Green Plains Inc. — Q1 2023 Form 10-Q
Reporting period: Three months ended March 31, 2023; comparisons are with Q1 2022 unless noted. Green Plains operates ethanol production, agribusiness and energy services, and fuel storage and transportation businesses. It is shifting toward higher-value agricultural ingredients, including Ultra-High Protein and clean-sugar products.
Key financial results
| Metric | Q1 2023 | Q1 2022 |
|---|---|---|
| Revenue | $832.9 million | $781.4 million |
| Gross margin | $7.9 million | $8.9 million |
| Operating loss | $56.5 million | $47.9 million |
| Net loss attributable to Green Plains | $70.3 million | $61.5 million |
| Basic and diluted loss per share | $1.20 | $1.16 |
| Adjusted EBITDA | $(27.7) million | $(27.8) million |
| Cash used in operating activities | $117.0 million | $162.5 million |
| Capital expenditures | $32.6 million | $62.0 million |
Revenue increased 6.6%, largely reflecting higher ethanol, distillers grains and renewable corn oil sales volumes and higher distillers-grains selling prices. The net loss widened by $8.9 million; management attributed the deterioration primarily to weaker agribusiness and energy-services trading margins and higher depreciation. Interest expense increased to $9.7 million from $8.8 million, while income taxes were a $3.4 million expense versus a $1.2 million benefit.
Ethanol production segment revenue rose to $695.5 million, but its operating loss widened to $53.4 million from $51.2 million. Agribusiness and energy-services operating income fell to $4.1 million from $10.4 million. Partnership operating income was $11.9 million, broadly flat year over year. The 2022 ethanol-segment comparison included a $13.2 million inventory valuation adjustment.
Financial position and liquidity
- At March 31, 2023, cash and cash equivalents were $354.2 million and restricted cash was $54.1 million, versus $444.7 million and $55.6 million, respectively, at December 31, 2022.
- Total assets were $2.035 billion; total liabilities were $1.062 billion. Current assets were $830.6 million and current liabilities $478.8 million.
- Balance-sheet debt was approximately $709.6 million, including $212.7 million of short-term borrowings. The company reported $271.6 million of variable-rate debt; a 10% interest-rate increase was estimated to raise annual interest cost by about $2.4 million.
- Green Plains reported $159.0 million available under its committed revolving credit agreement, subject to lending conditions. Approximately $118.7 million of subsidiary net assets were restricted from transfer to the parent.
- Operating cash outflow was lower than in the prior-year quarter, but remained substantial. The company cited working-capital movements, including accounts payable, as important drivers. Cash and restricted cash together declined $91.9 million during the quarter.
- Management expected 2023 capital spending for the remainder of the year of $120 million to $160 million, principally for MSC and clean-sugar technology deployments and other projects.
Business developments, outlook and risks
- Management described Q1 ethanol margins as weak, partly because of historically high physical corn basis levels. Average plant utilization was approximately 87.5%, compared with 83.1% in Q1 2022; ethanol production was 206.7 million gallons versus 196.3 million.
- Green Plains estimated 2023 U.S. net ethanol exports of 1.3 billion to 1.5 billion gallons. The filing provides no company earnings or margin guidance.
- Key exposures include volatile corn, ethanol, coproduct and natural-gas prices; derivative margin calls and hedge timing; interest rates; inflation and costs that may not be passed through to customers; and changes in renewable-fuel, tax and environmental policy. Management cautioned that sustained unprofitable operations could strain liquidity.
- On April 17, 2023, an explosion during maintenance at the Wood River facility caused one employee fatality and critically injured another. The plant was not operating at the time. The company was investigating with authorities and insurers and did not then expect a material financial-statement impact.
- On May 3, 2023, the company proposed acquiring the publicly held Green Plains Partners units it does not own through a stock-for-unit exchange. The proposal was subject to definitive documentation, approvals and other conditions; completion was not assured.
- The company reported compliance with debt covenants at March 31, 2023, and effective disclosure controls. It stated that ordinary-course litigation was not expected to have a material adverse effect.
Important facts for investors to verify
- Whether ethanol and coproduct margins recover from Q1 levels, and how corn basis, energy costs and hedging affect results and cash needs.
- Whether operating cash flow and available borrowing capacity are sufficient to fund planned capital spending, debt service and potential margin calls.
- Progress, costs and expected returns from Ultra-High Protein, MSC and clean-sugar projects.
- Developments in the Wood River incident investigation, including operational, regulatory, insurance and potential financial consequences.
- Whether the proposed Green Plains Partners transaction advances, and its final terms, approvals and effects on leverage, cash flow and public unitholders.
- Final U.S. renewable-fuel requirements and related tax-credit rules, and their implications for demand, product values and the company’s outlook.