ANDE - Earnings call transcript Q2 2022

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Operator

Good morning, and welcome to The Andersons 2022 Second Quarter Earnings Conference Call. All participants will be in a listen-only mode. [Operator Instructions] After today’s presentation, there will be an opportunity to ask questions. [Operator Instructions] Please note this event is being recorded today. I would now like to turn the conference over to Mike Hoelter. ahead. go Please

Mike Hoelter

morning, for Good thank for you Thanks, Andersons everyone, second us The quarter joining Joe. and earnings call.

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

performance slides encourage We the as Please most direct presentation could Certain on Slide If differ which these page non-GAAP viewing measure as your of being of attention the will recorded, disclaimers and sync. disclosure via release the press many to be this conditions. and on well to constitutes to recording information measures is are the events, SEC. forward-looking presentation. prepared appendix factors. non-GAAP industry described statements. subject the financial shortly. are of reports commentary comparable respect the These measures. to materially X our supporting our This statements results you risks the the website webcast will GAAP statement contain related this within file Investors today's statements future and Actual in and webcast, the you are factors, various are directly financial financial and a and made in as result be uncertainties. that on the andersonsinc.com forward-looking with views the today forward-looking remarks the with in slides reflect at to of presentation Reconciliations This current review company's included to company's available discussed

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

Pat Bowe

surpassed occur XXXX grain record rebounded to ownership result, quarter bean we good and we quarter, basis and all-time quarter our Renewables their of With XXXX nearly also us values. the second and results. is that terminal strong increases report first with morning this our first a segments We're truck results review improvement plant you, corn nutrient business. to lagged for over from QX year-over-year results at all Ukraine Thank quarter our significant Fleet income. would this trade providing this positions on strong our reflect grain merchandising war of after very had good morning, the of and thrilled everyone. our record. outstanding to results expected had strongly accumulate prices quarter, year-to-date quarter. prior grain three Midwest impact enabled earnings Trade's in our double-digit results. assets first futures XXXX, Trade Group has the second but appreciation 'XX you quarterly in the call joining quarter. last space ownership Thank equaled We Mike,

Our quarter. results feed Of the and note lines ingredients record was subsidiary a quarter. food specialty in U.K. Renewables had business also factors. delivered our strong

decreases a renewables. more record We first application lines. included solid that spring Plant with another other once in coproducts. ethanol positive from from the margins. results Our and renewable delivered of followed offset a margins completed Nutrient very again third-party favorable ethanol, strong than quarter. We season had CI We volume overall outlook strong plants good results product merchandising feedstocks our low quarter good remain that agricultural on in

Brian? he's items. in going environment. of to our now back the cover and flowing to customers I'm to good to be our supply-constrained financial kept I'll inventory When this turn key to remainder some for Brian things over well-positioned discuss finished, execution of Our products XXXX. outlook

Brian Valentine

of XXXX. XX% XXXX to million quarter, XXXX. the Andersons compared from second number increased results in million. of share per adjusted million discontinued $XXX.X EBITDA the of the XXXX, income measures million million to adjusted to continuing was quarter in turning adjusted our In XX or reported was $X.XX quarter for compares of the Gross second quarter for now months million. profit share. per EBITDA This second The $XX.X quarter good diluted and Slide on diluted morning, company quarter Pat, $X.XX $XX.X of second the of exclude Adjusted exceeding X. Thanks, to or of EBITDA operations. Trailing $XXX $XXX operations net We're these $XXX attributable second the everyone. Both

of XX% based recorded quarter effective amount We or non-controlling Our effective quarter to at on for rate. primarily tax tax a attributable loss income rate varies interest. each the taxes the the

forecasting between a XX%. now rate are effective full XX% and tax year We

amount $X main quarter and of cash, The debt At move of are to operations supported $X.X in quarterly we'll capital the XX had XXXX. facility. $XXX borrowing at inventories cash similar the the available marketable second in to levels compared XXXX. capacity working before related Next, changes a of XXXX. represents of to generated the million million end capital of reduction higher compared $XXX.X We borrowing million billion commodity when working growth the liquidity Slide in from we quarter discuss XX, short-term debt. X short-term $XX.X and March business of readily a billion on continuing is and relative June second balance our causes XXXX prices to of short-term of and credit our second High by flow over primary quarter, since

