Q4 2023 The Andersons Inc Earnings Call

Operator: Good morning, ladies. Welcome to the Andersons 2023 fourth quarter earnings. We will facilitate a question and answer session. And as a reminder... and now... President, Corporate Controller, and, Thanks Rocco, good morning everyone and thank you for joining us for the Andersons 4th 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.

Good morning, ladies and gentlemen.

Awesome to the Andersons 2000, Twenty's, where your fourth quarter earnings conference call.

Rocco: My name is Rocco and I will be your coordinator for today.

Rocco: At this time, all participants are in listen only mode.

Rocco: Later, we will facilitate a question and answer session.

Rocco: To ask a question. Please press Star then one on your telephone keypad.

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Rocco: As a reminder, today's conference is being recorded for replay purposes.

Rocco: I'll now hand, the presentation to your host for today, Mr. Mike Holter, Vice President corporate controller and Investor Relations. Please proceed sir.

Mike Holter: Thanks, Rocco good morning, everyone and thank you for joining us for the Andersons fourth quarter earnings call. We have provided a slide presentation that will enhance today's discussion if you're viewing this presentation on our webcast the slides and commentary will be on zinc. This webcast is being recorded and the recording and supporting slides will be.

Operator: This webcast is being recorded, and the recording and supporting slides will be made available on the investors page of our website at Andersonsinc.com shortly. Please direct your attention to the disclosure statement on slide two of the presentation, as well as the disclaimers 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. Such 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.

Mike Holter: Made available on the investors page of our website at Andersons, Inc. Dot com shortly.

Mike Holter: 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.

Mike Holter: These forward looking statements are subject to various risks and uncertainties.

Mike Holter: 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 incur encourage you to review these factors.

Operator: We encourage you to review these factors. This presentation and today's prepared remarks contain non-GAAP financial measures. Reconciliations of non-GAAP measures to the most directly comparable GAAP financial measure are included in the appendix of this presentation.

Mike Holter: This presentation and today's 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.

Mike: As always, on the call with me today are Pat Bowe, President and Chief Executive Officer, and Brian Valentine, Executive Vice President and Chief Financial Officer. We are also pleased to have Bill Kruger, Chief Operating Officer, join our call this quarter. After our prepared remarks, we will be happy to take your questions. I will now turn the call over to Pat. Thanks, Mike. Good morning, everyone.

Mike Holter: As always on the call with me today are Pat Bowe, President and Chief Executive Officer, and Brian Valentine Executive Vice President and Chief Financial Officer. We are also pleased to have Bill Kruger Chief operating officer, joining our call this quarter.

Mike Holter: After our prepared remarks, we will be happy to take your questions I will now turn the call over to Pat.

Bill Kruger: Thanks, Mike.

Patrick E. Bowe: Hey, good morning, everyone.

Patrick E. Bowe: Thank you for joining our call today to discuss our fourth quarter results and our initial outlook for 2024. First, as Mike mentioned, we're pleased to welcome Bill Kruger, Chief Operating Officer, to the call. As many of you know, Bill brings over 30 years of ag commodity experience. He was CEO of Lansing Trade Group at the time of the acquisition in 2019 and was president of our trade and renewables segments prior to assuming the COO role last year. We look forward to him sharing his thoughts during the Q&A session later.

Patrick E. Bowe: Thank you for joining our call today to discuss our fourth quarter results and our initial outlook for 'twenty 'twenty four.

Patrick E. Bowe: First as Mike mentioned, we're pleased to welcome Bill Kruger, Chief operating officer to the call.

As many of you know bill brings over 30 years of AG commodity experience.

Bill Kruger: He was CEO of Lansing trade group at the time of the acquisition in 2019.

Bill Kruger: And was president of our trade in renewables segments prior to assuming the C O overall last year.

Bill Kruger: We look forward to him sharing his thoughts during the Q&A session later.

Bill Kruger: Yeah.

Patrick E. Bowe: Record fourth-quarter results led to a third consecutive year of very strong earnings. Both trade and renewables contributed significantly to the quarter, with renewables setting a new adjusted Q4 earnings record, and trade delivered another strong quarter. Nutrient and industrial results were up slightly compared to last year on an adjusted basis. We ended 2023 with an adjusted pre-tax income of $159 million, which was our second best year ever. Adjusted EBITDA ended the year at $405 million, just behind the 2022 record adjusted EBITDA.

Bill Kruger: Record fourth quarter results led to a third consecutive year of very strong earnings.

Bill Kruger: Both trade and renewables contributed significantly to the quarter with renewable setting a new adjusted Q4 earnings record and trade delivered another strong quarter.

Bill Kruger: Neutral in industrial results were up slightly compared to last year on an adjusted basis.

Bill Kruger: We ended 2023 with adjusted pre tax income of 159 million, which was our second best year ever.

Bill Kruger: Adjusted EBITDA ended the year at $405 million, just behind the 2022 record adjusted EBITDA.

Patrick E. Bowe: Earlier in the year, we anticipated a greater year-over-year reduction from 2022, but we were able to make up some of the shortfall through our operating performance in a strong margin environment in our renewables business. The trade business posted a very strong 4th quarter with enhanced performance in our eastern grain assets, including basis improvement after a later harvest and income earned on drying wet grain received from farmers.

Bill Kruger: Earlier in the year, we anticipated a greater year over year reduction from 2022.

Bill Kruger: But we were able to make up some of the shortfall to our operating performance and a strong margin environment in our renewables business.

Bill Kruger: The trade business posted a very strong fourth quarter with enhanced performance in our eastern grain assets.

Bill Kruger: These results included.

Bill Kruger: This improvement after a later harvest and income earned on dry and wet grain received from farmers.

Patrick E. Bowe: Recent acquisitions in the pet food ingredient space made positive bottom-line contributions. Additionally, our renewables business set a new fourth quarter adjusted earnings record. This was due to a combination of record total production from our four plants and an improvement in Ethanol Yield and a much improved board Crush Margin. Our low-carbon, intensive, renewable diesel feedstock and feed ingredient merchandising product lines also improved. Nutrient and industrial improved slightly over the fourth quarter of last year on an adjusted basis on higher volumes and lower expenses. Agricultural product lines led the gross profit improvement. Manufactured product lines continue to be impacted by reduced consumer demand.

Bill Kruger: Recent acquisitions in the pet food ingredient space made positive bottom line contributions.

Bill Kruger: Our renewables business set a new fourth quarter adjusted earnings record. This was due to a combination of record total production from our four plants.

Bill Kruger: An improvement in ethanol yield and much improved board crush margins.

Bill Kruger: Our low carbon intensive renewable diesel feedstock and feed ingredient merchandising product lines also improved.

Bill Kruger: Nutrient and industrial improved slightly over the fourth quarter of last year on an adjusted basis on higher volumes and lower expenses.

Bill Kruger: Agricultural product lines led the gross profit improvement.

Bill Kruger: Manufactured product lines continue to be impacted by reduced consumer demand.

Patrick E. Bowe: Overall, I'm thrilled with a third consecutive year of very strong results. I'm also very proud of the team and how they optimized performance in a period of positive ag fundamentals. I'm now going to turn things over to Brian to cover some of our key financial information. When he's finished, I'll be back to discuss our early outlook for 2024.

Bill Kruger: Overall, I'm thrilled with our third consecutive year of very strong results.

Bill Kruger: I'm also very proud of the team and how they optimize performance in a period of pause and AG fundamentals.

Bill Kruger: I'm now going to turn things over to Brian to cover to cover some of our key financial information when he's finished I'll be back to discuss our early outlook for 2024 right.

Brian A. Valentine: Thanks, Pat. And good morning, everyone. We're now turning to our fourth-quarter results on slide number five. In the fourth quarter of 2023, the company reported net income from continuing operations attributable to the Andersons of $51 million, or $1.49 per diluted share, and an adjusted net income of $55 million, or $1.59 per diluted share. This compares to adjusted net income of $34 million, or $0.98 per diluted share, in the fourth quarter of 2022. Overall, fourth quarter gross profit of $218 million was up more than 25% compared to $170 million in 2022. Both trade and renewables showed increases, partially offset by nutrient and industrial costs. For the full year, gross profit of $745 million increased 9% from $684 million in 2022. Adjusted EBITDA for the fourth quarter was $135 million, up more than $30 million compared to $104 million in the fourth quarter of 2022. Full-year adjusted EBITDA was $405 million, just below the $412 million we achieved in 2022. We recorded taxes for the quarter at a 15% effective tax rate and for the full year at 22%.

