Title

Presentation

REX American Resources Corporation beats earnings expectations. Reported EPS is $0.71, expectations were $0.265.

Operator: Good morning, and welcome to the REX American Resources Third Quarter 2025 Conference Call. As a reminder, today’s call is being recorded. [Operator Instructions] I would now like to turn the call over to your host, Mr. Doug Bruggeman, Chief Financial Officer of REX American. Please go ahead.

Douglas Bruggeman: Good morning, and thank you for joining REX American Resources’ Q3 2025 Conference Call. With me on our call today are Stuart Rose, REX’s Executive Chairman; and Zafar Rizvi, REX’s Chief Executive Officer. We’ll get to our presentation and comments momentarily as well as your questions. But first, I will review the safe harbor disclosure. In addition to historical facts or statements of current conditions, today’s conference call contains forward-looking statements that involve risks and uncertainties within the meaning of the Private Securities Litigation Reform Act of 1995. Such forward-looking statements reflect the company’s current expectations and beliefs but are not guarantees of future performance.

As such, actual results may vary materially from expectations. The risks and uncertainties associated with the forward-looking statements are described in today’s news announcement and in the company’s filings with the Securities and Exchange Commission, including the company’s reports on Form 10-K and 10-Q. REX American Resources assumes no obligation to publicly update or revise any forward-looking statements. I’d now like to turn the call over to our Executive Chairman, Stuart Rose.

Stuart Rose: Good morning, and thank you again to everyone for joining us. During the third quarter of 2025, REX American Resources continued to demonstrate the strength and operational expertise that has defined our company for over 4 decades. I’m pleased to report that we are making progress on operational milestones we set out to accomplish and continue to position REX for sustained long-term growth. Our third quarter results reflect our focus on solidifying our core business of ethanol production. Our strong results during the quarter benefited from supportive ethanol industry dynamics, especially export volumes and strong crush spreads. Our One Earth Energy facility expansion to 200 million gallons per year is continuing and is on track for completion in 2026.

This expansion will significantly enhance our production capabilities and operational efficiency, contributing meaningfully to future performance. Additionally, we have begun examining potential benefits we can derive in the near term from 45Z tax credits. We are actively engaged with groups to assess our operations and assign a carbon intensity score to our production operations, which we expect to be below the threshold to begin earning credits. The third quarter demonstrated once again that REX’s focus on operational excellence, strategic investments and disciplined capital allocation continues to deliver superior results. Our net income per share of $0.71 represents strong performance reflect in our team’s exceptional execution and managing input costs and timely execution leading to strong margins.

Our continuing strong financial results have allowed us to maintain our strong balance sheet, including approximately $335 million in cash, cash equivalents and short-term investments, even after the to-date spend of approximately $156 million on our capital projects for plant expansion and carbon capture of One Earth Energy. As we have consistently emphasized, our success stems from having great facilities, corn belt locations and most importantly, we feel the most skilled and dedicated team in the industry. Their attention to detail and market awareness continues to set REX apart from our competitors. I want to thank our entire team for their outstanding efforts this quarter and their unwavering commitment to excellence. Now I’ll turn the call over to our CEO, Zafar Rizvi, to discuss our operational achievements and strategic initiatives in greater detail.

Zafar Rizvi: Thank you, Stuart. The expansion of ethanol production at the One Earth facility continues to progress steadily and remains on track for completion and in operation in 2026. Alongside this project, we are advancing our evaluation of our carbon intensity score and expect favorable outcome as we incorporate assessment from multiple independent experts. Regarding the near-term benefits available under the 45Z program, we continue to position the company to capitalize on these opportunities while we wait final guidance from the treasury department. For our carbon capture and sequestration initiative, the EPA currently estimate that our Class VI injection well permit application will be finalized in June 2026. REX remains in active constructive communication with the EPA throughout this process.

As of the end of the third quarter, we have invested approximately $155.8 million in our carbon capture and ethanol expansion projects. We remain within our revised combined budget range of $220 million to $230 million for both initiatives. I will now turn the call over to Doug Bruggeman to review our financial results. Doug?

Douglas Bruggeman: Thanks, Zafar. During the third quarter of fiscal 2025, our ethanol sales volumes reached 78.4 million gallons compared to 75.5 million gallons Q3 2024. The average selling price for ethanol was $1.73 per gallon during the quarter versus $1.83 in the prior year. Dried distillers grain sales volumes were approximately 160,000 tons for Q3 with an average selling price of $139.93 per ton compared to 170,000 tons and $147.14 per ton in the prior year. Modified distiller grain volumes totaled approximately 21,000 tons with an average selling price of $57.03 per ton. Corn oil sales volumes were approximately 27.4 million during the quarter with an average selling price of $0.60 per pound. This volume was up from the prior year sales by approximately 17% and an increase in average selling price of approximately 36%, leading to an approximately 60% increase in sales revenue for corn oil.

