MAUMEE, OHIO, US — The Andersons, Inc. was challenged in the first quarter of 2020 with lowered ethanol, corn and gasoline demand as the coronavirus (COVID-19) pandemic produced stay-at-home orders reducing travel and a need for those commodities.
The company sustained a loss attributable to The Andersons of $37.7 million in the first quarter ended March 31, which compared with a loss of $14 million in the first quarter of 2019.
“Most parts of our business were off to a decent start to the quarter, but the COVID-19 pandemic had a profound negative impact on our operating results,” Patrick E. Bowe, president and chief executive officer of The Andersons. “Stay-at-home orders reduced vehicle miles traveled, which in turn dramatically reduced demand for gasoline, ethanol and corn, significantly hurting the performance of both the Ethanol Group and Trade Group. The Plant Nutrient Group demonstrated resiliency during the quarter as results improved year-over-year and benefited from a good start to the planting season.”
The Trade Group sustained a pretax loss of $10 million and an adjusted pretax loss of $8.7 million in the first quarter of 2020 compared to an adjusted pretax loss of $6.3 million in the first quarter of 2019.
“Substantial decrease in the ethanol demand resulted in a significant drop in corn basis, which drove the Trade Group’s return on its storage assets, lower than in the first quarter of 2019,” said Brian A. Valentine, senior vice president and chief financial officer of The Andersons.
The Ethanol Group sustained a pretax loss of $24 million in the first quarter, which compared with $3 million pretax income in the same period a year ago.
The Ethanol Group’s results included the consolidated results of all five ethanol plants due to the October 2019 merger of The Andersons Marathon Holdings, LLC (TAMH). Beginning with the first quarter, it also included the results of the DDG trading business, which were previously included in Trade Group results.
“After a decent start to the quarter, the onset of stay-at-home orders resulting from the COVID-19 pandemic, caused demand and margins to decline significantly,” Valentine said. “In March, we announced the extended maintenance shutdowns of facilities. Fortunately, the plants ran in a highly efficient manner before we shut them down late in the month, which limited the amount of variable costs required for the first quarter production.”
Even though recent ethanol demand has floundered, The Andersons is looking forward.
“We expect ethanol demand to improve as the US economy reopens,” Bowe said. “We operate highly efficient plants and are well positioned to benefit from that when it happens.”
The Plant Nutrient Group sustained a pretax loss of $1.2 million the first quarter of 2020, a slight improvement compared with a pretax loss of $3.9 million in the first quarter of 2019.
“Our Plant Nutrient business is having a very strong spring,” Bowe said on May 6 during a call with analysts. “As you remember, we had a very wet spring last year and that hurt our volumes, we are having a really good start to the year. So, our Plant Nutrient business is in a very good position and running well.”
At the beginning of the year the Plant Nutrient Group reorganized itself to better align the markets The Andersons serve. The group has been divided into three divisions — Ag Supply Chain, Specialty Liquids and Engineered Granules — to integrate several related businesses.
The Rail Group generated a $1 million pretax income in the first quarter, down from $4.3 million last year. The company said COVID-19 has driven rail car loadings 11% lower year-over-year for the first 17 weeks of the year.
“The Andersons is a key player in essential businesses that are a part of the North American agriculture supply chain, and despite the challenging environment caused by the COVID-19 pandemic, our company remains healthy, resilient and strong,” Bowe said. “We have continued to operate throughout the pandemic except for the previously announced ethanol plant maintenance shutdowns, and our balance sheet remains solid; we have ample liquidity to sustain us.”
Since early 2016 The Andersons has focused on expense management, but considering the COVID-19 pandemic the company has taken a strong approach.
Some of the cost controls and management include:
- $20 million in additional expense reductions in 2020
- Limiting spending in the near term to those projects that are required for employee safety or are critical to serving customer needs
- Reduce spending on capital projects to $100 million in 2020
Despite the company focusing on cost controls and cash management, The Andersons recently invested with five other businesses in a new business called Roger.
Roger has built an application that simplifies the processes involved in shipping bulk commodities by truck. The platform is scheduled to roll out in late 2020. In the meantime, the platform is active and will expand use across carriers associated with initial charter members.
Follow our breaking news coverage of the coronavirus/COVID-19 situation.