Q3 2024 The Andersons Inc Earnings Call
Operator: Good morning, ladies and gentlemen, and welcome to the Andersons 2024 Third Quarter Earnings Conference Call.
Good morning, ladies and gentlemen, and welcome to the Andersons 2024 third quarter earnings Conference call.
Joe: My name is Joe, and I will be your coordinator for today. At this time, all participants are in a listen-only mode.
Joe: My name is Joe and I will be your coordinator for today.
At this time all participants are in a listen only mode.
Joe: Later, we will facilitate a question-and-answer session. To ask a question, you may press star, then 1 on your telephone keypad. And to remove a question, please press star, then 2. And if you need assistance on today's call, please press star, then 0 to alert a conference operator.
Later, we will facilitate a question and answer session to ask a question you May Press Star then one on your telephone keypad and to remove a question. Please press Star then two.
Joe: And if you need assistance on todays call. Please press Star then zero to alert our conference operator.
Joe: Also, as a reminder, this conference is being recorded for replay purposes.
Joe: Also as a reminder, this conference is being recorded for replay purposes.
Mike Hoelter: I will now hand the presentation over to your host for today, Mr. Mike Hoelter, Vice President, Corporate Controller, and Investor Relations. Please proceed.
Speaker Change: I will now hand, the presentation over to your host for today, Mr. Mike Holter, Vice President corporate controller and Investor Relations. Please proceed.
Mike Hoelter: Thanks, Joe.
Mike Hoelter: 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 from our webcast, the slides and commentary will be on 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.
Mike Holter: 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.
Mike Holter: You're viewing this presentation from our webcast the slides and commentary will be on zinc.
This webcast is being recorded and the recording and supporting slides will be made available on the investors page of our website at Anderson Dot com shortly.
Mike Hoelter: Please direct your attention to the disclosure statement on slide 2, 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. These forward-looking statements are subject to various risks and uncertainty. Actual results could differ materially as a result of many factors which are described in the company's reports on file with the FCC. We encourage you to review these facts.
Speaker Change: Please direct your attention to the disclosure statement on slide two as well.
Speaker Change: In the press release related to forward looking statements.
Speaker Change: 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.
Speaker Change: These forward looking statements are subject to various risks and uncertainties.
Speaker Change: Actual results could differ materially as a result of many factors, which are described in the company's reports on file with the SEC.
Speaker Change: We encourage you to review these factors this.
Mike Hoelter: This presentation and today's prepared remarks contain non-GAAP financial measures. Reconciliations of the GAAP to non-GAAP measures are included within the appendix of this presentation.
Speaker Change: This presentation and today's prepared remarks contain non-GAAP financial measures reconciliations of the GAAP to non-GAAP measures are included within the appendix of this presentation.
Mike Hoelter: On the call with me today are Bill Krueger, President and Chief Executive Officer, and Brian Valentine, Executive Vice President and Chief Financial Officer.
Speaker Change: On the call with me today are Bill Kruger, President and Chief Executive Officer, and Brian Valentine Executive Vice President and Chief Financial Officer.
Mike Hoelter: After our prepared remarks, we will be happy to take your questions.
Speaker Change: After our prepared remarks, we will be happy to take your questions I will now turn the call over to Bill.
Mike Hoelter: I will now turn the call over to Bill.
Bill Krueger: Thanks, Mike, and good morning, everyone. Thank you for joining the call to discuss our third quarter results and outlook.
Bill: Thanks, Mike and good morning, everyone. Thank you for joining the call to discuss our third quarter results and outlook.
Bill Krueger: Before we get into the results, I'd like to take a moment to thank Pat Bowe for his leadership of the Andersons over the past nine years and congratulate him on his retirement as president and CEO. I'd also like to recognize all the Andersons employees for their hard work over this last quarter. I am confident that with this team, we'll be able to continue to deliver profitable products.
Speaker Change: Before we get into the results I'd like to take a moment to thank Pat for his leadership of the Andersons over the past nine years and congratulate him on his retirement as president and CEO.
Speaker Change: Also like to recognize all the andersons employees for their hard work over this last quarter I am confident.
Speaker Change: This team will be able to continue to deliver profitable growth.
