Q3 2022 Andersons Inc Earnings Call
Good morning, ladies and gentlemen, and welcome to the Andersons 2022 third quarter earnings Conference call.
My name is Joe and I will be your coordinator for today.
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I will now hand, the presentation to your host for today, Mr. Mike Holter, Vice President corporate controller and Investor Relations. Please proceed.
Thanks, Joe Good morning, everyone and thank you for joining us for the Andersons third quarter earnings call. We have provided a slide presentation that will enhance today's discussion. If you are viewing this presentation on our webcast the slides and commentary will be in sync. This.
This webcast is being recorded and the recording and the supporting slides will be made available on the investors page of our website at the Andersons Inc. Dotcom shortly.
Please direct your attention to the disclosure statement on slide two as well as the disclaimer in the 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.
We're 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 and today's prepared remarks contain non-GAAP financial measures reconciliation 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'll 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 today to review our third quarter results.
We're excited to discuss our third quarter, which was our best ever adjusted third quarter from continuing operations.
Both trade and renewables posted very solid improvements over last year, well plant nutrient results declined and there was seasonally low quarter. Our overall company performance was strong with trailing 12 months adjusted EBITDA from continuing operations totaling nearly 440 million.
Yeah.
Yes.
With this Q3 result, we anticipate a very strong and potentially record setting year.
Trade group results were a record third quarter on an adjusted basis and reflect improvement in many areas.
Our Louisiana assets performed well during the corn harvest capturing strong elevation margins.
We don't want to chip in our grain terminal assets is earnings space income.
In merchandising, our new profit centers have contributed more than $5 million this quarter to our pre tax earnings.
We continue to have very strong results in our western grain belt and animal feed ingredient merchandising.
As well as in our food and specialty ingredients businesses.
In particular, our U K subsidiary again delivered strong results with organic feed business.
Renewables had another solid quarter, our eastern ethanol plants delivered positive results on weaker corn basis in spite of declining ethanol prices and inflation in natural gas and other production costs.
Our Kansas plant experienced high corn basis due to the ongoing drought in the region.
We continue to benefit from strong values of co products, particularly distillers corn oil used as a renewable diesel feedstock.
All of the plants have now completed their planned fall maintenance shutdowns.
Yeah.
Plant nutrient followed a very strong first half with mixed results our agricultural product lines performed well for the typically slow third quarter on good margins and well positioned inventory.
Within our manufactured lawn products, we were challenged with lower demand inflation and production cost and also took an inventory write down in the in the quarter.
Brian will now cover some key financial data after that I'll be back to discuss our outlook for the remainder of 2022 and into 'twenty 'twenty three Brian .
Thanks, Pat and good morning, everyone.
We're now turning to our third quarter results on slide number five.
In the third quarter of 2022, the company reported net income from continuing operations attributable to the andersons of $17 million or 50 cents per diluted share.
This compares to adjusted net income from continuing operations attributable to the company of $5 million or 15 cents per diluted share in the third quarter of 2021.
Gross profit increased 34%, despite this being our seasonally low quarter.
EBITA for the third quarter of 2022 was $83 million compared to adjusted EBITDA of $56 million in the third quarter of 2021.
Trailing 12 months adjusted EBITA was almost $440 million.
All of these measures exclude discontinued operations.
Our effective tax rate varies each quarter based primarily on the amount of income or loss attributable to the noncontrolling interests.
We recorded taxes from continuing operations for the quarter at a 28% effective tax rate.
We still expect a full year effective tax rate between 18 and 21%.
Next we'll move to slide number six to discuss cash liquidity and debt.
We generated quarterly cash flow from operations before changes in working capital of $51 million in 2022 compared to $56 million in 2021.
Hi, relative commodity prices and business growth are the primary causes of our continued continuing higher working capital and related short term borrowing levels when compared to the third quarter of 2021.
The short term debt balance of approximately $650 million at September 30th is supported by readily marketable inventories of over $1 $1 billion.
At the end of the third quarter, we had available short term borrowing capacity of over $1.3 billion. We continue to have good support from our banks as they understand the key role that we play in the AG supply chain.
We continue to take a disciplined approach to capital spending, which we expect will be approximately $100 million for the year about half of which will be related to maintenance capital.
Our long term debt to EBITA remains well below our stated target of less than two five times.
