MAUMEE, OHIO, US — The Andersons, Inc. showed improvement in its 2020 third-quarter results compared to 2019.
The company sustained a loss of $1.1 million in the third quarter ended Sept. 30, which compared with a loss of $4.2 million in the third quarter of 2019.
“Our results for the third quarter were solid in light of the current economic environment,” said Patrick Bowe, president and chief executive officer of The Andersons. “Trade, ethanol and plant nutrient all recorded improved results year-over-year. Trade led the way with better merchandising income as the fall harvest got off to a good start. Ethanol's results were much improved, notwithstanding large non-cash mark-to-market charges. Plant Nutrient's results improved substantially year over year in a quarter in which that business is usually seasonally weak. Finally, rail continued to feel the negative impacts of weak railcar demand.”
The Trade segment recorded an adjusted pretax income of $6.85 million, compared to an adjusted pretax income of $432,000 in the same period a year ago. The Andersons attributes the improved income to stock compensation expense associated with the 2019 acquisition of Lansing Trade Group.
“Income from merchandising grains, feed products and all other commodities was strong compared to the third quarter 2019 results due to increased market volatility,” said Brian A. Valentine, executive vice president and chief financial officer of The Andersons. “Income from the segment's asset portfolio was positive due to improved results from our Ohio and Louisiana assets. Synergy capture and other cost-cutting efforts continued to provide benefits.”
Bowe expects grain demand to continue to be strong following an excellent 2020 harvest.
“We are very pleased to see the 2020 corn and soybean harvest very much improved from the short crop in the eastern corn belt that hurt us last year,” Bowe said. “This puts us in a strong position for a year with robust grain demand. Nationwide, this year's crop is smaller and drier than we anticipated just three months ago. Export demand has been very robust, especially from China, which we expect to run well into the first quarter.”
Looking forward, Bowe anticipates continued merchandising opportunities for the Trade segment.
“Grain futures prices have rallied, creating an inverse in corn and soybean and wheat markets,” Bowe said. “If those conditions persist, they will impact the opportunity to earn storage income through the first part of 2021. As a result of those conditions, our current outlook for the trading business in the next four quarters is strong overall, with solid merchandising opportunities, yet a softer outlook on income from carrying grain than we thought it would be 90 days ago. We expect the results in 2021 to exceed 2020 in the Trade group.”
The Ethanol segment remained profitable on improved margins with had a pretax income of $1.14 million in the third quarter, a slight uptick from $1.07 million in the third quarter of 2019.
“Margins were much improved despite increasing corn costs as industry supply and demand remained relatively balanced,” Valentine said. “Third-party ethanol trading results were also higher year-over-year.”
Improved crush margins buoyed the company’s ethanol performance. The company noted that the Ethanol group recorded a non-cash mark-to-market charge of $6.2 million due to increases in corn and DDG prices late in the quarter.
“Spot ethanol crush margins continue to be very positive, but similar to grain markets are inverted,” Bowes said.
During the third quarter, all planned fall maintenance outages were on schedule at the four ethanol plants owned by The Andersons Marathon ethanol, Bowe noted.
“While spot margins are strong, how we finish 2020 and begin 2021 will depend on the balance between gasoline demand and the ethanol industry supply,” Bowe said.
The Andersons Plant Nutrient segment sustained a pretax loss of $5.4 million compared to a pretax loss of $7.4 million in the third quarter of 2019.
“Margins were up slightly on similar volumes, and the business continued to manage expenses and working capital effectively,” Bowe said.
This was the sixth consecutive quarter that the segment posted improved year-over-year results.
“We expect our Plant Nutrient business to finish the year well,” Bowe said. “We appear to be having a good fall application season, and we expect improvement in 2021, assuming continued higher commodity prices and another strong planting season.”
The company’s Rail segment sustained a pretax loss of $139,000 compared to a pretax income of $3.1 million in the same period a year ago.
“While railcar demand has been soft, and as we look into 2021 without any significant shutdowns, we think the bottom of the trough in railcar demand and lease prices may be behind us,” Bowe said. “However, we continue to see a challenging demand picture for railcars and rail repair services through much of '21, and the results should remain flat going into next year.”
Looking at the company as a whole Bowe is pleased on what The Andersons has accomplished and looks forward to achieving its future goals.
“In summary, we've made good progress on reducing long-term debt, put in place a more effective cost structure, and we're seeing the benefits of the Lansing acquisition and a stronger trading platform,” Bowe said. “US ag fundamentals have dramatically improved, which bodes well for the US farmer and for The Andersons. I'm very encouraged by the resilience of our workforce this past year. We feel we have a leaner and stronger company going into 2021 and are excited about our future prospects.”