Brian A. Valentine: Thanks, Pat and good morning, everyone. We're now turning to our fourth quarter results on slide number five.

Brian A. Valentine: In the fourth quarter of 2023, the company reported net income from continuing operations attributable to the andersons of $51 million or $1.49 per diluted share.

Brian A. Valentine: And adjusted net income of $55 million or $1.59 per diluted share.

Brian A. Valentine: This compares to adjusted net income of $34 million or <unk> 98 cents per diluted share in the fourth quarter of 2022.

Brian A. Valentine: Overall fourth quarter gross profit of $218 million was up more than 25% compared to $170 million in 2022.

Brian A. Valentine: Both trade and renewable showed increases partially offset by nutrient and industrial.

Brian A. Valentine: For the full year gross profit of $745 million increased 9% from $684 million in 2022.

Brian A. Valentine: Adjusted EBITDA for the fourth quarter was $135 million up more than $30 million compared to $104 million in the fourth quarter of 2022.

Brian A. Valentine: Full year adjusted EBITA was $405 million just below the $412 million, we achieved in 2022.

Brian A. Valentine: We recorded taxes for the quarter at a 15% effective tax rate and for the full year at 22, 22%.

Brian A. Valentine: Our effective tax rate varies each quarter based primarily on the amount of income attributable to non-controlling insurance. Now, let's move to slide six to review our cash flows and liquidity. We generated fourth quarter cash flow from operations before working capital changes of $122 million in 2023, compared to $90 million in 2022. Full year cash flow of $330 million increased $15 million year over year. This strong cash flow generation and our continued focus on working capital management, combined with lower commodity prices, resulted in negligible short-term borrowings at year-end. We ended the year with cash of $644 million, which was in excess of our total debt.

Brian A. Valentine: Our effective tax rate varies each quarter based primarily on the amount of income attributable to noncontrolling interests.

Brian A. Valentine: Now, let's move to slide six to review, our cash flows and liquidity.

Brian A. Valentine: We generated fourth quarter cash flow from operations before working capital changes of $122 million in 2023 compared.

Brian A. Valentine: Compared to $90 million in 2022.

Brian A. Valentine: Full year cash flow of $330 million increased $15 million year over year.

Brian A. Valentine: This strong cash flow generation and our continued focus on working capital management.

Brian A. Valentine: And bind with lower commodity prices resulted in a negligible short term borrowings at year end.

Brian A. Valentine: We ended the year with cash of $644 million, which was in excess of our total debt.

Brian A. Valentine: Next, let's turn to slide 7 to review our capital spending and long-term debt. We continue to take a disciplined, responsible approach to capital spending and investment, which were in line with our expectations at $152 million for the year. Our long-term debt to EBITDA ratio is one and a half times, still well below our stated target of less than two and a half.

Brian A. Valentine: Next let's turn to slide seven to review, our capital spending and long term debt.

Brian A. Valentine: We continue to take a disciplined responsible approach to capital spending and investments which were in line with our expectations at $152 million for the year.

Brian A. Valentine: Our long term debt to EBITDA ratio is one and a half times still well below our stated target of less than two and a half times.

Brian A. Valentine: We continue to evaluate growth projects and acquisitions and have a strong balance sheet that will support those investments that meet our strategic and financial criteria. Now we'll move on to a review of each of our three segments, beginning with trade on slide. Trade reported fourth-quarter pre-tax income of $44 million and adjusted pre-tax income of $47 million compared to adjusted pre-tax income of $52 million in the same period of 2022.

Brian A. Valentine: We continue to evaluate growth projects and acquisitions and have a strong balance sheet that will support those investments that meet our strategic and financial criteria.

Now, we'll move on to a review of each of our three segments beginning with trade on slide eight.

Brian A. Valentine: Trade reported fourth quarter pretax income of $44 million and adjusted pretax income of $47 million compared to adjusted pre tax income of $52 million in the same period of 2022.

Brian A. Valentine: Our grain assets had a good fourth quarter, with strong elevation margins and drying income from a wet corn harvest. The premium ingredients business showed a significant improvement from the prior year, including good results from recent capital investments and our recent acquisitions of BridgeAgri and ACJ International. Our merchandising portfolio delivered solid results with a mix of market challenges and opportunities across the commodities and geographies in which we operate. Challenges include ongoing geopolitical impacts and general weakness in the Middle East and North Africa regions. As expected, we were able to resolve substantially all of the remaining Egyptian currency issues during the fourth quarter.

Brian A. Valentine: Our grain assets had a good fourth quarter with strong elevation margins and drying income from a wet corn harvest.

Brian A. Valentine: The premium ingredients business had a significant improvement from the prior year, including good results from recent capital investments and our recent acquisitions of bridge Agri and a C J international.

Brian A. Valentine: Our merchandising portfolio delivered solid results with a mix of market challenges and opportunities across the commodities and geographies in which we merchandise.

Brian A. Valentine: Challenges include ongoing geopolitical impacts and general weakness in the Middle East and North Africa region.

Brian A. Valentine: As expected we were able to resolve substantially all of the remaining Egyptian currency issues during the fourth quarter.

Brian A. Valentine: Trades adjusted EBITDA for the quarter was $62 million compared to adjusted EBITDA of $72 million in the fourth quarter of 2022. Adjusted EBITDA for the full year was $155 million in 2023 compared to $199 million in 2022. Moving to slide nine.

Brian A. Valentine: Trades adjusted EBITDA for the quarter was $62 million compared to adjusted EBITDA of $72 million in the fourth quarter of 2022.

Brian A. Valentine: Adjusted EBITDA for the full year was $155 million in 2023 compared to $199 million in 2022.

Brian A. Valentine: Moving to slide nine.

Brian A. Valentine: Renewables generated record fourth-quarter pre-taxed income attributable to the company of $33 million, compared to $13 million in 2022. Outstanding operating performance in our four ethanol plants resulted in record ethanol production and improved yields in a strong crush margin environment. Improved Renewable Diesel Feedstock and Feed Ingredient Merchandising Volumes also added to earnings. For the full year, our team sold approximately 1.3 billion pounds of renewable diesel feedstock, an increase of 60% when compared to 2022. Renewables had EBITDA of $73 million in the fourth quarter of 2023, more than double when compared to $36 million in the fourth quarter of 2022. For the full year, renewables generated adjusted EBITDA of $230 million in 2023, up $50 million compared to $180 million in 2022. Turning to slide number 10.

Brian A. Valentine: Renewables generated record fourth quarter pretax income attributable to the company of $33 million compared to $13 million in 2022.

Brian A. Valentine: Outstanding operating performance in our four ethanol plants resulted in record ethanol production and improved yields and a strong crush margin environment.

Brian A. Valentine: Improved renewable diesel feedstock and feed ingredient merchandising volumes also added to earnings.

Brian A. Valentine: For the full year, our team sold approximately 1.3 billion pounds of renewable diesel feedstocks and increase of 60% when compared to 2022.

Brian A. Valentine: Renewables had EBITDA of $73 million in the fourth quarter of 2023 more than double when compared to $36 million in the fourth quarter of 2022.

Brian A. Valentine: For the full year renewables generated adjusted EBITDA of $230 million in 2023 up $50 million compared to $180 million in 2022.

Brian A. Valentine: Turning to slide number 10.

Brian A. Valentine: The nutrient and industrial business reported fourth-quarter adjusted pretaxed income of $2 million, which was a slight increase from the fourth quarter of 2022. Agriculture products sales volume increased approximately 3% in the quarter with a comparable per ton margin. Manufactured products had improved results in our turf business but continued to experience lower demand in contract manufacturing. Results also include a $2 million charge relating to a standstill agreement for an acquisition that we elected not to pursue.

Brian A. Valentine: The nutrient and thus nutrient and industrial business reported fourth quarter adjusted pre tax income of $2 million, which was a slight increase from the fourth quarter of 2022.

