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Trade, renewables generate solid Q3 results for The Andersons

Trade segment benefited from continuing global supply and demand imbalances

The Andersons Logo 75 years 2022

Strong results from The Andersons’ trade and renewables segments increased the company’s earnings in the third quarter ended Sept. 30.

Net income from continuing operations attributable to the company was $17.4 million, up from $13.9 million in the same quarter a year ago.

"Great results in our trade business led the way for this strong quarter," said President and CEO Pat Bowe. "The team executed well and we had positive results from our base business as well as the new growth investments. The renewables team also performed well in the quarter, despite declining ethanol crush margins and planned maintenance shutdowns."

The company generated $568.4 million and $364.6 million in cash from operating activities for the third quarters of 2022 and 2021, respectively, and $50.7 million and $55.6 million in cash from operations before working capital changes for the same periods, respectively.

Working capital remains higher than is typical, due to business growth and high commodity prices that impact the value of inventory and accounts receivable.

"We also made progress against our growth strategy," said Bowe. "We announced the acquisition of Bridge Agri - a pulses and pet food ingredients company headquartered in Lethbridge, Alberta.

"We also recently announced the acquisition of Mote Farm Service, a farm center located within our core geography," he continued.

"Bolt-on opportunities like these, that are well-aligned with our core grain and fertilizer verticals, remain very attractive growth opportunities for us."

Trade generates strong earnings

The trade segment recorded pretax income of $40.7 million for the quarter compared to pretax income and adjusted pretax income of $42.0 million and $27.6 million, respectively, in the third quarter of 2021.

The segment benefited from strong elevation margins, particularly in early harvest geographies, and excellent merchandising results across the portfolio. In addition, well-positioned animal feed ingredients and organic food and specialty inventories generated good margins.

The majority of The Andersons' assets are located in areas expected to experience above-trend yields. Continuing global supply and demand imbalances due to production shortfalls and logistical challenges are expected to keep prices relatively high and allow for continued merchandising opportunities and strong elevation margins.

Trade's third quarter EBITDA was $60.5 million, compared to third quarter 2021 adjusted EBITDA of $43.9 million.

Renewables generates solid Q3 earnings, strong margins

The renewables segment reported pretax income of $15.9 million and pretax income attributable to the company of $8.4 million in the third quarter compared to a pretax loss of $5.2 million and a pretax loss attributable to the company of $3.6 million realized in the same period in 2021.

Nearly all of the improvement from the third quarter of 2021 resulted from better margins in the ethanol plants. This was particularly evident in the eastern plants where corn basis was lower in front of an expected good harvest.

High co-product values continue to support results. Increased corn basis in the western U.S. may negatively impact ethanol margins in that region, while eastern corn belt production facilities are well-positioned for corn supply.

Expected margin declines into the fourth quarter will negatively impact performance as compared to the fourth quarter of 2021 when industry margins were at record highs.

Renewables had record third quarter EBITDA of $34.0 million in 2022, up $14.8 million from 2021 third quarter EBITDA of $19.2 million.

Plant nutrient ag business solid

"Within plant nutrient, ag businesses continued to see high margins, however, we took some write-downs in our lawn products inventory," said Bowe.

The plant nutrient segment posted a pretax loss of $11.6 million, compared to a loss in the prior year of $5.8 million in this seasonally low third quarter. As expected, margins remain strong in the core wholesale nutrients, farm centers and specialty liquid products.

In the granular and contract manufactured products, sales volume and margin declined on lower demand, production challenges, and inventory write-downs. Good fall weather and strong farm income are expected to support fall application rates in the core ag businesses.

Plant nutrient's third quarter EBITDA was $3.1 million compared to 2021 third quarter EBITDA of $1.8 million.

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