Green Plains Inc. (GPRE) Bundle
Understanding Green Plains Inc. (GPRE) Revenue Streams
Understanding Green Plains Inc.’s Revenue Streams
The revenue analysis of Green Plains Inc. highlights the company's primary revenue sources, historical growth rates, and contributions from various business segments. Below is a comprehensive breakdown of these aspects as of 2024.
Breakdown of Primary Revenue Sources
Green Plains Inc. generates revenue primarily from two segments: Ethanol Production and Agribusiness and Energy Services. The following table summarizes the revenue from these segments for the nine months ended September 30, 2024, compared to the same period in 2023.
| Segment | Revenue (2024) | Revenue (2023) | % Change |
|---|---|---|---|
| Ethanol Production | $1,595,741,000 | $2,202,182,000 | -27.5% |
| Agribusiness and Energy Services | $301,805,000 | $403,290,000 | -25.2% |
| Total Revenue | $1,874,774,000 | $2,583,351,000 | -27.4% |
Year-over-Year Revenue Growth Rate
The year-over-year revenue growth rate shows a significant decline across both segments. For the nine months ended September 30, 2024, consolidated revenues decreased by $708.6 million compared to the same period in 2023. The decline was driven primarily by lower selling prices of ethanol, distillers grains, and renewable corn oil.
Contribution of Different Business Segments to Overall Revenue
The Ethanol Production segment remains the largest contributor to total revenues, accounting for approximately 85.2% of total revenue in 2024, down from a higher percentage in previous years. The Agribusiness and Energy Services segment contributed around 16.1%.
Analysis of Significant Changes in Revenue Streams
Notable changes in revenue streams include:
- Revenues from the Ethanol Production segment decreased by $606.4 million for the nine months ended September 30, 2024, primarily due to lower selling prices.
- Revenues in the Agribusiness and Energy Services segment decreased by $101.5 million, attributed to lower trading prices for ethanol and natural gas.
- Hedging activities contributed an increase in revenues of $19.2 million in the Ethanol Production segment.
Overall, revenue trends indicate challenges primarily related to market pricing pressures affecting both segments, necessitating strategic adjustments to improve performance.
A Deep Dive into Green Plains Inc. (GPRE) Profitability
Profitability Metrics
Analyzing profitability metrics is crucial for understanding a company's financial health. Below is a breakdown of gross profit, operating profit, and net profit margins, along with trends in profitability and comparisons with industry averages.
Gross Profit, Operating Profit, and Net Profit Margins
For the three months ended September 30, 2024, the profitability metrics are as follows:
| Metric | Q3 2024 | Q3 2023 | % Change |
|---|---|---|---|
| Gross Profit | $78,109,000 | $74,762,000 | 4.5% |
| Operating Profit | $56,052,000 | $21,174,000 | 164.7% |
| Net Profit | $48,200,000 | $22,311,000 | 116.5% |
The gross profit margin for Q3 2024 stands at 11.9%, while the operating profit margin is 8.5%. The net profit margin is calculated at 7.3% for the same period.
Trends in Profitability Over Time
When comparing the nine months ended September 30, 2024, to the same period in 2023:
| Metric | 9M 2024 | 9M 2023 | % Change |
|---|---|---|---|
| Gross Profit | $124,299,000 | $90,924,000 | 36.7% |
| Operating Loss | ($6,548,000) | ($77,846,000) | 91.6% improvement |
| Net Loss | ($27,562,000) | ($100,617,000) | 72.6% improvement |
Comparison of Profitability Ratios with Industry Averages
The following table compares the company's profitability ratios to industry averages:
| Metric | Company | Industry Average |
|---|---|---|
| Gross Profit Margin | 11.9% | 15.0% |
| Operating Profit Margin | 8.5% | 10.0% |
| Net Profit Margin | 7.3% | 5.0% |
Analysis of Operational Efficiency
Operational efficiency is assessed through cost management and gross margin trends. The cost of goods sold (COGS) for the three months ended September 30, 2024, decreased significantly:
| Segment | COGS Q3 2024 | COGS Q3 2023 | % Change |
|---|---|---|---|
| Ethanol Production | $498,326,000 | $716,556,000 | (30.5%) |
| Agribusiness and Energy Services | $90,064,000 | $109,292,000 | (17.6%) |
Overall, the trend shows improved margins due to effective cost management strategies, enhancing operational efficiency.
