ANDE - Earnings call transcript Q4 2019

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Operator

Ladies and gentlemen, thank you for standing by, and welcome to the Andersons’ 2019 Fourth Quarter Earnings Conference Call. At this time all participants are in a listen-only mode. After the speaker presentation, there will be a question-and-answer session. [Operator Instructions]

I would now like to hand the conference to your speaker today, John Kraus, Director of Investor Relations. sir. ahead, go Please

John Kraus

morning, Andersons’ thank call. fourth Good us for for the quarter everyone, Joel. you and joining Thanks, XXXX earnings

have presentation slide provided enhance We discussion. today's that will a

webcast, at viewing on page the in presentation the This being the Investors recording is andersonsinc.com of and webcast you're be supporting If via slides sync. slides commentary will shortly. will this and be the and website recorded, our our made available

differ XX statements, the of Certain those conditions, described materially the prospectuses general information could constitutes Act company's actual in statements from United result the industries, the forward-looking are in and prepared a in factors in and connection internationally, both offerings. economic discussed many publicly and with forward-looking company's the competitive conditions that in presented results today including filings additional including conditions, the as company's and weather, States documents, factors, filed

the call not which Today's auditors financial reviewed. have completely includes information company's independent

assumptions the assurance that its reasonable, to no believes give Although company based can assumptions it upon that will statements which are be forward-looking prove these information are and financial the accurate. the

and remarks and net not as accounting operating period-to-period Adjusted EBITDA income company that income measures. comparability. and performance investors taxes before underlying better pretax operations, not as income income generally should determined an and financial This do today's its allowing evaluation believes adjusted pretax be company, accepted alternatives adjusted or of EBITDA contain attributable principles. additional income, pretax The adjusted EBITDA income, by considered and to the to information presentation adjusted to and prepared provide non-GAAP EBITDA others about

Chief and After take your Pat me Officer; Executive Financial Pat, I prepared questions. will the are remarks, to today Brian with Bowe, happy and Brian On Officer. be Chief our call Valentine,

also holding be Xst. will X:XX Before want will his remind our on website. The Wednesday a.m. webcast you on April Pat Day to be everyone that comments, at opening Investor in. presentation We an invite to makes we I live beginning listen

is floor With that the Pat yours.

Pat Bowe

good this morning to Thank of John, and then results. groups. brief for finish start on thoughts year each our our you, quarter everyone. business on high-level XXXX. XXXX joining and Brian I'll review, you some Thank morning those by review fourth remarks full providing and our our comments current our will and results business present about views of four prepared a with some overall our call I'll

Belt Most pretax came the by quarter Trade fourth adjusted earnings acquired higher of results those drove Corn quarter XXXX, newly were more While than the performed small, Eastern it's a much late large of and of of But by fourth in its lower XX%. we very Group's EBITDA historical quarterly of Trade short part well. Group, the earnings of a harvest our adjusted many shortfall in the caused lines wet fell product footprint. from

Farm the remained The We were Ontario down Michigan Center during were Tennessee these Group Most Nutrient and profitable The lower. and assets sales somewhat Group's proceeds sold Ethanol We some pay the the agronomy to assets, Group's Elevator. results slightly results quarter. Thompson's from Grain were sold Rail the a debt. used improved. of a Plant

year-over-year Group and is has it over to Trade adjusted acquisition was very Trade EBITDA XXX% its good that is our very Group clear one. income and year, a higher. pretax full the Lansing been be doubled adjusted For expected nearly

with from by sales Group the income sales Lansing was Grain than income contract an as Rail integrate in for into Group income was group's improvement marginally by priority to was environment Trade more is The was impacted a one decrease Ethanol was XXXX. that consistently an a slight leasing lower Plant complete. Nutrient results repair and expected in business. in the and tough XXXX year-over-year core the former shortened planting car income while geographies than both lower and wet number in manufacturing Group's extremely Group, significantly railcar However, season resulted The lower. margin its profitable, drove lower largely together pretax integration in offset the

our identify achieved $XX implement and at rate run We least goal expense XXXX. the end million savings by to in of

total Group's early exceeded a have savings year ELEMENT The in Ethanol $XX biorefinery goal to third. date expense We came this million. our with run approximately of online rate the

to merged production than the producing of with October, separate planned, Group technology pace began the Ethanol Petroleum and closed, slower by million the the merger Marathon When with four Also group's consolidated. our associated debt we ramp-up cellulosic partner, now our reduce While was been new the the are in results nearly ethanol financial using entities $XX quarter. able has Corporation. long-term business we in were Ethanol fourth

review walk results. now will through Brian financial our for you more a detailed

