REG: Q2 gallons spike 11%, but profit falls on biodiesel price squeeze

In Iowa, Renewable Energy Group announced its financial results for the second quarter ended June 30, 2014.

Revenues for the quarter were $332.9 million. Compared to the second quarter of 2013, REG sold 11% more gallons of biomass-based diesel, while revenue decreased by 13% and adjusted EBITDA decreased by 86%.

For Q2, REG sold 77.2 million gallons of biodiesel, an increase of 11% compared to the second quarter of 2013. REG produced 56.2 million gallons of biodiesel during the quarter, a 1% decrease when compared to the second quarter of 2013. The balance of the gallons sold consisted of 10.1 million gallons purchased from third parties and resold through the Company’s distribution network and 10.9 million gallons from inventory.

Revenues of $332.9 million decreased 13% when compared to the second quarter of 2013. The decline is attributable to a reduction in average sales price and lower RIN prices, which more than offset the 11% increase in gallons sold. The average price per gallon of biodiesel sold during the second quarter was $3.67, 21.4% lower than in the same quarter of 2013.

Gross profit was $15.2 million, or 4.6% of revenues, compared to gross profit of $50.2 million, or 13.0% of revenues, for the second quarter of 2013. The decrease in gross profit resulted from margin compression caused by lower selling prices.

The company said it “continues to actively prepare for future production growth,” citing its two most recent biodiesel acquisitions, REG Mason City and REG New Boston, now able to run at nameplate capacity. All upgrades are complete at REG Albert Lea, while previously announced upgrades to increase feedstock flexibility are progressing at REG Newton and REG Mason City. The Company also prepared for future improvements at its Danville, Illinois facility with the acquisition and rezoning of adjacent land. Finally, REG maintains a toll manufacturing arrangement that offers additional production capacity flexibility.

As announced in early June, the Company launched REG Synthetic Fuels, LLC with the acquisition of Syntroleum Corporation, which included Syntroleum’s 50% interest in Dynamic Fuels, a 75-million gallon per year nameplate capacity renewable diesel biorefinery located in Geismar, Louisiana. REG Synthetic Fuels acquired the remaining 50% of Dynamic Fuels from Tyson Foods a few days after the Syntroleum acquisition. Dynamic Fuels, LLC was renamed REG Geismar following the acquisition.