Q4 2021 Andersons Inc Earnings Call
Thank you for standing by welcome to the inter since 2021 fourth quarter earnings Conference call. At this time all participants are in a listen only mode. After the speaker's presentation. There will be a question and answer session to ask a question. During the session you will need to press star one on your telephone as a reminder, today's program may be recorded and now I'd like to introduce.
Your host for today's program My culture, Vice President corporate controller and Investor Relations. Please go ahead Sir.
Thanks, Jonathan Good morning, everyone and thank you for joining us for the Andersons fourth quarter earnings call.
Have provided a slide presentation that will enhance today's discussion if.
If you're viewing this presentation via our webcast the slides and commentary will be in sync. This webcast is being recorded and the reporting and the supporting slides will be made available on the investors page of our website at Andersons, Inc. Dot com shortly.
Please direct your attention to the disclosure statement on slide two of the presentation as well as the disclaimers in our press release related to forward looking statements certain information discussed today constitutes forward looking statements that reflect the company's current views with respect to future events financial performance and industry conditions.
These forward looking statements are subject to various risks and uncertainties actual results could differ materially as a result of many factors, which are described in the company's reports on file with the SEC.
We encourage you to review these factors this presentation in todays prepared remarks contain non-GAAP financial measures reconciliations of non-GAAP measures to the most directly comparable GAAP financial measure are included within the appendix of this presentation.
On the call with me today are Pat Bowe, President and Chief Executive Officer, and Brian Valentine Executive Vice President and Chief Financial Officer.
After our prepared remarks, we will be happy to take your questions I will now turn the call over to Pat.
Thank you, Mike and good morning, everyone.
Thank you for joining our call to review our fourth quarter performance.
To review our overall operating results.
<unk> had a best ever fourth quarter.
In addition, some of our reporting segments had record performances and I'll touch on them as we walk through each business.
As we noted in yesterday's earnings release AG fundamentals have been strong during 2021 and our team's performance has been outstanding.
We've been focused on solid operational and commercial execution and are seeing the benefits from recent growth in new markets.
Our adjusted EBITDA from continuing operations of $130 million and $353 million for the fourth quarter and full year, respectively were also records.
The trade business had a very strong fourth quarter, earning adjusted pre tax income of $26 9 million, which capped a record year for the group.
Our fourth quarter results were led by good performance across our asset footprint.
The food and specialty ingredients business also had a strong fourth quarter with results better than 2020.
Merchandising results remained healthy but didn't match the exceptionally strong fourth quarter of last year.
Also performing well in their full the first full quarter, while Swiss trading office in the recently acquired southwestern U S dairy feed ingredients business.
We recently renamed our ethanol segment renewables, reflecting the diverse growth opportunities in this broader category of products and services.
Renewables had its best fourth quarter since 2013, which was at the height of the ethanol buildout.
Crush margins were very strong as industry production struggled to meet demand.
We experienced good operational performance at our ethanol plants.
Sales at record prices contributed to our performance and continuing high commodity prices also increased the value of our feed ingredients.
Our ethanol and renewable feedstock trading team had a very successful quarter nearly doubling our 2020 results.
The plant nutrient business closed out.
Best year ever with a record fourth quarter, driven by strong margins within our AG supply chain and industrial product lines.
These results reflect optimal weather during application periods higher yields requiring replacement of nutrients increased slower income and industry concerns over limited supply.
These were partially offset by the labor challenges and input cost inflation that was continued in our manufactured products business.
I am very proud of our team and their performance over the past quarter and for the entire year executing well in these volatile markets and staying focused on serving our customers.
We're also excited to have recently been recognized as recognized in the Forbes list of America's Best employers.
I'm now going to turn things over to Brian to cover some key financial data when.
When he is finished I will be back to discuss our early outlook for 2022.
Thanks, Pat we're now turning to our fourth quarter results on slide number five.
In the fourth quarter of 2021, the company reported net income from continuing operations attributable to the andersons of $32 $8 million or <unk> 95 per diluted share.
And adjusted net income of $39 $2 million or $1 14 per diluted share on revenues of $3 $8 billion.
This compares to the fourth quarter of 2021, we reported net income from continuing operations attributable to the company of $17 3 million or <unk> 52 per diluted share and adjusted net income of $18 5 million.
Or <unk> 56 per diluted share and revenues of $2 5 billion.
Adjusted pre tax income attributable to the company nearly doubled to $52 5 million when compared to the fourth quarter of 2020.
