Average utilization was about 75%, compared with 66.8% in Q3 2020; the volume comparison was affected by the Ord plant sale.
- Cash and restricted cash together increased substantially from year-end 2020, supported by equity and debt financing. The company issued $230 million of 2.25% convertible notes, completed common-stock offerings, exchanged $51 million of 4.00% notes for shares, and repurchased approximately $135.7 million principal amount of 4.125% notes due 2022.
Outlook, commentary and risks
- Management described the Q3 ethanol margin environment as weak, citing historically high physical corn basis. It may reduce production when margins are compressed or during construction; future production could also fall below minimum volume commitments.
- Capital spending was expected to be $75–$100 million for the remainder of 2021, including Ultra-High Protein projects. Wood River began operations in October 2021; three more installations were expected by mid-2022, with further installations planned over subsequent years.
- Eight biorefineries had entered long-term carbon-offtake agreements connected to a carbon capture and storage project expected to be completed in 2024. The filing provides no company earnings or revenue guidance.
- Key exposures include volatile corn, ethanol, natural gas and co-product prices; derivative margin calls; changes in fuel demand and government policy; uncertainty around Renewable Fuel Standard volumes and small-refinery exemptions; and regulatory limits on summertime E15 sales.
- Several working-capital facilities mature in 2022, including Green Plains Grain’s facility in June and Green Plains Trade’s in July. The company also noted the transition away from LIBOR and uncertainty about replacement rates. A sustained period of unprofitable operations could strain liquidity.
- Unusual items include $32.6 million of losses on extinguishment or settlement of convertible debt during the first nine months, a $31.2 million net asset-sale gain, and a $2.0 million Q3 estimated loss related to an earn-out from the GPCC sale. Management said ordinary-course litigation was not expected to have a material adverse effect.
Important facts for investors to verify
- Whether ethanol margins recover enough to offset corn and other input costs, and whether operating cash flow improves.
- Progress, cost, timing and expected returns from Ultra-High Protein expansions and carbon capture commitments.
- Debt maturities, refinancing plans, covenant headroom and the effect of replacing LIBOR-linked rates.
- Working-capital and derivative exposure, including potential liquidity needs for commodity margin calls.
- Regulatory developments affecting RFS obligations, small-refinery exemptions, E15, and biofuel incentives.
- How asset sales, equity issuance and convertible-note terms affect ongoing earnings, leverage and shareholder dilution.