Brian A. Valentine: Agriculture product sales volume increased approximately 3% in the quarter with comparable per ton margins.

Brian A. Valentine: Manufactured products had improved results in our turf business, but continued to experience lower demand in the contract manufacturing business.

Brian A. Valentine: Results also include a 2 million dollar charge relating to a standstill agreement for an acquisition that we elected not to pursue.

Brian A. Valentine: Nutrient and Industrials' adjusted EBITDA for the quarter was $11 million, just above the fourth quarter of 2022. For the full year, Nutrient and Industrials recorded EBITDA of $62 million, a decline of $11 million from 2022's record performance. And with that, I'll turn things back over to Pat for some comments about our early 2024 outlook. Thanks, Brian.

Nutrient and industrial's adjusted EBITDA for the quarter was $11 million just above the fourth quarter of 2022.

Brian A. Valentine: For the full year nutrient and industrial recorded EBITA of $62 million, a decline of $11 million from 2020 two's record performance.

Brian A. Valentine: And with that I'll turn things back over to Pat for some comments about our early 2024.

Patrick E. Bowe: Thanks, Brian.

Patrick E. Bowe: Coming off another strong year, we remain optimistic about our growth prospects but acknowledge a shift in agricultural fundamentals as global supply has replenished the low stocks of the last few years, and commodity prices have declined. Over these three strong years, we've made investments in our core assets, as well as successfully completing several small bolt-on acquisitions in key product lines. We've also grown organically through new merchandising desks, focusing on new commodities and geographies with expected growth. Now that we've seen a reduction in commodity prices, our teams are prepared to meet these new fundamentals by leveraging our balanced portfolio of assets and merchandising product lines. Our trade business outlook remains positive, but it is likely to have a slower start to the year as farmers have been reluctant to make forward sales on lower market prices. In addition, expectations for higher wheat storage income have faded given the large export purchases China made in the fourth quarter.

Patrick E. Bowe: Coming off another strong year, we remain optimistic about our growth prospects, but acknowledge a shift in the AG fundamentals as global supply has replenished the low stocks over the last few years and commodity prices have declined.

Patrick E. Bowe: Over these over these three strong years, we've made investments in our core assets as well as successfully completing several small bolt on acquisitions in key product lines.

Patrick E. Bowe: We've also grown organically through new merchandising deaths, focusing on new commodities and geographies with expected growth.

Patrick E. Bowe: Now as we've seen a reduction in commodity prices. Our teams are prepared to meet these new fundamentals by leveraging our balanced portfolio of assets and merchandising product lines.

Patrick E. Bowe: Our trade business outlook remains positive, but is likely to have a slower start to the year as farmers have been reluctant to make forward sales on lower market prices.

Patrick E. Bowe: In addition expectations for higher wheat storage income have faded given the large export purchases China made in the fourth quarter.

Patrick E. Bowe: With our strong North American asset network, we are well positioned to handle grain when it is brought to market and earn space income. We expect some shifts in the mix of U.S. crops for 2024 but still anticipate significant quantities of corn in our key dry areas. Our mix of assets and merchandising should continue to provide us with opportunities for handling large grain harvests as well as opportunistic commodity merchandising. We have continued to grow our premium ingredients business and expect it to become a larger component of the overall trade segment. Seasonally weak demand has reduced ethanol crush margins into the first quarter, as is typical for our renewables segment. However, we believe that industry maintenance shutdowns and spring driving miles may positively influence crush margins beginning in the second quarter. Weaker corn prices are expected to reduce feed value.

Patrick E. Bowe: With our strong North American asset network, we are well positioned to handle grain when it was brought to market and are in space income.

Patrick E. Bowe: We expect some shifts in the mix of U S crops for 'twenty 'twenty, four but still anticipate significant quantities of corn in our key dry areas.

Patrick E. Bowe: Our mix of assets and merchandising should continue to provide us with opportunities for handling large grain harvest as well as opportunistic commodity merchandising.

Patrick E. Bowe: We have continued to grow our premium ingredients business and expect it to become a larger component of the overall trade segment.

Patrick E. Bowe: Yeah.

Patrick E. Bowe: Seasonally weak demand has reduced ethanol crush margins into the first quarter as is typical for our renewables segment.

Patrick E. Bowe: We believe that industry maintenance shutdowns and spring driving miles may positively influence crush margins beginning in the second quarter.

Patrick E. Bowe: Weaker corn prices are expected to reduce feed values.

Patrick E. Bowe: We should acknowledge that the industry's ethanol plants continue to age, leading to longer shutdowns and lower plant efficiencies. But our continued commitment to maintaining our plants should set our assets apart. We continue to make investments in our plants to improve their efficiency and reliability, as well as to improve both the quality and yield of distiller's corn oil, a low-carbon intensive input to the renewable diesel industry. We're also exploring a number of investments that will help to lower the carbon intensity of our ethanol production, allowing us to participate in future sustainable aviation fuel initiatives. This includes exploring carbon sequestration opportunities for our three eastern plants where the geology is favorable, and additional combined heat and power generation to run our plants more efficiently.

Patrick E. Bowe: We should acknowledge that the industry's ethanol plants continue to age leading to longer shutdowns and lower plant efficiencies.

Patrick E. Bowe: But our continued commitment to maintaining our plants should set our assets apart.

Patrick E. Bowe: We continue to make investments in our plants to improve their efficiency and reliability as well as to improve both the quality and yield of distillers corn oil a low carbon intensive input to the renewable diesel industry.

Patrick E. Bowe: Yeah.

Patrick E. Bowe: We're also exploring a number of investments that will help to lower the carbon intensity of our ethanol production, allowing us to participate in future sustainable aviation fuel initiatives.

Patrick E. Bowe: This includes exploring carbon sequestration opportunities for our three eastern plants, where the geology is favorable.

Patrick E. Bowe: An additional combined heat and power generation to run our plants more efficiently.

Patrick E. Bowe: Finally, we expect to continue to grow our renewable diesel feedstock merchandising through off-take and supply agreements with third parties. Additionally, even with an expected reduction in farmer income, we continue to anticipate solid demand for the fertilizers and specialty liquids that we supply in our nutrient and industrial segments. Our fertilizer and related product offerings are critical to maximizing production for farmers in the areas we serve, and we believe that the current grain prices will still support the application of fertilizers and specialty crop imports. As always, weather and the planting season will impact timing and our margin opportunity, but we continue to have good supplier support as we sell through our own retail farm centers as well as third parties.

Patrick E. Bowe: Finally, we expect to continue to grow our renewable diesel feedstock merchandising threw off take and supply agreements with third parties.

Okay.

Patrick E. Bowe: Even with an expected reduction in farmer income, we continue to anticipate solid demand for the fertilizers and specialty liquids that we supply in our nutrient and industrial segment.

Patrick E. Bowe: Our fertilizer and related product offerings are critical to maximizing production for farmers in the areas. We serve and we believe that the current grain prices will still support application of fertilizers and specialty crop inputs.

Patrick E. Bowe: As always weather and the planting season will impact timing and our margin opportunity. While we continue to have good supplier support as we sell through our own retail farm centers as well as third parties.

Patrick E. Bowe: In our turf product lines, we are taking steps to improve our operations and continue to look for further opportunities in this space. We continue to explore North American agricultural growth opportunities I've highlighted a number of growth areas that we're exploring in each of our three segments, and we'll continue to remain disciplined in our approach. As a reminder, in late 2017, we established an EBITDA goal of $300 million by 2020, which was approximately double our 2017 results. We exceeded this goal on a run rate basis and then increased our EBITDA target to $350 to $375 million by 2023, which we exceeded each of the last two years. This growth was only possible through our focus on strategy, a mix of organic and acquisition growth, and our team's hard work and successful execution.

Patrick E. Bowe: And our turf product lines, we're taking steps to improve our operations and continue to look for further opportunities in this space.

Patrick E. Bowe: We continue to explore north American agricultural growth opportunities.

Patrick E. Bowe: I've highlighted a number of growth areas that we're exploring in each of our three segments.

Patrick E. Bowe: And we will continue to remain disciplined in our approach.

