Green Plains, Inc. · NASDAQ:GPRE
Green Plains — BMO Capital Markets 13th Annual Farm to Market Conference 2018
47 slides from Green Plains's conference presentation, May 16, 2018
Slide 1: BMO Farm to Market Conference
BMO Farm to Market Conference May 16, 2018
Slide 2: Todd Becker, President & Chief Executive Officer
Todd Becker President & Chief Executive Officer
Slide 3: Forward-Looking Statements
Forward-Looking Statements This presentation includes forward-looking statements that reflect management’s current views of company performance, industry conditions and future economic environment. These statements are based on assumptions and various factors that are subject to risks and uncertaint
Slide 4: Green Plains Inc.
Green Plains Inc. Key Highlights Asset Locations One of the leading ethanol producers in the world Fourth largest cattle feeder in the U.S. World’s largest manufacturer and marketer of food-grade industrial vinegar General partner and 62.5% owner of Green Plains Partners, a master limited pa
Slide 5: First Quarter 2018 Highlights
First Quarter 2018 Highlights Results of operations • Net loss attributable to the company of $24.1 million, or $(0.60) per diluted share • EBITDA of $23.1 million • Ethanol production segment – Produced 280.4 million gallons of ethanol, running at 76.5% of capacity – Consolidated ethanol crush ma
Slide 6: Ethanol Production Segment
Ethanol Production Segment 17 ethanol plants in 9 states Ethanol Production (million gallons) Capacity to produce 1.5 billion gallons of 1,600 Production Capacity ethanol and 4.1 million tons of distillers grains; 1,400 recover 345 million pounds of corn oil 1,200 1,000 2,000 trucks of corn de
Slide 7: Agribusiness & Energy Segment
Agribusiness & Energy Segment Purchase ~520 million bushels, or ~14.5 million tons, of corn a year ~66% of corn directly from farmers 4 standalone elevators and 17 co-located grain storage bins with 42 production days, or 60.3 million bushels of storage Merchant trading of 12+ commodities Co
Slide 8: Food & Ingredients Segment
Food & Ingredients Segment Fourth largest cattle feeder in the U.S. with 4 cattle feedlots with 255,000-head capacity; supported by long-term supply agreement with Cargill World’s largest vinegar manufacturer and marketer with 7 vinegar plants in the U.S. Corn oil operations Fleischmann’s Whit
Slide 9: Green Plains Partners
Green Plains Partners Formed in 2015 as an MLP (NASDAQ:GPP) to Strategically Located Assets provide fuel storage and transportation services Primary vehicle to expand Green Plains’ downstream logistics activities Long-term, fee-based commercial agreements generate stable, predictable cash flow
Slide 10: Ethanol Industry and Regulatory Update
Ethanol Industry and Regulatory Update
Slide 11: Ethanol Industry Today
Ethanol Industry Today Top five producers account for 44% of overall RFS II mandate is 15.0 billion gallons domestic production capacity Regulatory Update 2018 estimated supply and demand • RVP for E15 year-round sales • 16.1 billion gallons of production • No RIN cap; no more small refinery
Slide 12: Record Domestic Gasoline Demand
Record Domestic Gasoline Demand (million barrels per day) 10.5 10.3 10.1 9.9 9.7 9.5 9.3 9.1 8.9 8.7 8.5 8.3 8.1 7.9 5 Year range 2018 2017 7.7 7.5 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec (in bgy) 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018P U.S. gasoline consumption 142.3 13
Slide 13: Attractive Ethanol Discount to RBOB
Attractive Ethanol Discount to RBOB Jun-18 Jul-18 Aug-18 Sep-18 Oct-18 Nov-18 RBOB $2.11 $2.12 $2.11 $2.09 $1.96 $1.92 Ethanol $1.50 $1.51 $1.52 $1.52 $1.51 $1.50 Ethanol Price vs. RBOB ($0.62) ($0.61) ($0.59) ($0.57) ($0.45) ($0.42) Dec-18 Jan-19 Feb-19 Mar-19 Apr-19 May-19 RBOB $1.89 $1.88 $1.88 $
Slide 14: Three-Year Low Margin Environment
