Green Plains, Inc. (GPRE)

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Green Plains Renewable Energy, Inc. (GPRE)

Q1 2010 Earnings Call Transcript

April 29, 2010 11:00 am ET


Jim Stark – VP, Investor and Media Relations

Todd Becker – President and CEO

Jerry Peters – CFO and Assistant Secretary

Steve Bleyl – EVP, Ethanol Marketing

Jeff Briggs – COO


Farha Aslam – Stephens, Inc.

Alex Potter – Piper Jaffray

Lucy Watson – Jefferies

Ian Horowitz – Rafferty Capital

Evan Fox – Olympia Capital Markets

Matt Farwell – Imperial Capital

Anand Shahi – Atlas Capital Partners

Luke Beltnick – TPG Credit



Good day ladies and gentlemen, and welcome to Green Plains Renewable Energy Inc. first quarter 2010 financial results conference call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session and instructions will be given at that time. (Operator instructions) As a reminder, today’s conference call is being recorded.

I would now like to turn the conference to your host, Mr. Jim Stark. Please go ahead.

Jim Stark

Thanks, Allison. Good morning and welcome to our first quarter earnings call. Todd Becker, President and Chief Executive Officer; Jerry Peters, our Chief Financial Officer; and Steve Bleyl, Executive Vice President of Ethanol Marketing are all on the call today. We are here to discuss our first quarter financial results and recent developments for Green Plains Renewable Energy.

Please remember that a number of forward-looking statements will be made during this presentation. Forward-looking statements are any statements that are not historical facts. These forward-looking statements are based on the current expectations of Green Plains' management and there can be no assurance that such expectations will prove to be correct. All forward-looking statements involve risks and uncertainties, Green Plains' actual results could differ materially from management’s expectations. Information about factors that could cause such differences can be found in this morning's or yesterday’s earnings press release on page two and in our 10-K and other periodic SEC filings.

The information presented today is time sensitive and is accurate only at this time. If any portion of this presentation is rebroadcast, retransmitted or redistributed at a later date, Green Plains will not be reviewing or updating this material.

Now, I would like to turn the call over to Todd Becker.

Todd Becker

Thanks Jim and thanks for joining us this morning, we are glad you could listen in today. We issued our first quarter earnings after market closed Wednesday and we hope you all had a chance to read it.

Let me first start with an update on our safety programs. We have had no major safety incident this quarter and we are continually focused on keeping our employees safe and our plants a safe place to work. In fact, we just celebrated the second anniversary of no lost time accident at our plant in Shenandoah which is a testament to their focus on safety and security of the operation at that plant.

Operationally, we had a very solid performance from our ethanol production segment in the first quarter. We produced 124 gallons, which exceeded our expected operating capacity during the quarter. We continue to make excellent progress on debottlenecking program and believe they are producing 500 million gallons of ethanol from our existing six plants is achievable in 2010.

The implementation of our operational excellence programs are in full swing. At any given time, the company is evaluating five to ten enhancement initiatives across the production platform. The value of a successful trial is maximized by our ability to immediately roll out the upgrade across our plants because of our consistent technology with five or six being (inaudible) ICM technology.

This is one of the main reason we are seeing the increase in production volumes. We are still focusing on the low hanging fruit as we have thought when we reached these volume levels we will need to add additional fermentation capacity which is relatively more expensive to complete and have subsequently found that we can continue to produce the higher level with minimal capital expenditures. We continually focus on controlling costs and managing the business as efficiently as possible, being a low cost producer is accretively important in the commodity processing business.

We had good financial results for the quarter. Our consolidated revenues were $426 million and we reported net income of $15.6 million or $0.58 per share for the quarter. But a very strong quarter again in the ethanol production segment, in fact the operating income for this segment was better than last quarter all while margins were contracting from 2009 highs. Jerry will go into more details on results later in the call, but I thought this was important to point out.

Our risk management strategy worked well for us in the quarter as we have locked away good portion of ethanol production for the first quarter by the end of 2009 and we were successful in locking the full quarter by the end of February. As a result, our ethanol production segment generated $29.2 million of operating income for the quarter, which was a $0.5 million higher than the segment’s operating income in the fourth quarter of 2009.

We ended the first quarter on March 31, with 67 million or 14% of expected production locked in for the next 12 months, most of which is 2010 calendar volumes. I will discuss today’s situation later in the call from a volumetric standpoint.

From an industry perspective, ethanol margins are down from the highs experienced in the fourth quarter, but margins are above where they were in the second quarter of 2009. Again, because of our hedging programs we did not fully realize the peak margins available in the fourth quarter, but more importantly avoided the valley during the recent downturn.

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