Patrick E. Bowe: As a reminder, in late 2017, we established an EBITDA goal of $300 million by 2020.

Patrick E. Bowe: Which was approximately double our 2017 result, we exceeded this goal on a run rate basis, and then increased our EBITDA target to $3 $50 million to $375 million by 2023.

Which we exceeded each of the last two years.

Patrick E. Bowe: This growth was only possible through the focus on strategy, a mix of organic and acquisition growth and our team's hard work and successful execution.

Operator: We remain focused on achieving our 2025 run rate EBITDA target of $475 million, which will be reliant on both internal growth and the successful completion of acquisitions. We'll continue to make responsible decisions that benefit our customers and maximize shareholder value while executing our growth strategy. And now, we'll be happy to take your questions. Thank you. If you would like to ask a question, please press star then 1.

Patrick E. Bowe: We remain focused on achieving our 2025 run rate EBITDA target of $475 million.

Patrick E. Bowe: Which will be reliant on both internal growth and the successful completion of acquisitions.

Patrick E. Bowe: We will continue to make responsible decisions that benefit our customers and maximize shareholder value, while executing our growth strategy.

Speaker Change: And now we'll be happy to take your questions.

Speaker Change: Thank you if you'd like to ask a question. Please press Star then one.

Operator: This question has already been put to the floor. I'm going to go ahead and open it up for questions. This question comes from Ben Bienvenu with... Hey, good morning, everyone.

Speaker Change: Question, that's already been addressed.

Speaker Change: So from queue. Please press Star then two.

Speaker Change: Today's first question comes from Ben.

Stephens Inc.: With Stephens Inc. Please go ahead.

Stephens Inc.: Okay.

Ben: Hey, good morning, everyone.

Ben Bienvenu: Morning, Ben. Brian, my first question is for you. Just as it relates to capital spending, what are you expecting in terms of capital expenditures for 2024, and what is Maintenance CapEx vs.

Ben: Good morning, Ben.

Ben: Brian My first question is for you just as it relates to capital spending what are you expecting in terms of capital expenditures for 2024 and what.

Brian A. Valentine: Gross CapEx, Sure. Yeah, thanks, Ben. And good morning.

Some of that is maintenance capex versus growth Capex.

Brian A. Valentine: I would say for 2024, we're targeting something in the range of $150 to $175 million. And it would probably be, call it an equal balance between maintenance and growth capex. That does not include M&A. So that would be just our growth and maintenance capex. Okay, great.

Sure. Thanks, Ben and good morning, I would say for 2024, we're targeting something in the range of $150 million to $175 million then it would probably be call. It a equal balance between maintenance and growth Capex is how I would model. It in that that does not that does not include M&A. So that would be just our you know our growth and maintenance.

Ben: Capital.

Okay great.

Ben: Recognizing that there is seasonality to the balance sheet, you're in a net cash position at the conclusion of this year, which is pretty remarkable.

Patrick E. Bowe: Recognizing that there is seasonality to the balance sheet, you're in a net cash position at the conclusion of this year, which is pretty remarkable. The business seems to be performing really well, notwithstanding, Pat, the shifts in the ag cycle that you alluded to. The stock is trading at 6 times the next 12 months' consensus EBITDA estimate. That's an exceptionally low valuation on the business.

Ben: The business seems to be performing really well notwithstanding Pat the shifts in the AG cycle that you alluded to.

Ben: The stock is trading at.

Ben: Six times, the natural but the consensus EBITDA estimates.

Ben: An exceptionally low valuation on the business how do you think about.

Patrick E. Bowe: How do you think about? You know, the rank ordering of why not buying back stocks versus having dry powder to pursue acquisitions. It sounds like you have the flexibility to do all of it. So why not be more? www.thevenusproject.com Yeah, Ben, that's a fair question. And I think from our perspective, we have a robust pipeline of potential M&A projects and other growth projects that we're looking at that are in various stages of completion. And I think as we look at it, we're thinking of it from a, call it a balanced approach through, you know, investments and growth, but also potential returns to shareholders. The other thing I would say is, and I'm sure you're aware of this, we do tend to have, you know, we have a few hundred million dollars that go out the door in early January for things like farmer hold payments and deferrals.

Ben: You know the rank ordering of why not bank buying back stock versus having dry powder.

Ben: To pursue acquisitions it sounds like you have the flexibility to do all of it so why not be more static.

Static and your repurchase activity Oh sure given the valuation where it is.

Speaker Change: Yes. It is.

Speaker Change: Fair question I think from our perspective, we have a.

Speaker Change: Robust pipeline of potential M&A projects and other growth projects that we're looking at that are in various stages of completion and I think as we look at it. We're we're thinking of it from a call it a balanced approach.

Speaker Change: Through investments in growth, but also potential returns to shareholders.

Speaker Change: The other thing I would say is and Im sure Youre aware of this we do tend to have.

Speaker Change: We have a few hundred million dollars that goes out the door in early January for things like a farmer homepages and deferrals deferred pay.

Patrick E. Bowe: And so, you know, I would say we're going to continue to take a balanced approach and try to make sure we're doing what is in the best interest of all stakeholders and shareholders. Maybe I'll add on to that, Ben, and you make some very good points. I think the thing is, let's just look back at last year. We completed four bolt-on acquisitions, albeit smaller. Two were in the pet ingredients segment.

Speaker Change: And so I would say, we're going to continue to take a balanced approach and try to make sure. We're doing what is in the best interest of all stakeholders and shareholders.

Speaker Change: Maybe I'll I'll add onto that <unk> been in a very good points.

Speaker Change: I think the thing is lets just look back at this last year, we completed four bolt on acquisitions, albeit smaller two were in the pet ingredients segment.

Patrick E. Bowe: And we've also invested in our food cohort, in our food ingredients business, as well as made improvements to our ethanol plant. So these are all to structure our business and make it stronger in the long run. And those really aren't dependent on the ag cycle or particular export moves, etc. So I would like to think of it this way: we have 50-plus profit centers in this kind of broad portfolio in North American agriculture. And that's all about serving our customers, right?

Speaker Change: And we've also invested in our food court and our food ingredients business as well as joining improvements at our ethanol plants. So those are all to structure our business to make it stronger in the long run.

Speaker Change: Those really don't aren't dependent on AG cycle, or particular export moves et cetera. So I always like to think of it. We have 50 plus profit centers in this kind of broad portfolio in North American AG and that's about serving our customers right. So that whether it be food feed or fuel and food whether it's.

Patrick E. Bowe: So whether it be food, feed, or fuel, food, whether it's for oatmeal production or corn for chip production or pet food. And then, for our big feed customers, cattle, swine, and poultry, those are critical customers that are very consistent in North America. And then, of course, in the fuel industry with ethanol and now RD feedstocks, we're positioned to really service those customers, and that's where we are targeting our investments. And I think it's important now to be really well poised with a strong balance sheet to be able to invest for the long term, especially as we look to make our ethanol plants lower CI. So I think we're in a really good position to invest in these key verticals that can lead to long-term growth for the company. Okay, very good. It makes perfect sense.

Speaker Change: For oatmeal production or a corn for chip production or pet food and then in our big feed customers cattle swine poultry. Those are critical customers that are very consistent in North America, and then of course in the fuel industry with ethanol and now are these feedstocks, we're positioned to really service those customers and that's where we're targeting.

Speaker Change: Our investments.

Speaker Change: And I think it's important now to be really well poised with a strong balance sheet to be able to invest for the long term, especially as we look to make our ethanol plants lower Ci. So I think we're in a really good position to invest in these key verticals that can lead to long term growth for the company.

Speaker Change: Okay.

Speaker Change: Okay very good it makes perfect sense.

Ben Bienvenu: Last question for me, maybe just panning out a bit, and Pat, you touched on this a little bit, I think with a little bit more focus on the near term, but, Can you offer us your State of the Union on how you're seeing the agricultural cycle play out in 2024, 2025 with what you can see down the line right now and how you think the Andersons is positioned relative to that to maximize shareholder value? Sure, a very good point. And I'll start off, and then maybe I'll turn it over to Bill, who's very close to this.

Speaker Change: Last question for me, maybe just panning out of bed and Pat you touched on this a little bit I think with a little bit more focus to the near term but.