Due to the sizable increase in the performance of renewables in plant nutrient coupled with continuing strong performance in trade.
Operating administrative and general expenses increased $10 6 million or 11% for the quarter when compared to the same period in 2020.
With much of the increase relating to variable incentive compensation expense on the strong performance.
Operating costs relating to our new merchandising profit centers and some stranded costs previously allocated to our rail business.
Adjusted EBITDA from continuing operations was $130 million in the fourth quarter of 2021, a quarterly record and exceeded the 2024th quarter by $59 million or over 80%.
For the full year, adjusted EBITDA was $353 million more than double our 2020, adjusted EBITDA and as Pat mentioned, an all time record.
In addition to the full year EBITA record. We also set full year records for revenue and gross profit.
Now, let's move to slide six to review liquidity and debt.
We generated fourth quarter cash flow from operations before working capital changes of 80, $84 $4 million in 2021 compared to $74 6 million in 2020.
Full year cash flow of $322 million exceeds our 2020 cash from operations by over $120 million.
We have seen a seasonal increase in short term debt as the volume of readily marketable inventories has increased from year end 2020.
And commodity prices have remained elevated.
Short term debt has increased somewhat but after deducting cash on the balance sheet at year end, our net short term debt position is below 2020.
Futures prices in the grain markets remain high but down from the levels earlier this year.
Typically our highest borrowings occur in the spring as a result of our seasonal businesses.
We continue to take a disciplined approach to capital spending and investments, which were $82 million for the year.
We expect 2022 capital spending to be in the range of $100 million to $125 million.
We have reduced total long term debt by more than $320 million and have met our stated target of having a long term debt to EBITDA ratio of less than two five times.
With lower leverage and a stronger balance sheet, we are well positioned to invest in our core agricultural businesses.
Now I'll move on to a review of each of our businesses beginning with trade on slide number seven.
Trade reported pretax income of $18 3 million and adjusted pre tax income of $26 $9 million.
<unk> to pretax income of $28 3 million and adjusted pre tax income of $29 3 million in the same period.
Fourth quarter 2021, adjusted pre tax income excluded approximately $8 3 million in asset impairment charges, primarily related to sand assets.
Elevation margins in our grain assets increased significantly from the fourth quarter of 2020.
Merchandising income remained solid in the quarter and our Swiss trading office in recently acquired southwest U S feed merchandising profit centers also contributed to the second half results.
Trade had adjusted EBITDA for the quarter of $41 9 million.
Compared to adjusted EBITDA of $45 8 million in the fourth quarter of 2020.
For the full year of 2021 trades recorded our best ever adjusted EBITDA of $150 9 million compared to $95 5 million for the full year of 2020.
Moving to slide number eight renewables reported strong fourth quarter pretax income attributable to the company of $26 5 million.
Compared to a fourth quarter 2020 pre tax loss attributable to the company up $3 5 million.
Ethanol crush margins were considerably higher during the quarter and high corn oil prices continued to add to our results.
Sales volumes were up as a result of production combined with additional third party ethanol trading.
Merchandising of co products and renewable feedstocks also contributed to the strong results.
Renewables recorded a best ever EBITDA of $78 million in the fourth quarter of 2021, compared with $16 $2 million in the fourth quarter of 2020.
For the full year renewables generated record EBITDA of $166 3 million a significant increase from the $33 3 million of EBITDA posted in 2020.
Turning to slide nine.
Plant nutrient business posted record fourth quarter pretax income of $15 $9 million.
Up sharply from $3 2 million in the fourth quarter of 2020.
For the full year plant nutrient pretax income was $42 6 million more than double the 2020 results and also a record for this segment.
Continuing the story from earlier in the year, well positioned inventory with continued demand led to solid margins per ton in our agricultural and industrial product lines.
Our manufactured products business, which includes our turf and specialty and AG recycled products experienced a small volume decrease was challenged by inflation in labor and raw material costs.
Plant nutrients EBITA for the quarter was $23 5 million.
More than double the $10 8 million of EBITDA. It had in the fourth quarter of 2020.
For the full year EBITDA was $72 9 million, which was up over 54% for the year.
With that I'll turn things back over to Pat for some comments about our early 2022.
Thanks, Brian .
Coming off a strong 2021, we're excited about the momentum we have coming into this year.
AG fundamentals remain strong and we're well positioned to execute in this environment.