We recently announced two separate bolt on acquisitions <unk> in the trade group and moat farm services in plant nutrient.
We continue to evaluate growth projects in our pipeline, including additional M&A opportunities.
We have a balance sheet that will support growth investment for those that meet our strategic and financial criteria.
We also have begun to utilize our previously announced share repurchase program executing over $7 million of share repurchases in the quarter.
We continued to repurchase shares during October bringing the total cash used to date for this program to about $12 million.
Now, we'll move on to review of each of our business segments, beginning with trade on slide number seven.
Trade reported pretax income of $41 million compared to adjusted pretax income of $28 million in the same period of 2021.
Our merchandising profit centers had a great quarter with gross profit and pre tax earnings growth of more than 40% over last year.
This includes solid contributions from our new businesses that Pat mentioned earlier.
The food and specialty ingredients business continued their strong results and our assets had improved gross profit capturing increased elevation margins.
With the current global supply disruptions yield reductions due to the U S. Due to the Western U S. Drought are significant and should continue to keep grain market is volatile.
Fortunately, we are experiencing a good harvest in our elevator draw areas with the majority of our assets located in the eastern grain belt.
This tight supply environment is conducive to continued merchandising opportunities.
Trades EBITA for the quarter was $61 million up from adjusted EBITDA of $44 million in the third quarter of 2021.
Yeah.
Turning to slide eight renewables had third quarter pretax income attributable to the company of $8 million.
Which was a significant improvement from the third quarter 2021 pretax loss of $4 million.
The renewable segment results reflected strong ethanol margins early in the quarter combined with solid plant operations co.
Co product values and in particular corn oil remain high and have added to plant profitability.
Renewable diesel feedstock merchandising activities continue to expand and also contributed to the positive quarterly results.
Renewables had EBITDA of $34 million in the third quarter of 2022, an increase of almost $15 million from the third quarter of last year.
Turning to slide nine.
The plant nutrient business reported a pretax loss of $12 million in the third quarter compared to a pretax loss of $6 million in the third quarter of 2021.
The third quarter in this business is typically our lowest quarter due to the crop cycles.
In our AG product lines, we continue to experience good margins on well positioned inventory, although with lower volumes.
The higher year over year loss was nearly all related to our manufactured one products business, where we have lower demand production challenges and recorded some excess and obsolete inventory reserves.
Plant nutrients EBITA for the quarter was a loss of $3 million compared to EBITDA of $2 million in the third quarter of 2021.
And with that I'll turn things back over to Pat for some comments about our outlook.
Thanks, Brian .
We remain optimistic about our outlook.
<unk> global market fundamentals, including supply chain disruptions should exist for some time keeping commodity prices historically high.
Worldwide supplies are projected to remain tight for the next few years.
Our trade business outlook remains very positive.
In addition to production and transportation challenges globally.
Demand remains strong for grains and oilseeds.
U S dollar strengthened logistics concerns with low water levels on the Mississippi River may keep more grain in the U S than was expected.
Our inland grain elevators that ship by rail and our domestic merchandising teams are well prepared for this volatile environment.
Our international team is also meeting the challenge of finding additional sources of supply amid the complicated logistics and lost production due to the ongoing conflict in Ukraine.
We're investing in our north American infrastructure to provide better service to our customers.
We continue to evaluate M&A opportunities that align with our strategy.
Such as the recently announced bridge Agri acquisition, which expands our presence in the pet food ingredients space.
We knew it would be challenging to match last year's strong second half trade group results. However, at this point, we see the potential for another strong fourth quarter and a possible improvement over the second half of 2021.
In our renewable segment, we have experienced an overall margin decline. Unlike the significant margin expansion in the fourth quarter of 2021.
We believe that our eastern ethanol plants are favorably located.
Western plants are facing much higher corn basis.
We continue to see strong demand and good values for co products, particularly.
Particularly distillers corn oil, which supports our overall margins.
In addition, our renewable diesel feedstock merchandising business is performing well.
And we are evaluating additional renewable diesel low carbon intensity feedstock opportunities.
We don't expect to be able to match last year's outsized fourth quarter ethanol crush margins, but we will continue to operate our plants efficiently and profitably as well as grow our third party merchandising opportunities.
The plant nutrient business outlook is mixed with strong farm income and I need to cover loss worldwide grain production. We expect continued strong global demand that should keep prices higher than historical averages.
