Green Plains (GPRE) Q1 2025 earnings call transcript

Philip B. Boggs Chief Financial Officer Thank you, and good morning, everyone. Welcome to the Green Plains Inc. First Quarter 2025 Earnings Call. Joining me on today's call are the members of our Executive Committee: Michelle Mapes, Interim Principal Executive Officer and Chief Legal and Administration Officer; Jamie Herbert, Chief Human Resources Officer; Chris Osowski, Executive Vice President, Operations & Technology; and Imre Havasi, Senior Vice President, Head of Trading and Commercial Operations. There is a slide presentation available, and you can find it on the Investor page under the Events & Presentations link on our website. During this call, we will be making forward-looking statements, which are predictions, projections or other statements about future events. These statements are based on current expectations and assumptions that are subject to risks and uncertainties.

Actual results could materially differ because of factors discussed in this morning's press release, in the comments made during this conference call and in the Risk Factors section of our Form 10-K, Form 10-Q and other reports and filings with the Securities and Exchange Commission. We do not undertake any duty to update any forward-looking statement. Now I'd like to turn the call over to Michelle Mapes.

Michelle S. Mapes Interim Principal Executive Officer, Chief Legal and Administration Officer & Corporate Secretary Thank you, Phil. To be direct, our performance has not met the expectations of this investment community or our own, and that is changing. As an executive committee and as a company, we are fully aligned and deeply committed to disciplined execution, supported by the clear and objective measurement of our progress every day. Our team members at Green Plains understand not only the strategic goals, but their roles in delivering against them. We're focused on returning this company to sustained profitability and, with that, earning back your confidence. Over the past few months, we've executed a zero-based approach to cost structure, leading to decisive actions across the organization.

We've exited noncore operations, launched the sale of nonstrategic assets and focused on a culture of operational excellence throughout the platform. These changes are driving meaningful efficiencies that position us to compete with greater focus and agility. On our last call, we committed to $50 million in cost reductions. I'm pleased to report we are well on track. We noted before we already achieved $30 million annualized cost savings, and our recently announced ethanol marketing partnership, among other internal initiatives, has unlocked another $15 million in annualized savings. Beyond strengthening our working capital, the Eco initiative delivers scale, market access and logistics efficiencies that would have been very difficult to achieve on our own. We expect these gains to show up in the bottom line, going forward, especially through transportation and marketing synergies.

We also have a clear line of sight to the final $5 million of targeted savings, which we expect to come not only from SG&A, but also through some process improvements and commercial execution. We are empowering our top performers with clear goals, metrics and accountability, and they are delivering. GREEN PLAINS INC. FQ1 2025 EARNINGS CALL MAY 08, 2025 spglobal. com/marketintelligence 4 As a result of this effort, we anticipate our consolidated SG&A run rate to decline meaningfully from the $118 million recorded in 2024, to exit this year at an estimated $93 million annualized run rate. Corporate and trade functions are expected to be reduced to $12 million to $13 million per quarter for the remainder of this year, with a line of sight to reducing that to the low-$40 million range on an annualized basis by year-end, which is much improved compared to the $73 million of corporate and trade SG&A incurred in 2024.

This is a company that is focused, aligned and committed to continuous improvement and a return to profitability, and we're just getting started. Let me now hand it over to Chris Osowsky to talk operations.

Chris Osowski Thanks, Michelle. Overall, our platform continues to perform operationally at a high level. Our 9 active plants achieved 100% utilization in Q1, our highest rate on record, driven by increased discipline, accountability and daily measurement of key operating metrics. We are achieving an overall reduction in OpEx per gallon of more than $0.03 since Q4 of 2024. The sense of urgency across the organization is tangible, and it's making a difference.

Looking ahead, the RTO project in Obion is nearing completion. Once fully online, we expect protein yields to exceed 3.5 pounds per bushel, with ethanol capacity returning to over 120 million gallons annually. With Q2 crush margins strengthening, we're actively hedging our production to secure value. Execution and performance measurement remain daily imperatives for our teams. We're institutionalizing a culture of operational excellence across Green Plains, where every process, cost and decision is underpinned by discipline and data. Our approach is very clear: safety first, no waste anywhere, every dollar spent must earn a return and every role must justify its value. This mindset is being driven across 5 core areas.