Global grain supply and demand is expected to remain tight and.
And volatility in commodity prices are likely to be impacted by any potential supply disruptions.
We expect U S demand for soybeans to increase help us fulfill growing global vegetable oil demand and for domestic renewable diesel production.
Global fee demand for protein production should also continue to be strong.
We expect that 2022 ethanol production demand for corn will also exceed 2021.
South American weather continues to be our concern.
And we're also influencing grain volatility worldwide.
Northern Hemisphere spring planting conditions will be critical to meet this growing worldwide demand.
Our broad trade portfolio benefits, both from merchandising brains for consumptive demand.
As well as providing storage space, which we see as continued complementary opportunities.
We expect to continue to navigate well in these volatile markets, while maintaining a keen focus on risk management.
This year to date seasonally weak winter driving demand has reduced current ethanol crush margins from the highs of last quarter.
We continue to look for opportunities to hedge our crush when available and should benefit early in 2022 from hedges, we placed in the fourth quarter.
Currently ethanol prices are low, but we expect production declines during the inventory.
Sorry, the industry maintenance season, and increased driving demand will help us to improve pricing into the second quarter.
The feed ingredients. We produce are currently supported by high overall grain prices, we expect core values remained strong.
Due to the growth in renewable diesel.
Our intention is to continue to expand our presence in renewable diesel feedstock supply.
We anticipate that our plant nutrient business will maintain momentum into early 2022.
Producer concerns over input pricing and availability have generated early orders for the new planting season.
Planting decisions by growers that we serve as well as timing of planting windows will influence.
Our results.
We're closely monitoring risk in our core fertilizer positions sub guard against any potential fertilizer market price resets.
We anticipate further growth in our industrial product lines.
A positive nearby outlook.
And our refresh strategy, which I'll discuss in a minute.
It makes us excited about our prospects for growth, particularly in sustainable AG opportunities.
We remain committed to adding value for our customers managing risk and operating safely and efficiently.
We will celebrate our 70 <unk> anniversary in 2022.
We've grown into a much larger stronger and more nimble and innovative company in the North American AG supply chain.
We look forward to providing continued extraordinary service to our customers supporting our suppliers and communities and rewarding our employees and shareholders for many years to come.
Now I'd like to close our comments by turning to slide 11, and comment about our growth strategy.
Over the last year, we've introduced a refresh strategy with a focus tied to our core agricultural markets.
Unison play a key role in the AG supply chain servicing customers from farm to Fork.
Agriculture has been impacted by the desired produce more sustainably and we intend to be a part of that solution.
As this impacts all participants in the AG supply chain.
We're firmly entrenched in the U S AG supply chain and are extending our presence into international markets.
With our stronger balance sheet sustainable cash flow and tighter strategic focus we anticipate being able to participate profitably in these growing markets.
We continue.
To evaluate opportunities for growth within our core agricultural verticals of grain and fertilizer.
We executed on two of these projects in the last half of 2021 and have a variety of projects that are within our growth pipeline.
Another specific area of growth is in the supply of raw materials to renewable diesel manufacturers.
<unk> established a trading desk over a year ago supplying new renewable diesel plants, and we look forward to expand our product offerings into this growing sector.
We're also enhancing our own corn oil production processes, and evaluating technologies to improve yield and quality.
In addition to focusing on current product lines, we are evaluating opportunities in new growth areas like carbon capture carbon trading and assisting growers and their carbon reduction efforts.
We're also building on our strong position in pulses by exploring additional supply to plant.
Based protein manufacturers.
As in the past premium food and feed product supply chains are areas that we will continue to grow and develop new products.
We plan to expand our organic fertilizer offerings to alignment with partners, which should create new organic products for us to market.
We're developing innovative new fertilizer specialty products for customers and growers in crops beyond traditional row crops.
We will also consider M&A within our core areas of strength and product line extensions for our manufactured products, including industrial applications.
We will continue to take a disciplined approach to capital allocation.
And stay true to investing within our core.
With our strengthened balance sheet and strong team, we are well prepared for this strategic growth.
With that I'd like to hand, the call back over to Jonathan and we will be happy to entertain your questions.
Certainly our first question line of MP Avenue from Stephens. Your question. Please.
Hi, Thanks, Good morning, guys and congrats on a great year.
Thank you.
Pat I wanted to start following up on your comments around.
Some of the sort of de carbonization endeavors that you guys are looking at and specifically I think I understand how carbon capture would influence the Ci score of your.
