Green Plains : First Quarter 2025 Results Transcript
GPRE
Published on 05/09/2025 at 13:53
Earnings Call
Thursday, May 8, 2025 2:00 PM GMT
CALL PARTICIPANTS 2
PRESENTATION 3
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QUESTION AND ANSWER 8
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EXECUTIVES
Interim Principal Executive Officer, Chief Legal and Administration Officer & Corporate Secretary
Chief Financial Officer
ANALYSTS
BMO Capital Markets Equity Research
Jefferies LLC, Research Division
DD Research LLC
Craig-Hallum Capital Group LLC, Research Division
Tudor, Pickering, Holt & Co. Securities, LLC, Research Division
Stephens Inc., Research Division
BofA Securities, Research Division
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Good morning, and welcome to the Green Plains Inc. First Quarter 2025 Earnings Conference Call. [Operator Instructions]
I will now turn the call to your host, Phil Boggs, Chief Financial Officer. Mr. Boggs, please go ahead.
Chief Financial Officer
Thank you, and good morning, everyone. Welcome to the Green Plains Inc. First Quarter 2025 Earnings Call. Joining me on today's call are the members of our Executive Committee: Michelle Mapes, Interim Principal Executive Officer and Chief Legal and Administration Officer; Jamie Herbert, Chief Human Resources Officer; Chris Osowski, Executive Vice President, Operations & Technology; and Imre Havasi, Senior Vice President, Head of Trading and Commercial Operations.
There is a slide presentation available, and you can find it on the Investor page under the Events & Presentations link on our website.
During this call, we will be making forward-looking statements, which are predictions, projections or other statements about future events. These statements are based on current expectations and assumptions that are subject to risks and uncertainties. Actual results could materially differ because of factors discussed in this morning's press release, in the comments made during this conference call and in the Risk Factors section of our Form 10-K, Form 10-Q and other reports and filings with the Securities and Exchange Commission. We do not undertake any duty to update any forward-looking statement.
Now I'd like to turn the call over to Michelle Mapes.
Interim Principal Executive Officer, Chief Legal and Administration Officer & Corporate Secretary
Thank you, Phil. To be direct, our performance has not met the expectations of this investment community or our own, and that is changing. As an executive committee and as a company, we are fully aligned and deeply committed to disciplined execution, supported by the clear and objective measurement of our progress every day.
Our team members at Green Plains understand not only the strategic goals, but their roles in delivering against them. We're focused on returning this company to sustained profitability and, with that, earning back your confidence.
Over the past few months, we've executed a zero-based approach to cost structure, leading to decisive actions across the organization. We've exited noncore operations, launched the sale of nonstrategic assets and focused on a culture of operational excellence throughout the platform. These changes are driving meaningful efficiencies that position us to compete with greater focus and agility.
On our last call, we committed to $50 million in cost reductions. I'm pleased to report we are well on track. We noted before we already achieved $30 million annualized cost savings, and our recently
announced ethanol marketing partnership, among other internal initiatives, has unlocked another $15 million in annualized savings.
Beyond strengthening our working capital, the Eco initiative delivers scale, market access and logistics efficiencies that would have been very difficult to achieve on our own. We expect these gains to show up in the bottom line, going forward, especially through transportation and marketing synergies.
We also have a clear line of sight to the final $5 million of targeted savings, which we expect to come not only from SG&A, but also through some process improvements and commercial execution. We are empowering our top performers with clear goals, metrics and accountability, and they are delivering.
As a result of this effort, we anticipate our consolidated SG&A run rate to decline meaningfully from the
$118 million recorded in 2024, to exit this year at an estimated $93 million annualized run rate. Corporate and trade functions are expected to be reduced to $12 million to $13 million per quarter for the remainder of this year, with a line of sight to reducing that to the low-$40 million range on an annualized basis by year-end, which is much improved compared to the $73 million of corporate and trade SG&A incurred in 2024.
This is a company that is focused, aligned and committed to continuous improvement and a return to profitability, and we're just getting started.
Let me now hand it over to Chris Osowsky to talk operations.
Thanks, Michelle. Overall, our platform continues to perform operationally at a high level. Our 9 active plants achieved 100% utilization in Q1, our highest rate on record, driven by increased discipline, accountability and daily measurement of key operating metrics. We are achieving an overall reduction in OpEx per gallon of more than $0.03 since Q4 of 2024. The sense of urgency across the organization is tangible, and it's making a difference.
Looking ahead, the RTO project in Obion is nearing completion. Once fully online, we expect protein yields to exceed 3.5 pounds per bushel, with ethanol capacity returning to over 120 million gallons annually.
With Q2 crush margins strengthening, we're actively hedging our production to secure value.
Execution and performance measurement remain daily imperatives for our teams. We're institutionalizing a culture of operational excellence across Green Plains, where every process, cost and decision is underpinned by discipline and data. Our approach is very clear: safety first, no waste anywhere, every dollar spent must earn a return and every role must justify its value.
