Higher feedstock costs have ‘significant impact’ on REG’s Q1 profits

Renewable Energy Group Inc. announced May 3 its financial results for the first quarter ended March 31.

Revenues for the first quarter were $540 million on 134 million gallons of fuel sold. Net income available to common stockholders was $39 million in the first quarter of 2021, compared to $73 million in the first quarter of 2020. Adjusted EBITDA in the first quarter was $56 million, compared to $89 million in the first quarter of 2020, which included a $54 million risk-management gain.

“We are pleased with the strong financial performance in the first quarter,” said Cynthia (CJ) Warner, president and CEO. “There was significant volatility, as we saw both feedstock and RIN prices rise rapidly. Strong operations and commercial optimization within this dynamic market environment enabled us to deliver exceptional financial results well in excess of our guidance. We continue to see signals for growing demand for lower-carbon fuels and believe we are well-positioned to help drive the energy transition and deliver additional value for our customers and shareholders.”

REG sold 134 million gallons of fuel, a decrease of 4 compared to Q1 2020. Self-produced renewable diesel sales were down 4 million gallons, as a result of the company’s planned 31-day turnaround at the Geismar, Louisiana, renewable diesel facility. Gallons sold of self-produced biodiesel decreased by 4 million, driven by COVID-related market disruptions in Europe. Third-party renewable diesel sales increased 6 million gallons while petroleum diesel sales decreased 4 million gallons as REG continued to optimize its sales mix.

REG produced 99 million gallons of biodiesel and renewable diesel in Q1, a decline of 22 million gallons compared to Q1 2020. Renewable diesel production decreased 8 million gallons compared to Q1 2020 as a result of the planned turnaround cited above. European biodiesel production decreased 3 million gallons from Q1 2020 due to the COVID-related market disruptions as noted above, and North American biodiesel production decreased 11 million gallons, due in part to unplanned downtime caused by extreme cold in Houston and the Midwest, as well as production scheduling choices made to optimize margins.

Revenues increased from $473 million to $540 million, largely driven by higher selling prices realized from a combination of a 159 percent increase in D4 RIN prices and a 14 percent increase in ULSD prices year over year.

Gross profit was $74 million, or 14 percent of revenues, compared to gross profit of $106 million in Q1 2020, or 22 percent of revenues. The decline in gross profit as a percentage of revenue was driven primarily by a $55 million swing in risk management, as the company recognized a $54 million gain in risk management in the first quarter of 2020 largely due to the COVID-related historic drop in ULSD prices compared to a $2 million risk management loss in the first quarter of 2021. Increased feedstock costs also had a significant impact on gross profit, as weighted average feedstock costs used in production increased 72 cents per gallon year over year. These declines were partially offset by higher average selling prices and a $14 million increase in gross profit for separated RINs driven by higher average D4 RIN prices.

Operating income was $42 million compared to $78 million in Q1 2020, with the decrease driven by the same factors as those described above for gross profit. Selling, general and administrative costs were up $4 million, while remaining flat as a percentage of revenues.

GAAP net income available to common stockholders was $39 million, or 88 cents per share on a fully diluted basis, compared to GAAP net income available to common stockholders of $73 million, or $1.67 per share on a fully diluted basis, in the first quarter of 2020. The differential drivers are the same as those described above for operating income and gross profit.

Adjusted EBITDA was $56 million compared to $89 million, with the decrease resulting from the same factors as described above.

At March 31, REG had cash and cash equivalents, restricted cash, and marketable securities (including long-term marketable securities) of $611 million, an increase of $253 million from Dec. 31, 2020. The increase in cash and cash equivalents is primarily due to the $365 million in funding, net of fees, from the company’s recent equity raise, the proceeds of which are intended to be used for the expansion of the Geismar facility, other investments and working capital.

At March 31, 2021, accounts receivable were $130 million, a decrease of $14 million from Dec. 31, 2020, and accounts payable were $111 million, a decrease of $22 million from Dec. 31, 2020. The value of the company’s inventory increased $81 million in the quarter, to $290 million.

For more information on REG’s Q1 financials, including detailed financial tables, click here.