REG 2016 financials: Revenue hits $2B with 567M gallons sold

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

For the fourth quarter of 2016, revenue was $560.4 million on 155.9 million gallons sold. Net income was $20.2 million and adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) was $60.3 million. REG increased total gallons sold by 58 percent compared to the fourth quarter of 2015. Revenue increased by 45 percent while Adjusted EBITDA increased by 179 percent in the fourth quarter of 2016 compared to the same period in 2015, primarily driven by increased gallons sold and improved margins.

For the full year 2016, revenue was $2 billion on 567.1 million gallons sold. Net income was $44.3 million and adjusted EBITDA was $102.1 million. For the full year 2016, REG sold 192.4 million more total gallons, revenue increased by 47 percent, and adjusted EBITDA increased by 104 percent, compared to 2015. The increase in net income and adjusted EBITDA is primarily attributable to significantly higher gallons sold, improving market conditions in the energy and commodity sectors in 2016, higher average selling price and increased production run rate across the company’s fleet.

“Our fourth quarter results were strong resulting from a total team effort to maximize our gallons sold as we sought to capture the lapsing tax incentive,” said Daniel J. Oh, president and CEO. “Revenue for the full year exceeded $2 billion for the first time and we set records for gallons produced and sold in a year.”

Oh continued, “The entire fleet ran very well in 2016. Notably, our Geismar biorefinery achieved a production record in the fourth quarter and has run continuously above nameplate capacity on average for the first two months of 2017. We are excited to see Geismar beginning to deliver on expectations. As we look to 2017, we expect to work our way through additional regulatory uncertainty as a company and an industry as we have done successfully several times in the past.”

Fourth quarter 2016 operating highlights

REG sold 155.9 million total gallons of fuel, an increase of 57.8 percent compared to the fourth quarter of 2015. Gallons sold in the quarter included 21.9 million gallons purchased from third parties and resold through the company’s distribution network, 20.5 million gallons of petroleum-based diesel fuel and 12.1 million gallons contributed by Petrotec.

REG produced 130.1 million gallons of biomass-based diesel during the quarter, an increase of 48.6 million gallons over the fourth quarter of 2015. The growth in production resulted primarily from our Geismar biorefinery running at high rates in the fourth quarter of this year compared to no production at Geismar in the 2015 period; production from the Madison, Wisconsin, facility acquired in the second quarter of 2016; and the remainder of the fleet producing at a high rate. The company also utilized contract or toll manufacturing, which contributed 5.9 million gallons in the quarter.

Fourth quarter 2016 financial results

All figures refer to the quarter ending Dec. 31, 2016, unless otherwise noted. All comparisons are to the quarter ended Dec. 31, 2015, unless otherwise noted. 

Revenue of $560.4 million represented an increase of $172.6 million when compared to the fourth quarter of 2015. The increase in revenue was driven by volume growth of 57.8 percent and an increase in biomass-based diesel prices. The average price per gallon sold (including RINs) for B100 was $3.05, an increase of 13.4 percent from the same period in 2015.

Gross profit was $81.9 million, compared to $106.4 million for the fourth quarter of 2015. Gross margin was 15 percent, compared to 27 percent in the year-earlier quarter. The decrease in gross profit was primarily due to the benefit from the reinstatement of the federal biodiesel mixture excise tax credit (BTC) for 2015, all of which was recognized in the fourth quarter of 2015.

Operating income was $32.2 million compared to operating loss of $96.6 million for the fourth quarter of 2015. Fourth quarter 2016 operating income was impacted by a $17.8 million noncash impairment charge of property, plant and equipment, of which $15.6 million related to our partially completed facility in Emporia, Kansas. The impairment charge for Emporia resulted from competition from foreign, imported product and the probability of that project being completed in the near term is unlikely. We believe this site continues to be a good opportunity for future biorefinery operations. Also in the fourth quarter of 2016, we recorded an initial and partial settlement of $15.1 million from our business interruption insurance claim related to the September 2015 fire at our Geismar facility. The loss in prior year quarter was largely due to the $175 million noncash goodwill impairment charge.

Net income attributable to common stockholders was $20.2 million, or $0.51 per share on a fully diluted basis. This compares to a net loss of $95.6 million, or $2.18 per share on a fully diluted basis in the fourth quarter of 2015.

Adjusted EBITDA was $60.3 million, a 179 percent increase compared to the 2015 period. Fourth quarter 2015 adjusted EBITDA was $21.6 million. 

At Dec. 31, REG had cash and cash equivalents of $116.2 million, an increase of 34 percent during the quarter. For the year, the company’s cash and cash equivalents increased by $69.1 million primarily as a result of cash generated from operations. At Dec. 31, accounts receivable were $164.9 million, an increase of $59.9 million from Sept. 30, mainly as a result of the increase in sales activities in the last quarter of 2016 in an effort to maximize the BTC that lapsed after Dec. 31. Inventory was $145.4 million, an increase of $47.2 million during the quarter. 

Full year 2016 results

All figures refer to the full year ending Dec. 31, 2016, unless otherwise noted. All comparisons are to the full year ending Dec. 31, 2015, unless otherwise noted. 

REG sold 567.1 million total gallons, an increase of 51.3 percent compared to 374.7 million gallons in 2015. Gallons sold in 2016 included 76.7 million gallons purchased from third parties and resold through the company’s distribution network, 53.7 million gallons of petroleum-based diesel fuel and 44.6 million gallons sold by Petrotec.

The average B100 price per gallon (including RINs) sold by REG was $3.17, compared to $2.97 in 2015.

REG produced 445.5 million gallons of biomass-based diesel, compared to 300.3 million gallons in 2015. The growth in production resulted from the Geismar biorefinery running at, or over, capacity in the fourth quarter; production from the Madison acquisition; and inclusion of Grays Harbor for the full year in 2016 compared to a five months in 2015; coupled with high production rates across the remainder of the company’s fleet. The company also utilized contract or toll manufacturing, which contributed 23.4 million gallons in 2016 compared to 17.3 million gallons in 2015.

Revenue was $2 billion, an increase of $653.9 million, or 47 percent, versus 2015 revenue of $1.4 billion. The increase was due to a 51.3 percent increase in gallons sold and a 6.7 percent increase in average biomass-based diesel prices during 2016.

Gross profit was $171.5 million, compared to $110.5 million in 2015. 

Operating income was $47.2 million, compared to an operating loss of $154.7 million in 2015. Operating income for 2016 was reduced by a $17.8 million noncash impairment charge of property, plant and equipment.  The loss in prior year was largely due to the $175.0 million noncash goodwill impairment charge.

Net income attributable to common stockholders was $43.5 million or $1.06 per share on a fully diluted basis for 2016. This compares to a net loss of $151.4 million, or $3.44 per share on a fully diluted basis for 2015. Net income attributable to common shareholders for 2016 was $61.3 million, excluding the noncash impairment of property, plant and equipment charge of $17.8 million, or $1.50 per share on a fully diluted basis. Net income attributable to common shareholders for 2015 was $23.6 million, excluding the noncash goodwill impairment charge of $175 million, or $0.54 per share on a fully diluted basis. 

Adjusted EBITDA was $102.1 million, compared to $50.2 million in 2015, resulting in an Adjusted EBITDA margin of 5 percent.

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