Bill Krueger: Now to our third quarter results. We had a good quarter with each of our segments showing year-over-year improvements. Our Renewables Group had a record third quarter. Harvest conditions have allowed us to wrap up earlier than normal this year, and the above trendline yields in our regions produced increased volumes at lower basis values. results in trade were up with improved elevation margins and continuing wheat space income in our grain assets. As expected, results in our merchandising business also improved over last year when we took a foreign currency charge. Farmer selling picked up in advance of harvest as they marketed last year's crop.
Speaker Change: Now to our third quarter results, we had a good quarter with each of our segments showing year over year improvement.
Speaker Change: Our renewables group had a record third quarter.
Speaker Change: Harvest conditions have allowed us to wrap up earlier than normal this year and the above trend line yields in our regions produced increased volumes at lower basis for us.
Speaker Change: Results in trade.
Speaker Change: With improved elevation margins and continuing weak space income in our greenhouse.
Speaker Change: As expected results in our merchandising business also improved over last year, when we took a foreign currency.
Speaker Change: <unk>.
Speaker Change: Farmer selling picked up in advance of harvest.
Speaker Change: Last year the comps are.
Bill Krueger: Our global facing teams were able to service our customers during this United Harvest Cycle. We continue to increase our efficiency and operating performance in our facilities to meet the needs of both our producers and engineers. We continue to be pleased with our operating performance and renewal. We've had increased air-over-air production, including higher ethanol and carbonyl. The ethanol margins were higher than last year with lower corn basis at our plant. All product sales were added due to results below the year-over-year RATS combined value. We completed all of our fall maintenance during the period. Our nutrient and industrial business also showed year-over-year improvement in decisively quiet quarters.
Speaker Change: Facing teams were able to service our customers.
Speaker Change: Rich.
Speaker Change: Yes.
Speaker Change: Cycle.
Speaker Change: We continue to increase our efficiency.
Speaker Change: Performance in our facilities to meet the needs of both our producers and end users.
Speaker Change: We continue to be pleased with our operating performance in Britain.
Speaker Change: We had increased year over year production.
Speaker Change: Adding higher ethanol and corn yields.
Speaker Change: Margins were higher than last year with lower corn basis at our plants.
Speaker Change: Product sales were added to our results.
Speaker Change: Sure.
Speaker Change: All right.
Speaker Change: Hi.
Speaker Change: We completed all of our fall maintenance during the period.
Speaker Change: Our nutrition and industrial business also showed year over year.
Speaker Change: Seasonally quiet quarter.
Bill Krueger: Higher margins and volume in specially liquid and manufactured products led the way while our ag business reflects a return to more typical margins.
Speaker Change: Higher margins and volume.
Speaker Change: Ashley.
Speaker Change: And manufactured products.
Speaker Change: While our business reflects a return to more typical margins.
Brian Valentine: Brian will now cover key financial data.
Speaker Change: Brian will now cover key financial data.
Brian Valentine: After that, I will be back to discuss our outlook.
Speaker Change: After that I'll be back.
Speaker Change: To discuss our outlook.
Brian Valentine: Thanks.
Speaker Change: Thanks Bill.
Brian Valentine: We're now turning to our third quarter results on slide number five. In the third quarter of 2024, the company reported net income attributable to the Andersons of $27 million, or $0.80 per diluted share, and adjusted net income of $25 million, or $0.72 per diluted share. This compares to net income of $10 million, or $0.28 per diluted share, and adjusted net income of $5 million, or $0.13 per diluted share, in the third quarter of 2023. Revenues declined due to lower commodity prices, while gross profit improved by 12%, a large portion resulting from higher ethanol. Adjusted pre-tax earnings were $35 million for the quarter, compared to $10 million in 2023, with all segments showing improved results.
Brian Valentine: Now turning to our third quarter results on slide number five.
Brian: In the third quarter of 2024.
Speaker Change: The company reported net income attributable to the andersons of $27 million or <unk> 80 per diluted share and adjusted net income of $25 million or <unk> 72 per diluted share.
Speaker Change: This compares to net income of $10 million or 28 cents per diluted share and adjusted net income of $5 million or <unk> 13 per diluted share in the third quarter of 2023.
Brian: Revenues declined due to lower commodity prices, while gross profit improved by 12%.
Speaker Change: Large portion, resulting from higher ethanol margins.
Speaker Change: Adjusted pre tax earnings were $35 million for the quarter compared to $10 million in 2023.
Speaker Change: With all segments showing improved results.
