Ethanol, rail groups show strong Q3 results for The Andersons

By Susanne Retka Schill | November 05, 2015

Strong performances from its rail and ethanol groups could not offset losses in The Andersons grain and plant nutrient groups that resulted in an overall third quarter loss of $1.2 million, or 4 cents per diluted share.

"The rail group had a great quarter as they continued to benefit from their focus on asset management, which has led to higher lease and utilization rates,” said Mike Anderson, chairman. “The ethanol group also had good results, despite margins being down, as they continued to increase throughput due to various process improvements they have made. Overall, however, this was a disappointing quarter.”  

The grain group’s performance was down year over year by $12.3 million primarily due to a significant decrease in equity earnings from its investment in Lansing Trade Group. The plant nutrient group’s performance was also negative, primarily due to added costs from recent acquisitions.

"We are confident in our future earning potential and we have again raised our dividend, Anderson added. “It has increased from 14 cents to 15 1/2 cents per share; this will be effective with the next planned dividend to be paid on Jan. 25.”  

In segment data, Q3 ethanol revenues were reported at $139 million, resulting in $5.9 million income before taxes. That compares with Q3 2014 results of $180 million in revenue and $21.3 million income before taxes. Total revenues for this year through the third quarter were $416.8 million, with $20.8 net income before taxes. That compares with 2014 revenues for the same period of $594.6 million and net income of $75 million.

In comments during the investor call, Anderson noted that The Andersons’ Albion, Michigan, plant had received U.S. EPA approval as an efficient producer, “that clears the way for the potential doubling of capacity there.”

In the question period following the financial presentations, Chief Operating Office Hal Reed responded to questions about the ethanol outlook. “We have a lot of positive perspectives for the long term use of ethanol for higher octane. We look for export demand to continue to pick up -- ethanol is the cheapest source of octane globally,” he said, noting the ethanol exports have remained strong in spite of the strong dollar and mentioning China’s interest in ethanol imports as a positive.

Responding to a question regarding the corn carryout estimates’ influence on corn prices, Reed said, “We don’t see the carryout estimates dramatically changing all that much or changing the price of corn.” The most likely influences on corn prices will be developments in the southern hemisphere and spring planting conditions, he added. “I would agree that lower oil prices are likely to be with us for a while, but we’ve had some great increases in demand as well. I don’t look at high-price corn creating an issue for ethanol.”  

Anderson noted during the call that this was the last of 68 quarterly finance calls, as he has stepped down as the CEO, although he will remain as chairman of the board. He introduced the new CEO, Pat Bowe, who started with the company on Monday. Anderson said Bowe’s experience at Cargill heading the corn processing segment, living in Brazil for a time, and other duties, would bring valuable perspectives and experience to The Andersons. Anderson added that the board was not signaling a change of course with the appointment of a new CEO, but he noted that it wasn’t long after he took on that position years ago that the company began to expand its business into its now successful rail and ethanol processing segments.