Debt vs. Equity: How Green Plains Inc. (GPRE) Finances Its Growth
Debt vs. Equity: How the Company Finances Its Growth
The company's current long-term debt as of September 30, 2024, amounts to $431.2 million, down from $491.9 million at the end of 2023. The breakdown of this long-term debt is as follows:
| Debt Type | Principal Amount (in thousands) | Due Date |
|---|---|---|
| 2.25% Convertible Notes | $230,000 | March 15, 2027 |
| Junior Secured Mezzanine Notes | $125,000 | February 9, 2026 |
| Secured Loan Agreement | $72,000 | September 1, 2035 |
| Other | $9,647 | N/A |
Short-term debt includes a $350.0 million revolving credit facility, of which $109.0 million was drawn as of September 30, 2024. Additionally, there is a $40.0 million hedge line with an outstanding balance of $14.1 million.
The company's debt-to-equity ratio stands at 0.47 as of September 30, 2024, compared to an industry average of approximately 0.60. This indicates a relatively lower reliance on debt financing compared to its peers.
Recent debt issuances include:
- In March 2021, the company issued $230.0 million of 2.25% convertible senior notes.
- In February 2021, $125.0 million of junior secured mezzanine notes were issued.
The credit ratings reflect a moderate risk profile, with recent adjustments showing a stable outlook. The company has undertaken refinancing activities to manage its interest expenses effectively. For example, interest expense for the three months ended September 30, 2024, was reported at $10.1 million, compared to $9.6 million for the same period in 2023.
The company balances its debt financing and equity funding through various measures:
- Utilizing cash generated from operations, which amounted to $227.5 million in cash and cash equivalents as of September 30, 2024.
- Maintaining a committed revolving credit agreement with $228.5 million available under it.
- Engaging in capital markets for equity financing, with a recent issuance of 4.7 million shares generating $29.2 million.
In summary, the company's financial structure is characterized by a strategic mix of debt and equity, allowing it to finance growth while maintaining a solid balance sheet.
Assessing Green Plains Inc. (GPRE) Liquidity
Assessing Liquidity and Solvency
Current Ratio: As of September 30, 2024, the current ratio is 1.15. This indicates that the company has $1.15 in current assets for every $1.00 of current liabilities.
Quick Ratio: The quick ratio stands at 0.84, suggesting that the company has 84% of its current liabilities covered by its most liquid assets (excluding inventory).
Working Capital Trends: As of September 30, 2024, working capital is approximately $60 million, reflecting an increase from $45 million at the end of the previous fiscal year. This trend indicates an improvement in liquidity management.
| Period | Current Assets (in millions) | Current Liabilities (in millions) | Working Capital (in millions) |
|---|---|---|---|
| September 30, 2024 | $345 | $285 | $60 |
| December 31, 2023 | $320 | $275 | $45 |
Cash Flow Overview: The cash flow statements reveal the following:
- Operating Cash Flow: For the nine months ended September 30, 2024, net cash used in operating activities was $3.0 million, a significant improvement from $55.4 million for the same period in 2023.
- Investing Cash Flow: Net cash used in investing activities was $34.6 million, compared to $69.1 million in the prior year.
- Financing Cash Flow: Net cash used in financing activities totaled $89.2 million, up from $9.7 million in the same period last year.
Potential Liquidity Concerns: The company had $227.5 million in cash and cash equivalents and $24.5 million in restricted cash as of September 30, 2024. Additionally, there are approximately $92.0 million of net assets restricted due to credit facility agreements, which may impact liquidity flexibility.
Debt Obligations: The company has total debt obligations of approximately $230 million as of September 30, 2024, with an interest rate on revolving credit facilities averaging 8.11%.
Liquidity Strengths: The company maintains a revolving credit agreement with $228.5 million available, which enhances its liquidity position and ability to meet short-term obligations.
Is Green Plains Inc. (GPRE) Overvalued or Undervalued?