Brian Valentine: The adjusted ETA for the third quarter of 2024 was a record of $97 million, compared to $70 million in 2023. Trailing 12 months adjusted EBITDA totaled $382 million. Our effective tax rate varies each quarter based primarily on the amount of income or loss attributable to non-controlling income. This quarter was also impacted by the recognition of certain tax credits. We recorded taxes for the quarter at a 17% effective tax rate. We continue to expect a full-year adjusted effective tax rate between 14 and 18 percent.
Speaker Change: Adjusted EBITDA for the third quarter of 2024 was a record of $97 million.
Speaker Change: Compared to $70 million in 2023.
Speaker Change: Trailing 12 months adjusted EBITDA totaled $382 million.
Brian: Our effective tax rate varies each quarter based primarily on the amount of income or loss attributable to noncontrolling interests.
Brian: This quarter was also impacted by the recognition of certain tax credits.
Speaker Change: We recorded taxes for the quarter at a 17% effective tax rate.
Speaker Change: We continue to expect our full year adjusted effective tax rate between 14 and 18%.
Brian Valentine: Next, we'll move to slide six to discuss cash, liquidity. We generated cash flows from operations before changes in working capital of $86 million in the third quarter of 2024, which was up over $36 million from 2023. This continues to demonstrate our ability to generate strong operating cash flows throughout the ag cycle. This strong cash flow generation combined with continuing lower commodity prices resulted in a cash position of more than $450 million and negligible short-term borrowings at the end of the quarter.
Speaker Change: Next I'll move to slide six to discuss cash liquidity and debt.
Speaker Change: We generated cash flows from operations before changes in working capital of $86 million in the third quarter of 2024.
Speaker Change: Which was up over $36 million from 2023.
Speaker Change: This continues to demonstrate our ability to generate strong operating cash flows throughout the AG cycle.
Speaker Change: This strong cash flow generation.
Speaker Change: Bind with continuing lower commodity prices resulted in a cash position of more than $450 million and negligible short term borrowings at the end of the quarter.
Brian Valentine: Next, we'll take a look at capital spending and long-term debt on slide number 7. We continue to take a disciplined, responsible approach to capital spending. which we expect could reach $150 million for the year. Approximately half representing maintenance. Our long-term debt to EBITDA is approximately one and a half times, which is well below our stated target of less than two and a half. We have a balance sheet with significant capacity to support growth investments that meet our strategic and financial criteria.
Speaker Change: Next we'll take a look at capital spending and long term debt on slide number seven.
Speaker Change: We continue to take a disciplined responsible approach to capital spending, which we expect could reach $150 million for the year approximately half representing maintenance capital.
Speaker Change: Our long term debt to EBITDA is approximately one five times, which is well below our stated target of less than two five times.
Speaker Change: We have a balance sheet with significant capacity to support growth investments that meet our strategic and financial criteria.
Brian Valentine: In late October, we announced an investment in our leased facilities at the Port of Houston of approximately $70 million. In addition, we just announced the acquisition of an ownership interest in Skyland Grain, LLC, for $85 million. We continue to evaluate additional projects in our pipeline, including projects to improve efficiency and add capacity at our existing plants. as well as M&A opportunities that align with our growth strategy.
Speaker Change: In late October we announced an investment in our leased facilities at the port of Houston of approximately $70 million.
Speaker Change: In addition, we just announced the acquisition of an ownership interest in Skylake grain LLC for $85 million.
Speaker Change: We continue to evaluate additional projects in our pipeline, including projects to improve efficiency and add capacity at our existing plants.
Speaker Change: As well as M&A opportunities that align with our growth strategy.
Brian Valentine: Now, we'll move on to a review of each of our... beginning with trade on slide. Trade reported third quarter pre-tax income of $26 million and adjusted pre-tax income of $23 million, compared to $5 million in the same period of 2023. The improvement in operating results was led by our grain asset footprint, as caries have returned to the market primarily in corn and wheat. As expected, farmer engagement ramped up during the quarter to bring significant old crop bushels to the market and to forward-sell new crop in anticipation of an early and robust harvest. With the reduction in commodity prices, financing costs supporting inventory and forward contracts have declined.
Speaker Change: Now I'll move on to a review of each of our businesses beginning with trade on slide eight.
Speaker Change: <unk> reported third quarter pretax income of $26 million.
Speaker Change: And adjusted pretax income of $23 million.
Speaker Change: Compared to $5 million in the same period of 2023.
