Green Plains Inc. — Q3 2022 Form 10-Q
Reporting period: Quarter and nine months ended September 30, 2022. Green Plains produces ethanol and coproducts, provides agribusiness and commodity-marketing services, and operates fuel storage and transportation assets. The company is shifting toward higher-value agricultural ingredients, including Ultra-High Protein and low-carbon products.
Financial results and liquidity
| Metric | Q3 2022 | Q3 2021 | Nine months 2022 | Nine months 2021 |
|---|---|---|---|---|
| Total revenue | $955.0 million | $746.8 million | $2,748.8 million | $2,024.8 million |
| Operating income (loss) | $(61.9) million | $(44.7) million | $(75.9) million | $17.7 million |
| Net loss attributable to Green Plains | $(73.5) million | $(59.6) million | $(88.6) million | $(56.4) million |
| Basic and diluted loss per share | $(1.27) | $(1.18) | $(1.62) | $(1.27) |
| Adjusted EBITDA | $(35.5) million | $(14.8) million | $(6.6) million | $55.4 million |
- Margins: Q3 consolidated gross margin was a loss of $1.9 million, versus a $16.6 million gross margin in Q3 2021. Ethanol production’s Q3 operating loss was $64.1 million; agribusiness and energy services recorded $5.2 million of operating income and the partnership $12.0 million.
- Cash flow: For the first nine months, operating cash flow was $(34.5) million, investing cash flow $(90.3) million, and financing cash flow $51.2 million. Capital expenditures were $183.2 million.
- Liquidity: At September 30, cash and cash equivalents were $420.8 million, restricted cash $66.6 million, and marketable securities $25.0 million. Management reported $155.0 million available under committed revolving credit, subject to restrictions and lending conditions. Current assets were $935.6 million and current liabilities $420.6 million.
- Debt and equity: Debt book value was approximately $703.2 million, down from $722.7 million at December 31, 2021. Total stockholders’ equity was $1,113.2 million. The company reported compliance with debt covenants at quarter-end; $115.4 million of subsidiary net assets were restricted from transfer to the parent.
Material changes versus prior period
- Q3 revenue increased 27.9%, mainly from higher prices and sales volumes for ethanol, distillers grains, and corn oil, but the company’s attributable net loss widened by $13.9 million. Management cited weaker ethanol crush margins, including historically high physical corn basis levels.
- Q3 ethanol production averaged 90.9% of capacity and totaled 219.4 million gallons, up from 181.2 million gallons and 75.0% utilization a year earlier. Higher production followed completion of plant modernization and upgrade work.
- Nine-month revenue rose 35.8%, but adjusted EBITDA fell to a loss of $6.6 million from income of $55.4 million. The prior-year comparison included a $31.2 million asset-sale gain; 2022 results included a $27.7 million USDA relief grant in other income, excluded from adjusted EBITDA.
- Ethanol production segment gross margin for the first nine months fell to a $0.5 million loss from $60.3 million of income, as corn costs and other production costs rose faster than product revenue. A $11.2 million inventory valuation adjustment also reduced 2022 results.
- The company retired its $64.0 million 4.00% convertible notes through conversion into approximately 4.3 million shares, and exchanged approximately $32.6 million of 4.125% notes for approximately 1.2 million shares. The remaining 4.125% notes were retired in September. These transactions reduced debt but increased shares outstanding.
Outlook, commentary and risks
- Management expects capital expenditures of $70–$100 million for the remainder of 2022, primarily for Ultra-High Protein expansion and maintenance, funded with cash on hand and operating cash flow. The filing provides no specific revenue, earnings, or margin guidance.
- Management described the quarter’s ethanol margin environment as weak and said production may be reduced when margins are compressed. It reported Ultra-High Protein production at two locations, a third plant commissioned in Q3, and two additional MSC technology installations expected to begin commissioning in Q4 2022.
- The company estimated 2022 U.S. net ethanol exports of 1.3–1.5 billion gallons, while noting that a stronger U.S. dollar could weaken export competitiveness. Its outlook remains sensitive to corn, natural gas, ethanol and coproduct prices; weather and supply conditions; and commodity-market volatility and hedging outcomes.
- Key policy uncertainties include EPA renewable fuel volume obligations, small refinery exemptions, E15 availability and implementation of Inflation Reduction Act incentives. Green Plains said it expects to benefit from certain clean-energy tax credits but could not yet estimate the benefit.
- Other risks include liquidity pressure from sustained unprofitable operations, potential cash margin calls on derivatives, variable-rate debt exposure, and execution and commissioning risks for growth projects. Management said pending ordinary-course litigation is not expected to have a material adverse effect. Disclosure controls were assessed as effective, with no material change in internal control over financial reporting reported.
Important facts for investors to verify
- Whether ethanol crush margins improve and high corn basis and other feedstock, utility, freight, and chemical costs moderate.
- Whether MSC and CST projects meet commissioning, production, customer-demand, and capital-cost expectations, and when they contribute meaningful margins.
- Cash burn, remaining capital spending, revolver availability, covenant headroom, and the impact of restricted subsidiary assets and possible derivative margin calls.
- The extent of share dilution from convertible-note exchanges and the remaining $230 million of 2.25% convertible notes due 2027.
- Actual effects of EPA rules, E15 policy, RFS volumes, Inflation Reduction Act credits, and export-market and currency developments.