Speaker Change: Can you offer us your state of the Union on how you're seeing the AG cycle play out in 2020 for 2025 with what you can see down the line right now and how you think the andersons is positioned relative to that.

Speaker Change: To maximize shareholder value.

Speaker Change: Sure very good.

Speaker Change: Good points and I'll start off and then maybe I'll turn it over to Bill who is very close to this so I think for US. It's important to think about as I was mentioning earlier, how to position our business regardless of the cycle or if its a big export period are big high soybean crush or corn.

Patrick E. Bowe: So I think for us, it's important to think about, as I was mentioning earlier, how to position our business regardless of the cycle, if it's a big export period or a big high soybean crush or corn conversion to ethanol margins. I think the consistent thing for us is to make sure our assets are very strong and well positioned. We've talked about this in ethanol. We feel our plants are very large and efficient with modern technologies.

Bill Kruger: Conversion to ethanol margins I think the consistent thing for US is to make sure your assets are very strong and well positioned.

We've talked about this in ethanol we feel are our plants are very large and efficient with modern technology I just want to continue to invest in those and now as we mentioned we're looking at carbon sequestration.

Patrick E. Bowe: We want to continue to invest in those, and now, as we mentioned, we're looking at carbon sequestration in those three eastern plants. Our western plant would need to be a pipeline play, but our three eastern plants are well-suited for geology to be able to do that.

Bill Kruger: Those three eastern plants are western plant would need to be a pipeline play, but our three eastern plants are well suited for geology to be able to do that that's going to be well positioned for the long term.

Patrick E. Bowe: That's going to be well-positioned for the long term for a potential south play, so we want to make sure we invest properly to do that. And in our grain business, we've really diversified across a broad array of products, right? So we've talked about feed to different feedings of different animals in North America, as well as different food ingredients.

Bill Kruger: For a potential south place so worked want to make sure we invest properly to do that and in our grain business, we've really diversified across a broad array of products right. So we've talked about from feed to different.

Bill Kruger: Feed feeding of different animals in North America, as well as different food ingredients, we've improved some of our food corn capability last year. So we're trying to do things arent reliant for example on a big export market because exports have slowed in North America, with Brazil really coming on strong supply in China. So we want to position ourselves to be able.

Patrick E. Bowe: We improved some of our food corn capability last year. So we're trying to, those things aren't reliant, for example, on a big export market because exports have slowed in North America, with Brazil really coming on strong, supplying China. So we want to position ourselves to be able to be successful, whether it's a big bull grain market or a softer grain market. We have big crops. We talked a couple of years ago about the need to have two or three crop cycles of good harvests to get back to a balanced S&D. And that's what's happening now.

Bill Kruger: To.

Bill Kruger: Be successful, whether it's a big bowl grain market or a software grade market.

Bill Kruger: So we have a big crops, we talked a couple of years ago about the need to have two or three crop cycles of good harvest to get back to a balanced S. A D and that's what's happened now we had a big South American production and then a good north American production. This year. So we're set up very well now from a global balance.

Patrick E. Bowe: We had a big South American production and then a good North American production this year. So we're set up very well now from a global balance sheet on grains. But, as you well know, this can change quickly with weather conditions changing or some geopolitical issues.

Bill Kruger: Sheet on drains but as you well know this can change quickly.

Bill Kruger: Weather conditions, changing or some geopolitical issues. So I think the bottom line. We just wanted to stay very well positioned and continue to deploy capital in areas will be for a long term growth.

Patrick E. Bowe: So I think the bottom line is we just want to stay very well positioned and continue to deploy capital in areas of E for long-term growth. And Bill can probably update you more about the macro on grain and ethanol. Thank you, Pat. Good morning, Ben.

Bill Kruger: Bill can probably update more about the macro.

Bill Kruger: Grain and ethanol.

Bill Kruger: Thank you Pat good morning, Ben.

Bill Kruger: I'll just kind of add to what Pat was saying there. If you look across the entire industry, you know, egg cycles come and go. This is going to be a really good opportunity for the Andersons to be able to collectively utilize the acquisition of Lansing, which was more focused on merchandising, our historic asset footprint in the East and what we've grown in the Western Corn Belt. So I think our opportunities as we go into this stock building mode, which is what I'm pretty sure you're referencing, I think it's going to be one that offers opportunities to There are a lot of things that we're looking at also. We all have seen the well-documented growth of soybean crush in the U.S., across North America, if you want to include canola.

Bill Kruger: Just kind of add to what Pat was saying there if you look across the entire industry.

Bill Kruger: AG cycles come and go.

Bill Kruger: This is going to be a really good opportunity for the andersons to be able to collectively utilize.

Bill Kruger: The acquisition of Lansing, which was more focused on merchandising.

Bill Kruger: Our historic.

Bill Kruger: Asset footprint in the east and what we've grown in the western corn belt. So I think our opportunities as we go into this stocks building mode, which is what I'm pretty sure you're referencing.

Bill Kruger: Think it's going to be.

Bill Kruger: One that offers opportunities to the andersons and maybe more so than it has historically.

Bill Kruger: There's a lot of things that we're looking at also we all well documented.

Bill Kruger: Growth of soybean crush in the U S across North America. If you want to include the canola, that's going to provide opportunities for companies like the andersons.

Bill Kruger: That's gonna provide opportunities for companies like the Andersons, and we're really looking forward to capitalizing on that. We are not in the soybean or canola crush business, but we are in the feed distribution business.

And we're really looking forward on on capitalizing that we're not in the soybean or canola crush business, but we are in the feed distribution business. We do understand the flows of grains and Greens products and we think there's going to be opportunities around the meal and then lastly, just to add to.

Bill Kruger: We do understand the flows of grains and grains products, and we think there's gonna be opportunities around the meal. And then lastly, just to add to Pat's comment about renewables, we have been very focused for the last five years on making sure that our ethanol plants continue to be very efficient, very focused on where we want to develop long-term. We think that's a good spot to be on ethanol. We also like the renewable diesel feedstock business and our understanding of how the different co-products going into renewable diesel have an interplay and are able to take advantage of that. Thanks for all the color.

Bill Kruger: <unk> comment around renewables, we have been very focused the last five years on making sure that our ethanol plants continue.

Bill Kruger: To be.

Bill Kruger: Very efficient very focused on where we want to develop long term, we think thats a good spot to be on ethanol. We also like the renewable diesel feedstock business and our understanding of how the different co products going into renewable diesel.

Bill Kruger: Have an interplay and are able to take advantage of those.

Bill Kruger: Okay.

Okay. Thanks for all the color thanks for taking my questions.

Ben Bienvenu: Thanks for taking my question. And our next question. All right, thanks for taking my questions and congratulations guys on a really good quarter here and a great end of the year. A few questions.

Bill Kruger: Thank you and our next question comes from Ben <unk>.

Ben: With Lake Street capital markets. Please go ahead.

Ben: Thanks for taking my questions and congratulations guys on a really good quarter here and a great end of the year.

Ben Bienvenu: First of all, the follow-up to your comments on the renewable segment and investing in carbon sequestration initiatives in advance of ethanol the jet. Can you talk about how you are considering your project here in the context of kind of the pending news coming out of the administration for the ultimate eligibility of ethanol as a feedstock for sustainable aviation fuel? I mean, how contingent are your initiatives on whatever comes out of the federal agencies here in the next couple of weeks? I'll go ahead and take that, Ben. Good morning.

Ben: A few questions first of all the follow up to your comments on the.

Ben: The renewable segment and investing in carbon sequestration initiatives in advance of.

Ben: Ethanol the jet.

Ben: Can you talk about how you are considering your your project here in the context of kind of the pending.

Ben: News coming out of the administration for for the ultimate eligibility of ethanol as a feedstock to sustainable aviation fuel I mean, how contingent or your initiatives on on whatever comes out of the federal.

Ben: Federal agencies here in the next couple of months.

Ben: Okay.

Ben: Oh go ahead and take that Ben Alright, good morning.

Ben: I'm going to assume you're referencing.