Brian Valentine

attributable XXXX, Pat, or attributable Thanks, the and of or to attributable In income EBITDA to of fourth the XXXX. increased $X.X share, million. million, and billion. XX% Andersons company of $X.XX to quarter diluted per diluted diluted We're company net approximately on million, fourth per $X.XX reported quarter good fourth of from the the $XX.X on the In share per XXXX $XX per quarter quarter of company net income $X.X in million or to revenues $XXX net on Adjusted Slide XXXX, in $XX.X of net or reported of $XX.X diluted of everyone. now the share we of the number morning share, income fourth the adjusted of million and $X.XX X. million million, $X.XX adjusted $XX income revenues

million, XXXX, $X.XX $XX on year and was the diluted was net or to diluted $X.XX the share, or adjusted billion. Andersons revenues $XX.X attributable per attributable income $X.X Andersons to income net per million, of full the share, For

share, Full was EBITDA $XXX.X $X.XX diluted to which revenues XXXX to These million. adjusted and adjusted million, reported diluted on net the per XX% compare $X net attributable company $X.XX was company per EBITDA our million, $XX.X billion. million, of the up or $XX.X numbers attributable over to XXXX adjusted of income of of income share, $XXX.X or year

tax adjusted income reported was rate XXXX by XX.X% return. XXXX was XX.X%. tax full for effective XXXX full Our that U.S. comparison, tax rate which By adjusted we adjusted our The not are our pretax accounts and tax XX.X%. income effective year on amounts rate was rate year deductible our

believe that increased a consolidation primarily currently entities. of will We in of quarter range rate be debt result Total last long-term ethanol XX% effective to compared as the our XXXX XX%. to tax the of slightly the

these previously debt However, as Pat mentioned, merger at held entities repay almost $XX the we to utilize closed. of cash ethanol to able when were million

compare of Belt XXXX to income quarter shows and pretax graphs year-over-year both from in provide and that XXXX year. a that adjusted Group, income Corn adjusted majority the by we the Eastern full for results wet fell Next, income that quarter. decrease shortfall. for the six came pretax bridge the much in small, Slide whose adjusted late fourth the of harvest $X.X million Trade in The accounts the fourth

margin by our new full of by Trade acquired $XX.X $XX.X the Ethanol's results X, challenging adjusted was pretax to down year to performance to number income of primarily many on Slide results million business environment. million due due lines the Moving strong from Group Lansing. year-over-year, the were up

were and pretax the than reported that year-to-date, income. both reason primary costs income higher acquisition related adjusted quarter For the was pretax

asset and asset ethanol essentially As sales offset the charges. impairment the merger other sand other gains and from

adjusted of a pretax business $XX to income compared of assets each with Slide acquisition. income in same recorded of pretax a to XXXX. pretax asset excludes Current X. income sand Group $XX.X move but million million impairment adjusted beginning primarily we'll Group pretax in reported The with charges, transloading the and of the units $XX.X the of period Now, associated as of on part million, review $XX.X Lansing our number quarter Trade Trade four loss acquired million of

the group's helped performance helped many a late group’s $XX.X to improvement by million, reduction wet XX% million EBITDA. adjusted Corn income lower the merchandising Grain Propane offset $X.X new harvest. planting from Eastern a an Group for as transloading of sand over Solid from the operating mitigate Belt quarter of XXXX performance by Distribution quarter fourth assets results of EBITDA was business. business in Group's Trade small the significant the or result lines Strong the and to