First, commercial discipline. We're actively and aggressively pushing price, terms and volume across procurement, logistics and sales, while upholding standards. Second, cost ownership. Each cost is being scrutinized as if it was its own P&L. We're laser-focused on reducing variable cost per gallon and improving our fixed cost absorption.

Third, capital efficiency. All capital, both fixed and working, is being held to strict ROI standards. Value creation is the only justification for our investments. Fourth, people accountability. We're applying a true zero-based approach to roles and responsibilities. Every function is rebuilt from the ground up based on what the business needs today and what delivers measurable value. And then last, KPI-driven execution. We manage by metrics, not anecdotes. Plants are measured daily against clear KPIs, and best practices are being shared across our network. We're currently executing focused operating excellence initiatives based on maintenance cost control, enzyme and chemical optimization and energy efficiency both with respect to price and usage. These actions are already showing impact and will drive both short-term gains and long-term margin improvement.

As previously announced, we made the strategic decision in Q1 to pause our Clean Sugar Technology initiative in Shenandoah. The technology has been proven and is capable of producing refined 95 dextrose, and we have received all of our necessary food safety certifications. However, wastewater challenges outside of our walls and commercial development timing has prevented us from operating the asset continuously for refined product. Operating at partial capacity or [indiscernible] was not economically viable. So we redirected our efforts to maximize ethanol production at full rate. The temporary pause allows us to run a simplified fermentation recipe at the Shenandoah plant, which delivers improved ethanol oil and protein yields while further reducing OpEx costs. This shift has had a GREEN PLAINS INC. FQ1 2025 EARNINGS CALL MAY 08, 2025 spglobal.

com/marketintelligence 5 $10 million annualized positive impact on the Shenandoah site, but we remain fully committed to CST and expect to resume commissioning once a technical solution is in place, currently projected for late Fiscal 2026. Now I will pass the call over to Imre to talk about the commercial and market update.

Imre Havasi Thank you, Chris, and good morning, everyone. Ethanol market fundamentals saw typical seasonal weakness through Q1, driven by the industry's high production levels and elevated inventory. However, U. S. ethanol exports continue to be a bright spot. We expect that 2025 volumes could surpass last year's record of nearly 2 billion gallons. Encouragingly, ethanol margins have strengthened heading into Q2 and Q3, with positive contributions now forecasted for our network. This improvement is supported by firmer corn oil fundamentals, driven by widely anticipated increases in renewable volume obligations; drawdowns in ethanol stocks due to the spring maintenance season; stronger seasonal blending demand; and a good start to 2025-26 corn planting, anticipated to result in the largest acreage since 2013, currently estimated at 95.3 million acres by the USDA.

We have secured a little more than half of our Q2 crush margins at favorable levels. This is consistent with a new disciplined and proactive approach to hedging and margin management. You have heard Michel and Chris talk about the strategic shift we're executing and the actions we are taking to significantly increase our productivity and cost competitiveness. As market conditions improve, along with our actions, Green Plains' bottom line is showing notable improvement already in Q2. Last month, we announced a long-term strategic marketing partnership with Eco-Energy. This collaboration enhances our scale, optimizes transportation and marketing economics and positions us to fully capture the value of our future ultra-low carbon ethanol production. For our protein business, we've also made great progress.

Commercial shipments of Sequence 60% protein have started. The product is starting to be included in salmon diets with our South American customer base. We have also expanded our sales of 50 protein ultra-high protein product to Ecuador for shrimp feed applications. Between these 2 products, we expect to have volume growth from 20,000 tons in 2024 to over 80,000 tons in '25 shipped to the South American market. These new shipments will be aided by efficiency improvements gained through bulk shipping, which will start in Q3. We're also gaining momentum in pet food, which is a key strategic growth area. Trials are underway with 2 major manufacturers who are not yet customers, and early feedback is very promising. Our high-protein product works very well in pet food diets.

We expect these opportunities to convert to commercial sales by Q4 of this year or early 2026. We plan to increase our sales in the pet food segment from 60,000 tons today to over 100,000 tons in 2026. And with that, I'll hand the call to Phil for a financial update.