Plant production.
Curious.
If I think about assisting farmers with reducing the carbon intensity of their crops is that something that you can incorporate into like a pathway to the LTA at best market in California, as you think about our plan.
Like element or something like that or how should we think about the impact of that to the value of your production.
Very good question and thanks for bringing that up I think this macro trend of de carbonization is with our egg supply chain business across the U S and we hear a lot about it.
I was specifically talking about carbon capture at an ethanol production asset.
We do some of that today with the production of <unk> for beverages, but that isn't the same type of environmental benefit I think what we're really focusing on is we're working with farmers.
Because of our fertilizer business and because of our consultation with them about different types of cover crops are different.
Farming practices for them to capture.
Carbon at the farm and be able to trade those carbon credits and move them into the.
Parts of the market that people want to pay for that we think we can play an interesting position. So we're a little bit of a unique company and that we have a fertilizer business and they work closely at the farm with.
With the fertilizer inputs with growers and our grain buyer and an ethanol producer. So we work across the whole chain to the end market. So we think theres opportunities. There we don't have any major announcements at this time.
To talk about but it's something we're all going to be learning about and we feel theres going to be lots of opportunities in this.
De carbonization type space or overall, environmental focus and agriculture. So.
Stay tuned for more specific actions, we're taking so far it's been a little bit more trials in and working on a smaller scale, but it is definitely an area of opportunity.
Okay I understand now very helpful. Thank you.
My second question you alluded to this in your comments about hedging some of your ethanol production in the first quarter.
Two part question. One is are you guys able to run at more full capacity utilization.
Actually three part question.
Part one part two.
Are you able to talk about how much of your production in the first quarter, you've hedged and then bolting on a third parts of the question.
You talked about kind of a bottoming out of trends in the ethanol market and improving gasoline driving demand can you talk about your near or intermediate term outlook on the ethanol market.
Yes.
You have the $1 billion collection, there is about what the outlook is going to be and it's always tough when we enter a year to forecast exactly what.
Driving demand is going to be in the ethanol production outlook for the year.
Specialty coming off a couple of Covid years, right I think we're feeling pretty good.
As I said coming off if you want to call. It COVID-19 years with reduced driving that we could see some improved driving we need other forecasts about big spring break week, driving and people going back to work. So that's probably some positive news overall for fuel demand.
We have a very high price crude oil environment as you know right now with geopolitical situation being what it is.
We'd like to see.
<unk> pick up going into the spring as we get a return to normal driving miles, but also our seasonal plant shutdowns will see across the industry.
We have done hedging in the fourth quarter for early in the first quarter of this year you always look back we wish you could have done more but we can try to take advantage of opportunities when we see them.
But we do are probably optimistic about the outlook.
Because the fundamentals for ethanol it look to be good, albeit margins today. During January you have softened quite a bit which is typical for this coming year. So I'd say at this point early in the year and pretty optimistic about what they could be.
Okay great.
My third last question is the railcar repair network any progress there around.
The divestiture of that business and what is the receptivity of the market if youre free to talk about it.
Yes, Ben Thanks for asking that this is Brian I would say, yes, we continue to make good progress I think when we announced that transaction. We said we expected to close the sale of repair within certainly within a year and more like within six to nine months and so I would say we continue to believe that we're on track to.
With that completed in line with what we've spoken about previously so I think we feel we feel good at this moment.
Okay, Great I'll pass it on thank you.
Thank you. Our next question comes from the line of Ken Zaslow from Bank of Montreal. Your question. Please.
Hey, good morning, everyone.
Okay.
So you hit your 2023 target.
Quite a bit earlier than you expected.
So do you think that you have the foundation from which to all the capital spending and the efficiency programs to use this as a new.
Is it.
Or do you kind of frame this year going forward.
And again I know you just announced the 2000.
'twenty three.
<unk>.
It happened earlier than you expected, which is always a good thing, but nevertheless, a high class problem, how do you kind of frame the next call.
Couple of years, now that you're kind of in a better situation than you thought.
Putting more capital how do you kind of played out.
That's really good question, Kevin like you said.
A good problem to have when we set the 2023 outlook targets for 350 to 375 again also that was the time when.
When we set the original goals.
Including rail we would've been over 400. This year. So we're happy with the results of <unk> 2021 hitting $3 53, we're very pleased with that.
We're pretty excited about the fundamentals across each of our business.