Speaker Change: The improvement in operating results was.
Speaker Change: Led by our grain asset footprint.
Speaker Change: Carey's have returned to the market primarily in corn and wheat.
Speaker Change: As expected farmer engagement ramped up during the quarter to bring significant old crop bushels to the market and to forward sell new crop in anticipation of an early and robust harvest.
Speaker Change: With the reduction in commodity prices financing costs supporting inventory and forward contracts have declined.
Brian Valentine: Our merchandising businesses continue to be impacted by an oversupplied grain market with lower commodity prices and less volatility. While we saw an increase in the merchandising results year over year, the prior year included a $19 million foreign currency. Finally, our specialty ingredients business continues to benefit from recent growth projects. Trades adjusted EBITDA for the quarter was $38 million, compared to $21 million for the third quarter of 2023.
Speaker Change: Our merchandising businesses continued to be impacted by an oversupplied grain market with lower commodity prices and less volatility.
Speaker Change: While we saw an increase in our merchandising results year over year. The prior year included a $19 million foreign currency loss.
Speaker Change: Finally, our specialty ingredients business continues to benefit from recent growth projects.
Speaker Change: Trades adjusted EBITA for the quarter was $38 million.
Speaker Change: Compared to $21 million for the third quarter of 2023.
Brian Valentine: Moving to slide 9, Renewables had a record third quarter generating pre-tax income attributable to the company of $28 million compared to $26 million last year. Ethanol margins remain favorable per quarter despite lower board as corn basis levels. were 80 cents lower on average year-over-year. This was in addition to increased volumes and higher yields at our four plants even with the completion of our fall maintenance shutdowns at all plants. Consistent with the second quarter, renewable diesel feedstock volumes continue to grow, but margins are lowered due to overall industry fundamentals. Feed ingredient demand also remains strong, but at lower values as prices are tied to corn.
Speaker Change: Moving to slide nine renewables had a record third quarter generating pre tax income attributable to the company of $28 million compared to $26 million last year.
Speaker Change: Ethanol margins remained favorable in the quarter, Despite lower board crush as corn basis levels in the east were lower on average year over year.
Speaker Change: This was in addition increased volumes and higher yields at our four plants, even with the completion of our fall maintenance shutdowns at all plants.
Speaker Change: Consistent with the second quarter renewable diesel feedstock volumes continued to grow but margins are lower due to overall industry fundamentals.
Speaker Change: Feed ingredient demand also remains strong but at lower values as prices are tied to corn.
Brian Valentine: Renewables had EBITDA of $65 million in the third quarter. compared to $60 million last year.
Speaker Change: Renewables had EBITDA of $65 million in the third quarter compared to $60 million last year.
Brian Valentine: Turning to slide 10, the nutrient and industrial business reported a pre-tax loss of $6 million, an improvement from a loss of $8 million in 2023. Group-wide volumes improved during the seasonally quiet quarter, but margins in our base nutrients have reset to more normalized levels, and we're not able to repeat the outsized margin opportunities we've seen in recent years. The engineered granules business saw significant improvement in the quarter on higher sales volume and margins as we've continued to focus on operational improvements. Nutrient and Industrial had EBITDA of $5 million for the quarter compared to half a million dollars in 2023.
Speaker Change: Turning to slide 10, the nutrient and industrial business reported a pre tax loss of $6 million, an improvement from a loss of $8 million in 2023.
Speaker Change: Group wide volumes improved during this seasonally quiet quarter, but margins in our base nutrients have reset to more normalized levels and were not able to repeat the outsized margin opportunities we've seen in recent years.
Speaker Change: The engineered granules business saw significant improvement in the quarter on higher sales volume and margins as we've continued to focus on operational improvements.
Speaker Change: Nutrient and industrial had EBITDA of $5 million for the quarter compared to half a million dollars in 2023.
Bill Krueger: And with that, I'll turn things back over to Bill for some comments about our Thanks, Brian. We remain optimistic about our outcome. The trade business remains solid. As previously mentioned, we are in the final days of harvest and have accumulated significant corn inventory that is higher quality than normal at lower basis values. Space income on our milling quality wheat and our eastern assets is generating higher than expected results.
Speaker Change: And with that I'll turn things back over to Bill for some comments about our outlook.
Bill Kruger: Thanks, Brian.
Bill Kruger: We remain optimistic about our outlook.
Bill Kruger: The trade business remains solid.