Philip B. Boggs Chief Financial Officer Thanks, Imre. For the first quarter, we reported a net loss attributable to Green Plains of $72.9 million, or a loss of $1.14 per share, which included $16.6 million in onetime restructuring charges tied to the closure of Fairmont, the exit of other noncore operations, cost reduction programs and leadership transitions. While these actions impacted the quarter, they were necessary steps to realign the business and accelerate our return to profitability. By comparison, we reported a net loss of $51.4 million, or $0.81 per share, in Q1 of 2024. We are supremely focused on improving these numbers, as they are not acceptable. These results are the reason why we have materially changed our go-to-market operating strategy and the human capital we are using to execute our plan.

We are moving with a keen sense of urgency and precision to reshape our financial profile. We are executing a clear plan to improve operating leverage, lower our cost base and position the company to benefit fully from the carbon and protein opportunities in front of us. GREEN PLAINS INC. FQ1 2025 EARNINGS CALL MAY 08, 2025 spglobal. com/marketintelligence 6 Revenue for the quarter was $601.5 million, up 0.7% year-over-year. While Q1 market conditions were challenged, we've taken proactive steps to secure better margin performance going forward, including reducing our costs, locking in favorable crush margins for Q2 and expanding our commercial reach through our partnership with Eco-Energy. On operations, as Chris mentioned, we achieved a record 100% utilization rate across our 9 operating plants, demonstrating strong asset performance and operational discipline.

Including the Fairmont asset, total fleet utilization was 87.7%, compared to 92.4% last year. We anticipate maintaining a mid-90% utilization for the remainder of Q2, even with scheduled maintenance underway. Adjusted EBITDA, excluding restructuring charges, was $24.2 million loss, compared to a negative $21.5 million in Q1 last year. These results reflect a transition period as we reset the cost base and scale new revenue streams. SG&A totaled $42.9 million, up $11.1 million from the prior year due to restructuring and severance charges. However, we expect this to trend down materially through the rest of the year. Our annualized run rate is already moving lower from the $133 million in 2023 and the $118 million in 2024 and is on track to exit the year at approximately $93 million annualized run rate, including a corporate and trade SG&A target in the low-$40 million range annually as we exit the year.

Depreciation and amortization was $22.4 million, up modestly year-over-year. And interest expense was $8.9 million, an increase primarily driven by the absence of capitalized interest from prior year project construction. Income tax was $0.1 million. We continue to carry a federal net operating loss of $197.6 million, which provides future tax efficiency, and our normalized tax rate going forward is expected to remain in the 23% to 24% range.

On the balance sheet, our consolidated liquidity at quarter-end included $126.6 million in cash, equivalents and restricted cash; $204.5 million in revolver availability; $48.7 million of unrestricted liquidity available to corporate. Since quarter-end, we've delivered on our plan to strengthen liquidity. We executed and are continuing to execute on noncore asset sales. We've enhanced credit capacity with a new $30 million line of credit, and we extended our $125 million mezzanine notes by about 3 months while we actively pursue refinancing or a full payoff through additional asset sales. We are confident in resolving this in the coming months. Overall, we've improved our unrestricted liquidity at corporate as of May 7 to $89.2 million. Capital expenditures in Q1 were $16.7 million, including targeted growth, maintenance and regulatory investments.

For the remainder of 2025, we expect capital expenditures to be in the range of about $20 million, excluding the carbon capture equipment for Nebraska, which is already fully financed and on schedule. In short, we are taking decisive action across all fronts, costs, capital, liquidity and strategy, to position Green Plains for sustained profitability and long-term value creation. And with that, I'll turn the call back to Michelle for an update on our strategic review, carbon initiatives and regulatory outlook.

Michelle S. Mapes Interim Principal Executive Officer, Chief Legal and Administration Officer & Corporate Secretary Thank you, Phil. Let's start with carbon. Our carbon strategy remains on track and is central to unlocking our long-term value. Construction of carbon compression infrastructure to support our Advantage Nebraska initiative is advancing on pace. Equipment deliveries are on schedule, and we remain on track to initiate operations across all targeted sites later this year. Lateral pipeline construction is well underway, and all key milestones point to a start-up in early Q4. GREEN PLAINS INC. FQ1 2025 EARNINGS CALL MAY 08, 2025 spglobal. com/marketintelligence 7 In parallel, we're actively engaged in the marketplace to monetize our 45Z and Q credits, with good interest and early momentum.