We have favorable harvest weather that should allow for good fall application.
With more stable supply as compared to the fourth quarter of 2021, we do not expect to repeat last year's record fourth quarter fertilizer results, where we capitalized on an outsized margin environment.
Overall, our strategy remains focused on our key role in serving the needs of our customers in the North American AG supply chain.
We've announced recent acquisitions, a bridge agri and moat farm services, each of which align closely to our growth strategy and are expected to be accretive in 2023.
With a strong balance sheet sustainable operating cash flows and this strategic focus we expect to continue to grow profitably in these dynamic AG markets.
We continue to evaluate growth projects that are centered around our core grain renewables and fertilizer segments and are a mix of capital investments and M&A.
We remain committed to adding value for our customers managing risk and operating safely and efficiently.
We're on a path to end this year strongly and could achieve a new earnings record through improvements in our base operations combined with growth investments.
I'm very proud of our team for their outstanding performance to date in 2022 and remain excited about our future growth prospects.
With that I'd like to hand, the call back to Joe and we'll be happy to entertain your questions.
We will now begin the question and answer session to.
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At this time I will pause momentarily to assemble our roster.
And our first question will come from Ben <unk> with Stephens. Please go ahead.
Hey, Thanks, good morning, and congrats on the quarter.
Morning, Ben.
I wanted to ask on a follow up on a comment you made Pat related to low water levels were seeing on the Mississippi River.
Can you talk about the opportunities that presents for you guys you know with port terminals in places like Houston.
Great Lakes exposure does that give you guys an advantaged position or are you still grappling with the same logistical challenges that your larger peers, who send more product out of the Gulf might.
Might be how should we think about your relative positioning.
With respect to that dynamic.
Yes, I think you pointed out very good point, Ben is that we're well positioned given this environment. We are not a river shipper and we don't ship a lot of our rail terminal asset ship that much to the golf.
We did have a very good Louisiana harvest early and shipped a lot of that product already.
Those to various domestic and Mexican markets, the Houston asset for exports is well positioned and we're in a good position for exports out of that terminal. So that's doing well and we've recently had some really nice sales out of the great Lakes. So do we have seen some margin improvement intellect shipments so we're well positioned.
We continue to have very good business on our rail supply to <unk>.
Crushers in cattle feeders, and with the shortfalls of Western production, there's gonna be grain movements into those feedlot markets, maybe different than normally what happened because of the drought conditions out west so.
Short answer, yes, we're very well positioned given the Mississippi River challenges.
Okay, great. Thanks for that and then maybe thinking about M&A you guys have done a number of bolt ons, you mentioned that they would be accretive in 2023.
Forgive me you might have said that somebody I just missed it was that the EPS or the EBITDA and then also.
When you think about kind of sizing the contribution maybe EBITDA would be helpful of the M&A you've done over the last let's say 12 months can you give us a ballpark for kind of how we should be thinking about contribution just in the bucket total bucket of bolt ons you've done.
Yes. So Ben this is Brian that's a great question I think that the two that we've most recently announced bridge Agri and moat farm centers I would say on an EBITDA basis for 2023, I would put it in the range of our kind of $5 million to $7 million range.
And if we think about about a year ago. At this time I think when we were talking about capstone and some of the international expansion. We said, we expected that to contribute in the range of $10 million to $15 million.
On a run rate in 2022, I would say, we're tracking above that right now so that's kind of the range that we originally were talking about them.
Again doing better than that on those two.
I'd like to add on to the comments, Brian made with which we're right on the money.
You recall there might have been the last call, we talked about our strategy and M&A and I was using the baseball analogy of singles and doubles, while we've looked at some pitches for home runs on big M&A deals. We havent seen a valuation that is something that we were attracted to but these recent ones in the case of moat farm services, It's a farm service.
Center in our region, Indiana, Ohio, as well as bridge Agri, which is in the pet food ingredients space that we really like these into what you'd call singles and doubles that are very attractive for our strategy and on point with where we're headed we have others like that in the pipeline and again Gibson, It's the world series going.
Right now, maybe we're not going to hit as many home runs as the Phillies, but I'll I'll be happy to have plenty of singles and doubles of solid acquisitions are close to our strategy and those are the things we're looking at right now.
Okay, that's great on.
On the one more question for me on the debt profile of the business.
