Grain group performance buoys The Andersons earnings

by Holly Demaree-Saddler
Share This:
Search for similar articles by keyword: [The Andersons], [Earnings report]

The Andersons
 
MAUMEE, OHIO, U.S. — The Andersons Grain Group’s continued improving performance helped push the company’s year-end earnings.

Net income for the year ended Dec. 31, 2017, totaled $41.2 million, equal to $1.46 per share on the common stock, up from $11.6 million, or 41¢ per share, in the same period a year ago.

Pat Bowe The Andersons CEO
Pat Bowe, president and chief executive officer.

“Our fourth-quarter performance was solid considering that we continue to face some challenging market conditions in several of our businesses, and we incurred some impairment expenses,” said Pat Bowe, president and chief executive officer, during an earnings call with analysts on Feb. 15. “Notwithstanding expenses associated with our decision to sell the three Tennessee elevators, the Grain Group recorded better year-over-year results highlighted by significant improvement by Lansing Trade Group. For the full year, our adjusted Grain earnings improved by almost $40 million.”

Revenue for the year was $3.686 billion, a slight decrease compared with $3.924 billion last year. 

corn
 
The Grain Group generated a pretax income of $12.8 million for the year ended Dec. 31, 2017, which compared with a loss of $15.7 million. Revenue for the year was $2.106 billion, down slightly from fiscal 2016.

“Our grain business results are improving and underlying grain fundamentals are stable with good grain ownership income opportunities,” Bowe said. “As we expected, however, large global 2017 corn and soybean harvests have kept world supply and carryouts into 2018 for corn, soybeans and wheat quite large, which have kept both prices and market volatility low. That low volatility limits trading opportunities and continued low prices keep the farmer less interested in selling.”

In addition, the company announced it has signed an agreement, subject to close next month, to sell its grain elevators in Humboldt, Kenton and Dyer, Tennessee, U.S., to a subsidiary of Tyson Foods, Inc. The Andersons owns three additional elevators in Tennessee that are not a part of the purchase agreement with Tyson. The company said it is exploring options for these three remaining facilities.

The Andersons
The Andersons new headquarters as of October 2016.
Photo courtesy of The Andersons.
 
The company’s pretax income for its Ethanol Group was $18.9 million for the year, a decrease of $5.8 million compared with 2016. Ethanol’s revenue ticked up to $708.063 million, which compared with $544.556 million in the same period a year ago.   

“The ethanol business delivered improved results for the third consecutive quarter despite lower year-over-year margins, which again, driven by higher industry production and stocks,” Bowe said.

The Andersons said values for distillers dried grains (DDGs) improved markedly during the quarter as the group worked through the last of the 2016 corn crop’s vomitoxin issues. Better international demand for DDGs also improved pricing and margins. Those two conditions combined to drive values more than 10% higher than in the prior quarter but not quite up to the values of the comparable 2016 period.

The Andersons Plant Nutrient Group sustained a loss of $45.1 million in 2017, which compared with pretax income of $14.2 million in the same period a year ago. Revenue for the year was $651.824 million, down from $725.176 million in the same period a year ago.

“The Plant Nutrient business worked through another difficult quarter,” Bowe said. “Wholesale nutrients results improved year-over-year on an adjusted basis, and while volume was up 12%, margin per ton was down 26%. Our expenses for the quarter were otherwise much lower due to productivity and efficiency improvements, the full effect of these cost reductions was muted by lower margins.”

The company said it expects the Plant Nutrient’s wholesale fertilizer business to continue to be challenged in the near term until some supply/demand equilibrium is achieved.

Train tracks
 
The Rail Group’s pretax income for the year was $24.8 million, down from $32.4 million in the same period of the prior year. Rail revenue jumped to $172.123 million in the third quarter, compared with $163.658 million in 2016.

“The railcar market continues to be oversupplied, keeping pressure on the lease rates,” Bowe said. “As we expected a quarter ago, our utilization rate rose again sequentially and it exceeded the fourth quarter 2016 rate. The lease rates were lower year-over-year. We continued to buy cars in the secondary market, purchasing more than 1,200 cars in the fourth quarter and almost 2,800 cars during all of 2017. We also scrapped more mostly older, underutilized cars and sold some others outright but income from these activities was lower than in 2016. Repair revenue was down for a second consecutive quarter and margins tightened.”

The company noted it will continue to pursue opportunities to enlarge its diverse lease and car portfolio and its repair network for its Rail Group.

 

Partners