REG's 2017 financials best ever if retro tax credit reinstated

By Renewable Energy Group Inc. | August 07, 2017

Renewable Energy Group Inc. announced its financial results for the second quarter ended June 30.

Revenues for the quarter were $535.1 million on 160.2 million gallons of fuel sold. Compared to the second quarter of 2016, REG sold 6.8 percent more gallons of fuel while revenue decreased 4.2 percent. The decrease in revenue was primarily due to the lapse of the federal biodiesel mixture excise tax credit (BTC) on Jan. 1 and the impact of imported gallons. Net loss attributable to common stockholders was $34.8 million, compared to a net income of $7.4 million in the second quarter of 2016. The company recognized a noncash expense of $32.5 million for the convertible debt conversion liability in the quarter. Net loss for the second quarter of 2017 attributable to common shareholders, excluding the convertible debt conversion expense, was $2.3 million. Adjusted EBITDA for the quarter was $19.7 million compared to adjusted EBITDA in the second quarter of 2016 of $8.1 million. Adjusted EBITDA in the year-earlier period includes net benefits from the BTC, which was in effect at that time.

“The financial performance demonstrates the substantial earnings power of our business,” said REG Interim President and CEO Randy Howard. “With a retroactive reinstatement of the BTC, we would be on track to meet or exceed the financial goals we put forth at our recent analyst day. If the BTC is reinstated retroactively as expected similar to prior years, both our second quarter and first half performance would be the best in company history.”

Howard continued, “The REG team once again demonstrated in the quarter its ability to execute. Our Geismar RHD facility continued to run smoothly and at high capacity. Several biorefineries within the fleet set monthly and quarterly production records as well. We are confident of our ability to deliver on our key initiatives, which include: maximizing profit from the traditional biodiesel fleet, optimizing and growing our RHD asset, and seeking growth through new opportunities in products, geographies and markets.”

Second quarter 2017 highlights

All figures refer to the quarter ending June 30, 2017, unless otherwise noted. All comparisons are to the quarter ended June 30, 2016, unless otherwise noted. 

REG sold a total of 160.2 million gallons of fuel, an increase of 6.8 percent. The company produced 117.4 million gallons of biomass-based diesel during the quarter, a 2.7 percent increase. The average price per gallon of biomass-based diesel sold decreased by 12.5 percent to $2.86 as a result of lapse of the BTC on Jan. 1, and the impact of imported gallons.

Revenues were $535.1 million, a decrease of 4.2 percent. The decrease is primarily attributable to the lapse of the BTC, offset by an increase in gallons sold and higher sales of separated RINs.

On Jan. 1, the BTC lapsed as it has several times in the past. Each time it has been allowed to lapse, Congress has reinstated it retroactively. As a result of this history, the company and many other industry participants have adopted contractual arrangements with customers specifying the allocation and sharing of a retroactively reinstated incentive. The company estimates that if the BTC, or a similar domestic production incentive, is retroactively reinstated for 2017 on the same terms as in 2016, REG’s net income and adjusted EBITDA for business conducted in the quarter ended June 30 would increase by approximately $58 million from a BTC reinstatement. For the first six months of 2017, the increase in net income and adjusted EBITDA from a retroactive reinstatement is estimated to be $98 million.

Gross profit was $30.1 million, or 5.6 percent of revenues, compared to gross profit of $24.9 million, or 4.5 percent of revenues. Gross profit as a percentage of revenue increased 1.1 percent due to improved margins from RIN sales.

Net loss attributable to common stockholders was $34.8 million, or 90 cents per share on a fully diluted basis. This compares to a net income of $7.4 million, or 18 cents per share on a fully diluted basis. Net loss attributable to common stockholders, excluding the noncash expense of $32.5 million from convertible debt conversion liability, was $2.3 million or 6 cents per share on a fully diluted basis.

At June 30, REG had cash and cash equivalents of $87.6 million, an increase of $5.4 million from the prior period end.

At June 30, accounts receivable were $66.9 million, or 11 days of sales. Accounts receivable at March 31 were $58.6 million. Inventory was $135 million at June 30, or 24 days of sales, a decrease of $34.8 million from the prior quarter end. Accounts payable were $74.8 million and $70 million at June 30 and March 31, respectively.

For more information, including financial tables summarizing REG’s second-quarter results, click here


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