banks that American We North the they we from our in play continue to key good the understand Supply have Chain. role Ag as support

million year, to related take continue to of be approximately half the expect disciplined will we which capital. We which maintenance a to capital approach about $XXX spending, be will for

stated about is less times, debt target of times. EBITDA X.X X.X which is than well currently long-term below Our to our

in evaluate strategic to those projects in growth and criteria. our invest meet We core agricultural continue our and financial businesses that

end program rail the repair of existing assets for after authorization. authorization we to Board the million One to of an of quarter, note, using on up of the $XX have begin a sale for business expect million. repurchase also $XXX item the and closed We share of just this other the

appreciated X. we review quarter, in futures gross reported of Trade quarter. really period to same business each the million second the of profit basis move of Now strong The pre-tax million Slide the $XX.X nearly income same quarter in will income of ingredients and beginning from losses specialty XXXX. first to recovered had on prices mark-to-market basis adjusted doubling than highlighted the a food quarter our pre-tax as on businesses, compared second XXXX. number more comments, that in with a we adjusted Trade stabilized of and $XX.X values during grain trade our

now our is for terminal grain In addition, our income face wheat assets. ownership earning

and also are conditions quarter-over-quarter conditions. supply better EBITDA key keep adjusted be locations reductions Eastern our Western areas better up yield crop second was while from $XX.X their our Currently, businesses some in continue averages. the the significant will impacts belt improved locations extreme With than global draw national results. market merchandising heat are our feeling locations, any this XXXX. grain of quarter seeing volatile. $XX.X Our Trade's million USDA adjusted from Generally, in slightly million, could are the disruptions, negative drought and to EBITDA for quarter of

quarter of X. second quarter $XX.X to of $XX.X Renewables XXXX second million. to pre-tax double pre-tax company number the Moving million the income attributable was nearly Slide income

high. good segment. segment in Margins for and facilities Renewables strong, the values very remained oil were our Our best were ethanol corn very results quarter this production ever

of reflect the mark-to-market nearly Our losses, gains. results million in with also together $XX some mark-to-market reversal prior additional

feedstock Third-party DDG merchandising to ethanol, contributed renewable diesel strong also the and activities quarterly results.

with recovery biofuels quarter $X.X of a share recorded quarter compared share. producer also to program distributed in difference million USDA the ethanol of the Renewables million include $XX.X second our XXXX $XX.X $XX.X Finally, plants. million the million, year. We plant EBITDA the received of second of of being our earnings last in to our second partners quarter total

than Turning second which Nutrient reported million pre-tax in to is million million. Slide of the income quarter, quarter Plant $XX X.The $XX.X higher income $XX.X pre-tax of XXXX business the second

busy While season. than allowed support positioned volume application to product inventory declines. our good customers offset during the ton agricultural serve from spring in and Good to more per lines continue suppliers our us margin our

fertilizer the about I'll million million, an While of XXXX. our outlook some the And in quarter was things $XX.X North price from prices occurred peak Pat March. the XXXX. back over in comments historically late declined high, turn half have second quarter levels that that, with increase from second Plant $XX.X for for EBITDA for remain American they the Nutrient to of

Pat Bowe

our Brian. ag that outlook Thanks, believe We strong. business remains

reductions prices produce from abundant We expect chain America recent the backdrop, weather-related crops fundamentals, market conflict-related time, for that high. will the Black offset supply commodity relatively in keeping this With it's exist crop Europe. order North to global to shortfalls and continues in that important some Sea disruptions including