Bill Kruger: I'm going to assume you're referencing the rules and regulations around 45Z. Yeah. Okay. With that assumption, there's a lot of planning that needs to go into these projects. And as an organization, we've spent the last several months working on that plan. We have a pretty good feel for what we think is going to come out of the final rulings.

Ben: Rules and regulations around 45 G.

Ben: Yeah.

Ben: Okay, alright with that assumption.

Ben: There is a lot of planning that needs to go into these projects and as an organization. We've spent the last several months working on that plan, we have a pretty good feel on what we think is going to come out of the final rule rulings.

Bill Kruger: But as we know, that is very instrumental in being able to go forward with the projects. And we're no different than any other ethanol company that's looking for opportunities. There are going to be ways that we can enhance our ethanol plants with CCS, and we're focused on moving forward with those. And to the other point that you made in referencing ethanol-to-jet, there really isn't any ethanol-to-jet without low-carbon ethanol.

Ben: But as we know that is very instrumental on being able to go forward with the projects.

Ben: No different than any other.

Ben: Ethanol company, that's looking at opportunities there there are going to be ways that we can enhance our ethanol plants with Ccs and we're focused on moving forward with those and to the other point that you made in referencing ethanol the jet there really isn't.

Ben: Any ethanol to jet without low carbon ethanol and Thats what were really focused on is making sure that we're able to participate in that market when it happens.

Bill Kruger: And that's what we're really focused on, is making sure that we're able to participate in that market when it happens. Maybe I'll add on to that, Ben, just to frame it up a little bit for people's background. Our four plants are three eastern plants in Indiana, Ohio, and Michigan.

Speaker Change: Maybe I'll add on to that Ben just to frame it up a little bit for People's background.

Speaker Change: On our four plants are three eastern plants in Indiana, Ohio, and Michigan, we feel have favorable geology to be able to conduct carbon sequestration.

Patrick E. Bowe: We feel we have favorable geology to be able to conduct carbon sequestration. In fact, two of those plants today, we already capture CO2 for beverage-grade use. So we're prioritizing where we think we can get the quickest bang for our buck with sequestration investment and also position ourselves long-term to be very efficient in making investments in our energy centers and making them lower cost, as well as capture some lower CI in our combined heat and power projects. So we've been successful with those already. We have combined heat and power capacity at our plants, but we want to continue to beef that up. Because our strategy is basic, we think that the larger scale, highly efficient, modern plants that have really good transportation economics and can have a lower CI score by sequestration will be the long-term winners. And it's just kind of that simple.

Speaker Change: Two of those plans today, we already captured.

Speaker Change: For beverage grade use.

Speaker Change: So we're prioritizing where we think we can get that.

Speaker Change: Quickest Bang for Buck with sequestration investment and also to position ourselves long term to be very efficient on our.

Making investments in and our energy centers, and making them lower costs as well as capture some lower C. I.

Our combined heat and power projects. So we've been successful with those already we have combined heat and power.

Speaker Change: Paucity at our plants, but we want to continue to beef that up because our strict strategies basic that we think that the larger scale highly efficient modern plants that have really good transportation economics and can have a lower Ci score I sequestration will be the long term winners and it's just kind of that simple.

Patrick E. Bowe: So that's where we're positioning our plants to be. One plant in Iowa will be part of a pipeline project, whatever that would come to pass, just like a lineup of other plants in Iowa. So we think we're in a good position on a relative basis to competitors. And we just need to execute against that, making the proper investments. Okay, that's very helpful context from both of you there.

So that's where we're positioned our plans to be our one plant in Iowa will be part of a pipeline project whatever that would come to past just like lined up with other plants in Iowa. So we think we're in a good position on a relative basis to competitors.

Speaker Change: And we just need to execute against that are doing the proper investments.

Speaker Change: Okay. That's very helpful context from both of you there I appreciate that.

Ben Bienvenu: I appreciate that. As a kind of follow-on question to this concept, but in the renewable diesel feedstock business, the 60% growth rate last year that I think you called out, that's phenomenal. Can you talk about your expectations for the continued growth trajectory in that business in terms of both the market maybe slowing down a little bit from capacity utilization, but also your ability to maybe take share? Do you expect a kind of 60% number to be sustainable going into next year? Do you think that's going to taper a bit given those two kinds of big picture puts and takes?

Speaker Change: As a kind of follow on question two.

Speaker Change: This concept, but in the renewable diesel feedstock business.

Speaker Change: 60% growth rate last year.

Speaker Change: You called out.

Speaker Change: So nominal on can you talk about your expectations for the continued growth trajectory in that in.

Speaker Change: And that.

Speaker Change: Business in terms of both the market may be slowing down a little bit for.

Speaker Change: From a capacity utilization, but also your ability to maybe take share do you expect a kind of a 60% number to be sustainable going into next year or do you think that's going to taper about given those two kind of big picture puts and takes.

Patrick E. Bowe: I'll start, and Bill has more expertise here, that we started this trading desk for RDFeedstocks at the beginning of this industry. And, of course, we had our cornerstone of our own corn oil to be positioned, but we've been very successful in partner with a lot of people both on the sell side and the buy side and really gotten to know these markets well, and we have a really crackerjack team that's doing a great job here. And we've grown, you know, very fast, as Brian mentioned, our growth rate is well over a billion pounds. We set a target to be 2 billion pounds by 2025, and we feel that's achievable. We've looked at acquisitions in this space, but we haven't found one that fits real well with us, but we'll continue to look for opportunities, especially in, you know, the lower CI feedstocks, which are in the fats and greases and used coconut oil.

Speaker Change: I'll start and Bill is more expertise here that.

Speaker Change: We started this trading desk for Rd feedstocks at the at the beginning of this industry and of course, we had our cornerstone of our own corn oil to be positioned but we've been very successful to partner with a lot of people both on the sell side and the buy side and really gotten to know these markets well.

Speaker Change: It hasn't really crackerjack team, that's doing a great job here and we've grown very fast as Brian mentioned, our growth rates well over 1 billion pounds, we set a target to be 2 billion pounds by 2025, we feel thats achievable.

Speaker Change: Looked at acquisitions in this space, we haven't found one that fits real.

Speaker Change: Real well with us, but we'll continue to look for opportunities, especially in the low Ci feedstocks, which is on the SaaS increases in used cooking oil. So we think theres opportunities for us to enhance and get bigger.

Patrick E. Bowe: So we think there's opportunities for us to improve and get bigger. I don't know about a magic 60% growth rate target, he said, but I think it's plotting a way where we can feel we can position ourselves best to service our customers. And that's what we're focused on. Hey, Bill can add some more color to that. Yeah, I would, I would agree with Pat.

Speaker Change: I don't know about a magic, 60% growth rate target you said, but I think its plot in a way where we can feel we can position ourselves best to service our customers and that's what we're focused on hey, Bill can add some more color to that.

Bill Kruger: Yes, I would I would agree with Pat.

Bill Kruger: There is still plenty of runway in our position primarily low Ci feedstocks I.

Bill Kruger: There is still plenty of runway in our position, primarily low CI feedstock. I do understand your comment about some of the ebbs and flows that we've seen recently with plants and supply. But what we're more focused on is utilizing both M&A around fixed assets and continuing to increase and grow the number of supply agreements, both as offtaker and as supplier. So, yeah, we think that there is still a lot of runway in that business since it's only a little over two years old. Right, very exciting. I appreciate that from both of you again.

Bill Kruger: I do understand your comment around some of the ebbs and flows that we've seen recently.

Bill Kruger: With plants with supply, but what we're more focused on is.

Bill Kruger: Utilizing both M&A around fixed assets and continuing to increase and.

Bill Kruger: Grow the number of supply agreements, both as off take and as suppliers. So yeah. We think that there is still a lot of runway in that business since it's only a little over two years old right.

Bill Kruger: Very exciting.

Speaker Change: I appreciate that from both you again bill.

Speaker Change: Bill a question.

Ben Bienvenu: Bill, a question specific to you on merchandising. Can you comment on the state of the state and merchandising heading into 24, particularly in the context of, you know, corn prices just kind of trickling, trickling away here over the last couple months? Is your, is your, profit per bushel taking a, you know, a materials hit in the current environment? Or are you guys able to be kind of steady state here in the face of corn prices? Good question.

