The Andersons reports profitable Q4 for ethanol group

By Erin Voegele | February 17, 2020

The Andersons Inc. reported a profitable fourth quarter for its ethanol group during a Feb. 13 earnings call, but noted a difficult margin environment is expected to continue. The company also reported its Element plant continues to ramp-up and is producing cellulosic ethanol.

In a financial report released Feb. 12, The Andersons reported that its ethanol group earned pretax income and adjusted pretax income of $41.2 million and $7.2 million, respectively, for the fourth quarter, compared to $6.3 million of pretax income it earned during the same period of 2018. The fourth quarter 2019 results included the consolidated results of all five ethanol plants due to The Andersons Marathon Holdings LLC merger and the continued ramp-up of the Element plant. The ethanol group reported adjusted EBITDA attributable to the company of $16.6 million, compared to $6.9 million for the same period of 20185.

"The Ethanol Group's operating results reflect the favorable impact of hedging activity and continued strong performance by the group's expanded trading team," said Pat Bowe, president and CEO of The Andersons, in a statement. "In addition, the fourth quarter results now include the consolidated results of the Ethanol Group's operations from the merger of four separate entities to form The Andersons Marathon Holdings LLC in early October. The impacts of these Trade and Ethanol Group transactions, along with the new Element ethanol plant, set us up well for improved company performance in 2020."

The Andersons said the ethanol group recorded significant appreciation on its hedged positions and increased sales volumes and margins by third-party production. The group’s crush margins were favorable early in the quarter, but degraded quickly in November and December. The company also noted that comparatively higher corn basis continued to compress margins.

Regarding the Element plant, The Andersons noted that more new technologies were brought online during the quarter. This includes a new-to-the-market cellulosic ethanol technology and new feed products.

During the earnings call, Bowe noted that the Element plant came online during the third quarter of last year. “While the pace of production ramp-up has been slower than planned, we began producing ethanol using our new cellulosic technology in the fourth quarter,” he said.

Moving into 2020, Bowe noted the current margin environment is causing the company to be cautious about ethanol’s prospects, especially in the first half of the year. The continued ramp-up of the Element plant, however, is expected to result in the industry’s lowest carbon score and is anticipated to help improve results late in the year, he continued.

Overall, the company reported $23.7 million in adjusted pretax income for the fourth quarter, down from $33.1 million during the same three-month period of 2018. Net income for the quarter was $6.6 million, compared to $23.8 million. Adjusted net income for the fourth quarter was $18.4 million, down from $26 million. Earnings per share fell to 19 cents, down from 84 cents during the fourth quarter of 2018. Adjusted earnings per share fell to 55 cents, down from 92 cents.

For the full year 2019, The Andersons reported its ethanol group earned adjusted pretax income of $13.4 million, down from $27.1 million in 2018.

For 2019, The Andersons adjusted pretax income was at $51 million, down from $59.9 million in 2018. Net income was $18.3 million, down from $41.5 million. Adjusted net income for 2019 fell to $43 million, down from $46.4 million. Earnings per share were at 55 cents, down from $1.46. Adjusted earnings per share for 2019 fell to $1.30, down from $1.63 in 2018.