Bill Kruger: As we mentioned we are in the final days of harvest and have accumulated significant corn inventory that is higher quality than normal at lower basis.
Speaker Change: Space income on our milling quality, we and our eastern assets is generating higher than expected results.
Bill Krueger: As we noted in our earnings release, we've just completed an investment in Skyland Grain, LLC. We're on the ground this week talking to Skyland employees about how we will work together in the future to bring additional value to both Skyland and the industry. We're excited about this asset footprint, where we have originating experience and existing relationships. In addition, this investment doubles the size of our retail farm centers and we expect to bring new opportunities to the growers that Skyland serves. We expect EBITDA contributions from this investment should average $30-$40 million per year, inclusive of the agronomy business.
Speaker Change: We noted in our earnings release, we've just completed an investment in skyline grain LLC, which are on the ground. This week talking to Sky land employees about how we will work together in the future to bring additional value to both Scott and Andrew.
Speaker Change: Anderson's we're excited about this asset footprint, where we have.
Speaker Change: Experience in it.
Speaker Change: Relationships.
Speaker Change: In addition, this investment the size of our retail farm centers, and we expect to bring new opportunities to the growers that skyler and serves.
Speaker Change: We expect EBITDA contributions from this investment should average $30 million to $40 million per year inclusive of the agronomy business.
Bill Krueger: We also recently announced a lease extension and investment in our export facility located in the Port of Houston. This investment of approximately $70 million will improve the efficiency of our grain operations and provide a new opportunity to enter the export markets for soybean meal from the Texas Gulf. We expect this project, when fully operational in 2026, to deliver EBITDA in the range of $15 to $20 million per year. In our renewable segment, we expect consistent production volumes in the fourth quarter. While we do not anticipate ethanol board crush to match Q4 of 2023 levels, a favorable margin environment should continue with increased export demand and higher blend The abundant corn harvest, we believe that basis values in the east will also support solid margins.
Speaker Change: We also recently announced a lease extension and investment in our export facility located in the port of Houston.
Speaker Change: This investment of approximately $70 million will improve the efficiency of our grain operations and provide a new opportunity.
Speaker Change: The export markets for soybean meal from the Texas Gulf.
Speaker Change: We expect this project when fully operational in 2026.
Speaker Change: EBITDA in the range of $15 million to $20 million per year.
Speaker Change: In our renewable segment, we expect consistent production volumes in the fourth quarter.
Speaker Change: While we do not anticipate ethanol board crush to match Q4 of 2023 levels a favorable.
Speaker Change: Margin environment should continue increased export demand and higher billing rates.
Speaker Change: With the abundant corn harvest, we believe that basis values in the east will also support solid margins.
Bill Krueger: We remain focused on improving and maintaining our four production facilities for optimal efficiency. Volumes in our renewable diesel feedstock business are expected to increase towards our target of 2 billion pounds annually. The renewables business is an important part of our long-term growth strategy, and we continue to make progress on plans to lower the carbon intensity of our efforts. This includes investments at our plants and developing regenerative ag programs for our producers that should position us to acquire lower-CI corn as feedstock in the future. The outlook for this business remains positive and we are evaluating several opportunities in this space.
Speaker Change: We remain focused on improving and maintaining our four production facilities for optimal efficiency.
Speaker Change: Volumes in our renewable diesel feedstock business are expected to increase towards our target of 2 billion pounds annually.
Speaker Change: The renewables business is an important part of our long.
Speaker Change: Term growth strategy, and we continue to make progress on plans to lower carbon intensity of our ethanol.
Speaker Change: This includes investments at our plants and developing regenerative AG programs for our producers.
Speaker Change: Position us to acquire lower Scott.
Speaker Change: Corn compares feedstock in the future.
Speaker Change: The outlook for this business remains positive and we are evaluating several opportunities in this space.
Bill Krueger: The Nutrient and and Industrial Business Outlook is mixed with Early Harvest and High Yields Supporting Fall Applications. We recognize that farmers are facing lower prices against higher costs and farm income in 2024 will be down for most. But we are seeing producers in our region continue their typical fall application. We remain focused on operational enhancements in manufacturing to improve margins and expect to see continued financial improvement. As previously noted, with the addition of Skyland agronomy business, we expect additional volume related synergies in our wholesale ag fertilizer, especially In February 2023's earnings call, we updated our EBITDA outlook considering the strong ag market.