How should we be thinking about your aspiration for debt pay down from here in particular long term debt, putting aside kind of the swings will see in working capital.
Yes, I would say.
Our long term as you know we target long term debt to EBITDA below two and a half times.
I'd say right now.
We're actually.
Kind of a trailing 12 months basis were actually a little bit below one and a half times. So if anything we feel like we have the balance sheet well positioned to fund growth in some of these singles and doubles that Pat is talking about and as you alluded to.
The short term side can swing around with.
Working capital changes in commodity inventory, so I would not look for call it.
A meaningful long term debt pay down strategy, if that's kind of what you're asking I would say, we feel like we're well positioned to fund growth.
Okay, great good luck with the fourth quarter.
Thank you Ben.
Okay.
Again, if you have a question. Please press Star then one to join the queue. Please just give us a moment to assemble our roster.
Yeah.
Our next question will come from Ben <unk> with Lake Street Capital markets. Please go ahead.
Alright, congratulations on a good quarter here and thanks for taking my questions.
Couple of questions Pat.
You commented within the trade group, new facilities contributing about $5 million to earnings in the quarter I think I know the answer to this but I wanted to clarify.
That $5 million is that is that inclusive of the acquisitions.
We're actually just talking about or are those five.
Or is there any material amount of that $5 million due to organic growth from from new facilities.
If you could elaborate on that that'd be helpful.
Ben This is Brian good question. The bet 5 million is actually related to a new <unk>.
Businesses that were announced call. It in 2021, and so it would be thinking about Swiss trading office capstone and some of the other new profit centers that would not include anything from the recently announced stuff or call it base organic growth.
You bet it does.
It doesn't include cap. So it does include Capstone now.
That's right.
To be clear that number is an EBT number not an EBITDA number.
Got it.
And I just wanted to okay, perfect and then just kind of want to add on that just kind of linking it back to the strategy as we said a year ago with with the opening of our office in Switzerland. We were really looking at how we could expand to the growth of population markets of the middle East and in Africa.
The strategy of skating to where the puck is going to be that's worked out very well for us. It's been a very complicated time as you can imagine with the Ukraine conflict and lots of challenges to supply chain I got a photo from one of our traders who is flying from the airplane over the Black Sea and it showed right now Theres one <unk>.
Nine vessels waiting in Istanbul to pass the Bosphorus to go into load in Ukraine, and Theres 57 loaded vessels awaiting inspection again at the box for us to get out into the Black Sea. So this on again off again, what's happening with your crane exports, where the Russians said theyre going to pull out of the joint agreement with a U N.
In Turkey now this morning, they said they will continue to operate under that agreement.
Russian loaded vessels from Russian origins are coming out just fine, but theres, a very active international trade going on especially to middle East and Africa. So we have a normal complicated environment with a strong dollar and different crop conditions around the world, but we through this Ukrainian conflict.
The mix, it's really created a very robust environment for trading and so far we've favored very well and we're glad that we made the move when we did.
Yes.
I hear you loud and clear I didn't catch that the news this morning, but it's good to hear that that's that agreements back up and running.
Hi.
I'd like to pivot over to your comments on renewable diesel and I have two questions I'm going to get back in queue. My first question. Pat you mentioned that merchandising opportunities in the space are growing at a nice clip. My first question here is given that so many of these facilities are still coming online.
It's still ramping the capacity I'm wondering.
The degree to which this growth rate that youre seeing is nice on a on a raw dollar basis or or or more just on a percentage basis, given kind of the low.
The kind of entry level position here.
In this space how material contributor today right right completely understand where youre coming from that know the Rd demand has really picked up in the feedstock demand for that going and will continue into 'twenty. Three so that should have a very positive impact of crush margins for the soybean crushers and for our corn oil demand.
We've as.
As we mentioned before we put it in new technology, <unk> and were putting in in four of our five plants to cleanup fin.
<unk> finished corn oil.
Products to make those more readily usable for Rd. We're looking to also sell those to third parties. So we're kind of excited about that piece of technology. We've also been able to add both used cooking oil and other rd feedstock ingredients to our portfolio and so that marketplace has been robust and are trading.
<unk> team is doing quite well and growing the volume in that segment. So we see this R&D feedstock impact to be a very bullish signal to the oilseed complex in North America, and that's going to continue well into 'twenty three.
That's great and you might have just answered my second question here.