Gross profit for the third quarter was $36.1 million compared to $39.7 million in Q3 2024. This primarily reflects lower prices for ethanol and distiller grains. SG&A expenses were approximately $8.2 million for the quarter compared to $8.4 million in Q3 2024. Interest and other income totaled $3.2 million for the quarter compared to $4.6 million in quarter 3 2024, reflecting lower rates and lower investments. Income before taxes and noncontrolling interest was approximately $35.5 million compared to $39.5 million in Q3 2024. Net income attributable to REX shareholders was $23.4 million or $0.71 per diluted share compared to $24.5 million or $0.69 per diluted share in Q3 2024. We ended the third quarter with cash, cash equivalents and short-term investments of $335.5 million.

REX continues to remain in strong financial position with no bank debt. I’ll now turn things back over to Zafar.

Zafar Rizvi: Thanks, Doug. Our 3Ps: profit, position and policy continue to guide our strategy and execution. This was evident throughout the third quarter. Profit. We have now delivered 21 consecutive quarters of profitability, reflecting the hard work, discipline and operational accidents demonstrated by our team every day. Position. We believe we are strategically positioning the company for long-term organic growth, reduced carbon intensity and enhanced value creation. Advancing our carbons sequestration project and core ethanol business will further strengthen our competitive position heading into 2026 and beyond. We also continued active engagement with the EPA regarding our Class VI well permit application. Policy. We’re leveraging the near-term opportunities provided by the 45Z tax credit program to enhance earnings.

We expect these benefits to increase as our ethanol production expansion and carbon sequestration facilities comes online and additional gallons qualify under the program. The third quarter was exceptionally strong across all key performance measures. Our core ethanol business benefited significantly from sustained robust export demand and reliable corn supplies. Last quarter, U.S. ethanol exports were running approximately 10% ahead of the 2024 pace. By August, the momentum has strengthened with export 14% higher than the first 8 months of 2024. According to the Renewable Fuel Association, we continue to expect 2025 to set a new record for U.S. ethanol exports. Looking ahead, the USDA project that corn production in South Dakota and Illinois for the 2025, 2026 harvest season will be among the highest result in recent years.

This will continue to favor our business driving lower input prices. We are excited about the opportunities ahead as we close out the year and prepare for a successful 2026. We expect the fourth quarter to generate a higher net profit than last year’s profitable fourth quarter. As we move into 2026, our strong balance sheet, no debt and expanding business opportunities position us well for another year of growth and improved performance. Now I would like to open things up for questions. Operator?

Operator: [Operator Instructions] Our first question comes from Chris Degner with Water Tower Research.

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Christopher Degner: Good morning, and it looks like a great quarter. I just wanted a couple of questions for you. And kind of curious of your thoughts on key hurdles and timing as you look forward to the 45Z tax credit program. And if you can give us any incremental color on when we could expect some more updates on that?

Stuart Rose: Zafar?

Zafar Rizvi: Yes, Chris. As you know, the treasury has not issued a guideline so far. We’re certainly waiting for the guidelines. Then also, there is a requirement for the prevailing wages and all those information calculation of CI score. We just want to make sure we have all the facts together, and we are reviewing these facts with different experts. And once we have all those numbers back, we will be able to — next quarter, hopefully, we will be able to explain that how much tax credit we will be receiving. But at this time, we are not willing to really give any numbers.

Christopher Degner: Sure. Okay. And then if you step back and think about some of the fundamentals of the industry, like it — I’d be curious like your view on like the impact of tariffs and then crack spreads as you look forward into 2026. I know it’s hard to forecast, but just curious on your view?

Zafar Rizvi: I think the tariff is in the beginning, certainly there was a huge impact because we were concerned about Mexico and Canada export. Mexico is the largest importer of DDG and Canada is the largest importer of ethanol. So hopefully, those relations stay the same. I think that will be great. And — but certainly, on the other side, we can see that Europe and several other countries are beginning to buy ethanol due to pressure from the tariff, our negotiation and others. So that’s why we can see that ethanol certainly has — January to August is approximately $1.4 billion. compared to last year, $1.2 billion. So certainly, there is a great impact — positive impact on export of ethanol at this time. But on the other hand, I think we see some of those soybeans are not — soybean or soybean oils are not shipped abroad or China is not buying.

There is some impact on the corn oil prices, which has dropped a little bit and also there is some concern about the DDG export. So those are the weak side, but we certainly are very happy to see that ethanol export is increasing and we believe that will continue to increase in 2026. And also, we are very pleased with the, as you know, the corn production in Illinois and South Dakota. It seems to be all-time high, and we believe that will be a positive impact on our cost of production moving forward.