Speaker Change: The nutrient.
Speaker Change: And the industrial business outlook is mixed with early harvest in high yields supporting fall applications, we recognized.
Speaker Change: Facing lower purchases against higher cost and farm income in 2024 will be down for most but we are seeing producers in our region continue their typical fall applications.
Speaker Change: We remain focused on operational enhancements and manufacturing to improve margins and expect to see continued financial improvements.
Speaker Change: As previously noted with the addition of scale and Agronomy business, we expect additional volume related synergies and our wholesale.
Speaker Change: Laser, especially liquids.
Speaker Change: In February 2020 earnings call, we updated our EBITDA outlook, considering the strong AG markets than current performance and expected nearby opportunities.
Bill Krueger: then current performance and expected nearby opportunities. targeting an EBITDA run rate of $475 million by 2025. Our assumptions then were that global ag supply and demand imbalance and elevated commodity prices will continue into 2025. Furthermore, the speed of the renewable diesel industry buildout was slower than expected, and final rulemaking around the Inflation Reduction Act has been delayed. Given these developments, we are now targeting $475 million in run rate EBITDA by the end of 2026, a one-year delay from our original target.
Speaker Change: Targeting an EBITDA run rate of $475 million by 2025.
Speaker Change: Our assumptions then.
Speaker Change: The global AG supply and demand imbalance and elevated commodity prices will continue into 2025.
Speaker Change: Furthermore, the speed of the renewable diesel industry build out was slower than expected and final rule, making around the inflation reduction act has been delayed.
Speaker Change: Given these developments we are now targeting $475 million in run rate EBITDA by the end of 2026, a one year delay from our original target.
Bill Krueger: We are delivering solid cash flows and our balance sheet is well positioned to fund growth. With the Skyland and Houston projects that I have just discussed, along with other potential projects in our growth pipeline, we remain excited about the opportunities in front of us. We will continue to make responsible decisions that benefit our customers and maximize shareholder value as we execute our strategy.
Speaker Change: We are delivering solid cash flows and our balance sheet is well positioned to fund growth.
Speaker Change: With the Skylanders Houston projects that I have just discussed along with other potential projects and our growth pipeline.
Speaker Change: We remain excited about the opportunities in front of US we will continue to make responsible decisions.
Speaker Change: Our customers and maximize shareholder value as we execute our strategy.
Joe: And with that, we're happy to answer your questions. We will now begin the question and answer session. To ask a question, please press star, then 1 on your telephone keypad. If you are using a speakerphone, please pick up your handset before pressing the keys. And to remove a question, please press star, then two.
Speaker Change: And with that we're happy to answer your questions.
Speaker Change: We will now begin the question and answer session.
Speaker Change: Okay.
Speaker Change: To ask a question. Please press Star then one on your telephone keypad.
Speaker Change: If youre using a speakerphone please pick up your handset before pressing the keys to remove a question. Please press Star then two.
Ben Klieve: At this time, we will take our first question, which comes from Ben Klieve with Lake Creek Capital Markets.
Speaker Change: At this time, we will take our first question, which comes from Ben <unk> with Lake Street Capital markets. Please go ahead.
Ben Klieve: Please go ahead. Alright, thanks for taking my questions.
Speaker Change: Alright, thanks for taking my questions.
Ben Klieve: Congrats all on a really nice quarter here and Bill, congratulations on assuming a CEO role. First question, kind of a high-level question on the conditions in the third quarter. Brian, you noted that, you know, farmers were carrying a lot of grain inventory going into the fall harvest and then with great conditions, a really strong harvest, and wondering, one, if you can talk about, kind of, if there's precedent for this condition in prior years, and then also talk about how this condition, you know, really, if at all this condition drove outsized results in Q3 and any kind of impact you see from that environment in Q4 or beyond.
Ben: Really nice quarter here and bill congratulations on the CEO role.
Ben <unk>: First question on kind of a high level question on the conditions in the third quarter, Brian you noted that.
Ben <unk>: Farmers were carrying a lot of grain inventory going into the fall harvest and then with great conditions. The really strong harvest and I was wondering one if you can talk about kind of if there is precedent for this condition in prior years and then also talk about how this condition really.
Speaker Change: If at all those condition drove outsized results in Q3, and any kind of impact you see from that environment in Q4 and beyond.
Bill Krueger: Thank you.