However, we do acknowledge there were a few market dynamics that happened in 'twenty, one that may not fully repeat.
As you remember we had a very steep inverse in the trading business, which we were able to capitalize on whether that happens next year or not that remains to be seen but that was something unique in 'twenty. One that worked out very well for us the.
The margins as we just mentioned and renewables.
<unk> margins fourth quarter, we're really outstanding it'd be great if that happens again, but I'm not sure whether we'll see those exact same kind of numbers and then our fertilizer business had a really a onetime run up during the year prices increased almost 200%, we don't see that happening again next year, having said that all three of them come.
From a much firmer base as you said and we are holding well.
So that 2025 long term goal of 375 to 400 in order to get there will need some additional growth and bolt ons like we did this year with.
Our M&A of Capstone and adding our Swiss office. So we hope to continue to add growth to drive that EBITDA numbers.
'twenty four 'twenty five.
Okay.
The second question I have is you mentioned corn oil technologies and other.
You kind of just referenced what technologies are you thinking about in terms of how are you.
Looking at <unk>.
Just on the oil side are you looking at other parts of your businesses, where are you in that and is that something that incremental that we should start to think about and including that 2000 2025 outlook.
How big are we talking about the technology, because I think technology seems to be accelerating.
Yes.
More than we've ever seen in my last 20 years.
Good point and with the historically high corn oil prices everyone. In the industry is trying to squeeze every last ounce of Cornell you can get with some technologies, we're putting in place to improve yields but also we're looking at different technologies.
To improve.
Actual quality of the all that renewable diesel players would prefer so those I'd say those are still in evaluation stage and haven't put the full scale yet so those things we're looking to do to really help capture our feedstock supply to renewable diesel customers not only just in coal, but other vegetable oils.
Fats and greases, we set up this.
Trading desk over a year ago, it's been quite successful we've expanded by getting several new supply agreements.
Our continued push in that area, we'd like to be one of the important players in that segment. So you see that as an area of growth and one will be talking about more this next year.
And my last question.
Here's that a little bit larger than you guys.
And they're talking about structurally right.
Earnings power.
Over the next couple of years again, I know that your you put out your <unk> you.
The forecast.
Relatively recently, but the question is is there a part of that portfolio. Now that you think is structurally different and maybe there isn't and I know maybe it might be too early for you to kind of change that 2025, we haven't gotten there but are there things like the corn oil there seems to be that.
Chinese demand is there are certain things that maybe gives you a little bit more confidence in getting to that base and then.
Going further than that and I'll leave it there and I appreciate it as always.
Good point, Kevin I think the overall fundamentals across the AG sector are firmer and maybe extending longer.
Some people had concerns or was this a one year blip with new Chinese demand coming in or is this a more longer sustained agricultural demand driven rally it feels a lot more like the latter.
<unk> right now are on weather forecast in South America, as we've seen some dryness in Brazil, and southern Brazil, and Argentina, which are impacting especially focused on being yields so getting the U S crop and good position its going to be very important this year.
We had a record year of exports of products last year and the outlook is that for us to continue in that space. So theres a good fundamental base across all of agriculture, which includes demand from the protein sector, both beef and pork.
And chicken areas are doing well and requiring more feed inputs.
There's a lot of interest around transfer supply chains, and what kind of.
Our products that people are putting it into finished food products, where they come from and we're continuing to focus on that and some of our more niche specialty foods segment products, which we think that will continue to grow as well.
Coming off a very high price spike here and fertilizer, it's hard to believe that it will double again.
Actual market perform and it's really important to have that available supply and we think theres, some new specialty products organic products and things like that and fertilizer that will continue to grow so I'm, giving you a little bit about what an answer of some of the things that we're excited about and agree with our peers for like Thursday.
Strong fundamental base of.
Friendliness towards agriculture, right now thats going to last longer it's not a <unk>.
From the Pan kind of thing so I think we're well positioned across the AG supply chain to perform strong as we go into the next two three years.
Great I appreciate it thanks guys.
Thank you. Our next question comes from the line of Eric Larson from Seaport Research. Your question. Please.
Yes, good morning, everybody congrats on a great year path and Brian and all.
So my first question is really a balance sheet question end of the year I know you had a big tax liability for the sale of rail.
I don't see a corresponding.
Liability on your balance sheet is that to 216 million balance of cash.
Net.
What you paid the U S government for your tax liability for sale of rail.
