Green Plains Inc. — Q3 2023 Form 10-Q
Reporting period: Quarter and nine months ended September 30, 2023. Green Plains produces ethanol and coproducts, provides agribusiness and commodity-marketing services, and operates fuel storage and transportation assets. Amounts below are in U.S. dollars; financial statement figures are in millions unless otherwise noted.
Financial performance and liquidity
| Metric | Q3 2023 | Q3 2022 | Nine months 2023 | Nine months 2022 |
|---|---|---|---|---|
| Revenue | $892.8 | $955.0 | $2,583.4 | $2,748.8 |
| Operating income (loss) | $21.2 | $(61.9) | $(77.8) | $(75.9) |
| Net income (loss) attributable to Green Plains | $22.3 | $(73.5) | $(100.6) | $(88.6) |
| Diluted EPS | $0.35 | $(1.27) | $(1.71) | $(1.62) |
| Adjusted EBITDA (non-GAAP) | $42.9 | $(35.5) | $0.4 | $(6.6) |
- Q3 gross margin was $81.5 million, versus negative $1.9 million a year earlier. The filing does not provide a clear consolidated gross-margin percentage.
- For the first nine months, operating cash flow was negative $55.4 million; investing cash flow was negative $69.1 million and financing cash flow was negative $9.7 million. Capital expenditures were approximately $78.2 million.
- At September 30, cash and cash equivalents were $326.7 million and restricted cash was $39.5 million. The company reported $200 million available under its committed revolving facility, subject to lending conditions.
- Debt carrying value on the balance sheet was approximately $653.6 million, including $159.7 million of short-term borrowings. Fair value of debt was approximately $663.5 million. The company reported compliance with debt covenants; $121.9 million of subsidiary net assets were restricted from transfer to the parent.
Changes versus prior periods
- Q3 revenue declined 6.5% year over year, while operating results turned positive. Management attributed the earnings improvement primarily to stronger ethanol-production margins, including lower corn costs, and, to a lesser extent, stronger agribusiness and energy-services margins.
- Q3 ethanol-production gross margin improved to $45.0 million from negative $32.8 million. Ethanol sold rose 2.0% to 223.5 million gallons; Ultra-High Protein sold increased to 61,000 tons from 15,000 tons. Distillers grains sales volume fell 10.0%.
- For the first nine months, revenue declined 6.0% and the attributable net loss widened by $12.0 million. Management cited weaker production volumes and margins, lower trading margins, higher depreciation, and the absence of the $27.7 million USDA relief grant received in 2022. Adjusted EBITDA improved by $6.9 million.
- Cash and restricted cash fell to $366.2 million from $500.3 million at year-end 2022. Operating cash use increased versus the prior-year period, with working-capital movements including higher accounts receivable and accounts payable payments among the drivers.
Outlook, developments, and risks
- Outlook: No consolidated earnings guidance was provided. Management estimated remaining 2023 capital spending of $25–$45 million, subject to review, primarily for MSC and CST technology deployment and other projects. The company estimated 2023 net ethanol exports of 1.3–1.5 billion gallons.
- Partnership merger: On September 16, Green Plains agreed to acquire the publicly held units of Green Plains Partners. Public unit holders are to receive 0.405 Green Plains shares and $2.00 cash per unit, plus a distribution-based adjustment. Completion remained subject to conditions, including required consent and an effective registration statement; the agreement’s outside date is March 16, 2024.
- Atkinson disposition: The company completed the sale of its Atkinson, Nebraska plant on September 7 for $22.9 million plus working capital, and separately sold storage assets and associated railcar leases to the partnership for $2.1 million. The filing reports a $4.6 million pretax gain on the plant sale and a $5.7 million gain on sale of assets in the income statement; final working-capital adjustments remained preliminary.
- Wood River incident: An April 2023 explosion during maintenance caused an estimated $15–$17 million loss in Q2 and Q3 before insurance proceeds. Insurance covered a portion; the filing does not provide a clear amount of proceeds.
- Key risks: Profitability is highly exposed to corn, natural gas, ethanol, coproduct and renewable-corn-oil prices and the spreads between them. Other risks include demand and policy changes affecting ethanol, competition and product-market acceptance for Ultra-High Protein, production disruptions, inflation, construction execution, derivative margin calls, and variable-rate borrowing costs. A 10% increase in interest rates was estimated to raise annual interest costs by about $2.1 million.
- Management said sustained unprofitable operations could strain liquidity, though it believed working capital was sufficient for existing operations. The filing also notes the merger may not close and may entail costs, delays, dilution, or failure to realize expected benefits. Ordinary-course litigation was not expected by the company to have a material adverse effect.
Important facts for investors to verify
- Whether the improved Q3 ethanol margins persist, and how commodity prices, hedge results, and working capital affect cash generation.
- Progress, costs, financing, operating yields, and customer demand for Ultra-High Protein and CST/MSC expansion projects.
- Merger approval and closing conditions, the final consideration adjustment, and potential transaction or integration costs.
- Final Atkinson working-capital adjustments and the amount and timing of Wood River insurance recoveries.
- Available liquidity after restricted cash, subsidiary transfer limits, borrowing needs, and any future margin calls or covenant requirements.
- Effects of renewable-fuel policy, RFS/RVO and small-refinery-exemption decisions, E15 access, clean-fuel credits, and longer-term electric-vehicle adoption on demand and margins.