The Andersons Ethanol Group reports profitable second quarter

By Ann Bailey | August 04, 2016

The Andersons Inc. Ethanol Group was profitable in the second quarter of 2016. Steady exports, seasonal driving demand, lower corn prices and stronger demand for sales of E10 ethanol boosted margins, company officials said.

Ethanol pre-tax income in the second quarter was $6.2 million, compared to $9.7 in the first quarter of 2015. The stronger second quarter returned the first half of the year to profitability with year-to-date pre-tax income of $3.5 million, compared to $14.9 million in the same period last year.

In the first quarter of 2016, the Ethanol Group had a pre-tax loss of $2.7 million, the company said. A higher corn basis in the eastern corn belt pressured the group’s performance compared to the broader industry which has a larger concentration of western plants where basis was comparatively lower, The Andersons said. Margin contributions from co-products also were under pressure in the first quarter as weaker demand, especially in China, resulted in lower distillers dried grain (DDGS) prices.

The company’s ethanol plants performed well in the second quarter of 2016, producing a record 97.1 million gallons of the biofuel, The Andersons reported. Ethanol production in the first quarter of 2016 was 95 million gallons and production in the second quarter of 2015 was 96.3 million gallons.

Looking ahead, the company expects its Ethanol Group’s performance in the second half of 2016 to be similar to, or slightly below, the first half of the year. Planned plant maintenance will trim production, the company said.

The Andersons, overall, reported net income of $14.4 million, up 51 cents per diluted share, on revenues of $1.1 billion for the second quarter of 2016. That compares to net income of $311 million or $1.09 per diluted share, on revenues of $1.2 billion in the second quarter of 2015. The company had a net loss of $273,000, or 1 cent per diluted share, in the first half of 2016. During the first half of 2015 the company had net income of $35.2 million, or $1.23 per diluted share.

“The first half of the year was challenging in line with our expectations, due to the poor crop last fall in the Eastern Corn belt,” said Pat Bowe, The Andersons CEO. “While challenges to our Grains Group persisted, we did begin to see positive impacts form a good wheat harvest and are starting to capture benefits from our productivity initiatives.”

The company is encouraged to see good volumes of specialty products in its plant nutrients business, but margins were disappointing in the face of the oversupply of plant nutrients and low grain prices, Bowe said. Certain products in the industry are being curtailed and that should restore more balance to supply and demand, he said.