Higher RIN, ULSD prices drive REG Q3 revenue to $1 billion
Renewable Energy Group Inc. announced its financial results for the quarter ended Sept. 30, 2021. Revenues for the third quarter were $1 billion on 176 million gallons of fuel sold. Net income available to common stockholders was $42 million in the third quarter of 2021, compared to net income of $22 million for the third quarter of 2020. Adjusted EBITDA was $68 million in the third quarter of 2021, compared to $55 million for the third quarter of 2020.
“REG delivered another period of solid performance in the third quarter, with strong operations and commercial optimization,” said CJ Warner, president and CEO. “We delivered these results even while managing disruptions from Hurricane Ida and volatile energy and feedstock markets. Financial results were moderated by hedge-related timing, as a substantial rise in diesel prices at the end of the quarter resulted in a risk management loss in the period, most of which is expected to be offset in the fourth quarter when the hedged gallons are scheduled for delivery.”
Warner added, “Our biobased diesel is delivering critical and valuable carbon reductions now in the on-road sector, and we are continuing to advance our strategy by initiating sales to marine and rail customers, which we anticipate will enable further substantial growth.”
Third quarter 2021 highlights
All figures refer to the quarter ended Sept. 30, 2021, unless otherwise noted. All comparisons are to the quarter ended Sept. 30, 2020, unless otherwise noted.
REG sold 176 million gallons of fuel, essentially flat versus the third quarter of 2020. The company continued to improve its product mix. Renewable diesel sales increased 9 million gallons. This increase was offset by a decrease of 7 million gallons in self-produced biodiesel sales and a decrease of 1 million gallons in both third-party biodiesel and petroleum-diesel sales.
REG produced 128 million gallons of biodiesel and renewable diesel during the third quarter, a 7 percent decrease versus the prior year’s third quarter. Production at Geismar decreased 13 percent, primarily due to downtime caused by Hurricane Ida, the impact of which will be realized in future periods. North American biodiesel production also decreased 4 million gallons, or 4 percent, primarily due to production optimization.
Revenues increased from $572 million to $1 billion, largely driven by higher selling prices realized from a combination of a 139 percent increase in D4 RIN prices and a 78 percent increase in ULSD prices year over year.
Gross profit was $89 million compared to gross profit of $74 million in the third quarter of last year. The increase in gross profit was driven primarily by an improved margin environment and continued optimization. These positive factors were partially offset by a $19 million negative year-over-year swing in risk management.
Operating income was $51 million compared to operating income of $24 million, driven by the same factors as those described above for gross profit along with a $16 million decrease in impairment charges. The increase was partially offset by a $3 million increase in selling, general and administrative costs.
GAAP net income available to common stockholders increased to $42 million, or 83 cents per share on a fully diluted basis, compared to GAAP net income available to common stockholders of $22 million, or 51 cents per share on a fully diluted basis. The differential drivers are the same as those described above for operating income and gross profit along with an increase in interest expense of $7 million from the green bond issuance that closed in May.
Adjusted EBITDA was $68 million compared to $55 million, with the increase resulting from the same factors as described above for operating income.
At Sept. 30, 2021, REG had cash and cash equivalents, restricted cash, and marketable securities (including long-term marketable securities) of $1 billion, an increase of $691 million from Dec. 31, 2020. The increase in cash and cash equivalents is primarily due to the $535 million in funding, net of fees, from the company’s green-bond issuance in the second quarter as well the $365 million in funding, net of fees, from the company’s equity raise in the first quarter. The combined proceeds are intended to be used for the improvement and expansion project at the Geismar facility, other strategic investments and working capital.
At Sept. 30, 2021, accounts receivable were $197 million, an increase of $53 million from Dec. 31, 2020, and accounts payable were $129 million, a decrease of $4 million from Dec. 31, 2020. The value of the company’s inventory at the end of the quarter was $374 million, an increase of $165 million from Dec. 31, 2020, due to rising commodity values.
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