We expect to provide a meaningful update on these efforts at our next quarterly call. We remain encouraged by ongoing policy discussions in Washington regarding a potential extension of 45Z and the possible elimination of the indirect land use change from the GREET model. These policy shifts, if enacted, could significantly improve our CI scores and further enhance the value of our carbon platform. As it relates to our strategic review, we continue to work closely with BMO and Moelis. All potential paths remain active and under consideration, including a company sale, asset divestitures or other material transactions. We firmly believe the market is undervaluing our platform, particularly the long-term opportunity associated with carbon monetization. We've also strengthened our board.

We welcome Steve Furcich, Carl Grassi and Patrick Sweeney to our board, and we thank Ejnar Knudsen and Alain Treuer for their service as they step off the board at the upcoming annual meeting. Our new directors are already contributing meaningful to our strategic direction.

In closing, here are some key takeaways I'd like to leave you with. Based on current market conditions, actions we have taken and our focus on execution, we are currently positive-EBITDA for the remainder of the year. Our carbon platform construction is progressing as planned, with compression and pipeline infrastructure on schedule for early Q4 start-up. Active monetization of our 45Z and Q credits is underway, with an update expected next quarter. Operational excellence is driving measurable performance gains. Our $50 million cost reduction target is nearly complete, with the remainder in sight. Our strategic marketing partnership with Eco-Energy is active, providing scale and logistics efficiencies for our ultra-low CI ethanol. Our Sequence protein platform is scaling, with expanded aquaculture and pet food demand.

And we are executing disciplined risk management daily. Our noncore asset monetizations are progressing and supporting liquidity as well as improving our focus. The strategic review is active and ongoing to unlock long-term value. Our Executive Committee is executing, and the board is refreshed and helps strengthen governance, strategy and risk management oversight.

With that, we'll now take questions. GREEN PLAINS INC. FQ1 2025 EARNINGS CALL MAY 08, 2025 spglobal.

Imre Havasi This is Imre. I'm going to start with the answer. Others can add to it. I mean, in general, hedging or managing risk for a business like this is good practice, and you do these things when the market opportunity presents itself. So we did some of this before. And with my background, we reestablished some of these processes. We do a lot of analysis, supply and demand fundamentals, technical analysis. We're looking at our business needs, of course, policy changes and historical data. And so as we go through that analysis day by day, when there's a market opportunity we do lock in some of those margins, both at the simple crush, the board crush, level as well as some of the co-products or wherever we see that opportunity.

So I think it's just, in general, good practice to manage risk, reduce exposure if needed. And yes, we lock in simple crush.

We potentially hedge DCO using soybean oil futures. We hedge in meal. Of course, we have strict limits and monitor value at risk. So it is a systematic approach supported by analytics and fundamentals, and we do it when the opportunity is there. Michelle S. Mapes Interim Principal Executive Officer, Chief Legal and Administration Officer & Corporate Secretary And I would just add that at the board level, the Risk Committee was formed here in the last 45 days or so. We have very seasoned and experienced folks on our board that are on that committee, and they're actively meeting with the team monthly, if not more frequently.

Michelle S. Mapes Interim Principal Executive Officer, Chief Legal and Administration Officer & Corporate Secretary Thanks for the question, Pooran. At this point in time, the process is ongoing. It's what I would call a pretty standard process for a public company, looking at all candidates who have applied. But we are nearing the final stages of that process, and we hope to have something that we can announce here in the near future.

Michelle S. Mapes Interim Principal Executive Officer, Chief Legal and Administration Officer & Corporate Secretary Sure. So we are working closely with the Tallgrass team. We have weekly calls, and we are very engaged on the process. That team is indicating that all signs point to early Q4 and actually late Q3 in terms of finalizing construction in a couple of the locations. And we don't anticipate a major time lapse between construction completion and start-up.

And Chris, would you like to add anything more to that? Chris Osowski Yes. I think we feel really good that we have construction in progress at all locations going in parallel. The major compression equipment has been built and is just waiting to be delivered when we get foundations put in place for the buildings to house that equipment. And feel really strong about our team's readiness and the ability to operate and maintain those assets once they're up and running.

Do you see this as a meaningful risk kind of moving forward? Imre Havasi So far, no impact. I mean, where we would be -- we would be exposed as an industry, of course, if there were tariffs on ethanol exports into Canada or the U. K. So that would be industry impact. We have not seen evidence of that, although Canada flagged that at one point. The other would be also industry-level impact relative to China that would impact the soybean complex. So some of those things, if they happen at the same time, there are offsetting impacts on tariffs. Some might lower costs domestically, but also restrict markets for us. In terms of our protein exports that would be specific to us, those exports are happening.

