The Andersons 2Q Income Up; Plant Nutrient Margins Offset Volume Drop

The Andersons Inc., Maumee, Ohio, reported second-quarter net income attributable to The Andersons of $29.9 million ($0.91 per diluted share) on sales of $2.32 billion, up from the year-ago $21.5 million ($0.76 per share) and $911.4 million. Sales were up dramatically due to the purchase, effective Jan. 1, 2019, of all of The Lansing Group and Thompsons Ltd. (GM Jan. 18, p. 1).

“Extremely wet weather in many of our core grain origination markets benefited our Trade Group, but hurt both our Ethanol and Plant Nutrient Groups during the quarter,” said President and CEO Pat Bowe. “The resulting market conditions illustrated perfectly the value of the more diversified, newly integrated portfolio we now operate in our Trade Group.

“We were able to capitalize on merchandising opportunities caused by grain and feed ingredient price volatility. However, we’re concerned about the implications of a smaller corn crop on the utilization of our eastern grain assets for the remainder of this year and into 2020,” Bowe continued.

“The Trade Group’s adjusted results were strong, as basis appreciation and good merchandising results helped offset weakness in the food and specialty ingredients units,” he added. “The Ethanol Group remained profitable in a considerably compressed margin environment. As expected, the Plant Nutrient Group’s results were hurt by substantially lower primary and specialty nutrient volumes due to the wet spring, but margins were stronger, resulting in improved year-over-year pretax income. The Rail Group performed well, primarily due to solid leasing results.”

The company said improved nutrient margins were driven by cost containment, operational efficiency, and product mix, and offset a 12 percent volume shortfall. The company also said inventory carrying costs increased year-over-year due to delayed and reduced planting. The company said since it rails product from Canada and Florida, it is not dependent on Gulf barge deliveries, which were delayed. However, it said persistent rain particularly impacted volumes in Ohio, Michigan, and Indiana.

Bowe told analysts that while nutrient margins continue to be stronger than the prior year, fall volumes are typically not large enough for the company to be able to make up the full amount of the shortfall. However, he said that with normal weather, higher grain prices, and nutrient deficiencies, the fall season could be better than normal.

In other news, the company announced that it has signed an agreement to sell the agronomy assets of Thompsons, a wholly-owned subsidiary in Ontario, to Sylvite Holdings Inc., Burlington, Ont. (see related story). The sale is expected to close in September 2019. The Andersons will continue to own and operate Thompsons’ grain and food processing facilities in Ontario.

The Andersons took a $3.1 million pretax impairment charge on its Trade Group’s remaining Tennessee assets.

Wall Street reacted well to The Andersons’ results, which beat many analyst estimates. While shares closed on Aug. 7 up 3 percent to $25.40, they reached as high as $27.49, up 11.5 percent.

Six-month net income was $15.9 million ($0.48 per share) on sales of $4.3 billion, up from the year-ago $19.8 million ($0.70 per share) and $1.55 billion, respectively.