Slide 1: Second Quarter Earnings Call
Second Quarter Earnings Call August 7, 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: Q2 '19 Highlights
Q2 ‘19 Highlights Strong quarter driven by excellent cash trading results and corn and bean basis appreciation Remained profitable despite deepening margin pressure driven by ethanol oversupply, weak exports and corn supply concerns in the Eastern Corn Belt Posted year-over-year improvement despite
Slide 5: Key Financial Data – Second Quarter 2019
Key Financial Data – Second Quarter 2019 $ In millions except per share data, long-term debt-to-equity Q2 ’19 Q2 ‘18 VPY YTD ‘19 YTD ‘18 VPY Sales and merchandising revenues $2,325.0 $911.4 $1,413.6 $4,301.8 $1,547.1 $2,754.7 Gross profit 160.7 90.5 70.2 270.4 154.2 116.2 Operating and general expen
Slide 6: Q2 '18 Pretax Income to Q2 '19 Adjusted Pretax Income Reconciliation
Pretax Income Q2 ’18 Pretax Income to Q2 ’19 Adjusted Pretax Income Q2 ‘19 Reconciliation $50,000 $18,243 $2,237 $45,000 $779 $44,103 $3,081 $44,103 ($4,646) ($1,781) $40,855 $137 $40,000 $35,000 $30,000 $29,271 $25,000 ($000) $20,000 $15,000 $10,000 $5,000 $0 Q2 '18 Trade Ethanol Plant Rail Other Q
Slide 7: YTD '18 Pretax Income to YTD '19 Adjusted Pretax Income Reconciliation
Pretax Income YTD ’18 Pretax Income to YTD ’19 Adjusted Pretax Income YTD ‘19 Reconciliation $40,000 $13,596 $2,173 $36,238 $3,081 $36,238 $35,000 ($5,130) $2,579 $11,707 $30,000 ($4,241) $27,261 $25,000 $21,450 ($000) $20,000 $15,000 $10,000 $5,000 $0 YTD '18 Trade Ethanol Plant Rail Other YTD '19
Slide 8: Adjustments are largely non-cash
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 $6.9 $7.1 Transaction-related stock compensation $4.8 $9.9 $4.3 $1.5 Total acquisition-related adjustments $11.7 $17.0 $4.3 $1
Slide 9: Trade (formerly Grain) Group Q2 '19 Highlights
Trade (formerly Grain) Group Q2 ‘19 Highlights • Trading team capitalized on weather-related price volatility • Physical grain margins improved on corn and wheat basis appreciation • Lansing integration continued to go well; Thompsons integration got underway Adj. Pretax Income ($M) Unaudited in $M
Slide 10: Ethanol Group Q2 '19 Highlights
Ethanol Group Q2 ’19 Highlights • Group remained profitable, but pretax income down sharply on weak margins • Operating costs were lower; ethanol and corn oil yields continued to improve • Group selectively reduced production in response to margin environment Pretax Income Attributable to Unaudited
Slide 11: Plant Nutrient Group
Plant Nutrient Group Q2 ’19 Highlights • Group pretax income improved even as persistent rain drove volumes considerably lower • Margins improved on contained production costs and pricing discipline Adj. Pretax Income ($M) Unaudited in $M Q2 ’19 Q2 ‘18 VPY YTD ‘19 YTD ‘18 VPY $14 $14 $15 $12 Revenue
Slide 12: Rail Group Q2 '19 Highlights
Rail Group Q2 ’19 Highlights • Lease income higher on strong utilization, more cars on lease • Income from car sales was negligible as planned; 2018 results included $5.2 million scrap loss • Repair business lagged prior year on weaker volume and higher workers’ comp and other expenses Unaudited in
Slide 13: 2019 Outlook
2019 Outlook Weather-induced planting struggles in Eastern draw areas create concern going into fall harvest despite anticipated continued trading opportunities Continue to run plants to optimize yield and profitability until margin environment improves; new, low-carbon ELEMENT gallons to target Cal
Slide 14: Q&A Session
Pe ¢¢en Sanaa Q&A Session
Slide 15: Thank you for joining us.
Thank you for joining us. Our next earnings call is scheduled for November 6, 2019 at 11:00 a.m. 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 Condition
U.S. Corn Condition Rated Good-to-Excellent Gold states = ahead of or equal to 2018 condition 73% Gray states = behind 2018 condition August 5, 2019 57% 66% 65% 57% 66% 46% 79% 71% 34% 41% 36% July 28, 2019 74% 48% 34% 71% 58% 86% 40% August 5, 2018 63% 71% Source: USDA crop progress report 8/5/19 1
Slide 19: U.S. Soybeans Condition
U.S. Soybeans Condition Rated Good-to-Excellent Gold states = ahead of or equal to 2018 condition 63% Gray states = behind 2018 condition August 5, 2019 61% 54% 69% 54% 65% 44% 70% 29% 40% 36% July 28, 2019 49% 47% 72% 54% 77% 54% 53% 70% August 5, 2018 61% 67% Source: USDA crop progress report 8/5/
Slide 20: Ethanol Group Production
Ethanol Group Production Ethanol Gallons Produced E-85 Gallons Shipped DDG Tons Sold Corn Oil Pounds Sold in millions in millions in thousands in millions 31.5 625.7 611.0 603.4 58.4 238.2 236.7 55.5 214.2 22.9 46.9 19.9 16.6 323.9 311.8 306.1 29.9 115.8 121.4 118.6 14.0 28.1 26.0 9.3 2017 2018 2019
Slide 21: Growing U.S. Ethanol Exports Continue to Support Market Price
Growing U.S. Ethanol Exports Continue to Support Market Price U.S. Ethanol Exports (MGY) 1,705 2019 YTD United Arab Emirates, 2% Other, 5% 1,459 Switzerland, 2% 1,367 Philippines, 6% 1,193 Peru, 3% Brazil, 33% 1,046 Netherlands, 2% 836 836 Mexico, 2% 740 620 Korea, 7% 397 Jamaica, 2% India, 15% Cana
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 16 657 13 16 209 628 109 186 590 108 165 360 351 217 254 214 202 178 Q1 '17 Q2 '17 Q3 '17 Q4 '17 Q1 '18 Q2 '18 Q3 '18 Q4 '18 Q1 '19 Q2 '19 Primary Nutrients Specialty Nutrients Other Tons Commi
Slide 23: Rail Group Fleet
Rail Group Fleet Key Metrics Railcar Fleet by Commodity2 ~24,000 Railcars Grain/Grain Products 24.0% Fertilizer/Minerals 11.4% 6.9% 94.6% Average Utilization Rate1 Sand/Sand Products Plastics 9.1% Wood & Forestry/Paper 5.7% ~22,500 Cars on Lease2 Ethanol & Gasoline 9.2% Metals & Products 4.4% 24 Rai
Slide 24: Rail Group Earning Power
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 23,923 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% 95.2% • Generates lease income from long-live