MAUMEE, OHIO, US — Strong performance from its Plant Nutrient and Renewables businesses were not enough to offset a sharp decline in Trade Group results at The Andersons, Inc., as overall income at the company slid 64% in the first quarter. News of the earnings miss sent the company’s share price tumbling lower, closing at $38.20 on May 4, down 27% from $52.21 on May 3.
Net income at The Andersons in the first quarter ended March 31 totaled $5.5 million, equal to 16¢ per share on the common stock, down from $15.11 million, or 45¢ per share, in the first quarter of 2021. Sales and merchandising revenue, meanwhile, increased 53% to $3.98 billion from $2.59 billion.
“Global ag markets in the first quarter were significantly impacted by the war in Ukraine,” Patrick E. Bowe, president and chief executive officer, said during a May 4 conference call with analysts. “We saw an extreme run-up in grain futures prices, which also drove basis values lower. Global fertilizer supplies remained tight with prices up further due to the conflict in Ukraine.
“I’m very proud of our team for managing through these resulting unprecedented price volatility and logistical challenges while maintaining focus on serving our customers.”
The Trade segment recorded an adjusted pretax income of $3.7 million in the quarter, down 74% from $14.3 million in the same period of last year. First-quarter EBITDA in the segment totaled $20.8 million, down from $32.5 million a year ago.
“Our Trade group results declined from last year, in large part due to the decline in corn and soybean basis values,” Bowe said. “While our inventories needed to be reduced to mark these lower basis values to market, we want to note that this pricing environment has allowed our teams to enter into new ownership positions at improved basis values. This, we believe, will position us well for the remainder of this year and into 2023 as these are historically good ownership values.
“Last year, we accumulated solid wheat positions in our Midwest grain assets and expect it will provide storage income moving forward. Growth in our international supply chain business contributed to our results in spite of the impact of the Ukraine war on supply and logistics.”
The Renewables segment had a pretax income of $5.5 million in the first quarter, up 90% from $2.9 million in the first quarter of fiscal 2021 and compared with a loss of $24 million in the first quarter of 2020.
“Ethanol board crush margins were improved from the first quarter of last year, and higher commodity prices kept feed and corn oil values high,” Bowe said. “Third-party merchandising of low CI renewable feedstocks and other co-products was up significantly from the first quarter of 2021 as that business continues to grow.
“Our results also include an $8.3 million mark-to-market hedge loss, most of which is expected to reverse in the second quarter. We’ve now completed our spring maintenance shutdowns on all of our five ethanol facilities, and we’re well positioned to meet the seasonal increase in driving demand.”
The Plant Nutrient segment posted a record quarter, delivering pretax profit of $10.7 million, up 26% from $8.5 million in the first quarter of 2021 and compared with a loss of $1.2 million in fiscal 2020.
“Our strong results reflect well-positioned inventory in this much high-priced and limited supply market,” Bowe said. “Improved margins more than offset lower volumes across most product lines.”
Despite the fact first-quarter financial results did not measure up to the strong performance of fiscal 2021, Bowe said The Andersons continues to believe its agricultural business outlook remains strong.
“We were anticipating elevated commodity prices for some time due to the relatively low worldwide stocks,” he explained. “But with the disruptions in the Black Sea region and the smaller South American crop, we expect demand to stay high into 2023 and beyond. Planting across the country has started slowly and is currently a week behind the five-year national average. It has been wet across the Midwest this week, and we do know that farmers are anxious to get into their fields as soon as they can. We expect them to ramp up activities quickly when possible.
“Fundamentals in the grain business continued to remain positive. Worldwide supplies are projected to be tight into the foreseeable future, and we’re very pleased with our ownership positions at good values. Storage income opportunity has returned to wheat, and we’re able to accumulate large wheat inventories with the expectations for reduced supply from Ukraine. (The) US fall harvest will reduce but not eliminate the impact of strong worldwide demand on all primary crops. With these markets and at this time of year, we’re very focused on monitoring the impact of the Safrinha harvest in Brazil and the planting progress and growing conditions in the US. As always, we are working to support our farmer customers with their grain marketing plans.”