This mindset is being driven across 5 core areas. First, commercial discipline. We're actively and aggressively pushing price, terms and volume across procurement, logistics and sales, while upholding standards.
Second, cost ownership. Each cost is being scrutinized as if it was its own P&L. We're laser-focused on reducing variable cost per gallon and improving our fixed cost absorption.
Third, capital efficiency. All capital, both fixed and working, is being held to strict ROI standards. Value creation is the only justification for our investments.
Fourth, people accountability. We're applying a true zero-based approach to roles and responsibilities. Every function is rebuilt from the ground up based on what the business needs today and what delivers measurable value.
And then last, KPI-driven execution. We manage by metrics, not anecdotes. Plants are measured daily against clear KPIs, and best practices are being shared across our network.
We're currently executing focused operating excellence initiatives based on maintenance cost control, enzyme and chemical optimization and energy efficiency both with respect to price and usage. These actions are already showing impact and will drive both short-term gains and long-term margin improvement.
As previously announced, we made the strategic decision in Q1 to pause our Clean Sugar Technology initiative in Shenandoah. The technology has been proven and is capable of producing refined 95 dextrose, and we have received all of our necessary food safety certifications. However, wastewater challenges outside of our walls and commercial development timing has prevented us from operating the asset continuously for refined product. Operating at partial capacity or [indiscernible] was not economically viable. So we redirected our efforts to maximize ethanol production at full rate.
The temporary pause allows us to run a simplified fermentation recipe at the Shenandoah plant, which delivers improved ethanol oil and protein yields while further reducing OpEx costs. This shift has had a
$10 million annualized positive impact on the Shenandoah site, but we remain fully committed to CST and expect to resume commissioning once a technical solution is in place, currently projected for late Fiscal 2026.
Now I will pass the call over to Imre to talk about the commercial and market update.
Thank you, Chris, and good morning, everyone. Ethanol market fundamentals saw typical seasonal weakness through Q1, driven by the industry's high production levels and elevated inventory. However,
U.S. ethanol exports continue to be a bright spot. We expect that 2025 volumes could surpass last year's record of nearly 2 billion gallons. Encouragingly, ethanol margins have strengthened heading into Q2 and Q3, with positive contributions now forecasted for our network.
This improvement is supported by firmer corn oil fundamentals, driven by widely anticipated increases in renewable volume obligations; drawdowns in ethanol stocks due to the spring maintenance season;
stronger seasonal blending demand; and a good start to 2025-26 corn planting, anticipated to result in the largest acreage since 2013, currently estimated at 95.3 million acres by the USDA.
We have secured a little more than half of our Q2 crush margins at favorable levels. This is consistent with a new disciplined and proactive approach to hedging and margin management.
You have heard Michel and Chris talk about the strategic shift we're executing and the actions we are taking to significantly increase our productivity and cost competitiveness. As market conditions improve, along with our actions, Green Plains' bottom line is showing notable improvement already in Q2.
Last month, we announced a long-term strategic marketing partnership with Eco-Energy. This collaboration enhances our scale, optimizes transportation and marketing economics and positions us to fully capture the value of our future ultra-low carbon ethanol production.
For our protein business, we've also made great progress. Commercial shipments of Sequence 60% protein have started. The product is starting to be included in salmon diets with our South American customer base. We have also expanded our sales of 50 protein ultra-high protein product to Ecuador for shrimp feed applications. Between these 2 products, we expect to have volume growth from 20,000 tons in 2024 to over 80,000 tons in '25 shipped to the South American market. These new shipments will be aided by efficiency improvements gained through bulk shipping, which will start in Q3.
We're also gaining momentum in pet food, which is a key strategic growth area. Trials are underway with 2 major manufacturers who are not yet customers, and early feedback is very promising. Our high-protein product works very well in pet food diets. We expect these opportunities to convert to commercial sales by Q4 of this year or early 2026. We plan to increase our sales in the pet food segment from 60,000 tons today to over 100,000 tons in 2026.
And with that, I'll hand the call to Phil for a financial update.
Chief Financial Officer
Thanks, Imre. For the first quarter, we reported a net loss attributable to Green Plains of $72.9 million, or a loss of $1.14 per share, which included $16.6 million in onetime restructuring charges tied to
the closure of Fairmont, the exit of other noncore operations, cost reduction programs and leadership transitions. While these actions impacted the quarter, they were necessary steps to realign the business and accelerate our return to profitability. By comparison, we reported a net loss of $51.4 million, or $0.81 per share, in Q1 of 2024.
We are supremely focused on improving these numbers, as they are not acceptable. These results are the reason why we have materially changed our go-to-market operating strategy and the human capital we are using to execute our plan. We are moving with a keen sense of urgency and precision to reshape our financial profile. We are executing a clear plan to improve operating leverage, lower our cost base and position the company to benefit fully from the carbon and protein opportunities in front of us.
Disclaimer
Green Plains Inc. published this content on May 08, 2025, and is solely responsible for the information contained herein. Distributed via Public Technologies (PUBT), unedited and unaltered, on May 09, 2025 at 17:52 UTC.