adjusted For $XXX.X to full a million, $XX.X year, or of Trade increase EBITDA improved more year-over-year million, the the Group’s XXX%. than

solid attributable Moving quarter, margins Spot during helped Group quarter. another the trading turned to group quarter early difficult Slide fourth industry fourth the increased an of rebounded $X.X $X.X in the market the the from XXXX. up supply production the us to and earned hedging in later income conditions. ethanol The Increased considering of in driving third-party pretax million, quarter The X, Ethanol fourth million quarter company adjusted quarter. in in

new during by at Production hurt basis to Eastern be less be continued technologies continued to introduced expected. to though the up quarter, However, ramp originally margins continue the biorefinery ELEMENT three corn than and quickly for plants. elevated the

of As of previously adjusted plants. merger that wholly-owned merged Albian entities $XX.X from EBITDA results reported full recorded the meaningful million million. during The owned pretax make were and XXXX. of the early the in quarter $XX.X in adjusted entities group will One revaluation income of EBITDA mentioned with Those a but change more October. XXXX previously, million results, also group's included comparisons the consolidation to a ethanol pretext of improves equity year-over-year income group's the makes the transparency, $XX.X is This Denison interests Climbers Greenville of along operating difficult company attributable the measure. which fourth facility

to primary fertilizers, XXXX in and million small results. nutrients. the Plant adjusted lower nutrients, lawn from about lower XX, were were liquid mostly were the specialty million recorded $XX.X expenses of profit. Slide XXXX. $X.X gross Lower and was Group of the Nutrient in the to for ton similar a higher quarter by but fourth which offsets for quarter primary nutrient specialty pretax fourth Plant improved operating per million but liquids adjusted for fourth EBITDA Margins decrease for quarter, Turning quarter for products. interest marginally was $X much down income Volumes

year, in $XX.X EBITDA from million EBITDA key in and our record down contract which expected was planting full million, $XX.X manufacturing despite For year XXXX adjusted the XXXX. from an in was a geographies drop season full difficult volumes year a X% of

average Group results compared rates quarter pretax credit of challenges averaged Slide in million and XX.X% lower $X.X some XX.X% $X.X the lease Utilization year. and XX, compared ethanol last markets. to million Leasing fourth reflect to for The and to Total Rail quarter last the in XX,XXX controlled, fourth generated million from income sand Moving the average remained to $X.X quarter of compared recorded sales in compared quarter. $X.X the of cars slightly income group cars pretax The of at quarter. pretax lease the XXXX. million fell car on stable to earned XX,XXX third income to the

million $XX.X $X.X on during of barges quarter to and other Repair XXXX. of repair the group The The due gain income not results which Service the was Rail was million year-over-year. quarter. fourth Group were last entirely recorded comparable business maintained EBITDA recorded locations result. the in for quarter, to year's in sale lower marginally the comparable XX

increase of For EBITDA had year from of $XX.X XXXX. Rail million, million the full in XXXX, an XX% $XX.X of

I Lansing little Pat, year over the time and turn made and of things of discussing to some full during wanted to income a back to quarter spend summary to On relating current also we present net we adjustments Before Slide we XX, a reported adjustments XXXX. acquisition. pretax the the

the million year. the total related expenses those costs in the fourth quarter, We for $XX.X bringing of to of incurred acquisition million $X.X

million incur year. expense $X.XX earnings that compensation the expenses $X.XX year. outstanding adjustments $X.XX The was in a based on respectively. per for part finalizing on adjustments impacts $X.X for of per we for $X.X stock our combined purchase and full in quarter we million tax the The the and The million of and XXXX $X the $X.X of result adjustments. earnings trued for are benefit As shares million per these the for of acquisition accounting share and to share tax will of $X.XX up impacts the were relating current related quarter the XXXX. transaction, We estimate income share

per the for million $X $X.XX were the and income share to the Those pretax quarter for of expenses amortization incremental million $XX.X adjusted depreciation the fourth and acquisition. formally full-year. diluted share impact not have $X.XX We related or for per or