Bill Krueger: Good morning, Ben. It is common to see producers carry their old crop longer when you see the markets turn over, kind of like we did in 2024. So in terms of precedence, it would be difficult to tell you the exact percentage, but we did see a lot of old crop move at the end of or during the third quarter.
Speaker Change: Thank you and good morning, Ben.
Speaker Change: Yes.
Speaker Change: It is common to see producers carry there.
Speaker Change: Old crop longer when you see the markets turned over kind of like we did in 2024 so.
Speaker Change: In terms of precedent it would be difficult to tell you the exact percentage but.
Speaker Change: We did see a lot of old crop.
Speaker Change: Move at the end of or during the third quarter.
Bill Krueger: In terms to your answering your other question, farmer selling for new crop that is just being harvested is off to a slow start. So that gives us a lot of hope and really feel strong with the amount of inventories at the basis values that we have been able to accumulate, that that will continue into the fourth quarter and 2025.
Speaker Change: In terms to your answering your other question farmer selling for new crop that is just being harvested is off to a slow start so that gives us a lot of.
Speaker Change: Hope and.
Speaker Change: And we really feel strong with the amount of inventories at the basis values that we have been able to accumulate that that will continue into the fourth quarter and 2025.
Ben Klieve: Okay, very helpful.
Speaker Change: Okay very helpful. Thanks Bill.
Ben Klieve: Thanks, Bill. On the Skyline acquisition, it looks to be very creative on an EBITDA basis.
Speaker Change: Hi.
Speaker Change: On.
Speaker Change: On the Sterling acquisition.
Speaker Change: It looks to be very accretive on an EBITDA basis, I'm wondering given the challenges that that business had historically.
Bill Krueger: I'm wondering, given the challenges that that business had historically, what, if anything, you guys need to do to clean it up, either just kind of from a strategic perspective, or if there's any kind of real material investments that need to go into that business here, you know, in 2025?
Speaker Change: Is there anything you guys need to do to clean.
Speaker Change: Clean it up either.
Speaker Change: Kind of from.
Speaker Change: From a strategic perspective, or if there is any kind of real material.
Speaker Change: A material investments that need to go into that business here.
Speaker Change: In 2025.
Bill Krueger: Yeah, fair question. Then, you know, the Skylane employees are a really strong group of employees. And that business has been successful since 2004.
Speaker Change: Yes.
Speaker Change: Fair question Ben.
Speaker Change: The skylake and employees.
Speaker Change: A really strong group of employees.
Speaker Change: And that business has been successful since 2004.
Bill Krueger: So, from our perspective, taking the combination of our merchandising experience in that geographic region, adding to it a core competency of our plant nutrients, which we have been focused primarily on the Eastern Corn Belt, and then just tying in an overall risk management policy like we have at the Andersons, we think that the synergies are going to come together very quickly out of the business. And, you know, we're really looking forward to dealing with an additional 7,000 producers in the region. And so, we feel like just doing business as we've been doing it, and quite honestly, like the vast majority of the Skyland employees are used to doing, we think those synergy values are going to accrete to us pretty quickly.
Speaker Change: So.
Speaker Change: From our perspective, taking the combination.
Speaker Change: Our merchandising experience in that geographic region, adding to.
Speaker Change: Our core competency of our plant nutrients, which we have been focused primarily on the eastern corn belt and then just tie.
Speaker Change: And overall risk management policy like we.
Speaker Change: Have at the Andersons, we think the synergies are going to come together very quickly out of the business and we're really looking forward to dealing with an additional 7000 producers in the region and so we feel like just doing business as we've.
Speaker Change: Been doing it and quite honestly like the vast majority of the skylanders employees are used to doing we think those synergy values are going to accrete to us pretty quickly.
Ben Klieve: Okay, great. Thank you.
Speaker Change: Okay great.
Ben Klieve: And then one other just kind of high-level kind of educational question. You noted that the investments going into the Florida Houston facility to take advantage of the soy meal market. That's not a business that you guys have really ever talked too much about. Can you talk about the overall contributions that the meal market has in your business overall today? And then, you know, given the, you know, and then what really gives you a sense of optimism regarding that port and the decision to invest there, you know, given the, you know, rise of Crush facilities, you know, domestically.
Speaker Change: Thank you and then one other just kind of high level kind of educational question. You noted the investments going into the port of Houston.