Christopher Degner: We do. My family has a farm in Iowa, and it’s been a good year. So it’s — as you think through like the carbon sequestration project that you’re looking at, like — how is like the permitting process going with the pipeline? And like is there — I don’t want to put you on the spot, but is there any other key hurdles that you can — that had — that you could see through with the Illinois state government?

Zafar Rizvi: I think basically, as you know, there was moratorium through July 1st pipeline. And — but we understand ICC, Illinois Commerce Commission is working on pipelines, all of those requirements, and they already have a couple of public hearings, and we believe they are certainly working on it. But we — at this time, we really has no clear get guideline when they will start taking the application. But moratorium will be July 1 is the last day. So we certainly will be able to apply after that, if not the earlier. But you probably also know that we have all the easements for our 6-mile pipeline. That pipeline was really 6-mile pipeline. We built it because we just wanted to be away from the aquifer, Mahomet Aquifer. And that’s the only reason otherwise, we really didn’t need that pipeline.

Operator: Our next question comes from Mason Bourne with AWH Capital.

Mason Bourne: Just a couple for me. Stuart, I guess, in your prepared remarks, you mentioned recognizing benefits under 45Z and it sounds like you’re not yet still sort of assessing where that — where that score is to start and then where it can go from there. But is it fair to say that you believe you’re going to be positively generating credits before the indirect land use change occurs at January 1, and then that would be an incremental step after that? Or is it still too early to say?

Stuart Rose: As Zafar mentioned, we are working diligently on trying to obtain credits this year, but we don’t know what the regulations are yet. They have not published them, but we will be prepared depending on what the — they have not actually — the land us change is correct, but they have not come out with a what qualifies as a carbon intensity score yet. So we cannot guarantee any credits for this year, but we are working on it diligently. Zafar’s team, I don’t know how many people he has working on it, including outside people, but a lot. And we hope, and I emphasize, hope to achieve credits this year, but we have no way of knowing whether we will or will not at this time.

Mason Bourne: So that’s something you could recognize retroactively. Is that your assumption?

Stuart Rose: That’s our hope. Yes. Yes, that’s our hope.

Mason Bourne: And then second for me on — I know it’s early on this as well, but ADM recently entered into an agreement with Google on some of their excess capacity. I know you guys are planning to have plenty of excess capacity in your carbon capture wells even on one alone, but potentially in all 3, if you have them operating. Just wondering if you could provide any thoughts there on your thinking there and any time line around — obviously, I assume you get your operation online first. But just any thoughts on potential for partnerships or what that could look like?

Stuart Rose: Zafar, do you want to answer that?

Zafar Rizvi: Yes. I think, Mason, as you know, we are really trying to concentrate on the well #1 first. And certainly, for the well #2, #3, even for the well #1, we will have enough capacity to have the carbon sequestration from the third party. And we have been in contact with several people and several people have reached out to us recently and even in the past. But we don’t want to make some commitment or contract up to the time we have received Class VI permit, and we have put the pipeline. All of those facts are taken care of it. After that, we believe that we will be able to get those — still those contracts in the future. But at this time, we have really not negotiating with anyone because we are not there where we are supposed to be at this stage.

And Mason, let me have that one answer that to you asked about the land use. Yes, our recent calculation, which we are looking at it, as you know, there is land use in this one and the next 2026, they’re not going to be land use. We believe that we are already at a score, which can be really without land use, we will be able to qualify it, but we have to still do a lot of calculation to make sure the prevailing wages and other lot of factors and treasury guidelines is clear. Even I can tell you that even some of those accountants who is reviewing our data and information, they are not even sure is that a gross ethanol or is a net ethanol, that means it’s a denatured ethanol, and undenatured ethanol will qualify. So there is several different ways we are doing all those calculations to make sure that the numbers are correct before we start talking about how many millions of dollars, et cetera, we are going to get that tax credit.

Mason Bourne: That’s helpful. And we appreciate your conservatism. So thank you for the details.

Operator: We have reached the end of the question-and-answer session. I’d now like to turn the call back over to Stuart Rose for closing comments.

Stuart Rose: Thank you. Our quarter was very good, and we expect next quarter ethanol to outperform last year’s fourth quarter, and we’re continuing to make further progress as we just talked about and capturing 45Z credits. It’s a tribute to all our employees, starting with our CEO, Zafar Rizvi, who is recognized by many of the, if not the, one of the top CEOs in the ethanol industry, including all of our employees, who we consider the best in the industry. We want to thank everyone for listening, and we look forward to talking to you after next quarter. Thank you. Bye.

Operator: This concludes today’s conference. You may disconnect your lines at this time, and we thank you for your participation.

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