You in your prepared comments you noted efforts in expanding.
The renewable diesel feedstocks and so I was curious if you could kind of characterize that a bit further in.
You just said, but I'm also wondering the degree to what Youre looking at.
New crush facilities coming online.
Source of volume for you.
We agree to what you are looking at kind of new crops that are emerging.
No new oilseed crops that are emerging that can that can participate in this in this play.
Are you looking at all of the above is there any kind of sourcing more intensely focused on the answer the answer is all of the above we don't have any intentions to enter into the soy crushing industry theres lots of our colleagues in the industry that are very strong in that space and have multiple plants and been at it for many many years and do a great job there.
There are some newer plants that are coming online or have expanded and those are opportunities for us to get originations from those facilities as well as you mentioned other cover crops and new oilseeds products that are coming to the marketplace specialty seeds.
That add to one the carbon recovery at the farm and then and can be crushed and use as a feedstock. So those are early days and they're relatively small in acreage, but shows some promise and we're having good discussions with people in that space and in general This convergence of energy and agriculture is really.
Fighting for our industry right, so with not just the Rd demand, but where the future of ethanol, it's going and higher inclusion rates as well as Saf and other potential products, we're quite bullish on the segment and a broad basis.
Very good that's very exciting.
Alright, well thanks for taking my question congratulations on a again on a good quarter and ill get back in queue. Thank you very much.
Our next question will come from Ken Zaslow with Bank of Montreal. Please go ahead.
Hey, good morning, guys.
Good morning, Ken.
A couple of questions. One is can you talk about the inflation reduction act how is that.
Pat you guys or how do you see it playing out it seems like there are a lot of nuances to it.
This may not be able to probably get into all the nuances, but I feel like there are a lot of things that maybe you could kind of shed some light on.
Yes, I don't think specifically in the near term there were things you know a while back ago that related to tax structures et cetera, and add a little bit of the payments that occurred in amphenol last year going forward. The money that is going in to try to.
Decarbonize egg supply chains is a plus we've not personally benefited from that at this point there could be opportunities on new technologies as we get into 'twenty three 'twenty, four where you could capitalize on Sept government.
Programs that helps that de carbonization to happen. So those are things that we're interested and nothing to announce at this time.
Okay.
I know, it's a little early for 2023, but could you talk about the puts and takes as you see them now.
And again not looking for exact guidance.
What do you see kind of lay out.
From the returns on your investments I know you have.
$10 million to $15 million, but can you kind of lay out some sort of picture.
Picture of what the puts and takes are for 2023.
Sure Ken let's first start with the <unk>.
Our merchandising grain business, where we see a very attractive fundamentals going into 'twenty. Three so we continue to have global problems.
Problems not just only because of the Ukraine situation, but we have had weather issues. We've had a good crop now in Australia with some range, it's very dry in Argentina early so.
So we'll have to see how things progress.
And this continuation of our quote log linear environment.
Had a very difficult drought in the western U S. So that's going to create merchandising opportunities for us to move grain domestically two locations that are short this year due to the drought. The good part for the Andersons with our traditional eastern assets in particular, what we call the Tri State area, Indiana, Ohio, Michigan.
We've had really good crops. So harvest has progressed well this year the national average for corn is about 76% in the east were only about 50% done so far but it had a great weather and we look to make some really good progress on corn harvest here in early November and beans nationally or 88.
Percentage were 80% done in the east we had good yields in our tributary areas on soybeans farmers in very good position, they've sold probably maybe 30 or 40%.
I had a time when markets rallied earlier this year, but we'll have grain to sell there very well heeled as you know with the high commodity prices.
And her story quite a bit of grain on farm, but it should be some movement that will happen in Jan Fab March mainly to make fertilizer payments. So.
We're fundamentally feeling very good about our grain business, we liked the opportunities of international trade that we've gone into and where our assets are positioned.
To supply that so filling feeling very positive about our overall trade business.
And the renewable side crush margins as you've seen came down quite a bit so fourth quarter crush.
It's quite a bit lower than last year, I think you remember Ken that we kind of really high on strong crush margins as we ended the year, we're not going to see a repeat of that having said that we think will be positive.
Our profitable for the fourth quarter, and we're positioned well from a basis standpoint in our eastern assets, a little more troubled in Kansas at our location in coach with I think basis levels are over 100 over right. Now. So that's just kind of the marketplace. This year, so excited about renewable diesel or volume.