Storage North through tight our remains the positions pleased harvest, conditions outlook income in for volatile ownership. ownership Worldwide wheat positive. good business at customer our projected trade are supporting has marketing and customers supplies be Currently, to values. in grain markets. returned we're with demand in plans XXXX America, farmer and Our growing our merchandising very our business these sourcing we're focused on for

sources is team conflict challenge due supply complicated international of in Our amid meeting the of more logistics additional to Ukraine. finding ongoing a the

outstanding volatile has needs markets. continuing year to evaluate North customers it second margins acquisition will trading strategy. be better pipeline results in as strong half our Group these in provide meet as their elevation our well American we our managed facilities Our in well year's in regions. challenging to to as added changing in opportunities We're team that certain Swiss had align and last investing quarter third very last service to know Trade unusually match with We our

ethanol for much are lower bring favorably good segment, the costs dry however, In our a exports merchandising margins. impacting overall favorably plants Eastern while good that opportunities. increased harvest corn with believe are in should our expected through our areas We are, preparing fall, facing We higher are corn located Renewables that us Western basis. plants ethanol

continue demand good distillers corn our oil, values and see particularly supports which We for coproducts, to margins. overall strong

are renewable diesel our our the adding crush year feedstock of positive. quarter the to addition, through and well business Board results. and XXXX, is favorable third full remains for margins In merchandising our outlook performing

with and oil recently distiller's innovation technology. announced an refinement agreement technology commercialize Separation Trucent Technologies the corn their front, On to we

Our and four installing additional first module commercial be our results, we with is ethanol at at Denison, will operated plants. excellent plant Iowa other ethanol modules being our

corn With off-season Plant on our oil provide focused typically our with also great producers. spring the application other business third We along for services lower. The quarter will Nutrient upcoming technology to their are finish marketing harvest, to had results ethanol growers a the season.

continued keep While may we It purchasing out. than strong cause remain disruption excited prices, decisions, price market and strong should have drive about efficiently. and seen farmers levels Strong our some prospects could will managing higher prices for fundamentals. while quarter growth purchases. the uncertain continued overall the lowering We global agricultural value fertilizer we're how adding historical income play fourth customers, the Overall, and to remains of and averages. to our safely for committed demand farm risk operating delay

strategy cash balance sheet, be on our of American Our key is able in our Ag in focused profitably to With Supply strong focus, and role serving in these Chain. we North grow the the exciting expect our ag needs customers sustainable strategic to flows markets.

happy capital team mix and Our proud and growth renewables centered our around excited be fertilizer our very for the to of the of call that and future. With projects I'd year first pipeline and our and your this is of back questions. grain, half our balance accomplishments about segments. that, hand the contains I'm for to entertain to M&A outlook a and Joe, like for we'll prospects

Operator

will question-and-answer ahead. go question first Our the Zaslow from will We Instructions] BMO. with begin [Operator Ken session. Please now come

Ken Zaslow

guys. morning, Good

Pat Bowe

Ken. morning, Good

Ken Zaslow

Just questions. a of couple

like your seems give the about cause how to guys right But the -- You in a alluded you place think are you the little particular, corn. you be process It And able might seems really given Can down on developing. bit it's yield. in for be collect concern assets, it? just terms mean, it there to thought of it a like to any crop in I little crop situation. how is

Pat Bowe

a by that Kansas Ken, was reference, impacted because report hot in the good government little Yeah. crop particularly the Nebraska. West good Far And the the conditions impacting yield improved really into USDA question, and That's weather, and Missouri the number. a of bit and dry a $X.XXX now have with point been

Ohio, and of be the soybean major production, our tributary the of their position are actually those really the cases. good. we And some most outlook while on feel look And record our about Michigan conditions next forecast have be won't know, good assets good about in crops month. assets. the you We Indiana, The feel improved the real important in will Inlay, assets. storage to As East. in assets corn it But here those

Ken Zaslow

you the second Swiss progress side -- as it's your is, as Can how diesel how you in you're talk can talk well also the your having renewable businesses, question you're out. renewable my -- -- about play starting both and trading about to the

Pat Bowe

point. good Yes, Sure.

mentioned able to been feedstock. to we our technology license trading diesel oil before very we've volume and year off vegetable on we desk calls, corn a that and added comments, As own business. I bullish started well to for other the my a oil demand ago, diesel and with for based mentioned There's production sourcing other grow fats in a corn also technology our outlook renewable over we a greases. We've that's Trucent, renewable others. and provider, sell

others plants, but oil specifications like then not to the shipped that industry be be and and directly to to further can we'll treated be cleans facility. own RD that doing we'd So, only extend up our at an corn at in it have not

So, good we a also think technology for overall that's can other grow the space. where in areas feedstock looking renewable we we're and

for that time good for and think a to area grow. it's we business segment, our an So, exciting that's

part Your was of the question on... other

Brian Valentine

Swiss. Yes.

