Jefferies 2014 Global Industrials Conference. August 11, 2014

Transcription

1 Jefferies 2014 Global Industrials Conference August 11, 2014

2 Disclaimer Safe Harbor Statement under the Private Securities Litigation Reform Act of 1995 This presentation contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, as amended. Such statements are identified by the use of words such as "anticipates," "believes," "estimates," "expects," goal, "intends," "plans," potential, "predicts," should, will, and other words and terms of similar meaning in connection with any discussion of future operating or financial performance. Such statements are based on management's current expectations and are subject to various factors, risks and uncertainties that may cause actual results, outcome of events, timing and performance to differ materially from those expressed or implied by such forward-looking statements. Green Plains may experience significant fluctuations in future operating results due to a number of economic conditions, including, but not limited to, competition in the ethanol and other industries in which the Company operates, commodity market risks including those that may result from current weather conditions, financial market risks, counter-party risks, risks associated with changes to federal policy or regulation, risks related to closing and achieving anticipated results from acquisitions, risks associated with the joint venture to commercialize algae production and the growth potential of the algal biomass industry, and other risks detailed in the Company's reports filed with the Securities and Exchange Commission, including its Annual Report on Form 10-K for the year ended December 31, 2013, and in the Company's subsequent filings with the SEC. In addition, the Company is not obligated, and does not intend, to update any of its forwardlooking statements at any time unless an update is required by applicable securities laws. Non-GAAP Financial Terms These slides contain certain non-gaap financial terms which are defined in the Appendix. Reconciliations of non-gaap terms to the closest GAAP term (i.e., net income) are provided in the Appendix. 2

3 Todd Becker President & Chief Executive Officer Green Plains, Inc. 450 Regency Parkway, Suite 400 Omaha, NE NASDAQ: GPRE 3

4 Downstream Upstream Green Plains at a Glance Agribusiness Ethanol Production Corn Oil Production 34.6 million bushels of storage and handling capacity, including ethanol plant locations, Cattle Feedlot 12 dry mill ethanol plants in six states, with over 1 billion gallons of annual production capacity 250 million pounds of annual industrial corn oil production capacity Green Plains is a Fortune 1000, diversified commodity processing business with grain handling and storage, ethanol production, corn oil production, a cattle feedlot and commodity marketing and distribution services The Company has a market capitalization of $1.5 billion (1) and an enterprise value of $1.8 billion (2) Incorporated in 2004 and based in Omaha, Nebraska, Green Plains is North America s fourth-largest ethanol producer Marketing & Distribution Over 1 billion gallons of annual marketing and distribution capacity; 8 blending terminals in key markets; trading flows around 10 primary commodities The Company has built a diversified value chain of synergistic businesses, amassing over $1.6 billion in assets Processes approximately 10 million tons of corn (2.7x more corn than China imported from the USA in ) Source: Company filings and management 1. Based on Aug. 9, 2014 closing price of $40.48 and 37.5 million shares outstanding per 10-Q 2. Based on $631.7 million of total debt and $374.7 million of cash and restricted cash as of 6/30/2014 4

5 What is Driving Ethanol Demand? U.S. ethanol remains the cheapest fuel molecule in the World World is octane and oxygenate short Ethanol has an octane rating of 113 per gallon Used to upgrade fuel to premium and sub-grade to spec Reduces CO 2 emissions by up to 50%; Reduces toxics by 13% (mass) and 21% (potency) Lowers tailpipe fine particulate matter by 50% and secondary particulate matter formation Ethanol Versus Other Octanes (1) Ethanol Demand in the U.S. Fuel Supply (2) $3.75 $2.94 $ b Base U.S. ethanol demand 7.5 billion gallons for $1.85 6b Clean Air Act 6 billion gallons for Octane enhancement - CBOB Ethanol Gulf Coast Alkyalte Reformate Toluene Substitute pricing reflects current low demand and is not representative of pricing in high demand substitution scenario Clean Air Act Clear gas CBOB 84 Octane Source: Renewable Fuels Association, DOE EIA Energy Review, Platt's and Wall Street Research 1. October 2014 futures prices 2. Based on U.S. gasoline demand of 135 billion gallons 5

6 U.S. Gasoline Demand Continues to Grow million barrels/day Blue shaded region represents the most-recent 5-year range J F M A M J J A S O N D Source: RJ O'Brien & Associates, LLC. 6

7 (Millions of Gallons) (Billions of Gallons) World Demand is Growing Overview Global Ethanol Production Top markets for ethanol growth outside of Canada & Brazil: India Africa USA Brazil Europe China Other Mexico Philippines China Top Importers of U.S. Ethanol ,200 1, Projected U.S. ethanol has exported million gallons thru June of 2014 Ethanol exports are anticipated to be between 800 million and 1 billion gallons Canada Brazil UAE Mexico Phillipines World demand growing at a 2-3% annually Source: Renewable Fuels Association, DOE EIA Energy Review, and Wall Street Research 7

