Ethanol sets records for The Andersons

By Kris Bevill | July 15, 2010
Posted Aug. 5, 2010

The Andersons Inc. reported strong second quarter earnings for 2010 and credited the company's diverse revenue sources as being the key to its profitability.

The company's net income for the second quarter was just over $25 million, nearly $10 million more than the same period last year. Impressive gains in the company's grain and ethanol group contributed greatly to the overall increase. The group's $19.6 million in operating income for the past three months is nearly $11 million more than last year's result of $8.9 million. The grain and ethanol group's performance in the first six months of this year resulted in a record $40.3 million of operating income.

The Andersons CEO Mike Anderson said he is "very pleased" with the company's performance, particularly in the grain & ethanol and plant nutrient groups. "As I review these results, I am again reminded that our strategy of purposeful diversification allows us to remain a strong and profitable company even when one or more of our business units is under performing," he said.

Improvements in the company's ethanol performance were attributed to ethanol sales that were contracted during periods of higher margins. During a conference call to discuss the company's earnings, Anderson said the company has locked in contracts for approximately three-quarters of its ethanol for the last half of the year. "Margin structure is never good in the last half, but we think we'll be above break even," he said. The company has a bit more capacity to come online later this year, according to Anderson, and as has been pointed out by many in the industry, said that production amounts will soon be greater than domestic consumption, so producers are looking forward to being able to blend at levels greater than 10 percent. However, he also stated that Brazilian sugar prices are currently "through the roof," so U.S. exports of ethanol are increasing, which is alleviating some of the pressure on the domestic supply side. In all, Anderson said the company expects the last half of 2010 to be profitable for its grain and ethanol group, but still below its 2009 numbers.

In other segments of the company, the plant nutrient group had its second highest second quarter results in the group's history and achieved an operating income of $19 million. The rail group's operating income was down $500,000 to just $100,000. The company said the group's gross profit was down due to lower utilization rates and the corresponding carrying costs of idle assets. The retail group's operating income was down $800,000 from the previous year.