<unk> will increase as we go into 'twenty three in feedstock and that's a bullish area for us that we're excited to participate in and then we go to the fertilizer side fundamentals on the AG side are very strong farmer income still very good farmers being incentive to strongly fertilizers crops and make good.
<unk> of both corn and soybeans. So we feel good about our AG and our farm center business one of the reasons, we bought the moat Farm Center.
On the retail side, we mentioned, we took a little bit of a hit in the quarter because the retail margins on la and I think he member in the Covid.
Covid period, everybody was working on their lawn and sales of lawn retail products, just really jumped.
Some have seen some other national retailers to announce some of the challenges they've had with full supply chains and sales that have slumped that impacted our lawn segment. We took some write downs of obsolete product and have said slowed down on sales. There that's been a nice business historically for US we think it will come back.
But we just took a short term.
He had in that business in the quarter, but we're overall friendly to the fertilizer business and 23. So bottom line, we see the momentum continuing into 'twenty, three and feel good about the year and Ken just to frame that kind of in a in an overarching way as you know we had a strong EBITA in 2021 with EBITA, just north of 350 million.
And we expect to exceed that this year in 2022.
As Pat was just summarizing our 2023 outlook is really expecting continued strong fundamentals and so in.
In total we believe we should be able to maintain these levels of EBITA looking ahead to 2023, and which aligns really with our original targets that we outlined back in kind of late 2020.
Okay.
Just.
One more just maybe two more but.
Please go ahead.
How can we then right now how do I take the write down and why do you keep it hasn't so item.
I didn't hear the second part you said how much was the write down and what would you say and why it wasn't an extraordinary item.
It is nonrecurring.
Yes, so the amount of the write down was about $4 million in the quarter.
Didn't wind it out as an extraordinary item just because it was so.
So moving obsolete, but youre right, we don't anticipate a recurrence of that item.
But because you've reset the lawn business I'm, assuming so like next year, you will get that.
Right, it's not a reset right now right off the room sorry.
The way Youre thinking about it is correct.
Okay and then maybe my last question is the $100 million, you said $50 million of maintenance what are the what are you spending the other $50 million with growth on like can you talk about some of the project.
Illustrative.
Yes. So if you think about I mean, it's really all of these strategic areas that we've been talking about if you think about some of the things well Pat mentioned on renewables some of the truths in investments that are happening. There is a lot of things going on with additional corn oil extraction in the facilities and if we think about.
The renewable side of the business, it's all on operating efficiency and extracting more things in the corn oil space.
If you think about our plant nutrient side of the business it could be things that are going to be in the organic space.
And a variety of other other areas in some of the newer fertilizers and I don't know Pat if you want to talk about some of the things in trader, yes, that's terrific.
Ken just strengthening our assets, we're catching up on capital deployment and our core grain elevators in fertilizer as Brian mentioned, we also have some projects in organics that are interesting.
We like this pet food ingredients segment, we announced this acquisition here. The last couple of days, we think there'll be opportunities for additional growth in that segment that is a high margin growth segment.
Other areas in our food segment, we we produce we put more capital into our corn assets, where it makes food grade corn for chip manufacturers, that's been a solid growth segment for us and so we are.
Strength in some of those assets by putting some more investment there.
And Brian mentioned, the opportunities that look interesting or anything related to the organic.
I'm, sorry, organic let's say renewable diesel feedstock business. So we've had some growth opportunities there, we're evaluating and we'd like to maybe.
Maybe partner and align with other people, where we can get additional volumes of feedstocks to this really solidly growing category. So that's an area of focus for us going into next year and Ken one other one that I would mention and this is particularly in the plant nutrient side of the business. There are some projects that we're looking at from an automation perspective.
As of automating some things in our facilities that previously those numbers didnt, the economics didn't work, but with what's been happening with markets and margins and inflation some of those projects and I'll make a lot more economic sense also to clarify in that <unk> segment, while sales.
Really slowed during the quarter, we had some obsolete inventory we still see this as a very attractive business. It has historically been a good margin and growth business for us and we would look to grow in that segment, if we see the right opportunities.
And you would argue that that if you go back to pre Covid now even if you take out that $4 million. The business has grown over those years. It just grew too quickly and then you're just going to try to get a little bit.
Xactly, yes it has.