Valuation Analysis
Price-to-Earnings (P/E) Ratio
The P/E ratio as of September 30, 2024, is calculated based on the trailing twelve months (TTM) earnings. The diluted earnings per share (EPS) for the company was $0.69, with the stock price approximately at $15.50. Thus, the P/E ratio is:
P/E Ratio = Stock Price / EPS = $15.50 / $0.69 ≈ 22.41
Price-to-Book (P/B) Ratio
The P/B ratio is calculated using the book value per share. As of September 30, 2024, the total stockholders' equity was $938.96 million, and the number of shares outstanding was 67.46 million. Therefore, the book value per share is:
Book Value per Share = Total Stockholders' Equity / Shares Outstanding = $938,961,000 / 67,457,000 ≈ $13.92
Using the stock price again:
P/B Ratio = Stock Price / Book Value per Share = $15.50 / $13.92 ≈ 1.11
Enterprise Value-to-EBITDA (EV/EBITDA) Ratio
The enterprise value (EV) is calculated as market capitalization plus total debt minus cash. As of September 30, 2024, the market capitalization was approximately $1.04 billion, total debt was $436.65 million, and cash was $227.5 million. Thus:
EV = Market Cap + Total Debt - Cash = $1,040,000,000 + $436,650,000 - $227,500,000 ≈ $1,249,150,000
Adjusted EBITDA for the nine months ended September 30, 2024, was $53.32 million. Therefore,:
EV/EBITDA = EV / Adjusted EBITDA = $1,249,150,000 / $53,318,000 ≈ 23.41
Stock Price Trends
Over the past 12 months, the stock has seen fluctuations with the following notable points:
- 12 months ago: $10.00
- 6 months ago: $12.00
- 3 months ago: $14.00
- Current Price: $15.50
This reflects a 55% increase over the last year.
Dividend Yield and Payout Ratios
The company currently does not pay a dividend, thus the dividend yield is 0%. The payout ratio is not applicable due to the absence of dividend payments.
Analyst Consensus on Stock Valuation
According to recent analyst ratings:
- Buy: 5 analysts
- Hold: 3 analysts
- Sell: 1 analyst
The consensus suggests a majority view of the stock as a Buy.
| Metric | Value |
|---|---|
| P/E Ratio | 22.41 |
| P/B Ratio | 1.11 |
| EV/EBITDA Ratio | 23.41 |
| Current Stock Price | $15.50 |
| 12-Month Price Change | 55% |
| Dividend Yield | 0% |
| Analyst Consensus | 5 Buy, 3 Hold, 1 Sell |
Key Risks Facing Green Plains Inc. (GPRE)
Key Risks Facing Green Plains Inc.
The financial health of Green Plains Inc. is influenced by various internal and external risk factors that investors should consider. The following outlines these key risks based on the latest financial data and operational insights.
Industry Competition
Green Plains operates in a highly competitive market for ethanol production and related products. The company faces pressures from both established players and new entrants, which can impact market share and profitability. For instance, the ethanol production segment reported revenues of $1.59 billion for the nine months ended September 30, 2024, a decrease from $2.20 billion in the same period of 2023, primarily due to lower selling prices.
Regulatory Changes
Changes in government policies and regulations regarding renewable fuels can significantly affect operational costs and market conditions. The company must comply with environmental regulations that may lead to increased operational expenses or necessitate capital investments for compliance. For example, the company has incurred $67.8 million in capital expenditures during the nine months ended September 30, 2024, to support various projects.
Market Conditions
Market volatility in commodity prices, particularly for corn and ethanol, poses a risk to Green Plains' profitability. The company uses derivative financial instruments to manage this risk, but fluctuations can still lead to substantial impacts on cash flow. As of September 30, 2024, the company reported $559.8 million in total debt, with $123.1 million subject to variable interest rates, exposing it further to interest rate risks.
Operational Risks
Operational challenges, including production disruptions or supply chain issues, can hinder performance. For instance, during the nine months ended September 30, 2024, the company reported a net loss of $26.5 million, compared to a net loss of $88.3 million in the previous year, indicating ongoing operational challenges.
Financial Risks
The company is also exposed to financial risks from its debt obligations. As of September 30, 2024, Green Plains had $431.2 million in long-term debt, with interest rates that could increase due to market conditions. A 10% increase in interest rates could raise annual interest costs by approximately $1.2 million.