Our shipments are going to Asia. We're locking in contracts and prices down to Latin America with actually no tariff discussions around it. So, so far, we have not seen any impact. And of course, things are somewhat unpredictable when it comes to tariffs. So things can change. But if I want to be an optimistic, maybe there's an upside there, too. Instead of tariffs, you look at trade and see if this administration can open up new markets for us. So if we were able to sell more protein, vegetable protein, into some of those deficit countries in Asia or down to South America through some of these trade agreements, that would be actually an uplift for our platform.

So that can go both ways. Of course, everybody is rightfully so talking about the risks, which are probably -- have higher probability. But to summarize it, so far, we have not seen adverse impact on our business.

Imre Havasi Sorry. The line was breaking up.

Saumya Jain Yes, just about the tariffs impact.

Saumya Jain Yes, and how that's affecting your outlook for the year. Imre Havasi So of course, the components of how our cash crush or consolidated crush comes together, it's in pieces, right? And the impact of DCO, which is driven by RVOs and 45Z and a couple of other things, is a big component of our total margin. We're optimistic on DCO for 2 reasons. One is the premium it carries to other feedstocks just in general because of the low CI score. And then secondly, the overall context with the restrictions on imported UCO, the rumored or anticipated higher RVO levels going above 5 billion gallons. There's a little bit tighter soybean oil S&D as soybean oil became a discount or got to a discount point early in the year, encouraging exports.

So there's plenty of tailwind for our DCO product. We're putting together pricing and hedging structures to maximize that opportunity. But overall, for sure, going into Q2, Q3 and maybe even Q4 and as long, for sure, as 45Z is around, we're very optimistic about the DCO market, and we consider that as a significant contributor. And just as -- and I know this was not part of your question, but the operations team is very focused on maximizing DCO yields, not just through the core operation, but also where we have these MSC plants, we have a significant uplift of DCO. So overall, DCO production should be up. And with higher prices that we're anticipating, it will contribute greatly to overall crush margins.

And then I guess, how are you guys looking at the local protein markets as well?

Saumya Jain I said both. I said local, but yes, I said local.

So protein, of course, is -- it has been -- protein has been weak and has been under pressure just in general, right? But that includes DDGs and other vegetable proteins. Huge pressure from soybean meal. Q1, there was an abundance of soybean. I think the industry worked through that glut. GREEN PLAINS INC. FQ1 2025 EARNINGS CALL MAY 08, 2025 spglobal. com/marketintelligence 11 But in general, the domestic protein market will be probably flat, muted. Of course, when you look at oil share, that's part explained. Oil carries the premium. And meal has to be formulated into our diets, both domestically, but we also need an export market to get rid of the surplus. Higher industry run rates, of course, increase DDG supplies as well in domestic markets.

So when it comes to our own protein platform, of course, DDGs, we're extremely focused on our local customer base and enhance value that way. When warranted, we're putting on forward sales and stay- ahead crush. That's part of risk management. In terms of the ultra-high protein, our strategy a few years ago when we built all these facilities was to supply higher-margin markets. But unfortunately, a lot of production came to the market. So we had to sell our highest -- our protein to all sorts of species and with different kind of margin structures. So we're past that. And of course, customer development in some of the higher-value segments like pet and aqua has been taking longer than just selling to poultry or swine.

But those are coming to fruition. As I mentioned in my script, we're actually making a lot of breakthrough sales recently. And selling to aqua and pet are probably, I'm just going to throw out a number, about $45 to $60 per ton higher FOB margins when I add in the supply chain solutions as well. So the strategy will remain. Protein in itself is going to be flat going forward, but our book will and our margins will improve as we execute those higher-margin segment sales.

Eco-Energy is a marketing partner. So they execute -- they manage the customer relationship and they manage logistics. So all sales are basically back-to-back, except for a few opportunities where Eco would have infrastructure, and that would apply to maybe some of the California markets where they would support us with last-minute logistics through a terminal. So it is the execution part is what we outsource and not the risk management part. So we manage all risk. What we expect from this relationship, other than a smooth operation, of course, on the logistics side, is leverage to scale. So we lost scale over the years, and that's why it made sense for us to combine our volumes with Eco's volumes.

