The Andersons: Ethanol group profitable in Q2

By Erin Voegele | August 05, 2020

The Andersons Inc. on Aug. 4 reported a profitable second quarter for all four of its business groups, including the ethanol group. The company also announced changes to its business structure, including the combining of the ethanol and trade groups.

The Andersons’ ethanol group reported pretax income attributable to the company of $900,000 million due to its timely maintenance shutdowns and improved ethanol margins, compared to $3.7 million in pretax income reported for the same period of 2019. Adjusted EBITDA for the ethanol group was $11 million, compared to $4.5 million during the second quarter of last year.

 "Our Ethanol Group's navigation of the unprecedented decrease in demand due to the COVID-19 crisis helped produce good results under those difficult conditions,” said Pat Bowe, president and CEO of the Andersons, in a statement.  

“The ethanol group continued to be affected by reduced gasoline demand, but still earned positive pre-tax income attributable to the company as margins recovered late in the quarter,” Bowe added during a second quarter earnings call held Aug. 5. “The group’s decision to extend normal spring shutdowns allowed the plants to quickly reach peak efficiency as we brought them back online.”

The ethanol group’s five plants operated at approximately 50 percent of capacity during the quarter, the company said, noting that the extended maintenance shutdowns were safely completed largely using company employees.

“We feel much better about our ethanol business fundamentals than we did three months ago,” Bowe said. “Supply and demand seem to be fairly well balanced at this time. All five plants are back online and operating efficiently, and we’re producing higher-value feed products at two of them. The results of the business through next year will depend on an increase in gasoline demand with a return to more normal driving miles.”

Bowe also discussed strategic changes The Andersons is making to its business structure and leadership. The trade group and ethanol group will be combined and led by President Bill Krueger, who was formerly president of the trade group. Jim Pirolli, who served as the ethanol group president, has been appointed senior vice president of the combined group.

“We believe we will benefit from having all grain origination, coproduct trading and risk management under one umbrella,” Bowe said. “This change will enable us to manage overall risk, logistics and arbitrage as one unified business. It will also allow for the management of food, feed and fuel products from one end of the supply chain to the other. While these strategic benefits drove this combination, we also expect to realize cost savings as the two units become further integrated.”

The plant nutrient group and rail group will also be combined and led by Joe McNeely, who was formerly president of the rail group. “Cost savings was the main driver of this combination, though we also expect to identify business synergies,” Bowe said.

Overall, The Andersons reported pretax income attributable to the company of $18.2 million, down from $40.9 million during the same period of last year. Adjusted pretax income was $21.6 million, down from $44.1 million. Net income was $30.4 million, up from $29.9 million during the second quarter of last year. Adjusted net income was $29.3, down from $32.3 million. Diluted earnings per share reached 92 cents, up from 91 cents during the same period of 2019. Adjusted diluted earnings per share was 88 cents, down from 98 cents. EBITDA was $66.7 million, compared to $86.4 million. Adjusted EBITDA attributable to the company was $70.1 million, down from $90.1 million during the second quarter of last year.