REG to sell life sciences unit, confident BTC will be reinstated

By Renewable Energy Group Inc. | March 05, 2019

Renewable Energy Group Inc. announced its financial results for the fourth quarter and full year ended Dec. 31, 2018.

“REG generated $139 million of adjusted EBITDA in 2018, an outstanding result reflecting strong operational performance and a favorable margin environment,” said Cynthia (CJ) Warner, REG president and CEO. “In addition, we remain confident that Congress will reinstate the [blenders tax credit (BTC)] for 2018, which we estimate would add approximately $237 million to our 2018 adjusted EBITDA. We are excited about the growth opportunities that this level of profitability would permit.”

Revenues for the fourth quarter of 2018 were $519.8 million on 163.2 million gallons sold. Net income was $19.1 million, net income from continuing operations attributable to common stockholders was $30.4 million, and adjusted EBITDA was $44.5 million. Total gallons sold increased by 6.8 percent compared to the fourth quarter of 2017. 

For the full year 2018, revenues were $2.4 billion on 649.2 million gallons sold. Net income was $292.3 million, net income from continuing operations was $295.8 million and adjusted EBITDA was $138.9 million. In 2018, REG sold 62.5 million more gallons and revenue increased by 10.6 percent compared to 2017. 

If the currently lapsed BTC is retroactively reinstated for 2018 on the same terms as in 2017, the company estimates that its net income and adjusted EBITDA would each increase by approximately $58.3 million for business conducted in the quarter ended Dec. 31, and by approximately $237 million for business conducted in the full year of 2018.

The company’s board of directors has decided to pursue a sale of the company’s life sciences business unit. As a result, the fourth quarter and year-end financial statements have been adjusted to reflect the life sciences unit as discontinued operations for all historical periods. The company also recognized an $11.2 million impairment charge related to this business unit in the fourth quarter of 2018.

Fourth quarter 2018 highlights

All figures refer to the quarter ended Dec. 31, 2018, unless otherwise noted. All comparisons are to the quarter ended Dec. 31, 2017, unless otherwise noted.

REG sold 163.2 million total gallons of fuel, an increase of 6.8 percent compared to the fourth quarter of 2017. REG produced 131.7 million gallons of biomass-based diesel during the quarter, an increase of 10.6 percent from the fourth quarter of 2017.

Revenues decreased $56.2 million to $519.8 million, driven by lower biomass-based diesel prices and lower RIN prices, partially offset by the 6.8 percent increase in gallons sold. The average price per gallon sold (including RINs, but excluding the allocation of the 2017 BTC) for our biomass-based diesel was $2.82, a decrease of 12.1 percent from the same period in 2017.

Operating income was $33.4 million compared to operating loss of $51 million for the fourth quarter of 2017. The increase in operating income was mainly driven by increased volumes and improved margins, while the fourth quarter of 2017 was impacted by a $48.5 million noncash impairment charge for property, plant and equipment.

Net income from continuing operations attributable to common stockholders was $30.4 million, or 66 cents per share, on a fully diluted basis. This compares to net loss from continuing operations attributable to common stockholders of $13.9 million, or 36 cents per share on a fully diluted basis, in the fourth quarter of 2017.

Net loss from discontinued operations attributable to common stockholders for the fourth quarter of 2018 was $12.2 million or 33 cents per fully diluted share compared to net loss from discontinued operations attributable to common stockholders for the fourth quarter of 2017 of $3.1 million or 8 cents per fully diluted share. The company recognized an $11.2 million impairment charge related to the life sciences business unit in the fourth quarter of 2018.

Net income was $19.1 million, which compares to a net loss of $17 million in the fourth quarter of 2017.

Adjusted EBITDA was $44.5 million, compared to $6.5 million, excluding the allocation of the 2017 BTC, in the fourth quarter 2017. After allocating the net benefit of the BTC to applicable periods in 2017, adjusted EBITDA was $58.9 million in the fourth quarter of 2017.

At Dec. 31, 2018, REG had cash and cash equivalents and marketable securities of $174.5 million, a decrease of 17 percent during the quarter. For the year, the company’s cash and cash equivalents and marketable securities increased by $96.9 million primarily as a result of the receipt of the 2017 BTC in 2018, strong cash generated from operations, partially offset by cash invested in plant upgrades, as well as the repayment of debt and repurchase of common stock and convertible notes. At Dec. 31, 2018, accounts receivable were $74.6 million, a decrease of $18.3 million from Sept. 30, 2018. Inventory was $168.9 million, an increase of $27.7 million during the fourth quarter.

Full year 2018 results

All figures refer to the year ended Dec. 31, 2018, unless otherwise noted. All comparisons are to the year ended Dec. 31, 2017, unless otherwise noted.

REG sold 649.2 million total gallons, an increase of 10.6 percent compared to 586.7 million gallons in 2017. The increase in gallons sold is mostly attributable to volume increases in biodiesel and renewable diesel of 27.1 million gallons and petroleum diesel of 35.4 million gallons.

REG produced 501.7 million gallons, compared to 453.7 million gallons in 2017. The growth in production primarily resulted from our Geismar renewable diesel plant running at higher capacity for the full year and our Ralston and Madison biodiesel plants producing higher volumes following their fourth quarter 2017 down time for expansion and repairs, respectively.

Revenues were $2.4 billion, an increase of $228.3 million, or 10.6 percent, versus 2017 revenues of $2.2 billion. The increase was primarily due to the 2017 BTC that was earned during 2017, yet recognized in the first quarter of 2018 when it was retroactively reinstated, coupled with an 11 percent increase in gallons sold and partially offset by lower RIN prices. The average biomass-based diesel price per gallon (including RINs, but excluding the allocation of 2017 BTC) sold by REG was $3.03, compared to $3.06 in 2017.

Operating income was $312.4 million, compared to an operating loss of $61.4 million in 2017. The improvement in operating income for 2018 was due mainly to better margins resulting from favorable feedstock pricing and the 2017 BTC received in 2018 as well as higher volumes. The operating loss in 2017 was impacted by a $48.5 million noncash impairment charge for property, plant and equipment.

Net income from continuing operations attributable to common stockholders was $295.8 million or $6.78 per share on a fully diluted basis for 2018. The 2018 income from continuing operations attributable to common stockholders includes $216.1 million of the BTC that was earned during 2017, yet recognized in the first quarter of 2018. This compares to a net loss from continuing operations attributable to common stockholders of $66.3 million, or $1.71 per share on a fully diluted basis for 2017.

For the full year 2018, net loss from discontinued operations was $11.3 million or 30 cents per fully diluted share compared to net loss from discontinued operations of $12.8 million, or 33 cents per fully diluted share, for 2017.

Net income was $292.3 million, which compares to a net loss of $79.1 million for 2017.

Adjusted EBITDA was $138.9 million, compared to $25.3 million in 2017, resulting in adjusted EBITDA margins of 5.8 percent and 1.2 percent for 2018 and 2017, respectively. After reallocating the net benefit of the BTC to applicable periods in 2017, adjusted EBITDA was $230.2 million for 2017.

For more detailed information, including financial tables summarizing REG’s fourth-quarter and full 2018 results, click here.

 

 
 
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