Kind of a rapid rise up and then.
Inventory kind of oversupply period.
Alright, I appreciate it guys.
Our next question will come from Eric Larson with Seaport Research partners. Please go ahead.
Yeah. Thanks, guys.
And congratulations on the quarter. So just a couple you've alluded to some of the things Pat I think that our.
Relevant to this question, but you know late in the third quarter, we saw we.
We saw basis, we can pretty sharply in the eastern corn belt.
Basis in the western corn belt is off the charts.
And.
I guess I thought maybe that would be it would have.
A negative impact on your third quarter basis appreciation in the grain business and the trade business.
And then I'm looking at $1 3 billion of.
Although available liquidity and I think it was only about a half a billion at the end of the last quarter are you not seeing with these with these low eastern corn belt with a favorable basis that you guys should be buying keep going on are you not seeing those opportunities.
Put more to put more business on your books or.
What am I missing here.
Eric I think you pointed to that at the very beginning with the drought on the west coast basis levels to rise pretty dramatically quickly, especially in the desert southwest and into those feedlot markets that is actually a good opportunity for us from a merchandising standpoint, and what we call our Midwest truck segment that sells to those markets has done very.
Well with this appreciation of the basis, so actually that's a good thing.
The one area. It hurt us is in our Kansas ethanol plant has high basis levels in that as made margins very difficult in cold, which are little bit higher also in Denison, Iowa, Iowa basis levels are a little bit higher it's really a Kansas, Nebraska phenomena.
When it comes to the East as you pointed out we've had good we had a good book on early with growers in the East I would say, it's been a normal harvest activity in the last month was kind of a steady supply and steady selling of grain nothing like backlog and huge lines or anything like that so it's been kind of a very orderly.
Progression. This harvest so we're in very good shape.
We like the position we're in a we're gaining storage on wheat in the delivery market here in Toledo for soft red wheat, which is a nice.
Related clip some coupons, there and we really like our ownership in basis levels have been.
Firm for export sales and we like the position. We're in so simple answer your question, it's going quite well and then we have good volumes and a very healthy farmer. So it's a good environment for us.
Okay. Good to know that I mean that sounds great and it sounds like there to pull me.
And I know that the Easter is not as far along on harvest is the west is but the weather has been just phenomenal.
We're progressing pretty quickly I think around the whole country, but so if you are only let's say, 50%, 55% harvested should there.
That not give you more opportunities in the fourth quarter, maybe you've answered this fourth quarter, you should be able to.
Pick up some really good cheap grain and and have some pretty good momentum going into the first half of next year is that fair.
Fair way to look at it.
Yes.
As of Monday crop, a part where 50% in the.
In the Indiana, Ohio, and Michigan markets. So harvest is progressing rapidly right now whether it's perfect and so yes, we're hoping to capture quite a bit of rain here in the second half of harvest. So it's a it's a good good outlook on on both for fertilizer application and for corn coming straight out of the field.
Beans were very dry and so corn is probably normal right now so our drying and blending of corn is probably on a normal basis right now.
So it's it's a good year.
Especially in the east So we're very pleased with our eastern harvests, thus far.
So what kind of moisture levels are you seeing in corn right now.
Kind of it's sort of spotty, Eric so kind of in the high teens some spots low twenties, but most that's why of course have waited they took the beans.
Almost gone attic or 80% in beans, and that that'll be will be done probably by this week, but some draws have waited to get corn dry down the field. It's beautiful 60 degree Sunny days here are probably the best Halloween we've seen in a long time. So we've had just a beautiful weather this fall.
Yes, no. It's the same here, we're gonna set record highs today, it's just it's just beautiful weather perfect for harvest.
Perfect for fall application stuff so.
All good seems to be on the agricultural front. So thanks for your comments, Pat and Brian and Mike.
Thanks, Eric.
Good luck for the rest of your harvest.
Yeah. Thank you.
This concludes our question and answer session.
I would like to turn the conference back over to Mike Holter for any closing remarks.
Thanks, Joe we want to thank you all for joining US. This morning, Our next earnings conference call scheduled for Wednesday February 15, 2023 at 11, a M. Eastern time, when we will review our fourth quarter results as always thank you for your interest in the Andersons and we look forward to speaking with you again soon.
Yeah.
The conference has now concluded. Thank you for attending today's presentation. You may now disconnect your lines.