Ethanol delivers $24.7 M pretax income for The Andersons in 2016
The Andersons ethanol group had a stronger fourth quarter in 2016, showing a 52 percent improvement over fourth quarter 2015, the company said in its Q4 and year-end earnings report.
The company’s ethanol group earned pretax income of $11.7 million in Q4, up from $7.7 million for the same period a year ago. Higher margins drove the increase, The Andersons said. Total pretax income in 2016 was $28.5 million, down $4 million from 2015. Coproducts prices were under pressure during the fourth quarter of 2015 as a result of vomitoxin in corn in the Eastern Corn Belt. A decrease in export demand, particularly from China, also put pressure on DDGS prices during the fourth quarter of 2016, The Andersons said.
On the production side, The Andersons had a record breaking year, producing 387 million gallons of ethanol in 2016, 3 million more gallons than in 2015. Weaker demand for ethanol during the first quarter of 2017 has reduced margins from fourth quarter 2016 levels, said Pat Bowe, The Andersons CEO. Demand typically is weaker in January when gasoline demand is lower, Bowe noted. He expects demand to improve in the next few months as the summer driving season approaches.
The Andersons is focusing on operational efficiencies of its ethanol plants, Bowe said. Expansion of The Andersons Albion, Michigan, plant is nearing completion. The expansion will double the capacity of the plant to 130 million gallons annually. The Albion plant will be operating at full capacity by the end of the second quarter of this year, Bowe said.
Overall the company reported Q4 net income of $10.1 million, a $5.1 million improvement over the adjusted net income in the same period a year ago. For the full year, The Andersons reported net income of $11.6 million compared to a net loss of $13.1 million in 2015. In the earnings release, Bowe reported the company addressed underperforming assets by selling underperforming grain group assets, closing a cob processing facility and recently announcing the closure of its retail group.
The rail group led The Anderson’s earnings with $32.4 million of pretax income for the year, followed by the ethanol group’s $24.7 million. The grain group saw a rebound in Q4 after a good harvest with pretax income of $12.9 million, but lost $15.7 million for the year. The plant nutrient group ended 2016 with pretax income of $14.2 million. The retail group recorded a $6.5 million asset impairment charge after the company announced its intent to exit the business, driving a full-year pretax loss of $8.8 million.