The Andersons reports profitable Q3 for ethanol group

By Erin Voegele | November 06, 2019

The Andersons Inc. has reported its ethanol group was profitable in the third quarter despite a challenging margin environment. The company also announced its Element biorefinery in Kansas began operating in August.

The Andersons made the announcements in a Nov. 5 press release and Nov. 6 earnings call held to discuss third quarter financial results.

“The ethanol group continued to remain profitable during the third quarter despite a difficult margin environment when many in the industry incurred significant losses and reduced production or shut down entirely,” said Pat Bowe, president and CEO of The Andersons, during the earnings call.

Brian Valentine, senior vice president and chief financial officer of The Andersons, noted, however, that while the ethanol group did remain profitable during the three-month period, results were significantly lower due to the challenging market environment. The group’s profit fell by $16.6 million, he said, but stressed “the ethanol group turned in a solid third quarter considering the continuing difficult market conditions.”

“Margins continued to be stressed by elevated corn basis, particularly for the three eastern plants,” Valentine continued. “The group continued to concentrate on maximizing production efficiency at each plant and again benefitted from increased third party ethanol trading.”

Both Bowe and Valentine discussed operations at the company’s Element biorefinery, a 70 MMgy the Andersons built in cooperation with ICM Inc. The facility began producing ethanol, corn oil and distillers grains in August. The Andersons reported that production continues to ramp up at the facility, with additional higher margin products expected to be introduced in mid-2020. Bowe noted that the company plans to selectively add some of Element’s technologies to its other four ethanol plants.

Company officials also discussed the Oct. 2 announcement that The Andersons and Marathon Petroleum Corp. merged four ethanol plants into a new legal entity known as The Andersons Marathon Holdings LLC. The ethanol facilities involved in the merger include those in Albion, Michigan; Clymers, Indiana; and Greenville, Ohio, which were all previously jointly owned by The Andersons and Marathon Petroleum; and The Andersons' wholly-owned ethanol facility in Denison, Iowa. The Andersons owns 50.1 percent of TAMH, while Marathon owns the remaining 49.9 percent.

Bowe said the merger will provide many positive outcomes, including more effective use of cash and debt and increased financial transparency for the investing public. Valentine added the new business structure will allow the company’s commercial team to trade corn, ethanol and distillers grains freely among the four facilities to achieve optimal profitability and allow the company’s procurement team to leverage the resulting larger purchasing power.

The ethanol group reported pretax income of $900,000 for the quarter, down from $10.4 million during the same period of last year.

Overall, The Andersons reported a net loss of $4.2 million, compared to a net loss of $2.1 million for the third quarter of 2018. Adjusted net loss for the quarter was $2.3 million, compared to an adjusted net income of $500,000 for the same period of last year. Earnings per share were negative 13 cents, compared to negative 7 cents during the third quarter of last year. Adjusted earnings per share fell to negative 7 cents, compared to positive 2 cents during the third quarter of 2018. EBITDA was $40 million, compared to $24 million, while adjusted EBITDA reached 442.5 million, up from $27.5 million.