The Andersons: Ethanol segment performed well in Q4

By Erin Voegele | February 17, 2021

The Andersons Inc.’s ethanol group performed well during the fourth quarter of 2020, said President and CEO Pat Bowe during the company’s fourth quarter earnings call on Feb. 17. The first quarter of 2021, however, has seen falling margins.

Bowe said spot margins have fallen sharply in the past 90 days and continue to be unseasonably low. “We hedged more than one-third of our expected first quarter gallons before year-end, which should help mitigate continued low margins during the first quarter,” he added, noting the company’s plants continue to run well at a relatively low variable cost per gallon.

Bowe also noted that this week’s polar vortex is impacting the ethanol industry. “Natural gas shortages and power outages are causing curtailments at a large number of ethanol plants,” he said. “This should reduce ethanol production and decrease stocks in the short term.”

Moving into 2021, Bowe said The Andersons sees growth in E15 and increasing export demand as potential tailwinds later this year. He also said distillers grains prices are up and noted the company is selling more higher-value feed products. “We’re also benefiting from a sustained uptick in corn oil values, driven by increased demand for renewable diesel,” Bowe added.

For the fourth quarter, The Andersons’ ethanol segment reported a pretax loss attributable to the company of $3.5 million, compared to $8.1 million during the same period of 2019. Production volumes for the quarter were flat when compared to the same period of the previous year.

Ethanol board crush margins were 25 cents lower year-over-year and were driven by rising corn prices that were only partially mitigated by higher ethanol prices. Strong operating performance at the plants helped offset the impact of the lower crush margins.

Ethanol recorded adjusted EBITDA of $16.2 million in the fourth quarter, down from $25.9 million during the same period of 2019.

Overall, The Andersons reported net income of $16 million, or 48 cents per diluted share, and adjusted net income of $19.4 million, or 59 cents per diluted share. Adjusted EBITDA for the quarter was at $85 million, comparable year-over-year despite significant pandemic impacts.