So their volumes increased 50% through our contribution. And they also, of course, have a very good infrastructure in the country, as I mentioned earlier, for distribution in California, but also for exports. And we expect to leverage that scale, leverage that scale in terms of market access, arbitrage opportunities, exports and improve our -- so where we expect the improvement is really on that basis level. We manage -- we're going to be managing, as I mentioned earlier, simple crush, co-products, everything else. But where Eco can help us is that basis, improve that basis by maybe $0.01 or $0.02 when it comes to logistics and supply chain opportunities or finding us better maybe ship-to locations or customers so we can optimize our portfolio.

And of course, the export opportunity is going to be good. GREEN PLAINS INC. FQ1 2025 EARNINGS CALL MAY 08, 2025 spglobal.

com/marketintelligence 12 So that's on the marketing side. Philip B. Boggs Chief Financial Officer And Sal, this is Phil, I would just like to add that the Eco relationship also improves our working capital efficiency levels. With one customer, we believe that we will be able to reduce our working capital by somewhere in the neighborhood of $50 million through faster AR turn times and lower inventory levels because of the relationship of when Eco buys that ethanol inventory from us out of our tanks. And so there's a working capital efficiency to this as well that will reduce our working capital revolvers.

Philip B. Boggs Chief Financial Officer Well, Sal, we included the corporate liquidity numbers just to give some additional clarity. We do have cash across the organization in various subsidiaries that's not available to corporate. But this $30 million loan from Ancora, I mean, one, it demonstrates that we have a supportive shareholder who not only has some members on the board now, but is also putting cash to work in support of the company. But that enhances our flexibility and really just allows us to execute on our focus for maintaining liquidity. We're focused on cost reductions. We're focused on working capital efficiency. We're focused on exiting noncore assets. And really, this is all about maximizing our flexibility as we pursue various options.

Philip B. Boggs Chief Financial Officer So I mean, we're really looking at anything that's what we would call noncore. And so what is that? I mean, we've closed some businesses. So we have working capital and equipment in businesses that we've sold. So that's one of it. We have various smaller JVs from over the years that we're looking at exiting or are in the process of exiting. So we're really focused on that from a noncore standpoint and looking at how do we narrow the focus of what it is that we're trying to do every day, and that's really focus on the core, which is running our assets well, lowering our costs and improving our margin capture through these efforts.

Michelle S. Mapes Interim Principal Executive Officer, Chief Legal and Administration Officer & Corporate Secretary Let me just first address the quarterly part. Yes, it does mean quarter-by-quarter, we are currently EBITDA-positive. Much of that is from the actions we have taken. It's a combination of cost reductions; disciplined risk management; obviously, market conditions. I'll let Imre touch a bit on the hedging piece of it, but we're pleased to be where we are and committed to doing all we can, assuming what the market will give us.

Imre Havasi I mean, most of our hedges are, obviously, Q2. We started locking in margins for Q2 as those opportunities as crush margins improved at the end of March. So we entered the quarter with hedges already and added to it as those opportunities presented ourselves. There's a lot less liquidity in ethanol, especially when you go out to Q3, Q4. So Q3, Q4 are still very much open. Most of our hedges are in Q2.

Imre Havasi The current inventory level is 25 million barrels, and that's sort of a point that we're looking at trying -- when we stay under that level -- and we just came off of 27 million barrels that we printed maybe 6 weeks ago. Of course, spring maintenance helped that. Export was, we don't have March data yet, but census indicated 195 -- sorry, census data indicated a significant improvement in March. That has to be confirmed. So you could say that, yes, we are on track on hitting the 2 billion mark for the year, but Q1 was very, very strong. And what we could say -- you could say that some people pulled forward some of these shipments because of tariff considerations, but as we expect tariffs to be sort of lesser of a risk, we're going to hit over 2 billion gallons.

Now that doesn't help if domestic consumption doesn't pick up. So inventory levels are sitting at 25 million barrels today. We think they're going to drop towards 23 million as the driving season and higher blending kicks in. Our risk there, of course, is that we'll maintain production, but if we enter a recession or we don't have that demand from the consumer, then those inventories will not drop down towards those 23 million, 22 million levels, but they will continue to stay around 25 million and eventually build up as we head into the winter. So our risk today is lower blending demand and lower gas demand going into the summer. Chengxi Jiang Jefferies LLC, Research Division And can you add a bit more color on the corn business, like the profit contribution of corn oil and protein platform year-to-date and how you expect that to evolve through the year-end?

