FutureFuel Corp. (NYSE: FF)

FutureFuel Corp., often referred to as FutureFuel, operates in the diversified chemical products and biofuels industry, with its business divided into two segments: chemicals and biofuels. The company's stock is listed on the New York Stock Exchange (NYSE) under the symbol FF. FutureFuel's chemicals segment manufactures a wide variety of chemical products, generating most of its revenue from the custom manufacturing of specialty chemicals for specific customers. The company has been making efforts to expand its reach in the chemicals business by entering new markets and updating its operations for the pharma intermediates market, which has been validated by third-party audits.

In contrast, the biofuels segment focuses on the production and sale of biodiesel and petrodiesel blends. FutureFuel's biodiesel production facility in Batesville, Arkansas, has a demonstrated production capacity of approximately 59 million gallons per year. The company began its biofuels business segment in 2005, primarily producing and selling biodiesel, which it sells in blends with petrodiesel and as pure B100. FutureFuel's technical and operational expertise, developed through its specialty chemicals business, has allowed the expansion of its manufacturing process to accommodate a diverse range of feedstock oils. The company produces biodiesel and blended products, such as B2, B5, B10, B20, B50, and B99 blends, which it offers at its Batesville facility and a short-term leased storage facility in Little Rock, Arkansas.

FutureFuel is committed to growing and adapting its biofuels and chemicals businesses. For the biofuels business segment, FutureFuel aims to leverage its technical capabilities, secure local and regional markets, expand marketing efforts to fleets and regional/national customers, and continue to pursue the development and commercialization of new products, such as building block chemicals and intermediate chemicals requiring Good Manufacturing Practices (GMP). For the chemicals segment, the company intends to develop and commercialize new products, including building block chemicals and intermediate chemicals requiring Good Manufacturing Practices (GMP).

The company's biofuels business segment is heavily influenced by legislative initiatives at both federal and state levels. The federal Renewable Fuels Mandate, also known as the Renewable Fuel Standard (RFS), requires refiners, blenders, and importers to blend a certain percentage of renewable fuels, such as biodiesel, into the gasoline and diesel pool. The RFS has been expanded and amended several times, with the most recent expansion being the RFS2 mandate, which requires a certain percentage of biomass-based diesel to be blended into the diesel fuel pool. FutureFuel has also benefited from federal and state tax incentives, such as the Blenders' Tax Credit (BTC) and the Small Agri-Biodiesel Producer Credit, which have supported the development of the biodiesel industry and encouraged the production and use of biodiesel.

FutureFuel's quality control measures include testing all biodiesel manufactured at its Batesville plant to ensure it meets the requirements of American Society for Testing and Materials (ASTM) D6751. The company is an ISO 9001 accredited production facility for both chemicals and biofuels. The company generates RINs (Renewable Identification Numbers) with its biodiesel, which are used to track the production and blending of renewable fuels, and are traded on the market, with FutureFuel selling them separately from its biodiesel products. FutureFuel's byproducts include crude glycerin, produced at a rate of approximately 10% by mass of the quantity of biodiesel produced. The company refines a large portion of its crude glycerin into a purer form, which is used in higher-value markets such as specialty chemical production, agricultural formulations, food, pharmaceutical, and/or cosmetic applications.

The biodiesel industry is highly competitive, with numerous producers and emerging renewable diesel and cellulosic-based biodiesel technologies. FutureFuel competes with other producers of biodiesel regionally, nationally, and with foreign imports, using price, supply reliability, biodiesel quality, and RIN integrity as its primary methods of competition. In the chemicals segment, FutureFuel competes with large multi-national companies with internal specialty chemical manufacturing divisions and smaller independent producers. The company's major competitors in this segment include companies such as BASF, Dow Chemical, and DuPont. FutureFuel's competitive advantages include its scale of operations, technical capabilities, on-site utilities and wastewater treatment, reputation, and financial strength.

FutureFuel's customers include a diverse range of companies, including those in the chemical, pharmaceutical, and food industries. The company's products are used in a variety of applications, including coatings, adhesives, sealants, and elastomers, as well as in the production of pharmaceuticals, food additives, and personal care products. FutureFuel's specialty chemicals are generally high-unit-value products sold in bulk or low-volume packaged form, with distribution being a relatively minor component of cost. Most products are sold FOB the Batesville site for distribution globally, while raw materials for these products are comparatively higher-value components that are sourced globally.

In terms of cyclicality and seasonality, some of FutureFuel's chemical products can be cyclical, driven by changes in energy prices and agricultural commodity prices. Supply and demand dynamics determine profitability at different stages of cycles, and global economic conditions affect the length of each cycle. FutureFuel devotes considerable resources to its research and development programs, which are primarily targeted towards three objectives: innovating, developing, and improving biofuels processes, in particular biodiesel and other biofuels, including value-up technology and applications for co-products; developing and improving processes for custom manufacturing products; and innovating, developing, and improving performance chemical products and manufacturing processes.

FutureFuel is subject to various environmental laws and regulations, including the Clean Air Act, the Resource Conservation and Recovery Act, and the Endangered Species Act. The company has established reserves for closure/post-closure costs associated with the environmental and other assets it maintains. Environmental assets include waste management units, such as chemical waste destructors, storage tanks, and boilers. FutureFuel has the ability to treat hazardous and non-hazardous waste on-site, eliminating most greenhouse gas emissions associated with transportation of waste and significantly reducing liability associated with public exposure to waste. The company has developed strategies for coping with seasonal, weather-related, and market-driven volatility, improving its ability to dampen the impact of climate-driven challenges but may not successfully overcome poor market conditions.

FutureFuel's executive management team at the Batesville plant consists of individuals with a combined 100-plus years of experience in the chemicals industry, comprising technical, operational, and business responsibilities. The members of the executive team also have international experience, including assignments in Europe and Asia.