expected impact those million expect reflects of non-cash sand and asset XXXX, transloading record and $X.XX quarter the to is years. in impact XXXX to fourth depreciation We The EPS the of charge. $X.X which impairment incremental XXXX in of be amortization those charges of of each

exclude significant plants. we The the On equity $XX.X was Slide most present the the which similar summary we adjustment investments the Climbers the in October. Albian XX, Ethanol gain to in a we of and recorded closed made Greenville made adjustments of million we to on merger, relating our revaluation non-cash

costs was incurred of diluted earnings XXXX. during We recorded in transaction merger. share depreciation quarter which $X.XX relating We net quarter $X.X the to million expense The pretax per to adjustments those diluted also income of million, share $X.XX. the equates two or incremental $X.X fourth in per in of of this million $XX

income We share per and have adjusted earnings not this formally pretax amount. for

about to back like per over for the in anticipate that, or on recording of some relating $X.XX XXXX. to we million $XX in with XXXX and things Currently turn our asset share Pat to comments And step-up outlook. depreciation I'd each

Pat Bowe

from integration were We signs better prospects Trade Plant we those this we we time for Ethanol Nutrient of more year, When than about the we results our work. that as Lansing last the at guarded Brian. spoke Groups. feeling Especially, good but optimistic saw would Thanks, were and early XXXX. be Group, XXXX continued the

confidence also run hitting about EBITDA target $XXX expressed rate We XXXX our million. of

those months some Group good to on XXXX, XX can will earnings through impact merchandising record. what has This Belt provide of assets the Trade negatively continuing Now Corn into among opportunities. well worst we're Eastern also harvest manage but later, the been

prospects, The result half help lowest anticipated ramp-up especially and year. environment assuming late of ELEMENT should current results in year. carbon in score industry's the the ethanol's has plant the margin the continued about cautious improve The in is the of to first

by is that tailwind war will how resolution when While demand. should a to it begin of groups, the drive much the both and resolution unclear China trade be for

for with planting business should coronavirus we're the more It on impact currently XXXX will help material does to corn epidemic While history. of in We a direct the other Andersons. Plant topic of not a think line China, three the increase be as a Group the level have the improve groups to in likely helpful Nutrient results recent in well.

decrease continues which repair the year-over-year and For in North both loadings suggest the American in lower railcar leasing trend could Rail Group, that to widen income XXXX.

our outlook current market upbeat about We than more reflected feel or longer-term continue of reflected the is our we to stock company what price. in what

expense around the last expense Group implement will optimize identify performance. and maximizing other following group initiatives, Trade additional Trade our XXXX introduced the we acquisition, making one, on the In the call, organically focus and and opportunistic growing On Lansing Two, the Group synergies investments. reductions company.

$XX we will integration another We end and cost and $X remain run operating million total confident to carve million of out that this rate the savings company increase in year. expenses by

in cash this technology we at four score our will late up expect generate expect now we that an what products ramp at full operating other be and suite commission, basis. new Three, annual ELEMENT the carbon on ELEMENT biorefinery the an obtain positive sometime We upgrades be technologies of year. industry-leading plants. Four, new free to in ethanol flow

managing to better addition our In to we'll producing on results, capital. focus refine operating working continue

amortization Lansing well below We'll projects. capital expense at maintenance hold recently XXXX, acquisition. to reduce the our debt expense. on spending debt annual increased five, in long-term not reducing the solid but plan of following growth also And We focus depreciation and

continue asset to portfolio to potential will cash. our identify sources We of evaluate

was In just late normal than on less run ago rate and market adjusted reported million. the XXXX. rate pace with of in which target we think than toward of earned hit announced two XXXX, adjusted million run We target conditions, ideal $XXX end on-time $XX of the Yesterday, to nearly market remain the EBITDA $XXX the higher million that by move is conditions. EBITDA years EBITDA more we we million, XXXX $XXX XXXX

in XXXX. both added significant and the the we Group horsepower summary, In Ethanol Trade Group to

over tune better like to more operations to we'll continue to business hand and questions. entertain generate to and expect in and your balance With I'd will sheet our to back cash We happy Joel the XXXX to our produce results. that, to be call

Operator

Thank Stephens question you. Inc. comes first [Operator Instructions] from with Ben Bienvenu Our

open. now is line Your

Okay.

