MAUMEE, OHIO, US — Strong merchandising results in the fourth quarter of 2020 led to improved performance within The Andersons Trade Group, but it was not enough to propel a year-over-year increase in earnings at the Maumee-based company.
Net income at The Andersons totaled $7.7 million in the fiscal year ended Dec. 31, 2020, equal to 23¢ per share on the common stock, down 58% from $18.3 million, or 56¢ per share, in fiscal 2019. For the fourth quarter ended Dec. 31, 2020, the company had net income of $16 million, or 48¢ per share, which compared with $19.4 million, or 59¢ per share, in the same period a year earlier.
The Trade Group recorded an adjusted pretax income of $29.3 million, up from $17.6 million in the same period a year ago. Income from commodity merchandising rose by more than one-third year-over-year. Asset-based business performance for the trade group decreased, as income from both grain storage and handling fell.
“The Trade business led the way in the fourth quarter by earning adjusted pretax income that exceeded 2019 results by more than 60%,” said Patrick E. Bowe, president and chief executive officer of The Andersons. “Strong merchandising results and grain elevations, which were the best since 2014, were bolstered by robust exports, particularly to China. We shipped the most vessels from the Port of Toledo in decades and exports out of our Houston terminal were the highest in four years. The grain price rally also provided welcome trading volatility.”
Looking ahead for the Trade Group, Bowe said he is encouraged about how early 2021 is setting up.
“Rally in grain and other commodity prices that began at mid-November has been a blessing for ag market participants, unlike anything we have seen in a long time,” he said. “Strong exports, particularly to China, have led the rally, which we think could last for some time as being driven by increases in demand.”
It is expected that more corn will be planted in 2021, benefiting The Andersons’ Trade and Plant Nutrient Group, Bowe said.
“These conditions continue to drive strong elevation margins and considerable volatility, which we welcome because it creates good merchandising opportunities for us,” Bowe said. “In addition, we are seeing excellent results in other products we merchandise such as feed ingredients.”
The Ethanol Group performance was squeezed by a decrease in crush margins. It sustained a pretax loss of $3.5 million in the fourth quarter, which compared with a pretax income of $8.1 million in the fourth quarter of 2019.
“The Ethanol business performed well in the fourth quarter in spite of significantly weaker year-over-year crush margins and recording a large mark-to-market charge,” Bowe said. “On a more positive note, the business netted better income from high-protein feed products, DDGs, corn oil and trading. We are executing well against our high-protein feed strategy and are realizing the incremental revenue on the new higher protein feed products. We are very optimistic about the outlook for these enhanced feed products.”
The Plant Nutrient group recorded an adjusted pretax income of $3.2 million in the fourth quarter, down from $3.9 million in the same period as last year.
“The Plant Nutrient business closed its best year since 2014 with a solid quarter, driven by a higher year-over-year fertilizer volumes,” Bowe said. “Like grain prices, fertilizer prices have risen considerably as well.”
The Plant Nutrient Group’s 2020 performance is expected to improve in 2021.
“We anticipate that our Plant Nutrient business will maintain its 2020 momentum into early 2021,” Bowe said. “We also expect some improvement in sales, assuming continued higher commodity prices and another strong planting season.”
Rail recorded an adjusted income tax of $2 million, which compared with $4.5 million in the fourth quarter of 2019 due to lower income from railcar sales.
“Rail reported modest income that was below last year's results,” Bowe said. “The decrease reflects our decision to sell fewer cars during the quarter. Continued lower rail traffic year-over-year negatively impacted both leasing and repair.”
Bowe expects lowered demand in to impact Rail’s 2021 performance.
“In our Rail business, weekly intermodal and grain car loadings were now up year-over-year,” Bowe said. “But that improvement, unfortunately, has not found its way to most other freight and tank car markets yet. Consequently, we see a flat demand picture for railcar leasing and repair services through much of 2021.”
Looking at the company as a whole Bowe is positive on what The Andersons has achieved and is encouraged by its prospects.
“We continue to benefit greatly from the complementary trading business we acquired in early 2019 and have since successfully integrated,” Bowe said. “We continue to focus on creating a leaner cost structure, having taken approximately $40 million of cost out of the business in the last two years. In addition to opportunities in the Trade and Plant Nutrient segments, a recovery in the ethanol and rail markets should lead to significant year-over-year increases in EBITDA. In short, we are pleased to see the strength in ag markets and look forward to better financial performance ahead.”
In 2021, The Andersons’ will celebrate its 25th anniversary as a public company.
“We have grown into a much larger, stronger and more nimble and innovative company in the North American ag supply chain in the past 25 years,” Bowe said. “We look forward to providing extraordinary service to our customers, supporting our suppliers and communities and rewarding our employees and shareholders for many years to come.”