MAUMEE, OHIO, US — An “all-time record performance” in the Trade group contributed to the best third-quarter performance at The Andersons, Inc. since 2014, said Patrick E. Bowe, president and chief executive officer.
Net income in the third quarter ended Sept. 30 totaled $15.74 million, equal to 42¢ per share on the common stock, which compared with a loss of $1.06 million in the same period a year ago. Sales and merchandising revenues in the quarter surged 59% to $2.99 billion from $1.89 billion.
Leading the charge in the quarter was the Trade group, which posted adjusted income of $27.62 million in the third quarter, up sharply from $6.85 million in the same period a year ago. Sales and merchandising revenues, meanwhile, increased 56%, climbing to $2.24 billion from $1.43 billion.
“Trade had a great quarter, executing well in dynamic grain markets, where low grain stocks have provided excellent merchandising and elevation opportunities,” Bowe said during a Nov. 3 conference call with analysts. “We had especially strong elevation margins in a number of regions. Our Louisiana locations were not impacted by the recent hurricanes, and we were able to continuously serve customers. Idaho also benefited from strong basis appreciation in its wheat inventory. Our propane distribution business continued to perform very well. Winter wheat harvest receipts were better than expected, and we are seeing storage income return to the corn and wheat markets. We also saw incremental gross profit from new profit centers in the quarter, including our Swiss trading office.”
The Andersons said it sustained a loss of $3.64 million in its Ethanol group during the third quarter of fiscal 2021, which compared with adjusted income of $1.15 million in the same period a year ago. Sales and merchandising revenues totaled $614.64 million, up 76% from $349.96 million a year ago.
“Although our ethanol segment had a loss in the quarter, board crush margins were improved and US ethanol stocks ended the quarter very low,” Bowe said. “As we predicted in our last earnings call, we were negatively impacted in the third quarter by high corn basis at our ethanol plants but have seen relief as we started the corn harvest. We completed scheduled shutdowns and increased quarterly production of ethanol. Co-products, especially distillers corn oil and high-protein feeds were sold at improved values. Third-party merchandising of ethanol and related products nearly doubled 2020 results. The quarter also included mark-to-market losses of $6.8 million, while we expect the majority of these to reverse in the fourth quarter.”
The Andersons also sustained a loss in its Plant Nutrient business. The $5.83 million loss in the period compared with a similar loss of $5.39 million in the same period a year ago. Sales and merchandising revenues in the business climbed to $142.06 million from $102.71 million.
Looking ahead to the remainder of 2021, Bowe said The Andersons’ outlook remains positive.
“While grain export demand has seasonally slowed, we expect high global demand for US produced crops into 2022,” he said. “This demand continues to support world grain trade and commodity prices higher than historical averages.
“Harvest in our draw area is progressing well. Farmer income is high, and we expect an abundant harvest that will provide us additional merchandising and elevation opportunities into 2022. Given these conditions, we remain optimistic in the potential for our trade segment. Worldwide supplies are projected to be tight beyond this 2021 harvest. Some storage income opportunity has returned to corn and wheat, and we’re able to acquire more of the summer wheat harvest than projected. A large 2021 harvest will reduce but not eliminate the impact of strong worldwide demand. With a broad trade portfolio, the benefits from merchandising grains for consumptive demand as well as by providing storage space, we see continuing complementary opportunities.
“We continue to navigate well in these volatile markets, and we remain focused on managing risk. While we believe our fourth quarter in Trade could be comparable to 2020, keep in mind that the prior year included some especially high-margin soybean sales. We expect good results from the harvest despite some delays from recent wet weather across the corn belt.”
Bowe said The Andersons is optimistic about the long-term growth prospects in its core ag segments, including adjacent new products and markets. He said the company continues to look for ways to apply its expertise in commodity trading and logistics. Recent examples include the opening of a new Swiss trading office and the acquisition of Capstone Commodities, he said. In addition, the company is investigating adjacencies such as farmgate solutions for carbon and other opportunities in sustainable agriculture.
“We will continue to invest in premium products in food and feed supply chains,” he said. “We are evaluating both organic and new ingredients for human and animal consumption, including pet food and are expanding our organic fertilizer offerings. Biofuels is a rapidly evolving space, especially in supply chain surrounding renewable diesel. We will participate here primarily through input and offtake agreements as well as optimizing our production of feedstocks. In addition, we'll continue to improve efficiency in our ethanol plants in order to maintain our strong position.”