So this Brian. is Ken,

I You say last I expected. we would had And call would other the performing about is are had asked year Feed. would now we also what Southwest as about even that Swiss bolt-on acquisition our office that those and Swiss. say

the So, in they're with on had... of performing we track kind and line expectations

Pat Bowe

much the we're has and flows done and supply to we trade very Africa, of East into get Middle do need out see help to those complement closely to very disrupted around. supply some ports of Africa. lot Odessa multilateral and with to countries I of the shipments excited Obviously, opened them supply to Middle wanted those And in and in very team were a team We the adapted there. customers try moved East the our get agreements worked well. chains the to and And and

But in So that's a our team overall. Switzerland a bright spot industry job. nice done for our has really is

Ken Zaslow

that like more. like then there, can EBITDA? new I'll one How but And ask I does can I leave to talk this you year does change? time as type return the characteristics? in two technology, what of The just it appreciate and And Not that years, about how next incremental year, add your always.

Pat Bowe

additional Ken, right purification prices, Sure. step can per and On just proven $X.XX that Corn an pound we've to oil, the customers. add and now, demonstrated that with

want huge, are we to plants. not build quickly our on those into to these So, actually Again, bring These facility. you that plants. a additions are skids big existing modules. They're

other to commitments diesel other would I we our to existing our about those experience. out the producers. capital oil and renewable to So plants earlier, sell those to for merchandising to and just get play. have we made build that, at be able plan corn talked also With oil built provide

to oil, and of book our build us. for that to bottom corn would profits like we'd line So, add additionally

Ken Zaslow

new on and I it. congratulations Thank you, quarter. a appreciate guys

Pat Bowe

much. very you Thank

Operator

from Our ahead. Ben Capital come Markets. go Street with question next Lake Klieve will Please

Ben Klieve

for congratulations level. is and here. I on year kind over high on quarter of kind my the question a non-cash wanted to very first a elements Thanks of My quarter focus of taking last kind the on question and great so. or the guess of I in

And are -- kind end that from $XXX number for -- the And of you the the what expecting do you of kind XXXX $XXX gains second guys -- what within then rest the of and of address If you of gains? losses? much can non-cash guys quarter? up where how do then here really, non-cash much million, how of you TTM made and EBITDA is

Brian Valentine

this Brian. Ben, is Yes.

would what segment, we small of the in talked $X think had what pretty I previous mark-to-market that lot reversal in because proportion through. would characterize amount, is million actually non-cash the put about I gains, we if noncash to Renewables I as even it's range saw probably to $XX of losses million the say a come a we is have of it

million million So, a range stuff up of that, balance there. we $XX had sheet quarter mark-to-market beyond come probably on through. ton $X not hung end in will that that of But to in of the non-cash

Ben Klieve

All go -- great. right. That's I sorry, ahead.

Pat Bowe

part more is second question second your Pat. outlook the half. Ben, was of for This about

last fourth on ethanol ladder -- ethanol. As we're I PN, season for ethanol year the mentioned, spring to big application into for match fourth you good season off board is ethanol. stood the as in in we're very hang And the the need the kind optimistic we we a very crops. we in outlook crush that had well. do money season, be had shows, make up balance But tend a year driving Remember I quarter farmer and But number, which the to in summer climb a the finishing year. most and good, back-to-school positive tough mentioned then margins have now. sales go of it you but is I to produce margins declining year. plus, optimistic during so is last the to the mentioned income last quarter very as might in of for year, we're your good of about on we

very portend is high, say, fertilizer see would fertilizer price we'll good sales, though to even slipped some. that is So question they've still

