Detailed Narrative
Record First Quarter Performance
REX American Resources reported its most profitable first quarter on a net income per share basis in company history, reaching $0.56 per diluted share in Q1 FY27. This marks the 23rd consecutive profitable quarter, reflecting the team's ability to navigate market conditions and consistently deliver value for shareholders. Gross profit significantly improved to $29.1 million compared to $14.3 million in Q1 FY26, primarily due to 45Z tax credits and reduced corn pricing.
Strategic Growth Initiatives
The company is actively pursuing two major growth projects: the ethanol production capacity expansion at its Gibson City facility and a carbon capture and sequestration initiative. These initiatives are central to strengthening production capabilities and positioning the company for long-term growth. Total investment in these combined projects reached approximately $176.3 million as of the end of Q1 FY27.
Ethanol Expansion Progress
The ethanol facility expansion at Gibson City is progressing on schedule, with completion anticipated by the end of 2026. This expansion is expected to enhance the company's production capacity and contribute to future operational excellence. Ethanol sales volumes for Q1 FY27 were 71.1 million gallons, a slight increase from 70.9 million gallons in Q1 FY26.
Carbon Capture and Sequestration Update
The carbon capture project continues to advance, with ongoing engagement with the EPA for Class VI injection well permit application. The Illinois moratorium on carbon pipeline permitting is set to expire on July 1, 2026, after which the company plans to submit its application to the Illinois Commerce Commission. The company began recognizing 45Z production tax credits in Q4 2025 and recorded an additional $7.5 million in Q1 FY27.
45Z Production Tax Credits Impact
REX American Resources recorded $7.5 million in 45Z production tax credit income in Q1 FY27, which is now reported as operating income from consolidated plants. These credits are currently booked at $0.10 per gallon at consolidated plants and were a primary driver of the improved gross profit. An additional $1.8 million of the increase in equity and income from unconsolidated affiliates was also due to 45Z tax credits.
Financial Strength and Capital Allocation
The company maintains a strong financial position with $364.3 million in cash, cash equivalents, and short-term investments, and no bank debt. This strong balance sheet allows REX to fund its organic expansion initiatives. The combined project budget for the carbon capture and ethanol expansion projects is in the range of $220 million to $230 million, with the company operating within this budget.
Market Outlook and Policy Monitoring
Market fundamentals for the ethanol industry remain constructive, with stable domestic demand and strong export markets. Ethanol exports to March increased by 20% compared to the same period last year. REX continues to closely monitor federal and state policy discussions related to carbon capture incentives and regulatory developments, including the anticipated expiration of the Illinois carbon pipeline moratorium.