8 Economics Still Drive Blending Decisions Ethanol remains at a significant discount to wholesale gasoline on the forward curve Refiners saving at least $0.04 per gallon on average refining for CBOB 85% of the gas supplied to terminals comes from refiners Refiners have no incentive to sell E0 to retail competitors only to be underpriced The refiner wants the RIN Independent retailers are looking for an advantage and we have the answer 14-Sep 14-Oct 14-Nov 14-Dec 15-Jan 15-Feb RBOB $2.77 $2.64 $2.61 $2.59 $2.59 $2.59 Ethanol $1.96 $1.86 $1.80 $1.76 $1.73 $1.71 RB/Eth diff. ($0.75) ($0.82) ($0.76) ($0.81) ($0.87) ($0.91) 15-Mar 15-Apr 15-May 15-Jun 15-Jul 15-Aug RBOB $2.61 $2.79 $2.79 $2.77 $2.76 $2.74 Ethanol $1.70 $1.69 $1.68 $1.67 $1.65 $1.65 RB/Eth diff. ($0.92) ($0.94) ($1.12) ($1.11) ($1.09) ($1.07) Gasoline/E0-E15 (Ford gas cap) Source: DOE, EIA Energy Review and Platt's RBOB to Ethanol Spread as of 8/08/14: CME 8

9 Corn versus Sugar Advantage USA! You have heard that Brazil was the cheapest producer because they convert sugar into ethanol It may be true their cost of conversion is cheaper, but what is their starting point? The fundamental purpose of a U.S. ethanol plant is to convert starch into sugar At $3.50 corn, we produce 8 cent a pound sugar World sugar currently trading at 16.1 cents per pound This allows U.S. ethanol to compete head to head with Brazil 9

10 Why an Ethanol Producer Bought a Cattle Feedlot We believe that a cattle feedlot is an adjacent business for what we already do We buy commodities and extract value to make more commodities We produce 3 million tons of livestock feed (ddgs) annually and another 250 million pounds of corn oil that is also fed to livestock 66% of the 50 million tons of ddgs produced by U.S. Ethanol is used for beef production and dairy operations Our success in the ethanol industry comes from managing the ethanol crush volatility; we believe we can use that same disciplined approach managing the cattle crush A steer in a feedlot is a corn processing unit Extends our corn origination network and enhances our intelligence around a large industry consumer of our products 10

11 BioProcess Algae Overview Algae bioreactor Green Plains owns 63% of the BioProcess Algae joint venture Headquarters is now in Omaha We continue to meet DOE milestones at each step Evaluating whether continued involvement with the DOE will accelerate our commercial development We are in the final planning stages for the new expansion of production capacity Algae bioreactor from the inside. 11

12 How We Have Changed.. The long-term goal has been to financially de-lever the business which could provide us with more operating leverage With the recent refinancing of nearly half of our ethanol plant debt, corn oil generates operating income to cover two-thirds of our current 12 months forward ethanol plant debt obligations As we potentially roll in the remaining ethanol plants into the credit facility; corn oil alone should cover our future debt obligations for the ethanol segment This along with solid fundamentals for ethanol is why nothing points us to a need to be in a hurry to lock in more hedges for Q4 at this time 12

13 Liquidity and Capital Structure (in millions) Q Q Q Q Q Q Gross Debt $631.7 $642.5 $735.2 $663.3 $636.8 $669.0 Working Capital Financing $131.5 $128.4 $171.5 $144.4 $69.6 $89.2 Term Debt $500.2 $514.1 $563.7 $518.9 $567.2 $579.8 Cash & Equivalents $374.7 $229.9 $299.0 $280.1 $194.6 $261.0 Net Debt $125.5 $284.2 $264.7 $238.8 $372.6 $318.8 Stockholders Equity $707.4 $595.8 $545.3 $490.5 $505.4 $497.7 Book Value per Share $18.83 $15.93 $17.88 $16.52 $15.36 $13.90 EBITDA (1) TTM $270.0 $225.9 $156.6 $115.5 $148.6 $129.6 Term Debt/Total Capitalization 41.4% 46.3% 50.8% 51.4% 52.9% 53.8% Term Debt/EBITDA 1.9X 2.3x 3.6x 4.5x 3.8x 4.8x Ethanol Plant Debt $389.8 $404.7 $366.8 $399.7 $443.1 $463.1 Ethanol Plant Debt per Gallon $0.38 $0.40 $0.36 $0.54 $0.60 $0.68 Ethanol Debt Service FTM (2) $60.6 $117.2 $102.9 $69.7 $74.4 $69.9 Ethanol Debt Service/Gallon $0.06 $0.11 $0.10 $0.09 $0.10 $0.10 (1) Non-GAAP measure see notes in Appendix (2) FTM Forward twelve months, not including sweeps 13