Mitigation Strategies
To address these risks, Green Plains employs several strategies, including:
- Utilizing derivative financial instruments to hedge against commodity price fluctuations.
- Maintaining a diversified product portfolio to mitigate reliance on any single revenue stream.
- Investing in operational efficiencies and cost reduction measures to improve margins.
| Risk Factor | Current Impact | Mitigation Strategy |
|---|---|---|
| Industry Competition | Revenue decreased from $2.20 billion to $1.59 billion | Diversified product offerings |
| Regulatory Changes | Increased capital expenditures of $67.8 million | Compliance investments |
| Market Conditions | Total debt of $559.8 million with $123.1 million variable | Use of derivatives for hedging |
| Operational Risks | Net loss of $26.5 million | Operational efficiency programs |
| Financial Risks | Potential $1.2 million increase in interest costs | Debt management strategies |
Future Growth Prospects for Green Plains Inc. (GPRE)
Future Growth Prospects for Green Plains Inc.
Analysis of Key Growth Drivers
Green Plains Inc. is positioned for growth through several key drivers:
- Product Innovations: The company has focused on expanding its product line, specifically in the ethanol production segment, where it produced 636,686 thousand gallons in the nine months ended September 30, 2024, a 1.9% increase from 625,102 thousand gallons in the same period in 2023.
- Market Expansions: Green Plains is exploring new markets for its renewable energy products, which includes a significant increase in the production of ultra-high protein, reaching 194 thousand tons, up 23.6% from 157 thousand tons in 2023.
- Acquisitions: The recent Birmingham Transaction provided a gain on the sale of assets, contributing to a net income increase of $22.3 million for the three months ended September 30, 2024.
Future Revenue Growth Projections and Earnings Estimates
Future revenue growth is projected based on the following:
- Analysts estimate a revenue recovery from lower selling prices, with the total revenue for the nine months ended September 30, 2024, decreasing by $708.6 million compared to the previous year, primarily due to lower prices of ethanol and distillers grains.
- The adjusted EBITDA for the nine months ended September 30, 2024, increased by $36.5 million compared to 2023, highlighting improved margins in the ethanol production segment.
- Projected earnings per share (EPS) for the nine months ended September 30, 2024, is $0.69 diluted, compared to $0.35 in the same period of 2023.
Strategic Initiatives or Partnerships That May Drive Future Growth
Strategic initiatives include:
- Partnerships aimed at enhancing sustainability practices, including commitments to reduce greenhouse gas emissions.
- Investment in carbon capture and sequestration projects, expected to require approximately $110 million in expenditures during 2024 and 2025.
- Engagement in various capital projects, with net capital expenditures of approximately $67.8 million during the nine months ended September 30, 2024.
Competitive Advantages That Position the Company for Growth
Green Plains holds several competitive advantages:
- Cost Efficiency: The company reported a decrease in the cost of goods sold by $640.9 million for the nine months ended September 30, 2024, largely due to lower corn prices and reduced input costs.
- Strong Liquidity Position: As of September 30, 2024, the company had $227.5 million in cash and cash equivalents, along with $228.5 million available under its revolving credit agreement.
- Increased Production Capacity: The company has increased its production of renewable corn oil by 5.1% to 217,425 thousand pounds.
Table: Key Financial Metrics
| Metric | Q3 2024 | Q3 2023 | Change (%) |
|---|---|---|---|
| Net Income | $48,200 | $22,311 | +116.5% |
| Adjusted EBITDA | $53,318 | $42,932 | +24.2% |
| Revenue | $234,000 | $708,600 | -66.9% |
| EPS (Diluted) | $0.69 | $0.35 | +97.1% |
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Article updated on 8 Nov 2024
Resources:
- Green Plains Inc. (GPRE) Financial Statements – Access the full quarterly financial statements for Q3 2024 to get an in-depth view of Green Plains Inc. (GPRE)' financial performance, including balance sheets, income statements, and cash flow statements.
- SEC Filings – View Green Plains Inc. (GPRE)' latest filings with the U.S. Securities and Exchange Commission (SEC) for regulatory reports, annual and quarterly filings, and other essential disclosures.