The Andersons operate in erratic marketplaces.
In the second quarter of 2021, The Andersons’ four business sectors all had strong earnings increase, propelling the company to its highest second-quarter earnings since 2014.
The Andersons’ net income increased by 43% from $30.4 million in the second quarter of 2020 to $43.5 million in the second quarter that ended on June 30, 2021, or $1.30 per share on the common stock.
“I’m thrilled that every one of our four companies produced exceptional, year-over-year growth with sound execution in erratic markets,” stated The Andersons’ president, CEO, and director Patrick E. Bowe. “I’m proud of our team; they did a great job of anticipating market prospects. Our skills in position management, logistics, and commodities trading are enhanced by these market conditions. Large harvests in our main draw areas are currently anticipated this fall, and we expect North American demand to stay high, which should lead to strong performance until 2022.
In contrast to the $1.4 million adjusted pretax income in the second quarter of 2020, the Trade sector reported an adjusted pretax income of $14.1 million for the quarter. The 2019 purchase of Lansing Trade Group and the related expense of stock compensation were the causes of the discrepancy between reported and adjusted income for both quarters.
In a conference call with analysts on August 4, Mr. Bowe stated, “The Trade Group had another solid quarter, executing well in dynamic grain markets where tightening grain stocks have provided excellent merchandising and elevation opportunities.” The growth conditions for corn and soybeans in our main draw areas are excellent, and we expect favorable buying opportunities through to harvest. In our draw region, the volume of winter wheat harvested was more than anticipated, and some carryback is being observed.to the corn and wheat markets.”
Regarding the Trade business, Mr. Bowe expressed his belief that the company’s agricultural portfolio will continue to offer great potential.
“We anticipate strong worldwide demand for US crops into 2022, even though export demand has seasonally slowed,” he stated. “This demand keeps the global grain trade going strong and prices above historical averages. While circumstances are dry in some other sections of the country, crops in our draw areas are in excellent condition. We anticipate a bountiful crop, which will offer us more chances for marketing and elevation. In light of these circumstances, we continue to have high hopes for our Trade division.
Pretax income for the Ethanol segment increased to $23.5 million in the second quarter from $900,000 in the corresponding period of 2020. Strong co-product margins at the five ethanol plants and successful third-party trading of ethanol, feed components, and vegetable oil were credited by the Andersons for the increase in ethanol earnings.
“With income from strong co-product values and third-party trading results, combined with the reversal of unrealized mark-to-market losses resulting from our hedging programs, our Ethanol segment recorded one of its — the best quarters ever,” Mr. Bowe stated.
Even though fuel demand is back to pre-pandemic levels, Mr. Bowe anticipates difficulties for the ethanol industry in the third quarter.
He stated, “Gasoline demand is expected to continue, having increased dramatically since the pandemic slowdown.” Through the third quarter, industry production is predicted to decline due to limited supplies of old crop corn and facility maintenance shutdowns. Co-product demand is still very robust, which helps sustain our overall margin. Our Colwich, Kansas, and Denison, Iowa, plants both continue to generate and market our novel high-protein feed products at profitable margins. Our low-CI efficient facilities are in a good position to benefit from increased ethanol margins and better co-product prices.
The Andersons anticipate receiving approval for carb shipping from their Colwich factory to California by the end of the third quarter, although they are currently awaiting word on this.The pretax was recorded in the Plant Nutrient segment. income of $24 million, which compared with $19.4 million in the same period of 2020.
“The Plant Nutrient Group also had a strong second quarter,” Mr. Bowe said. “Its best since 2014. As anticipated, margins were up in all product lines on tight supplies and strong demand. Fertilizer prices remain high and orders for the fall are being placed.”The business anticipates that demand in its Plant Nutrient segment will continue to rise.
“We anticipate continued strong performance from our Plant Nutrient business,” Mr. Bowe stated. “Fall demand appears to be strong in the absence of the customary summer price reset and persistently tight stockpiles. We anticipate that the high demand we’ve seen for our tailored granules and specialty liquids for industrial and agricultural applications will continue throughout the upcoming year.
Due to the high price of scrap steel, the Rail segment’s pretax income increased to $3.1 million in the second quarter of 2021 from $2.6 million in the same period the previous year.
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Rail’s second-quarter statistics showed a small improvement, mostly due to the opportunistic scrapping of out-of-service and end-of-economic-life railcars forhigher-than-normal scrap prices,” Mr. Bowe said.According to Mr. Bowe, there may be an industry recovery in the Rail segment.
“While still lower than 2019 volumes, use rail carloads have increased significantly from a year ago,” Mr. Bowe stated. Although they have risen gradually, lease renewal rates are still less than long-term lease rates. This industry’s revival is still going slowly. When it makes sense economically, we have scrapped idle and out-of-service railcars, and we will continue to do so.