REX American Resources' 2026 Q2 Earnings Call: Emerging Contradictions on RFS, Ethanol Margins, and Carbon Capture Timelines

The above is the analysis of the conflicting points in this earnings call

Date of Call: None provided

Financials Results

• EPS: $0.43 per diluted share, down from $0.70 in Q2 2024

Guidance:

• Q3 2025 expected to outperform Q2 2025, but below Q3 2024.
• H2 2025 anticipated to exceed H1, supported by favorable corn supply and rising ethanol exports (~10% above 2024 YTD; 2025 could set a new record).
• One Earth Energy expansion to 175M gal/year expected fully operational in 2026; longer-term plan to reach 200M gal.
• EPA Class VI injection well permit decision estimate moved up to March 2026.
• Carbon capture economics supported by 45Q and 45Z (extended through 2029; simplified requirements).
• Anticipate margin support from potential record U.S. corn harvest.
• Board authorized a 2-for-1 stock split; record date 09/08/2025.

Business Commentary:

• Ethanol Production and Sales:
• REX American Resources reported ethanol sales volumes of 70,600,000 gallons in Q2 2025, up from 65,100,000 gallons in Q2 2024.

• The increase in sales volumes was driven by favorable corn supply trends, steady demand, and rising ethanol exports, particularly to nations like Britain and Japan.

• Feedstock Supply and Export:

• Early estimates suggest a potential record harvest for U.S. corn crops, which should benefit REX.

• Ethanol exports are running about 10% ahead of 2024 levels through June, with expectations for a new record in 2025, further supporting REX's core business.

• Carbon Capture and Sequestration Project:

• The Big Beautiful Bill Act preserved both the 45Q and 45Z tax credits through 2029, strengthening the economics of REX's carbon capture project.

• The legislation also removed mandates tied to climate-smart farming practices, making REX's project more feasible, with the EPA estimating Class VI injection well permit approval in March 2026.

• Byproducts and Pricing:

• Dry distiller grain (DDG) sales volumes were approximately 148,000 tons in Q2 2025, with an average selling price of $143.63 per ton.
• DDG prices have been relatively weak compared to corn prices, with decreased export demand, while corn oil production has remained strong.

Sentiment Analysis:

• “Our third quarter for 2025 is on pace to outperform the second quarter.” “REX anticipates better performance in 2025 compared to the first half of the year.” “EPA estimate that our Class six injection well permit application will be finalized in March 2026.” “We remain within our revised combined budget range of $220–$230 million.” “REX continues to maintain a strong financial position with no bank debt.”

Q&A:

• Question from Peter Gastrich (Water Tower Research): Who attended the One Earth Energy facility event and what are the implications for local/state support for CCS?
  Response: Event drew local officials, shareholders, and community; it bolstered goodwill and local political support for projects, including CCS.

• Question from Peter Gastrich (Water Tower Research): Was the local utility interconnection issue for CCS resolved?
  Response: Yes; now receiving power directly from Ameren with no remaining issue.

• Question from Peter Gastrich (Water Tower Research): Outlook for ethanol margins and co-products in the second half?
  Response: Q3 to exceed Q2 but trail last year’s Q3; bumper corn crops improve feedstock; ethanol exports rising; corn oil strong; DDG weaker due to lower exports (incl. Mexico).

• Question from Jared Ellin (South Dakota Investment Office): Current CI scores and ability to qualify for 45Z without a carbon pipeline?
  Response: Guidelines not finalized; removal of smart-farming boosts CI by ~4–6 points, possibly enabling some 45Z benefit without CCS, but no commitments yet.

• Question from Jared Ellin (South Dakota Investment Office): Post-Illinois pipeline moratorium, can you build quickly if the Class VI well is approved?
  Response: Goal is yes, pending county special-use, IEPA, and ICC approvals; if received, operations targeted in 2026.

• Question from Jared Ellin (South Dakota Investment Office): Build time from approvals to first carbon injection given the short pipeline?
  Response: Pipeline is ~6.5 miles; after ICC permission, construction would take a couple of months; route chosen to avoid aquifer.