Speaker Change: Specific to you on merchandising can you comment on kind of the state of the state and merchandising heading into 'twenty four, particularly in the context of corn prices, just kind of trickling trickling away here over the last couple of months as you're as you're as you're.

Speaker Change: Profit per bushel, taking are taking.

Speaker Change: Taking it.

Material hit in the current environment or are you guys able to to be kind of a steady state here in the face of corn prices.

Speaker Change: Good question.

Bill Kruger: As we've talked a lot before, you know, volatility is our friend when it comes to our true retail businesses. Our volumes continue to be steady, if not increasing. The approach that we've taken over the last couple of quarters is to really focus on, as we see a buildup of stocks, what stocks are in the U.S. or North America, what can we do to work with our customers to come up with more value-add products? And that's one area that we've been focusing on, not only in our premium ingredients business, but also in our traditional grain businesses. As commodity prices come down, there have been more opportunities for our customer base to look at some of these value-added lines with the traditional grains. The other area that we are really experts in is North American transportation.

Speaker Change: As we've talked a lot before volatility is our friend when it comes to our true merchandising businesses. Our volumes continue to be steady if not increasing the approach that we've taken.

Speaker Change: Over the last couple of quarters is to really focus on as we see a building of stock what stocks in the U S or North America, what can we do to work with our customers to come up with.

Speaker Change: More value add products.

Speaker Change: One area that we've been focusing on not only in our premium ingredients business, but also in our traditional.

Speaker Change: Traditional grain businesses as commodity prices come down there have been more opportunities with our customer base to look at some of these value added.

Speaker Change: Lines with the traditional grains. The other area that we are really experts in is north American transportation.

Bill Kruger: And those opportunities will prove more valuable when you have excess supply and a lower commodity market, specifically grain. So, yeah, we won't see some of the large spikes, but we do think that the base is there with opportunities to grow that will be able to carry into any agricultural cycle. Maybe I can add to that, Ben. Bill made some very good comments there. If you think about it, so corn slid down maybe 40, 50 cents, call it 4.60 nearby. Beans have been quite a bit worse. So, I mean, beans are often one of the worst starts.

Speaker Change: And those.

Speaker Change: Opportunities will prove more valuable.

Speaker Change: When do you have excess supply and lower.

Speaker Change: Commodity market, specifically grain so yeah, we won't see some of the large spikes, but we do think that the base is there with opportunities to grow that we'll be able to carry into <unk>.

Speaker Change: Any ag cycle.

Speaker Change: Maybe I can add on to that then bill made some very good comments. There. If you think about so corn sled down maybe 40 or 50 cents call at 460.

Speaker Change: Nearby beans have been quite a bit worse. So beans is often one of the worst start we've seen a start of a calendar year down about <unk> 50.

Patrick E. Bowe: We've seen the start of a calendar year down about $1.50, and we've seen it over 40 years. So, I mean, beans have really declined quite a bit. The point that we like to think about that impacts our business as basis traders is really, what are those domestic opportunities, as Bill talked about, on freight and working closely with our clients? And so what's changed is going from an inverse market to more of a carry market. You know, we have some opportunities to do well in the inverse.

Speaker Change: You've seen it over 40 years. So I mean, the beans are really declined quite a bit the point that we like to think about it impacts our business as basis traders is really what are those domestic opportunities as bill talked about on freight and working closely with our clients and so what's changed is going from an inverse market tomorrow mccarey market.

We have some opportunities to do well in the universe for example, our Louisiana assets did very well in the last two years and an inverse being early corn to the market, but a carrot. He comes back for a bigger eastern assets, where we can earn storage income that we haven't seen that much over the past couple of years. So it's kind of a balanced thing for us more than.

Patrick E. Bowe: For example, our Louisiana assets did very well the last two years in an inverse, being early corn to the market. But the carry comes back to our bigger eastern assets, where we can earn storage income that we haven't seen that much over the past couple years. So it's kind of a balanced thing for us, more than it is a negative thing. So what we'd like to see, as Bill mentioned, some volatility, some freight arbitrage, and opportunities to continue to work with our key clients in servicing their needs. Very good. Very good indeed. Well, I appreciate that from both of you. Congratulations again to you all for a great quarter. Thanks for taking my questions.

Speaker Change: It's a negative thing so we'd like to see as Phil mentioned, some volatility some freight arbitrage and opportunities to continue to work with our key clients in servicing their needs.

Speaker Change: Very good very good well I appreciate that from both of you. Congratulations again to you all for a great quarter. Thanks for taking my questions and I'll get back in line.

Ben Bienvenu: I'm gonna get back to you, Thank you, and our next. Thanks, good morning, and congrats on the quarter. Good morning.

Speaker Change: Thank you and our next question comes from Brian Wright with Roth.

Brian Michael Wright: Please go ahead.

Brian Michael Wright: Thanks, Good morning.

This quarter the mowry.

Brian Michael Wright: Yeah.

Brian: A couple things, I just wanted to try and dig a little deeper to see about like what to think about as far as just the margin pressure on the ethanol business, just maybe contextualize it from a magnitude and just like are you saying that the ability to offset with the storage and merchandising is like it's kind of a one-to-one and just trying to think about like how your view, and I know it's early on in the year, but just any help to think about the puts and the takes and what the net kind of... Sure Brian, and this is sometimes I feel like the old man of ethanol, been around it for about 30 years, is that the winter months are always difficult, and ethanol, it's one of the seasonal low margin time of the year, and this winter is no exception. The difference being, our merchants did a very nice job with pre-hedging some Jan, Feb, and even a little bit into March, ethanol, and we had those, the benefit of that shows up in our fourth quarter earnings, because we mark to market those hedges, so we don't see those in January, but we were able to get a nice job trading the ethanol market going into the start of the year, again, that showed up in fourth quarter last year.

Brian Michael Wright: A couple of things I, just wanted to try and dig a little deeper.

Brian Michael Wright: About like what to think about as far as just the margin pressure on the ethanol business just maybe.

Brian Michael Wright: Texture wise it from a magnitude and it just like you.

Brian Michael Wright: Or are you, saying that the ability to offset with the storage and merchandising is it like it it's kind of a one to one and just just trying to think about like how that how your view and I know it's early on in the year, but just you know.

Brian Michael Wright: Any help to think about the puts and takes and what the net kind of.

Petrobras: And Petrobras to Brian and this is sometimes I feel like the old man of ethanol been around it for about 30 years. Its just the winter months are always difficult enough in all its seasonal low margin time of the year.

Petrobras: And this winter is no exception the difference between our merchants did a very nice job with pre hedging some gen fab and even a little bit into March.

Petrobras: Ethanol and we had those.

Petrobras: Benefit of that shows up in our fourth quarter earnings because we mark to market. Those hedges. So we don't see those in January but we were able to did a nice job trading.

Petrobras: That's in all market going into the start the year again that showed up in the fourth quarter last year, having said that we were actually in a worse margin position on the board at this time last year than we are this year. So I think that we're looking forward to what the spring season will be.

Brian: Having said that, we were actually in a worse margin position on the board at this time last year than we are this year, so I think that we're looking forward to what the spring season will be. It's interesting, I've done some reading about people talking about how driving mileage, there's an interesting little statistics for vacation planning, may be the highest ever, that people after COVID spent a lot of time traveling on summer vacations and spring breaks by cars, and now with airline tickets quite pricey, and some challenges in some overseas locations to visit, there may be a record amount of spring and summer vacation travel, so that's kind of an interesting little tidbit, but bottom line is we see an improvement in the spring-summer driving miles and a good balance in the ethanol S&D, so we're optimistic for a good margin recovery as we head into the latter part of the year, but Bill can provide a little more detail. Thanks, Pat.

Petrobras: It's interesting I've done some reading about people talking about how driving my knowledge is an interesting little statistics for vacation planning, maybe the highest ever that people. After COVID-19 spent a lot of time traveling on summer vacations and spring breaks by cars and now with airline tickets quite pricey and some.

Petrobras: Challenges and some overseas locations to visit there may be a record amount of spring and summer vacation travel. So that's kind of an interesting little tidbit, but bottom line is we see.