Three-Year Low Margin Environment (thousand barrels) ($ per gallon) 26,500 $1.50 $1.25 24,500 $1.00 22,500 $0.75 20,500 $0.50 $0.25 18,500 $0.00 16,500 -$0.25 14,500 -$0.50 Ethanol Inventory Weekly AvgCrush Margins Source: Energy Information Administration as of April 27, 2018 BMO Farm to Market Con
Slide 15: Driving Demand Through Higher Blends
Driving Demand Through Higher Blends E15 sold in 29 states at 1,375 retail stations as of April 30, 2018; expected to reach 2,000 by year end 68 million gallons of ethanol sold through E15 initiative in 2017 We expect approximately 175 million gallons of E15 sales in 2018 RVP waiver for E15
Slide 16: Expanding Export Markets
Expanding Export Markets 1.37 billion gallons of U.S. ethanol exported in 1Q18 Ethanol Export Mix 2017, 31% more than 2016 • ~70% went to 3 countries 20% Brazil • Anticipate exports of 1.7 to 1.8 billion gallons in Canada China 2018, led by Brazil, Canada and India 5% 46% India 6% South Korea • 1Q
Slide 17: Increasing Shareholder Value
Increasing Shareholder Value
Slide 18: Program Rationale
Program Rationale Market is not giving us credit for the value of the platform nor rewarding our stakeholders through share price appreciation Portfolio Optimization Strategy will optimize our platform and drive shareholder value • Divest select assets that are undervalued by the market or do no
Slide 19: Step 1: Prove Value
Step 1: Prove Value
Slide 20: Sum of the Parts Analysis Illustrates the Gap in Valuation
Sum of the Parts Analysis Illustrates the Gap in Valuation As of 5/04/18 end of day before Portfolio Optimization Program announcement(1)(2) Partnership valued from current unit price and remaining asset values based on TTM EBITDA * a reasonable multiple Valuation Recap Value Per Share Per Gallo
Slide 21: Changing the Valuation of our Ethanol Assets Doubles our Market Cap
Changing the Valuation of our Ethanol Assets Doubles our Market Cap Assume that our ethanol assets are valued at a $1.00 a gallon The value of our share price and market capitalization would more than double Valuation Recap Value Per Share Per Gallon (3) Working Capital, Net $62 $1.50 $0.04 (4)
Slide 22: Step 2: Reduce Leverage
Step 2: Reduce Leverage
Slide 23: Liquidity and Capital Structure
Liquidity and Capital Structure Green Plains Inc. (in millions, except per share and per gallon amounts) For the three months ended Mar 31, 2018 Dec 31, 2017 Mar 31, 2017 Gross debt $1,370.4 $1,361.5 $1,124.8 Working capital financing 533.7 526.2 335.7 Term and convertible debt 836.7 835.3 789.1 Cas
Slide 24: Step 3: Invest in Protein & Export Supply Chain
Step 3: Invest in Protein & lign Export Supply Chain
Slide 25: Thesis: World Protein Demand Growth is Significant Led by Aquaculture
Thesis: World Protein Demand Growth is Significant Led by Aquaculture From 2017 – 2027 22% increase in poultry production (1.97% CAGR) 15% increase in pork production (1.40% CAGR) 12% increase in beef production (1.12% CAGR) 32% increase in soymeal consumption (2.98% CAGR) 22% increase in world soym
Slide 26: Aquaculture needs more protein
Aquaculture needs more protein…. Fish consume roughly 1.2lb of feed to gain 1lb of body weight - the most efficient feed ratio of the top 4 animal protein sources1 Over 3 billion people rely on seafood as their main source of animal protein1 To meet the world’s seafood demands, aquaculture pro
Slide 27: Record Soy Crush Margins are led by Meal Demand
Record Soy Crush Margins are led by Meal Demand – Hi-Pro DDGs can Compete… U.S. Soybean Crush Capacity Projections 2,300 49 2,250 2,200 47 2,150 45 2,100 2,050 43 2,000 41 1,950 MM BU SOY CRUSH 1,900 39 1,850 MMTS 1,800 37 1,750 35 1,700 1,650 33 1,600 31 1,550 1,500 29 1,450 1,400 27 1,350 25 1,300
Slide 28: Maximizing the Value of our Feed Ingredients
Maximizing the Value of our Feed Ingredients Produce 50%-protein animal feed ingredients from a portion of distillers grains; similar in content as soybean meal and forecasted to trade similarly Hi-Pro DDGs can provide a consistent uplift of at least 10 cents per gallon to the ethanol margin str
Slide 29: What is Hi-Pro DDGs?
