The Andersons: Ethanol segment profitable in Q3

By Erin Voegele | November 05, 2020

The Andersons reported improved ethanol margins in its third quarter earnings call, held Nov. 4. The near-term outlook for ethanol, however, will depend on the balance between gasoline demand and ethanol supply, said President and CEO Pat Bowe during the call.

According to Bowe, The Andersons’ ethanol business reported a pretax income for the third quarter that was up slightly from the same period of last year. While margins were improved during the period, he said the corn futures price rally led to a large non-cash mark-to-market charge on the company’s corn and DDGS that it did not face in 2019.

Brian Valentine, executive vice president and chief financial officer at The Andersons, said the ethanol business reported third quarter pretax income attributable to the company of $1.1 million, up slightly from the third quarter of last year. Margins were much improved, he said, despite increasing corn costs as industry supply and demand remained relatively balanced. Ethanol EBITDA was $11.1 million, up from $3.9 million during the same period of last year.

Bowe noted that spot ethanol crush margins continue to be very positive, but similar to grain markets, are inverted. He said the company completed all planned fall maintenance outages at the four plants owned by The Andersons Marathon Ethanol, noting that all four facilities are running well. Bowe also indicated that the company is continuing to line out some of the new technologies being used at the Element plant and is excited about a new high protein feed product that is already being produced at the Element facility and the ethanol plant in Denison, Iowa.

While spot margins are currently strong, Bowe said how the ethanol group finishes 2020 and begins 2021 will depend on the balance between gasoline demand and the ethanol industry supply.

Regarding operations at the Element plant, Bowe said that the COVID-19 has caused some delays but confirmed that the plant has been running at full capacity and producing ethanol. The company is still working to complete its certification under the California Low Carbon Fuel Standard. Bowe said the plant’s front-end wood burning system still has to be certified under that process. The plant is completing a big maintenance shutdown and is expected to start bringing the boiler system online soon. That system has to complete a 90-day run before the LCFS certification can be completed. Bowe said the company expects to have the LCFS certification fully in place by mid-2021.

For the third quarter, The Andersons reported a net loss attributable to the company of $1.1 million, or 3 cents per diluted share, and adjusted net loss was $2.4 million, or 7 cents per diluted share. Adjusted EBITDA attributable to the company was $46.2 million, up 21 percent when compared to the same period of last year.