So Eric this is Brian So we did in the fourth quarter of 'twenty, one pay the tax liability on the gain on the taxable gain related to the rail sales. So that's that's now been completed that was in roughly it was about $75 million of cash taxes paid on that and I think probably what youre seeing.
On the balance sheet is a combination of some timing of checked clearing and stuff like that also a combination of some.
Farmer deferred paid and prepaid stuff like that.
Okay, Okay. It sounds good.
<unk>.
Yes.
Next question is.
It looks at 2022.
And we've had.
We've had some record prices established on the futures market for the last two weeks.
Boston, corn, and particularly soybeans and corn.
And yet we're still seeing it.
It seems like acceleration in purchases from China, even at these high prices now we also know that they canceled contract pretty rapidly as well.
Can you.
Fill us in on your outlook for how this demand function is working we have.
Pretty tight global supply it just seems like.
No the setup here for 'twenty two for you Paul.
It's pretty pretty darn strong.
Any comments on that that would be great.
Thanks, Eric.
You are right last year on your outlook on fertilizer little more bullish than we were at the time, So I got to give me credit for that.
Soy prices here above $15.
They are up 18% year to date or something like that last week.
Brazil production. The current estimates are down 5 million tonnes kind of 34 million tons in Argentina off maybe $1 5 million tonnes, that's going to be a factor that will push demand.
Chinese demand to the U S. Hopefully so.
So our demand that we saw for U S. Grain that was posted earlier. This week was a record up 18% to $177 billion. So not only the value of those commodities, but the volume shipped having said that we had a little softer demand out of China of late.
Normal seasonal slowdown the question will be what will we see.
Thank you mentioned some cancellations at higher prices or will they come back strong once you get a clearer outlook on what's happening in South America that remains to be seen so that it's coming off a fundamental strong base on exports.
It may be hard for them to keep up that very high pace, we saw last year, but nonetheless domestic demand is really strong. So we think ethanol demand will be higher.
Corn demand for the year as well as all protein demand.
In soy crush will be pushed again by renewable diesel so U S. Fundamental domestic demand I think is kind of an exciting thing for our industry. So overall fundamental underpinnings of the grain sector are pretty strong and of course always volatile all dependent on the weather forecast at any point in time, so a big.
Issue now is like how many acres will be planted.
And I think Theres a lot of people talk about switching to beans, given our fertilizer sales and things we see we don't see it being quite as dramatic as maybe some others in the industry. We think we will still have a big corn crop this year.
Excited about the outlook for the grain side and for fertilizer now I mentioned fertilizer, it's hard to see a.
Spike like we had last year, but the underpinnings of pricing still pretty firm across the fertilizer sector.
Yes no.
I would totally agree so so.
When you look at again going back to the balance sheet.
Native inventory on the books, obviously, that's been created by the current.
The current grain pricing environment. So.
If you look at just pure volume tonnage that you have in storage and look at your store.
Your storage income.
<unk>.
And particularly on the forward curve here, obviously, we're still dealing with kind of an inverted curve.
Yes.
Do you have good do you have good great storage do you have good outlook for good grain income.
George income can you kind of put all of that.
In some perspective for us.
So question and the answer of course is always it depends right. So the good thing is we had a good harvest last year, we're able to make a good originations.
Our facilities, we've had good pace of shipments of our products given the boost we saw demand last year really really carry that we've seen significant money has been in wheat.
We're kind of optimistic that carry could widen but that remains to be seen.
I think we'll probably stay pretty tight and inverted and some of the markets until we get U S production.
In solid shape for next year. So I think to answer your question from a volume standpoint, we're in good shape.
The termination of carries kind of remains to be seen for the year and you did make one very good point.
And we would like to highlight that people look at our balance sheet.
Readily marketable inventories and Thats true for all of our colleagues in this industry with high prices like we have that number tends to increase dramatically, but thats part of the way, we do business and we have plenty of borrowing capacity and this is a good thing for us to have readily available inventories to be able to supply the market. So.
Glad you pointed that out.
Okay. Thanks, Scott and just one final question and I'll pass it on so.
So Ivan is getting a little bit more aggressive here at glencore.
Obviously, the port Gamble on then.
We're starting to see more consolidation in the U S or in the <unk>.
North American.
Great merchandising business.
The Andersons is a much simpler cleaner.
Wonderful company today, and congratulations on that Pat.
So as the Andersons consolidate tour or are they a consult.
Will they be a consult.
It would be consolidated to someone else.