Ben Bienvenu

Good morning thanks. Hey, guys.

Pat Bowe

Dan. morning. Good

Ben Bienvenu

Belt. can traditional I the opportunities than from of you side Corn in about Can in question, businesses, a would the of, think a if when we question How guidance help result be origination an expect you wonder you $X in about through kind the expected ask Lansing? with Lansing the answer, an maybe deliver any alluded Group the balancing to offset to to would to belt? general relative us Eastern to, to challenges? environment then times making us if help continues business as from origination much there's challenging difficult you Corn that make, rule of trade-off simplified when or helpful. And merchandising light want volume the Eastern And I revenue the the decisions, in Trade operating the think of Trade versus what identify two there a help you're offset about you but margin overly you business perspective that's can Lansing of can those of Group, better

Pat Bowe

Sure, Ben.

I think overly where question. very simplified of know complicated It a you're is yet, from. coming I

in done, blending elevators we've markets. has a had and are Lansing's But grain point-to-point Belt not has you Illinois, much protein business and focused had little ethanol Andersons' more space on our the we Ohio Louisiana. diversified export predominantly couple physical Lansing storage a shipping elevators to footprint in where the with assets know, been and Idaho as really of handling and a Indiana, and Andersons trading legacy so west. Michigan, and physical of But Corn and where what grain or assets, So assets just of further a more Eastern were

We good. in in would potentially wheat margins, down, a the belt, east our as some be have season some difficult storage definitely normal that made narrowed. was margins the carries as hurting in well harvest was grain harvest Eastern our production So in had had, but wet what in we cases planting drying

make in as much don't we recent in we wheat on So wheat, the softer east. years as had money storing

breadth trading broad as But the that good as the the from opportunities news pet is Lansing of to propane. food

demand for We that has worked and grain to have lots and been And the to in for there trade markets. very of of relatively that businesses dim in spite well futures the what And its has in quite trading of team, pretty take our XXXX. well. especially and been disparities domestic advantage have performed continue we be a not see a sluggish quite pace, that's market regional domestically. vibrant export We in case corn, to opportunities a

Operator

you. Thank

from question Montreal. comes Bank Ken Zaslow next of Our with

Your line is now open.

Ken Zaslow

morning Hey good everyone.

Pat Bowe

Good morning, Ken.

Ken Zaslow

A One questions. couple was can about for relative there. I'll is outlook? talk your your to expectation of And And separately, you is, the the be margin Ethanol China? new plant, What of cellulosic the rest your structure start plant? what

Pat Bowe

question, we that been we've the now deal talking would Brazilian strong. very South for and whole focused some China markets trade American China. has real, been time, harvest to that's good about on have South supply Ken. the world that's favor cash and A just The an so happened, now American low, all all-time deal a been that has trade in

to we come U.S. Chinese pattern, buying or in purchase real strong the of seen market So haven't ethanol. first that

is And guess, be that that. the will and will about that I happen? So don't we big question will know how and When China. when

to what hit have Ethanol watch shifted food from impact and think ships consumption that I it actually shift. domestic for or domestic won't to we swine of I focus closely. to question hog think a lot see more ethanol, has DDGs how in in think water. coronavirus. impact those now But until about things We'll the China the that that your to African means What fever, China production have an of to I impact

actual bit, of margins trade kind dissipated come little that not of through rumor to It's On went with orders. up the seeing extent. but some deal the a

market is ethanol standpoint. first So margin sluggish year the half the kind of in a of the from

we're wet back We bit up planned. with there working that in we season, introduced expect ELEMENT will phase. originally completed to new the later construction very so focus carbon our plant say the and plant, And phase. us. up that little but California to in we ramp-up position year. a of the pick certification are we in the when for schedule we're than that we've The behind good were a I'd good you When switch delayed really be well, ramp-up technologies a is we're news score And get our still in it's

to higher still of sales market premium for project, talked that looks that. market time bit if the than we $X.XX a and At to about $X.XX a not the California case, to the be little

the we out, changed. marketplace started optimistic firmer when So still the we're slightly it's hasn't anything, about ultimate for than If project. will but ELEMENT that that be what