Imre Havasi Corn oil?

com/marketintelligence 14 Chengxi Jiang Jefferies LLC, Research Division Yes, the profit contribution of corn and also protein [indiscernible]. Imre Havasi And we touched on this one during the previous question or the answer to the question earlier in the call. We started the year, corn oil was at very low levels, in the low -- in the mid-40s, high 40s. We're at $0.55 FOB back to our plants today. So that's a $0.10 improvement per pound. We think those levels will hold throughout the year, supported by a restriction on used cooking oil imports as a feedstock that's used in the biodiesel production. And as we also mentioned, that corn oil carries a premium because of the low CI score relative to soybean meal.

So we're very -- we're friendly. That contribution has increased, of course, with this $0.10 per pound improvement over the last 3 months. So that is supporting our margins, going forward. Some of our -- the way we sell corn oil also allows us to capture margins in an up market. About 50%, give or take, depending on our market view, is index-priced. So we're benefiting from an up market. And of course, if we -- that's within the quarter. And if we have a different bias, of course, we can hedge that by selling soybean oil futures or through options there. But we remain friendly corn oil, and it's been very beneficial to the overall margin structure, for sure, for Q2, but we expect that to continue in Q3 and Q4.

So you're right. The strategy has evolved over the years. As we originally talked about some years ago when we launched upon our protein strategy and our pillars of corn oil, in particular, we were very focused there. And then along came, to our surprise, the IRA, which then did cause us to pivot slightly and add the carbon pillar to our focus. We remain very constructive on protein. It's taken longer than we had anticipated. It's been harder than we've anticipated. It's been harder than what we previously communicated. But we're committed to making sure that we're executing, going forward. And I think Imre has shared with us some numbers that are reflective of we are now getting that penetration and our products are turning the corner there.

We obviously still remain constructive on corn oil. And as it relates to carbon, we are very bullish. We continue to be excited about where we are, where we're going. I think when you look at our company today, we're pausing a bit, not that we don't support all the initiatives. We are cleaning some things so that we can be positioned for profitability to move this GREEN PLAINS INC. FQ1 2025 EARNINGS CALL MAY 08, 2025 spglobal. com/marketintelligence 15 company forward on solid footing, executing on those same pillars and those same strategies, but we're going to take a few months here, and we're going to get things moving in the right direction. And that's really where our focus is now.

It's not a shift in strategy.

So there's a lot of things that are going in there that would make us pull the trigger. The 50% is not a mark. It might be 0. It may be a little more. We're not going to be 100% hedged. It's not executable just in the futures markets. So it is a risk assessment-driven decision, coupled with what the business needs. So it can be 0 to, I don't know what the top end would be, but maybe 50% to 70%, that we can actually execute, but there's no script for that.

Philip B. Boggs Chief Financial Officer And Andrew, this is Phil. So in terms of SG&A pacing, I mean, we are on track. We executed those reductions here in the second quarter. So you won't see it fully baked in the second quarter because of the timing of when we announced Eco and when we took some of those actions to further reduce our SG&A. But here in third quarter and fourth quarter, you'll see it coming through. Most of that SG&A is immediate. And while we're still chasing things, we still have contracts that are going to expire that might not be renewed and we're still working on some things to further reduce that number, most of that, that Michelle mentioned in her comments, that corporate and trade SG&A in that $12 million to $13 million range for Q3 and Q4.

So it's coming fast.

" Chris Osowski This is Chris Osowski. And I covered this a little bit in the initial commentary. Yes, we are pausing the CST initiative. And really, what it's about right now is maximizing the profitability of the Shenandoah site. We're able to run at higher throughput rates on the ethanol side and take advantage of better margin environment here in Q2. At the same time, we're able to run a simpler fermentation recipe that lowers OpEx and helps us improve the protein and oil yields out of that plant. And GREEN PLAINS INC. FQ1 2025 EARNINGS CALL MAY 08, 2025 spglobal. com/marketintelligence 16 that plant is leading our fleet in terms of the protein yield at over 4 pounds per bushel.

