REG discusses renewable diesel, chemicals during Q3 call

By Erin Voegele | November 12, 2014

Renewable Energy Group Inc. recently released financial results for the third quarter, reporting revenues of $384.3 million, down 16.2 percent from the same period of 2013. The decline is attributed to a reduction in average sales price and lower renewable identification number (RIN) prices, which more than offset the 14.4 increase in gallon sold. The average price for biodiesel during the quarter was $3.54 per gallon, down 28.5 percent from the same period of last year.

Gross profit was $22.7 million, or 5.9 percent of revenues. During the same period of 2013, REG reported a gross profit of $57.8 million, or 12.6 percent of revenues. The decrease is attributed to margin compression caused by lower selling price.

Operating income was $6 million, down from $45.2 million during the third quarter of 2013. Net income attributable to common stockholders was $4.5 million, or 11 cents per share on a fully diluted basis. This is down from $78.5 million, or $2.31 per share on a fully diluted basis, for the same period of last year, which included tax benefits of $42.1 million, or $1.12 cents per share on a fully diluted basis. EBITDA was down 77.7 percent from the same period of last year.

”Our third quarter results reflect a very solid financial performance despite weak market conditions, while we worked to bring REG Geismar online and continued to invest in product development," said Daniel J. Oh, president and CEO. "Our traditional biodiesel business saw double digit volume growth of gallons sold and produced, compared to the third quarter of last year. The Mason City upgrades, which now allow that biorefinery to use lower cost feedstocks, were completed on time and within budget, and reflect our continued investment and focus on the biomass-based diesel business."

Oh continued, "We are very pleased with the progress at REG Geismar and operations start-up that was completed safely, timely and within our budget expectations."

During the quarter, the REG sold 88.8 million gallons of biodiesel, up 14.4 percent from the third quarter of 2013. The company’s operations, however, are not limited to biodiesel. During an investor call to discuss the quarterly results, Oh spoke about the recently startup of the REG Geismar renewable diesel plant. The former Dynamic Fuels facility was recently acquired by REG and shipped its first truckload of renewable diesel in October

Oh said the plant has been producing on-spec commercial quantities of renewable diesel, with the first truckload of fuel shipped from the plant Oct. 23. Renewable naphtha and LPG are also being produced and sold from the facility, he said, noting REG is pleased with the startup of the plant and how it is operating. To date, the plant has run at up to 90 percent capacity. Over the past several months, REG performed inspections and repairs and made process improvements to the plant. Oh indicated additional projects are planned for front-end pretreatment, storage capacity and improved rail loading access. Oh also noted the plant has already produced more than 2 million gallons of fuel and is forecast to sell 7 million to 10 million gallons during the fourth quarter.

Oh also discussed progress by REG Life Sciences. The renewable chemicals company, formerly known as LS9 Inc., was acquired by REG earlier this year. Progress for REG Life Sciences remains on track, said Oh, noting that technology platform yields are continuing to improve. The company is nearing the day when it will achieve its first sales, he said, noting that the company is conducting run through samples at the Okeechobee fermentation facility in Florida and is focused on building its portfolio of specialty chemicals. While Oh indicated REG will not announce specific products until those products are offered for sale, he said REG Life Sciences is expected to have introduced product and generated revenue by the middle of next year.