What is Hi-Pro DDGs? Thin Stillage Clarifiers – High Protein Dryer Feed Hi-Pro DDGs is created with a few added steps to our current DDGs process. Higher nutritional characteristics than conventional DDGs. 50+% Protein 26% Yeast 98% Availability of Lysine – No Heat Damage done Similar pr
Slide 30: High Protein Distillers compete head to head
High Protein Distillers compete head to head - indicates an essential amino acid for each animal class. - Lysine and Methionine are highlighted because they are crucial, limiting amino acids that help the absorption of other amino acids. - Source: Amino Acid Nutrition in Animals: Protein Synthesis
Slide 31: Leveraging our Export Capabilities at Beaumont
Leveraging our Export Capabilities at Beaumont JGP Energy Partners export/import fuel terminal 50/50 joint venture with Jefferson Gulf Coast Partners at Jefferson’s existing Beaumont, Texas terminal $50 million development cost: working ethanol storage capacity of 550,000 barrels for multiple
Slide 32: Global Demand will Drive Growth
Global Demand will Drive Growth Domestic Ethanol Exports by Year Global demand growing 2-3% annually (million gallons) 2,000 Corn-based ethanol is the most 1,800 1,600 economical source of octane in the 1,400 world 1,200 1,000 800 Cost to produce equivalent starch 600 derived from sugar from $
Slide 33: Step 4: Reduce Controllable Expenses
Step 4: Reduce Controllable Expenses
Slide 34: Step 5: Support the Share Price
Step 5: Support the Share Price
Slide 35: GPRE: Should not be a proxy for the crush
GPRE: Should not be a proxy for the crush… For the most part, GP’s share value remains Correlation breaks appear to occur when tied to the expected forward value of ethanol, GP earnings news varies from analyst given the ethanol’s relative size within the expectations – but is somewhat mean portfoli
Slide 36: Impact to the Partnership
Impact to the Partnership
Slide 37: The Process of a Sale
The Process of a Sale Non-core ethanol facilities that do not support our protein and export strategy Partnership objectives: • Maintain distributable cash flow per unit and long-term Sale of non-core coverage ratio target of 1.10x ethanol plant that meets defined criteria Ethanol 3rd Party Buye
Slide 38: Partnership's History of Growth
Partnership’s History of Growth Green Plains Partners light products terminal business (Expected 2H 2018) • 50/50 joint venture with Delek Logistics Partners, AMID and Delek Terminal Assets valued at $162.5 million • Acquiring Caddo Mills, Texas and North Little Rock, Arkansas terminals from Ameri
Slide 39: Closing Thoughts
Closing Thoughts Divest assets to improve the company’s share price Significantly reduce or eliminate term debt by 2018 Invest in high-protein process technology at Shenandoah with other locations to follow Repurchase shares with remaining proceeds and free cash flow Reduce controllable ex
Slide 40: Green Plains Inc. | NASDAQ: GPRE | www.gpreinc.com
Green Plains Inc. | NASDAQ: GPRE | www.gpreinc.com Green Plains Partners LP | NASDAQ: GPP | www.greenplainspartners.com
Slide 41: Asset Locations
Asset Locations BMO Farm to Market Conference | May 16, 2018 Page 41
Slide 42: Condensed Balance Sheet
Condensed Balance Sheet Green Plains Inc. (in millions) Assets Mar 31, 2018 Dec 31, 2017 Current assets $1,146.1 $1,206.5 Property and equipment, net 1,157.8 1,176.7 Other assets 356.0 401.5 Total assets $2,659.9 $2,784.7 Liabilities and Stockholders’ Equity Current liabilities $779.5 $886.3 Long-te
Slide 43: Condensed Income Statement
Condensed Income Statement Green Plains Inc. (in millions, except per share amounts) For the three months ended Mar 31, 2018 Mar 31, 2017 Revenues $1,045.3 $887.7 Costs and expenses 1,049.2 870.3 Operating income (loss) (3.9) 17.4 Interest expense and other (21.6) (18.1) Income tax benefit 6.0 2.3 N
Slide 44: Segment Operations
Segment Operations Green Plains Inc. (in millions) For the three months ended Mar 31, 2018 Mar 31, 2017 Operating income (loss) Ethanol production (27.5) (6.6) Agribusiness and energy services 7.1 6.4 Food and ingredients 12.6 9.6 Partnership 15.4 16.6 Corporate activities (11.5) (8.6) (3.9) 17.4 EB
Slide 45: Non-GAAP Reconciliation
Non-GAAP Reconciliation Green Plains Inc. (in millions) For the three months ended Mar 31, 2018 Mar 31, 2017 Net income (loss) $(19.5) $1.6 Interest expense 22.1 18.5 Income tax benefit (6.0) (2.4) Depreciation and amortization 26.5 26.1 EBITDA $23.1 $43.8 BMO Farm to Market Conference | May 16, 201
Slide 46: Selected Operating Data
Selected Operating Data Green Plains Partners LP (in million gallons) For the three months ended Mar 31, 2018 Mar 31, 2017 Product volumes Storage and throughput services 298.3 321.1 Terminal services 61.7 74.4 Railcar capacity billed (daily average) 99.2 89.2 BMO Farm to Market Conference | May 16,
Slide 47: Adjusted EBITDA and DCF
Adjusted EBITDA and DCF Green Plains Partners LP (in millions) For the three months ended LTM ended Mar 31, 2018 Mar 31, 2017 Mar 31, 2018 Net income $13.4 $15.0 $57.3 Interest expense 1.6 1.2 5.8 Income tax expense - - 0.1 Depreciation and amortization 1.2 1.3 5.0 Minimum volume commitment adjustme
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