I don't know its proper English, but I sure like consolidate toward better and that is our focus and we will.
The kind of companies, we're adding to our portfolio may not be a blockbuster headline.
The size of a gamble on but we're able with our balance sheet to make some significant moves and we're really targeting.
Areas of growth that we talked about in this new environmentalism has its impact to agriculture renewable diesel feedstocks. Other things that are kind of on trend both in the AG markets and with consumers right. Now so we think will be.
Growth mode, and really focused on driving the bottom line of our business, but we've done a lot of the hard work in the last few years of cleaning up our asset footprint and making our balance sheet stronger now we really want to focus on just driving the future of the company and returning good returns for our shareholders.
Alright, Thanks, Scott will talk later.
Yes.
Thank you. Our next question comes from the line of Brian Meyers from Lake Street Capital. Your question. Please.
Yeah, Hi, guys. Thanks for taking my question. So regarding the news with trading can you comment on how meaningful of a contributor as it has been over the past few quarters, and then kind of.
What you guys see as the growth opportunity here in 2022.
Sure Ryan and thanks for joining the call.
So I think we strategically made a decision over a year ago to kind of lengthen our supply chain. When we looked out in the long term future of demand you see a lot of that demand growth in the main.
Population centers of the planet and that a lot of it being middle East North Africa. So we had historically been a shipper to those markets and how we are doing direct sales to those geographies and built out a trading team in Switzerland.
Late last year, it's off to a good start we're doing a good volume of business both out of.
Eastern Europe , and South America, and the U S and fits in well with our U S assets Houston in the Great lakes as far as the supply chain. So we're doing this in a very.
Logical and methodical way to make sure we do it properly so near term it is added.
A good amount of earnings of our business, it's saying, it's a massive needle mover I would say no but it can be over time.
You need to grow for US yes, Brian . This is Brian I think previously we had talked about the new Swiss trading office in capstone likely contributing somewhere in the range of $10 million to $15 million on an annualized basis.
Would say that continues to be our outlook and probably more towards the higher end of the combination of those two.
Okay. That's helpful and then when we look beyond the Swiss office.
Alluded to this but where do you guys see a lot of the opportunity to expand international operations further in 2022.
Not particularly looking to do anything more in international areas I don't see that as a key focus for our company, we don't want to be in country and different parts of the world. We have some major multinational competitors who are very good at that we're doing what makes sense for us and our growth line and that's the.
Swiss office in the pipeline to Africa was a key lane that made sense for us.
A lot of other domestic opportunities, particularly in diversifying.
Our product mix, both in fertilizer and grain.
A lot of it relating to environmental impact and sustainability, which is going to be a key focus in the U S. For some time to come and we think that's going to create good opportunities for us to grow so thats kind of our area of focus.
Got it and then when you guys think about the $100 million $125 million guidance for Capex.
As most of the spending going towards growth initiatives or is it just kind of maintenance capex or how are you guys thinking about that.
Sure.
So I would say that probably $60 million to $70 million. So call. It roughly half of that number is maintenance capital and the remainder would be growth. So if I had to ballpark maintenance would be call. It $60 to 75 nine months.
I think it's important to note land and building.
Brian's comment that I.
I think when we really tightened our belts two and three years ago. When times were tougher we have some catch up to do on maintenance of our facilities third good shape, we want to make sure. We really are running well and we have some big capital projects, we want to get done at our assets here. This next year, which will be important for us to make sure. We're.
Operating really efficiently and this kind of a tight market, where we are going to need that capacity. So it's timely execution of that maintenance capital.
Okay, and then last one for me kind of a housekeeping item. So in the renewable segment were there any material noncash gains included in EBIT during the quarter.
So we did have.
Reversal of Mark to market come through in the quarter I don't know the answer off the top of my head, but we can certainly get that for you.
That's all I had thanks guys.
Thank you and just as.
A final check.
Once again, ladies and gentlemen, if you have any further questions. Please press Star then one at this time.
And seeing no further questions I'd like to hand, the program back to Mike culture for any further remarks.
Thanks, Jonathan we want to thank you all for joining US. This morning. Our next earnings conference call is scheduled for Wednesday May four 2022 at 11, a M. Eastern time, when we will review our first quarter results as always thank you for your interest in the Andersons and we look forward to speaking with you again soon.
Thank you, ladies and gentlemen for your participation in today's conference. This does conclude the program you may now disconnect good day.
Okay.
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