Slide 1: Third Quarter Earnings Call
Third Quarter Earnings Call November 6, 2019 1
Slide 2: Safe Harbor and Non-GAAP Financial Measures
Safe Harbor and Non-GAAP Financial Measures Certain information discussed today constitutes forward-looking statements. Actual results could differ materially from those presented in the forward looking statements as a result of many factors including general economic conditions, weather, competitiv
Slide 3: Speakers
Speakers Pat Bowe President and Chief Executive Officer Brian Valentine Senior Vice President and Chief Financial Officer John Kraus Director, Investor Relations 3
Slide 4: Q3 '19 Highlights
Q3 ‘19 Highlights Continued benefits from the Lansing acquisition and stronger merchandising income drove improved results Remained profitable despite difficult margin environment; ELEMENT began production; created single legal entity with Marathon to hold our 4 existing plants Posted year-over-year
Slide 5: Key Financial Data – Third Quarter 2019
Key Financial Data – Third Quarter 2019 $ In millions except per share data, long-term debt-to-equity Q3 ’19 Q3 ‘18 VPY YTD ‘19 YTD ‘18 VPY Sales and merchandising revenues $1,982.8 $685.6 $1,297.2 $6,284.6 $2,232.7 $4,051.9 Gross profit 109.1 53.9 55.2 379.5 208.0 171.5 Operating and general expens
Slide 6: Q3 '18 Adjusted Pretax Loss to Q3 '19 Adjusted Pretax Loss
Pretax Income Q3 ’18 Adjusted Pretax Loss to Q3 ’19 Adjusted Pretax Loss Q3 ‘19 Reconciliation $12,000 $10,468 $10,000 $8,000 $6,000 $4,000 $2,000 ($000) $0 ($176) ($11,260) $536 ($2,000) ($4,000) ($2,595) ($6,000) ($8,000) ($10,000) ($12,000) ($7,500) ($10,527) ($10,527) ($14,000) ($13,081) $2,554
Slide 7: YTD '18 Adjusted Pretax Income to YTD '19 Adjusted Pretax Income
Pretax Income YTD ’18 Adjusted Pretax Income to YTD ’19 Adjusted Pretax Income YTD ‘19 Reconciliation $55,000 $24,062 $50,000 $45,000 $40,000 $35,000 ($16,624) $30,000 $26,688 ($3,705) ($16) ($000) $25,077 $17,342 $25,077 $25,000 ($5,328) $20,000 $15,000 $10,000 $7,735 $5,000 $0 YTD '18 Trade Ethano
Slide 8: Trade Group Q3 '19 Highlights
Trade (formerly Grain) Group Q3 ‘19 Highlights • Strong results from western assets offset by impacts of planting-related issues in the Eastern Corn Belt • Solid merchandising results considering market backdrop • More than $10 million in run-rate synergies identified and being implemented Adj. Pret
Slide 9: Ethanol Group Q3 '19 Highlights
Ethanol Group Q3 ’19 Highlights • Group remained profitable, but pretax income down sharply on weak margins due to elevated corn basis • Increased ethanol trading boosted results • ELEMENT startup expenses added to year-over-year shortfall Pretax Income Attributable to Unaudited in $M Q3 ‘19 Q3 ‘18
Slide 10: Plant Nutrient Group
Plant Nutrient Group Q3 ’19 Highlights • Pretax income improved 7% on better volumes and lower operating expenses • Margins were lower due to product mix • Carrying costs on higher inventory continued to be a headwind Adj. Pretax Income ($M) Unaudited in $M Q3 ’19 Q3 ‘18 VPY YTD ‘19 YTD ‘18 VPY $14
Slide 11: Rail Group
Rail Group Q3 ’19 Highlights • Lease income fell due to lower lease rates and utilization and headwinds in grain, frac sand and ethanol markets • Income from car sales was negligible as planned • Repair business results lagged prior year on higher labor and benefits expenses Unaudited in $M Q3 ‘19 Q
Slide 12: Adjustments Related to Lansing Acquisition
Adjustments Related to Lansing Acquisition Actual YTD Estimated Estimated Estimated (pretax, in millions) 2019 FY 2019 FY 2020 FY 2021 One-time acquisition and synergy costs $7.0 $7.1 Transaction-related stock compensation $7.3 $9.9 $4.3 $1.5 Total acquisition-related adjustments $14.3 $17.0 $4.3 $1
Slide 13: 2019 Outlook
2019 Outlook Lower production in our core eastern footprint will reduce volume; merchandising opportunities are solid across the remainder of the portfolio Near-term margin picture has allowed hedging opportunities that should improve results; ELEMENT plant will bring new products online Full-year v
Slide 14: Q&A Session
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Slide 15: Thank you for joining us.