14 Any Questions

15 Appendix

16 Proven Risk Management and Hedging Expertise Ethanol Operating Income + Depreciation & Amortization / Gallon Based on average daily crush Based on GPRE's realized crush Due to prudent risk management, Green Plains realized crush spread outperformed the market in 2012 Corn prices increased in 2012 due to severe drought, thereby negatively impacting ethanol crush margin Average Daily Crush: $0.22 (Standard Deviation: 22.4%) GPRE Realized Crush Average: $0.17 (Standard Deviation: 9.4%) Q1 10 Q2 10 Q3 10 Q4 10 Q1 11 Q2 11 Q3 11 Q4 11 Q1 12 Q2 12 Q3 12 Q4 12 Q1 13 Q2 13 Q3 13 Q4 13 Q1 14 Q2 14 Margin Management: A Core Competency Comprehensive risk management practice Employ Value at Risk (VaR) to drive discipline Fundamental focus is on operating margin management Traders, marketers, and risk managers work closely together across all commodity groups Robust risk management system requires balanced position Hedging Hedging policy prioritizes both prudent risk management and desire to opportunistically lock in margins IT infrastructure and internal controls in place to properly monitor hedges Accounting processes and controls avoid potential earnings volatility For $0.02 of crush margin, Green Plains has consistently reduced the volatility of its portfolio, enabling the Company to meet its obligations and strengthen its balance sheet to capture opportunities as markets normalize

17 Ethanol Production Segment (in millions, except per gallon amounts) Q2-12 Q3-12 Q4-12 Q1-13 Q2-13 Q3-13 Q4-13 Q1-14 Q2-14 Gallons Sold (in millions) Operating Income (in millions) $ (11.0) $ (7.5) $ 12.0 $ (2.3) $ 7.0 $ 17.9 $ 40.5 $ 66.2 $ 30.1 Depreciation & Amortization (in millions) Total $ 0.1 $ 3.7 $ 23.0 $ 8.8 $ 18.1 $ 29.3 $ 52.2 $ 79.2 $ 43.0 Per Gallon $ 0.00 $ 0.02 $ 0.14 $ 0.05 $ 0.11 $ 0.16 $ 0.24 $ 0.34 $ 0.18 During Q1-2014, finished ethanol inventory levels increased primarily due to product that was in transit to external customers, which resulted in a significant increase in intersegment profits that were deferred. The chart to the right illustrates net realized operating income before depreciation resulting from sales to external customers. Q1-14 Q2-14 Gallons Sold Externally Operating Income $ 66.2 $ 30.1 Depreciation & Amortization Intersegment Elimination (22.4) 19.8 Total $ 56.8 $ 62.8 Per Gallon $ 0.26 $ 0.25

18 Stocks v. Margins (barrels in thousands) Ethanol Inventory vs. Crush Margins ($ / gallon) 23,500 22,500 21,500 20,500 19,500 18,500 17,500 16,500 15,500 14,500 Jun-10 Sep-10 Dec-10 Mar-11 Jun-11 Sep-11 Dec-11 Mar-12 Jun-12 Sep-12 Dec-12 Mar-13 Jun-13 Sep-13 Dec-13 Mar-14 Jun-14 $1.50 $1.30 $1.10 $0.90 $0.70 $0.50 $0.30 $0.10 -$0.10 -$0.30 -$0.50 Ethanol Inventory Weekly AvgCrush Margins Four-week average ethanol demand has been running at 13.6 billion gallons annualized Canadian demand is increasing, along with other export markets SE market seems to have regained its strong demand Ethanol share of gas pool sits at 9.95% for the last four weeks Source: CME Group, Houston Biofuels and EIA.

19 Consolidated Income Statement Summary (in millions, except per share amounts) Q Q YTD-2014 YTD-2013 Revenues $837.9 $804.7 $1,571.7 $1,570.2 Gross profit $78.3 $32.6 $179.1 $59.8 SG&A $19.4 $14.0 $41.8 $28.6 Operating income $58.9 $18.6 $137.3 $31.3 Interest expense ($9.7) ($7.8) ($19.5) ($15.8) Income before income taxes $50.1 $10.3 $119.8 $14.4 Net income $32.3 $6.0 $75.5 $8.5 Earnings per share diluted $0.82 $0.19 $1.88 $0.28

20 Non-GAAP Reconciliations (1) Green Plains uses certain Non-GAAP financial measures as defined by the Securities and Exchange Commission. These are measures of performance and not defined by accounting principles generally accepted in the United States, and should be considered in addition to, not in lieu of, GAAP reported measures. EBITDA defined as earnings before interest, income taxes, noncontrolling interests, depreciation and amortization. Three Months Ended EBITDA Reconciliation (in millions) June 30, 2014 June 30, 2013 Net income $32.3 $6.0 Interest expense Income tax expense Depreciation and amortization EBITDA $74.5 $30.5 Twelve Months Ended EBITDA Reconciliation (in millions) June 30, 2014 March 31, 2014 June 30, 2013 Net income $110.4 $84.0 $40.5 Interest expense Income tax expense Depreciation and amortization EBITDA $270.0 $225.9 $157.8 Year Ended EBITDA Reconciliation (in millions) December 31, 2013 December 31, 2012 December 31, 2011 December 31, 2010 Net income $43.4 $11.8 $38.2 $48.2 Interest expense Income tax expense Depreciation and amortization EBITDA $156.6 $115.5 $148.6 $129.6