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REG Is Raking It In with Biodiesel

August 28, 2012 in Biodiesel by Rich Piellisch  |  No Comments

Net Income of $14 Million as Volumes Soar, Terminals Open

“It’s not a new industry anymore,” Renewable Energy Group president and CEO Dan Oh told F&F Friday, one week after REG’s second-quarter earnings report showed net income of $14.4 million for the first quarter, compared with a $948,000 loss for the first quarter of 2011. Company revenue grew 29%, to nearly $272 million, as gallons produced rose 30%, to 43 million.

Expect to see the Renewable Energy Group’s REG-9000 brand biodiesel from more terminals like this Maxum Petroleum facility in Long Beach, Calif.

“REG sold 54 million gallons of biodiesel in the second quarter, an increase of 63% compared to the same period in 2011,” the firm (NASDAQ:REGI) reported.

In the first quarter of 2011, Oh says, petroleum distributors were just beginning to have to conform with today’s federal Renewable Fuel Standards, knows as RFS2. This year, they understand the requirements, and biodiesel volumes have soared.

“The year over year increase in gallons sold was primarily due to increased production capacity online and an increase in biodiesel demand compared to the same period in 2011 as petroleum-fuel refiners and importers sought to meet their renewable volume obligations to purchase biomass-based diesel,” states the REG earnings release

REG biorefinery in Seneca, Ill.

In addition to new processing capacity in Albert Lea, Minn. and Seneca, Ill., REG is meeting demand with new terminals. A deal with Maxum Petroleum making the firm’s REG-9000 biodiesel available from Long Beach, Calif. was announced this month, with word of availability from Lebanon, Ohio and Clovis, N.M. having come in June.

“We are building out our biodiesel business across all of North America,” Oh says.

The REG chief emphasized to F&F that the majority of REG’s product is made with no impact on food supply – or positive impact. “We principally use fats and greases and waste-recovered products,” he says, “not virgin vegetable oil.”

“We take co-products and by-products that need to find a home and we add value.” Meat industry waste, he says by way of example, becomes far more valuable when there is demand for it from the biodiesel industry. That, in turn, helps keep meat prices down.

“We make it far more likely that food is going to be produced in the first place,” Oh says, “and is going to be produced at a price that people will like.”

Return of the $1 Credit Would be Welcome

Oh notes that his firm does its business business-to-business, providing product primarily to wholesalers. With small-percentage biodiesel blends now common, “People are using biodiesel all the time and they might not even have any idea.”

And while REG is very profitable today, Oh would like to see the return of the expired $1-per-gallon credit for B100. “The blender’s credit is important to the entire value chain,” he says. It makes the decision to participate in the biodiesel business “a simpler long-term investment decision.”

“National policy goals will be met much quicker of it is there,” he says. “We’d love to see it come back.”

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