Ken Zaslow

ethanol are the surprised and that? production, And you at by the of then questions leave ramp-up ethanol I'll

Pat Bowe

Yes.

shutdowns ramp down we've seen right? we then out think this I then off, When market little it years, and slow up for the and production comes a of starts bit. comes to

now a we've industry margin structure. built and an production stocks as has on damper keeps occurred, some ramp-up So which

So it's behavior past somewhat expected because has that's been what been. the

a So demand we see of spring/summer into continues pace out doldrums the season. – get really the more winter have driving of as to these and how

Operator

Our Buckingham Instructions] with Eric question comes next Larson [Operator Research. from

is line now Your open.

Eric Larson

morning Good you How everyone. Yes. doing? are

Pat Bowe

morning, Eric. you. are How Good

Eric Larson

well I'm thanks.

first I good. So your of, grain of thought pretty question earnings kind where they actually kind were would, came my they in is,

quite your bit better. Nutrient Your ethanol Plant better, margins was a were

acres, should XQ inventories in Plant be is, spring, get question expect guess looks still I increase for good, the we setup expecting if I and significant the on pretty good, How corn quarter in the volume we're look this margins. if Nutrient margin the you drag but which the acreage? you first but So get would can industry the second for do

Pat Bowe

be industry the is, late question, good Yes, our a a probably get for gave retailers And Eric. nice farmers We are applications. will in – planted average acres, a estimates XX be opportunity close had that for to we'll fertilizer year is good good that'll and and the overall demand. relatively million a weather some which good pickup fall to probably which that's what

acres, pretty normal that kind additional way. We've planting you has mild great with would to across that. of be on And said, early. relatively and some a shape season. applied for these in And upside with Our had of Be Midwest us. winter as so margin especially to starters corn like returned some most has normal for be a the the we outlook good upside for potential that spring

stable available. ample So during period supplies this there's relatively and fertilizer prices have been

I a think we'll what spring. have to. solid looking good So That's forward we're

Eric Larson

Okay. Then, a the Trade I you quick all were Group, quarter. did year on again the you question struggling and struggle fourth think in

get I better. think the comps

still against fourth profitability start You believe for in also lapped? factor wheat grain? some the high struggled again, difficult very have comps in your QX grain QX Well, storage that significantly in that and numbers, a Was I – we lapsing quarter. those

Pat Bowe

you Yeah, about got I right. think

years So it in also you the I last factor on quarter. and soft struggling. income the storage had that if know fourth three was as remember wheat call we I'll outside a

and think year wheat I wasn't or market enjoyed the works carry three that was where that here been just that's sometimes. it's ago, opportunity we where and here that, years in one two

corn through We and more are using opportunity that space to and that. that beans move handle

when it's market gives So one it – an in opportunity changes, one. another creates like

into southeast, a with good. which been opportunities, market has trade our demand protein So especially here is the strong

the done in think I quite an markets we've spaces. other and market Rail have Eastern some in, trade we where So active we'll and of well those

Operator

time. further I to back at for not I'm like over the turn now questions this closing showing any to you. would John remarks. call Thank Kraus

John Kraus

joining with page andersonsinc.com. are presentation that all information slides at website I mention you also want this our for of additional supporting thank morning. on and We this available Joel. the want us to Investors Thanks again to

sign X. we again upcoming I to Day of our remind everyone want Before Wednesday, off, Investor April also on

first for Time, earnings X, scheduled that results. hope time Wednesday, at is join AM XXXX again we'll well. Eastern when you review XX:XX our be at We Our May then can us next call quarter until

Operator

today's call. participating. gentlemen, Thank Ladies this and you for concludes conference

may You disconnect. now

The Andersons, Inc. (ANDE) 13 Feb 202019 Q4 Earnings call transcript