REX

REX American Resources Corp. (REX) - Q1 2026 Filing Summary

Business Context and Reporting Period

This Form 10-Q covers the quarterly period ended April 30, 2026 (Fiscal Q1 2026). REX American Resources Corporation operates in the ethanol and by-products sector, owning majority interests in NuGen Energy, LLC (99.7%) and One Earth Energy, LLC (76.1%), and an equity interest in Big River Resources, LLC (10.3%). The company produces ethanol, dried distillers grains, and distillers corn oil. The filing reflects a change in accounting policy effective February 1, 2026, regarding the recognition of Section 45Z production tax credits.

Key Financial Metrics

Material Changes vs. Prior Period

• Profitability Surge: Net income attributable to REX shareholders increased 113% to $18.5 million, driven primarily by the recognition of $7.5 million in Section 45Z production tax credits, which were not recorded in the prior year due to pending regulations.
• Revenue Mix: Total net sales decreased slightly (1%) to $156.5 million. Ethanol revenue declined 5% due to lower selling prices ($1.66/gal vs $1.76/gal), while distillers corn oil revenue surged 31% due to higher prices and improved yields.
• Cost Management: Cost of sales decreased 6% to $135.0 million, with corn costs remaining the largest component at approximately 75% of total costs.
• SG&A Increase: Selling, general, and administrative expenses rose 64% to $9.7 million, largely due to a $3.2 million increase in performance bonuses tied to higher net income.
• Equity Income: Income from the equity method investment in Big River Resources increased to $3.6 million from $1.0 million, partly due to $1.8 million in recognized 45Z tax credits.

Outlook, Risks, and Management Commentary

• Capital Projects: Management budgets $220 million to $230 million for the One Earth plant expansion and carbon sequestration projects. As of April 30, 2026, $117.7 million has been spent on expansion and $58.7 million on sequestration. The company plans to fund these from available cash.
• Regulatory Environment: The "One Big Beautiful Bill Act" (OBBBA) extended the 45Z clean fuel credit through 2029. However, the carbon sequestration project faces permitting delays, including a North Dakota court voiding permits for the Summit Carbon Solutions pipeline and Illinois state legislation imposing moratoriums on new CO2 pipeline certificates.
• Commodity Volatility: The company remains exposed to corn, ethanol, and natural gas price volatility. A 10% adverse price change in ethanol could reduce pre-tax income by approximately $51.6 million over the next 12 months.
• Liquidity: The company maintains a strong liquidity position with a current ratio of 6.8x. No stock repurchases were made in Q1 2026, though 2.36 million shares remain authorized under the buyback program.

Investor Verification Checklist

• Tax Credit Monetization: Verify the final rules and monetization strategy for Section 45Z credits, as the company currently intends to use them to offset taxes due rather than sell them immediately.
• Permitting Status: Monitor the status of EPA Class VI injection well permits for the One Earth carbon sequestration project and the legal challenges facing the Summit Carbon Solutions pipeline for the NuGen facility.
• Capital Expenditure Execution: Track the $70 million to $80 million planned spend for the remainder of fiscal 2026 to ensure alignment with the $220M-$230M total project budget.
• Commodity Hedging: Review the effectiveness of hedging strategies given the company's exposure to a 10% price swing in ethanol and corn.
• Related Party Transactions: Note that $18.8 million of corn purchases in Q1 2026 were from minority equity investors and board members.