Green Plains Inc. — Q2 2023 Form 10-Q
Reporting period: Three and six months ended June 30, 2023. Green Plains produces ethanol and higher-value coproducts, operates agribusiness and commodity-marketing activities, and owns and consolidates Green Plains Partners, its fuel storage and transportation provider.
Financial performance
| Metric | Q2 2023 | Q2 2022 | Six months 2023 | Six months 2022 |
|---|---|---|---|---|
| Revenue | $857.6 million | $1,012.4 million | $1,690.6 million | $1,793.8 million |
| Operating income (loss) | $(42.5) million | $33.8 million | $(99.0) million | $(14.1) million |
| Net income (loss) | $(48.3) million | $52.7 million | $(114.6) million | $(3.2) million |
| Net income (loss) attributable to Green Plains | $(52.6) million | $46.4 million | $(122.9) million | $(15.1) million |
| Adjusted EBITDA, non-GAAP | $(14.9) million | $56.7 million | $(42.6) million | $28.9 million |
| Net cash used in operating activities | — | $(168.4) million | $(106.6) million |
- Q2 gross margin was $22.5 million, down from $91.1 million; ethanol production generated a $4.2 million gross loss, versus $56.3 million gross profit a year earlier.
- Q2 diluted loss per share was $0.89, compared with diluted earnings per share of $0.73. Six-month diluted loss per share was $2.09, versus $0.28.
- Q2 ethanol sold was 194.8 million gallons, down 15.8%; capacity utilization averaged 81.5%, compared with 96.9% a year earlier. Lower production and weaker margins, including planned and unplanned downtime, pressured results.
- Q2 operating loss included a $9.5 million inventory lower-of-cost-or-net-realizable-value adjustment. The prior-year comparison also included a $27.7 million USDA biofuel relief grant.
Balance sheet, debt and liquidity
- At June 30, cash and cash equivalents were $312.9 million and restricted cash was $46.9 million, down from $444.7 million and $55.6 million, respectively, at year-end 2022. The company reported $128.0 million available under its committed revolver, subject to borrowing conditions.
- Total debt was approximately $742.5 million, including $247.1 million of short-term borrowings and $495.4 million of current and long-term debt. Debt fair value was estimated at $772.3 million. Variable-rate debt was $304.6 million; a 10% rate increase was estimated to add about $2.8 million in annual interest cost.
- Total liabilities were $1.097 billion and stockholders’ equity was $925.9 million. The company was in compliance with debt covenants at quarter-end; $119.4 million of subsidiary net assets were restricted from transfer to the parent.
- Six-month investing cash outflow was $57.6 million, including $48.9 million of net property and equipment purchases. Financing activities provided $85.5 million, largely reflecting net short-term borrowing. Operating cash use increased year over year, including due to losses and payments of accounts payable.
Changes, outlook and material developments
- Revenue declined 15.3% in Q2 and 5.8% for the first half. Management attributed the deterioration in earnings primarily to reduced ethanol production volumes and margins, lower agribusiness trading volumes and margins, and the absence of the 2022 USDA grant. Six-month interest expense also rose, reflecting higher floating rates and less capitalized interest.
- Management expects $100 million to $150 million of capital spending in the second half of 2023, subject to project review, principally for MSC and clean-sugar technology deployments and other projects. No formal earnings or profit guidance is provided in the filing.
- Management estimated 2023 U.S. net ethanol exports at 1.3 billion to 1.5 billion gallons. Results remain highly exposed to commodity spreads, particularly corn and natural gas costs versus ethanol and coproduct prices; the company may reduce production when margins are compressed.
- An April 2023 explosion at the Wood River facility was estimated to have caused a $15 million to $20 million Q2 loss. Management expects insurance proceeds to partially offset the loss in future quarters; the final financial impact was still being evaluated.
- On May 3, Green Plains made a non-binding preliminary proposal to acquire publicly held Green Plains Partners units. Any transaction requires definitive agreements and approvals; completion is not assured.
- On July 25, a subsidiary agreed to sell its Atkinson, Nebraska plant, with a related agreement involving the Partnership’s storage and rail assets. The transaction was expected to close within 30 days of the announcement.
- Other risks include commodity-price volatility, plant downtime and minimum-volume commitments, execution and returns on technology investments, changing biofuel policies, inflation and supply-chain constraints. Management said it believed working capital was sufficient, but warned sustained unprofitable operations could strain liquidity.
Key investor checks
- Track ethanol margins, production utilization, downtime and the pace of recovery in agribusiness trading results.
- Monitor operating cash use, revolver availability, short-term borrowing needs and compliance with subsidiary debt covenants.
- Verify the Wood River insurance recovery and the ultimate impact of the incident, and review progress and costs for planned capital projects.
- Follow the status and terms of the proposed Green Plains Partners acquisition and the Atkinson divestiture.
- Assess the effect of RFS and clean-fuel policy, commodity prices, interest rates and demand for Ultra-High Protein and renewable corn oil on future profitability.