Better margins, more gallons sold boost REG net income in Q3

By Renewable Energy Group Inc. | November 06, 2018

Renewable Energy Group Inc. announced its financial results Nov. 6 for the third quarter ended Sept. 30.

“We have added another very positive quarter to our already strong financial performance in the first half of 2018,” said Randy Howard, president and CEO. “We generated $34.6 million of adjusted EBITDA without the [blenders tax credit (BTC)] being in effect. Adjusted EBITDA for the first nine months of 2018 was $94.4 million, reflecting a favorable market environment and our continued efforts to optimize the efficiency of our biodiesel and renewable diesel plants.”

Net income attributable to common stockholders was $24.3 million in the third quarter of 2018, compared to net loss of $11.4 million in the third quarter of 2017. The improvement in net income reflects better margins in 2018 as well as more gallons sold. Adjusted net income was $19.8 million compared to adjusted net loss of $15.1 million in the third quarter of 2017, excluding allocation of the 2017 BTC. Third quarter 2018 adjusted EBITDA was $34.6 million, compared to adjusted EBITDA of negative $1.5 million in the third quarter of 2017, excluding allocation of the 2017 BTC. After reallocating the net benefit of the BTC to applicable periods in 2017, adjusted net income was $40.4 million and adjusted EBITDA was $55 million in the third quarter of 2017.

Revenues for the third quarter were $597.8 million on 178.8 million gallons of fuel sold. Revenues in the third quarter decreased $29.2 million compared to the third quarter of 2017 mainly due to a lower average selling price and lower revenue from sales of separated RINs, partially offset by more gallons sold in the third quarter of 2018.

The company estimates that if the currently lapsed BTC is retroactively reinstated for 2018 on the same terms as in 2017, REG’s net income, adjusted net income and adjusted EBITDA would each increase by approximately $70 million for business conducted in the quarter ended Sept. 30 and would each increase by approximately $178.7 million for business conducted in the first nine months of 2018.

Third quarter 2018 highlights

All figures refer to the quarter ending Sept. 30, 2018, unless otherwise noted. All comparisons are to the quarter ended Sept. 30, 2017, unless otherwise noted.

REG sold a total of 178.8 million gallons of fuel, an increase of 18 percent, primarily due to increased biodiesel and petroleum gallons sold, partially offset by fewer sales of biomass-based diesel gallons produced by third parties. The average selling price per gallon was $3.03, a decrease of 5.6 percent excluding allocation of the 2017 BTC. The company produced 139.2 million gallons of biomass-based diesel during the quarter, a 15.7 percent increase.

Revenues were $597.8 million, a decrease of 4.7 percent that was primarily due to lower revenue from sales of separated RINs and a lower average selling price per gallon, partially offset by the increase in gallons sold.

Gross profit was $51.4 million, or 8.6 percent of revenues, compared to gross profit of $14.8 million, or 2.4 percent of revenues. Gross profit as a percentage of revenue increased due to lower feedstock costs and operational improvements, partially offset by declining RIN prices.

Net income attributable to common stockholders was $24.3 million, or 53 cents per share on a fully diluted basis. This compares to a net loss of $11.4 million, or 29 cents per share on a fully diluted basis in the third quarter of 2017. Adjusted net income attributable to common stockholders was $19.8 million, or 43 cents per share, compared to an adjusted net loss excluding allocation of the 2017 BTC of $15.1 million, or 39 cents per share, on a fully diluted basis in the third quarter of 2017. Adjusted EBITDA was $34.6 million compared to negative $1.5 million, excluding allocation of the 2017 BTC, in the third quarter 2017.

At Sept. 30, 2018, REG had cash and cash equivalents of $156.6 million, an increase of $79 million from Dec. 31, 2017. Additionally, REG had $52.9 million of marketable securities at Sept. 30, 2018, and zero at Dec. 31, 2017. The increase in cash and cash equivalents and marketable securities is mainly due to significant cash flow generated by operations, including the company's receipt of the 2017 BTC refund in 2018.

At Sept. 30, 2018, accounts receivable were $92.9 million, or 14 days of sales. Accounts receivable at Dec. 31, 2017, were $90.6 million. Inventory was $141.2 million at Sept. 30, 2018, or 23 days of cost of sales, an increase of $5.6 million from Dec. 31, 2017.

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

 
 
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