Thank you for joining us. Our next earnings call is scheduled for Thursday, February 13, 2020 at 11:00 a.m. EST 15
Slide 16: Appendix
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Slide 17: Definitions
Definitions EBITDA: Earnings before interest, taxes, depreciation and amortization; a non-GAAP measure. A primary measure of period-over-period comparisons, and we believe they are meaningful measures for investors to compare our results from period to period Ethanol Margin Hedging: From time to tim
Slide 18: U.S. Corn Harvest
U.S. Corn Harvest Gold states = ahead of 2018 harvest Percentage Harvested Gray states = behind 2018 harvest Yield (Bushel/Acre) 10% November 4, 2019 44% October 19-20 27% 21% 52% 43% 25% 58% 168.2 60% 49% 58% 57% November 4, 2018 66% 83% 71% October 18-19 95% 74% 99% 99% 176.4 Five-year average Sou
Slide 19: U.S. Soybeans Harvest
U.S. Soybeans Harvest Gold states = ahead of 2018 harvest Gray states = behind 2018 harvest Percentage Harvested Yield (Bushel/Acre) 56% 80% November 4, 2019 October 19-20 82% 62% 75% 90% 80% 57% 46.9 78% 77% 79% November 4, 2018 70% 54% 77% October 18-19 45% 81% 82% 75% 50.6 93% Five-year average 9
Slide 20: Ethanol Group Production
Ethanol Group Production Ethanol Gallons Produced E-85 Gallons Shipped DDG Tons Sold Corn Oil Pounds Shipped in millions in millions in thousands in millions 47.5 360.1 354.8 941 918 915 87.7 330.6 85.0 36.4 74.4 32.4 121.9 16.0 315 116.3 118.1 312 304 29.2 27.5 29.5 12.5 9.3 2017 2018 2019 2017 201
Slide 21: U.S. Ethanol Exports Expected to Fall from 2018 Peak
U.S. Ethanol Exports Expected to Fall from 2018 Peak U.S. Ethanol Exports (MGY) 1,705 YTD through August 2019 Jamaica, 2% Other, 9% 1,447 UK, 2% 1,367 Mexico, 2% Brazil, 25% 1,193 Oman, 3% 1,046 Netherlands, 3% 836 836 740 Peru, 3% 620 Colombia, 5% 397 Canada, 21% Philippines, 5% Korea, 6% India, 13
Slide 22: Plant Nutrient Tons Sold
Plant Nutrient Tons Sold Historical Seasonality in Volume (000’s) 13 16 247 13 221 207 15 14 23 132 153 15 16 13 657 13 16 95 209 628 109 186 590 108 165 360 351 254 287 217 202 214 178 Q1 '17 Q2 '17 Q3 '17 Q4 '17 Q1 '18 Q2 '18 Q3 '18 Q4 '18 Q1 '19 Q2 '19 Q3 '19 Primary Nutrients Specialty Nutrients
Slide 23: Rail Group Fleet
Rail Group Fleet Key Metrics Railcar Fleet by Commodity2 ~24,800 Railcars Grain/Grain Products 23% Fertilizer/Minerals 11% 8% 90.3% Average Utilization Rate1 Sand/Sand Products Plastics 7% Wood & Forestry/Paper 6% ~22,500 Cars on Lease2 Ethanol & Gasoline 5% Metals & Products 5% 26 Railcar Repair Fa
Slide 24: Sources of Income
Rail Group Earning Power $ in millions YE 2015 YE 2016 YE 2017 YE 2018 YTD 2019 Average # of Assets 23,017 23,057 23,314 22,693 24,041 Beg. $ on Bal. Sheet $297.7 $338.1 $327.2 $521.8 $660.5 Sources of Income Average % Utilization 92.4% 87.8% 85.0% 90.3% 93.5% • Generates lease income from long-live