Petrobras: An improvement in the spring summer driving miles and a good balance in the ethanol F&D. So we're optimistic for us a good margin recovery as we head into the latter part of the year, but bill can provide a little more detail.

Bill Kruger: Thanks Pat.

Patrick E. Bowe: Yeah, we, as Pat just mentioned, the start to 2024 has actually been better than the start to 2023 was. In looking at kind of the 2024 calendar year, we will see increased production. You know, we've had a couple plants come back online.

Bill Kruger: Yes.

Bill Kruger: As Pat just mentioned the start to 2024 has actually been better than the start to 2023 was.

And looking at kind of the 2024 calendar year, we will see increased production. We've had a couple plants come back online, but at the same time, we're likely going to see an increase in the blend rate every.

Bill Kruger: But at the same time, we're likely going to see an increase in the blend rate. Every year, it continues to increase, I think, with the exception of one year. So we're expecting that trend to continue. We will see increased exports. You know, with January off to a slow start, we're still confident that Canada specifically will continue to grow. And with ethanol being at such a steep discount to ARBOB, countries that want to increase their blend rate are more than likely going to come to the US with us being at such a discount to Brazil.

Bill Kruger: Every year. It continues to increase I think with the exception of one year. So we're expecting that trend to continue.

Bill Kruger: We will see increased exports.

Bill Kruger: With January off to a slow start we're still confident that a.

Bill Kruger: Canada, specifically, we will continue to grow and with ethanol being at such a steep discount to our Bob.

Bill Kruger: Countries that want to increase their blend rate are more than likely going to come to the U S with us being at such a discount to Brazil, so from our perspective the.

Bill Kruger: So from our perspective, the balance sheet for ethanol really looks the same at the end of 2024 as it does or as it did at the end of 2023. So I don't know that the forecast is that pessimistic; we just were able to see a lot of really strong opportunities throughout 2023 that we're not certain are going to repeat. Okay, no, that's very helpful.

Bill Kruger: The balance sheet for ethanol really looks the same at the end of 'twenty four as it does as it did at the end of 'twenty three so I don't know that the forecast is that pessimistic. We just were able to see a lot of real strong op.

Bill Kruger: <unk> throughout 2023.

Bill Kruger: We're not certain we're going to repeat.

Okay.

Speaker Change: That's very helpful. Thank you I guess kind of follow up on that you know given the C. O T short position of making money in corn and soybean futures just can you talked a little bit of like you know windows positions.

Patrick E. Bowe: Thank you. I guess, kind of to follow up on that, you know, given the COT short position of managed money and corn and soybean futures, just can you talk a little bit about when those positions cover and, historically, how significant that can be and how, you know, the duration of those covering kind of rallies can be. You make a very good point. I don't know if it's a record, but we have very, very large short positions, speculative short positions in the futures markets these days, and they've been right. They've made some good money on those positions, and when those are reversed, you'll see a bounce. And, you know, that timing of that, and I think a lot of it in the fundamentals of the Ag SAC will be when we get farmers in the field ready to plant. That's when they, the farmers, make decisions about selling some corn.

Speaker Change: You know cover and historically like Hell.

How significant that can be in and how you know the duration of those covering kind of rallies can be.

Speaker Change: You make a very good point is that this I don't know if its a record, but we have very high.

Speaker Change: Very large short position spectrum short positions in the futures markets. These days than they've been right. They've made some good money those positions and when those are reversed youll see a bounce.

Speaker Change: And that timing of that and I think a lot of it in the fundamentals of the AG cycle will be when we get farmers in the field ready to plant that's when they the farmers make decisions on so on some corn.

Speaker Change: They haven't sold a lot.

Patrick E. Bowe: They haven't sold a lot early this year, so we expect to see, as farmers get ready for the next crop cycle, to probably sell some of that, and they would likely sell it at some kind of rally. So if we get a short covering rally, that would be well received by the farm community, obviously. But these, you know, prices are lower off the last two-year peaks, but these are not horrible prices, right?

Early this year, so we expect to see as farmers get ready for the next crop cycle to probably sell some of that is likely to sell it on some kind of a rally. So if we get a short covering rally that would be well received by the farm community obviously.

Speaker Change: But this <unk>.

Speaker Change: Those are lower off the last two year peaks, but these are not horrible prices right. There is still you know at breakeven kind of numbers and corn given the current <unk>.

Patrick E. Bowe: There are still, you know, break-even kind of numbers in corn, given the current input costs, so this isn't a disaster year, it's just lower than we were off the peak the last couple years. I don't know, Bill, on the trades, have you seen some other fundamentals there? No, I think, Brian, the short answer is any substantial rally with managed money coming out of their positions, I think, will be offset with farmer hedging or farmer selling, which will mean commercial hedging. And then, I guess, lastly, if I could, could you talk maybe about the pet food impact on business in the corridor? to a level that we can talk a little bit about from a quantitative point of view. I'll take that, Brian. Yeah, our pet food industry, or our pet food business, has continued to perform well. However, much like several industries, some of the premium products are being replaced with lower cost products due to inflation and consumers.

Speaker Change: <unk> costs. So this isn't a disaster year, its just lower than we're off the peak. The last couple of years now know bill on the trade side, you've seen some other fundamentals there no I think Brian the short answer is.

Speaker Change: Any substantial rally.

Speaker Change: With managed money.

Speaker Change: Coming out of their positions I think will be offset with farmer hedging our farmer, selling which will mean commercial hedging.

Speaker Change: Got it okay.

Speaker Change: Then I guess lastly, if I could can you talk maybe about the pet food impact on the business in the quarter or is that too.

Speaker Change: To a level that we can talk a little bit about from a quantitative.

Speaker Change: <unk>.

Yeah.

Speaker Change: Okay.

Speaker Change: I'll take that Brian Yeah, our pet food industry for our pet food business.

Speaker Change: Has continued to perform well much like several industry. Some of the premium products are being replaced with lower cost products due to the inflation and the consumers, but one one interesting opportunity as Brian mentioned is two of our.

Bill Kruger: But one interesting opportunity, as Brian mentioned, is two of our acquisitions, recent acquisitions between Bridge Agri and ACJ International. Both are really focused on the pet food industry, and that's brought a welcomed increase in our volume. It's also brought opportunities to our existing pet food industry that allowed us to take advantage of the synergies that we expected out of those businesses. So, in terms of continued growth and focus on the business, it is one of the key areas in our premium ingredients sectors that we are focused on and honestly looking at more growth opportunities. And Brian, just to add a little more context, even on Bridge and ACJ, I think we previously, when we announced those, had commented that we thought that the combination of the two would add incrementally about $5 to $10 million a year. I would say we're on track to meet or actually probably trend a little bit higher than that.

Speaker Change: <unk> recent acquisitions between bridge Agri and ACG International both are really focused on the pet food industry and that's brought a welcomed increase in our volume. It's also brought opportunities to our existing pet food industry. That's it.

Speaker Change: Allowed us to take advantage of the synergies that we expected out of those businesses. So in terms of continued growth and focus on the business. It is one of the key areas in our premium group premium ingredients sectors that we are focused and honestly looking at more growth.

Speaker Change: <unk> and Brian just to add a little more context, even on a bridge in ACG I think we've previously when we announced those had commented that we thought that the combination of the two would add incremental EBITDA by about $5 million to $10 million a year I would say.

We're on track to meet or actually probably trend a little bit higher than that.

Brian A. Valentine: Great. Thank you so much. What is your question? Conference, back over to Mr. Holton, www.LRCgenerators.com. Thanks, Rocco.

Speaker Change: Great. Thank you so much.

Speaker Change: Thank you and this concludes our question and answer session I would like to turn the conference back over to Mr. Woltz for any closing remarks.

Thanks, Rocco we want to thank you all for joining US. This morning. Our next earnings conference call is scheduled for Wednesday May eight 2024 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.

Operator: We want to thank you all for joining us this morning. Our next earnings conference call is scheduled for Wednesday, May 8, 2024 at 11am 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 very much. Thank you all, and others. BF-WATCH TV 2021

Speaker Change: Thank you. This concludes today's conference call. We thank you all for attending today's presentation.

Speaker Change: You may now disconnect your lines and have a wonderful day.

Speaker Change: Okay.

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