I when cautious still quarter last So, could fertilizer, next fourth our bit tributary production kind We're accumulate a fourth able be optimistic to that we away rallied grain really basis Harvest and to merchandise trade basis When off comes market remained at a put quarter in here in about the season. already. assets. that the to to not we're great ownership able that quarters. strong our it we category We'll if grain coming little BC futures we're match in fertilizer talked we're Surprisingly, of very positive the the from shipments about of Louisiana were far -- a to about year's but we business, weekend. good really

So, the I corner. is around the just fall mean

good about we're our So, strong business, we feeling XXXX. ethanol like a in we're Also positioned. how had quarter very fourth

that a the business fundamentally to would tall order, solid across we're So, segments. each but lap of fundamentals be very three

Ben Klieve

kind very Thanks, adjustment Brian. for Perfect. quantifying that's and mark-to-market here. Pat that the Thanks helpful, of

inputs. me, anything, is how Anderson's space doing and those differently of right queue. year about, if are two, -- non-cash quantify a in the that get the a there's EBITDA the today? that so in were in kind the around here given what, It how particularly they ahead think the farmers ahead totally the time, pendulum of something helpful quarter number. are element a how market -- if highlight focusing And that really to if just back one, business. of to talking for on I the to get to something really chain, I'm in set kind talk one the than those in the more are that's I'm everybody. you in supply much the That’s -- the Pat kind My to challenges Thanks you themselves lot then to of and it but of I'm hearing sympathetic can seeing with it's back next up swinging industry I'll about second the fertilizer space. that farmers fertilizer question the is of cash lot lot a talk adjustments, for usually in challenges I’ll you year looking a for you are given wondering touches queue. on overwhelming now

Pat Bowe

about in Yeah. America. Ben, farmers good points it’s the North very a

declines tight Recent not we growers weakness said, as hot production has have peak it, Ukraine U.S. of well So, into war dry in as it's Europe really as to a production. coming as right, weather situation South some had the S&D we the because with really our for critical helped. America in

the So, globally. been in has Nature not year Mother great past

would some land more ever. their critical rail income stewards the been as and between et in U.S. than good do we the as levels are which American in So, good gives into time, and say very that proper farmers I ability cetera, nutrients. U.S. to Florida, that we've farmers should production, be think in and will putting them they've North mean -- been primarily is as supplied We good production supply shape distribution network. the invest of which domestic a in are just XX% Canada high

the right position the products right had at of amount we've right the So, time. in

season, So, in the is plan when our working the price that we our sure to up price fertilizer season. do timing just they we're fertilizer with do flat and to job and risk growers for and market make again next the lock that's on And next inventories management, that. should load and in

good said, the there's the fertilizer. Midwest out, application kitchen decisions lot discussions all of these now a of So, years. out tables make growers a one, at about happening Like that year two, right around go three you

So, on them as well and decisions closely and farms. their their plans grain sustainability the we're with they long-term carbon as their can for working make marketing that plans best on economic

time good and they markets agile a farmers volatile be American the and very now. to right need it's are So, but for

Operator

from go next Instructions] [Operator question Partners. with ahead. Please will Eric Seaport Research Larson Our come

Eric Larson

great Good quarter, and Thanks. morning, Yeah. congratulations.. everyone

and really inventories but I'm appreciation, me very So reversals your great quarter you Pat, over MTMs, second of your the at your came the some you well comment $X billion second that markets your some really and a looking year. for even in give nicely Can seems to on great of on half, nice merchandising back basis visibility quarter, next still RMIs it maybe your first that? are actually into

Pat Bowe

player market I able as et a supplier some contract millers, changed CME know, the against to Traditionally, as well fundamentals, think the wheat make widening all and a as spreads. softed be are have deliveries with wheat storage Eric, wheat on of we Yeah, cetera. of wheat to you the good terminal

wheat wheat. also income to able customers, the to but to and be -- very able wheat off storage a little able production quality quality our earn of even though bit, was on good and very been blend we've we've make for So, been was good,

capture carries. amount the to wheat as in those enable tonnage is we of up So,

We have domestically quite export been beans. regularly, and shipping corn and on both