So that's really the focus there. We also have some outside-our-fence issues with respect to wastewater management that will take additional potential CapEx to resolve. And we want to make sure that we have a very good plan in place before restarting that effort, and we're thinking end of 2026 as a target.

Are there areas where it would be harder, but you certainly would go down that road, if necessary? Chris Osowski Well, I would add on the operational excellence initiatives, we're focused on a couple of different areas where we see opportunity, specifically on R&M management, repair and maintenance. So our teams are committed to doing more predictive and preventative maintenance as opposed to breakdown type fix- it work. And that opportunity is anywhere from $8 million to $10 million that's in front of us, and we're starting to realize some of that now. And then on the chemicals, yeast and ingredients side of things, we're focused on improving our front- end processes in our fermentation plants to drive higher yields and lower our chemical, yeast and enzyme costs, and that opportunity is somewhere in the $4 million to $6 million range.

Michelle S. Mapes Interim Principal Executive Officer, Chief Legal and Administration Officer & Corporate Secretary And I would just add to that, some things just take a little more time. Phil mentioned, like, our contractual commitments. As we exited the Eco transaction, there are contracts and services that we may no longer need. We're winding out of some of those things. We're in obviously some very large space here. We're working on that, but those things just take a little bit longer, and those are the kinds of things that we know we can and are executing on are just going to take a few quarters to make that happen.

Philip B. Boggs Chief Financial Officer I appreciate the question, David. And it's a great question, and I appreciate the comments. We are focused on maintaining liquidity. Like we've gone through on this call, we're focused on a disciplined hedging program, disciplined cost reduction programs and returning to consistent profitability. So we did lose some cash in the first quarter as a result of the EBITDA losses, the CapEx, the interest and the restructuring charges, but it's our goal that we start to minimize that and we turn this back to a cash- generating company. We should be cash-positive, cash-generating-positive, here in the second quarter. And as we look out into Q3 and Q4, crush still has some work to do.

I mean, it's probably still -- ethanol crush by itself is still probably in the low to mid-single digits, all in, in terms of consolidated crush. And we've got carbon coming in the fourth quarter as well. So there are opportunities for this to continue to move higher, but we've taken these steps to liquidate noncore assets and put facilities in place and extend loans so that we can maximize our flexibility and really focus on returning this overall thing to profitability.

Michelle S. Mapes Interim Principal Executive Officer, Chief Legal and Administration Officer & Corporate Secretary Well, thanks for the question, David. This is Michelle. Not all assets are created equal, albeit it is expensive to rebuild, as you are well identifying. We would peg replacement costs in the probably $2 to $3 a gallon range, depending upon the asset, depending upon what we choose to rebuild and where, those types of things. One of the reasons for our strategic review process is to ensure that we're getting and maximizing value for our shareholders and getting out there in the market to identify what's available, one, on a whole- company basis, on an asset basis. And that is ongoing, and we are committed to ensuring that we're not leaving that value on the table for our shareholders.

Chris, would you like to add something as it relates to the detail on plants?

Chris Osowski Yes. Specifically related to plants and asset values, we have 3 different engineered designs of plants; that being ICM plants, plants that were built by Delta-T and, finally, Vogelbusch. And each of those plants performs a little bit different in terms of their energy consumption and total OpEx and throughput. And one of the things I wanted to highlight is the improvement specifically related to our Delta-T platform over the past, let's just say, 6 to 9 months. Our Wood River, Otter Tail and Superior plants are performing right now very close to, if not as good as, an ICM-designed 100 million gallon plant. You see it in our total throughput numbers, and you see it in our reduced OpEx per gallon results coming here out of Q1.

And GREEN PLAINS INC. FQ1 2025 EARNINGS CALL MAY 08, 2025 spglobal. com/marketintelligence 18 that puts us in a good spot with respect to taking advantage of better margins in Q2 and the rest of the year. And I think it's important for the industry to start changing the narrative around those Delta-T assets and proving that they can perform and create value like those that were built by ICM.

Michelle S. Mapes Interim Principal Executive Officer, Chief Legal and Administration Officer & Corporate Secretary Thank you. I want to assure you we are deeply committed to earning back your trust and executing on our strategy. We thank you all for your participation in today's call. And if you do have follow-up questions, please don't hesitate to reach out, and we'll find a time to connect. Thanks, and have a great day.