So the then Like of anxiously new we'll just and the corner look crop. is arrival And that continue. are said, inverted. I Louisiana around the will markets forward to

year. our just it was So, it's for assets, Louisiana a like good opportunity last

So general, we're about for in outlook positive merchandising. the grain

Eric Larson

Okay. Good.

on folks know have conservative obviously you want lot in been your get because your sell relatively to you it high-cost fertilizers I are fertilizer. caught question inventory of -- have a on pipeline out. and inventories, don't for to a So with just

So have drop fall? the with fertilizer now pretty how in more positioning are fertilizer putting inventory recent sale for -- are fertilizer with sizable you and the the fairly for -- market? Or bought prices, you this yourself you

Pat Bowe

Yeah.

warehouse note Eric, that important it's very rail of and good think, I fertilizer large assets. we have network distribution to

we good able be able quantities that us, work product. our we take ship suppliers them for And and to and they're have can with feel. key home provides year-round for an when to So, advantage that

We've a spite been rail have the in as plan job regard, business that disruptions done that normal of probably In usual. X.X in do as to We happening good years. well. So, last we're that. of

available So, last Volume a customers. off ample was for farmer our we'll inventories little year. bit have

income bit return optimistic that think been with high And this I the prices. more more need tied good a a for to probably production, has year, little somewhat and volumes. was think normal to I maybe to strong farmer we're

from not the product it's at can the on We're quantity right having We're focused time usual. business as much. too get line, imported not a on country right that bottom foreign or product and very a disrupted. place So reliant and Russian

markets markets as we going quarter products point little when your trimmed thing, on is we need have So, from down it's being a to the correction, here probably fertilizer, forward. go but last in the fertilizer a still which be for good

Eric Larson

Got back it. get and then I'll final And then question, my in queue.

guys you program. have $XXX million So, buyback share

repair another now was the $XX close million XX%, down from your stock You've rail of from to XX%. business. The sale received

you, been starting kind that on earlier? of So share buyback why haven't

Brian Valentine

Yeah, Eric. ask, we you thought question a Eric. might That's

we whether repurchase execute of related the the a or into And that that go and authorization. have know, under place in I'd thing you a to timing. As we not say there's factors is only plan variety

Eric Larson

Okay.

give question economics driving second -- good. Let just one you Can The exports of your half? more us ethanol. good. better good all about miles there. It's kind you the down, continue tailwind looks for have bit me but be little very those have It like just factors feel blending show can really a -- of Pat, in are a to been in will come how

Pat Bowe

really That spiked of conditions been and are locations where corn natural realized prices Kansas Yeah, the plant is I estimating But has of those tailwind we not because billion the and is in as Colwich, has Nebraska Kansas, in it exports. weather could of attractive hasn't really should think could cetera. basis some prices some port in production the be about the a if our some up well. higher gas very a potentially high We're for basis get high. even level. conditions, basis et corn see there. It plants, yet. that gallons Unfortunately, assets more maybe right really than corn outlook We're industry. our unusual us. set softening be in We Particularly our than X.X with others others western Western very market for probably

co-product from ethanol very because the is the under and run our besides been and think I outlook to very little positive. want other importantly, And producers, program cash. bit corn government values administration the industry. about as towards our as values receiving government high oil pro-feed solidly remaining money well We're for optimistic renewables the more legislation more pro the strong, more Biden that's and supportive being a for

ethanol So industry. tailwinds across general, feeling that, of in the a

Eric Larson

congratulations again. guys Thanks, right. and All

Pat Bowe

much. very you Thank

Operator

remarks. Holter Mike conference concludes like question-and-answer over session. This back to turn our I'd to any the for closing

Mike Hoelter

Thanks, joining this morning. us want Joe. for all to We thank you

third Our conference our Eastern for Daylight XX:XX at results. when call will X, next scheduled a.m. Wednesday, November Time quarter review XXXX, earnings we is

The As always, and your thank you Andersons, interest you we speaking to in with look soon. forward for again

Operator

has conference presentation. The attending now concluded. you today's for Thank

You may lines. disconnect your now

The Andersons, Inc. (ANDE) 4 Aug 222022 Q2 Earnings call transcript