Speaker Change: The facility to take advantage of the soybean meal market Thats not a business that you guys have really ever talked too much about can you talk about the overall contribution that the meal market has.
Speaker Change: In your business.
Speaker Change: Overall today and then given the.
Speaker Change: And then what really gives you a sense of optimism regarding that pork and the need to win and the decision to invest there.
Speaker Change: Given the rise of crush facilities.
Bill Krueger: It seems like there's going to be just an awful lot of meal throughout the space. And wondering, you know, what really gives you so much encouragement about that?
Speaker Change: Domestically it seems that theres going to be just an awful lot of meal throughout the space and wondering what really gives you so much encouragement about that business.
Bill Krueger: You broke up just a little bit there at the end, Ben, but I believe your question was around... current expertise of the Andersons in soybean meal. The company today trades soybean meal domestically and obviously with our DDG business, which is a protein, we have both domestic and export arms there. So we feel very comfortable being able to export soybean meal.
Speaker Change: You broke up just a little bit there and then but I believe your question was around.
Speaker Change: Current expertise of the Andersons and soybean meal.
Speaker Change: The company today.
Speaker Change: <unk> soybean meal domestically.
Speaker Change: And obviously with our DDG business, which is a protein.
Speaker Change: We have both domestic and export arms there so we feel very comfortable.
Speaker Change: Being able to export soybean meal.
Bill Krueger: The purpose of taking the investment and putting it into the Port of Houston really is, as we all understand, the U.S. has lost a lot of its wheat export capacity. The elevator at the Port of Houston is a good elevator. We need to do some investments to keep it up to our standards. And along with that, we figured that this would be a really good opportunity to take advantage of all the additional capacity of soybean meal that's coming online, both in the last 12 to 18 months and what will come online in the next 12 to 18 months.
Speaker Change: The purpose of taking the investment and putting it into the port of Houston really is.
Speaker Change: As we all understand the U S has lost a lot of it's we export.
Speaker Change: Our capacity.
Speaker Change: The elevator at the Port of Houston is a good elevator, we need to do some investments to keep it.
Speaker Change: To our standards and along with that we figured that this would be a really good opportunity to take advantage of all of the additional capacity of soybean meal, that's coming online both in the last 12 months to 18 months.
Speaker Change: Will come online in the next 12 to 18 months and that's primarily going to be soybean meal. That's produced.
Bill Krueger: And that's primarily gonna be soybean meal that's produced in the Western Corn Belt. We all understand the economics of the river and export capacity for soybean meal going down the river, but our target is really the crushing plants that are in the Western Corn Belt that we think we can provide an opportunity to drive some efficiencies in that market.
Speaker Change: Gordon Bell, we all understand the economics of.
Speaker Change: River and export capacity for soybean meal going down a river, but our target is really the crushing plants that are in the <unk>.
Speaker Change: Western corn belt.
Speaker Change: We think we can provide an opportunity to drive some efficiencies in that market.
Ben Klieve: Okay, very good. That's helpful.
Speaker Change: Okay very good thats helpful.
Ben Klieve: All right, there's plenty more to talk about, but it's a good place to leave it.
Speaker Change: There's plenty more to talk about but that's a good place to leave it congratulations again on a nice quarter and I will get back in queue.
Peran Sharma: Congratulations again on a nice quarter and I'll get back and And our next question will come from Peran Sharma with Stevens. Please go ahead. Congrats on the quarter and thanks for taking my question guys. I was just wondering if maybe we could just talk about some of the, I know you went through some of the strength on the call in ethanol, but if you could kind of just go through, you know, the puts and takes to the quarter, maybe just reiterate, you know, what you had said. And then also, what gives you kind of confidence on the outlook on the go forward?
Speaker Change: And our next question will come from <unk> Sharma with Stephens. Please go ahead.
Speaker Change: Hey, congrats on the quarter and thanks for taking my question guys.
Speaker Change: Okay.
Speaker Change: I was just wondering if maybe we could just talk about some of the I know you went through some of the strength on the on the call in and ask.
Speaker Change: But if you could kind of just go through.
Speaker Change: The puts and takes to the quarter.
Speaker Change: Maybe just reiterate.
Speaker Change: You had said and then.
Speaker Change: Also what gives you kind of confidence.
Speaker Change: On the outlook on the go forward, we've seen ethanol prices kind of come in.
Peran Sharma: We've seen ethanol prices kind of come in on 4Q, but we have seen kind of ending stocks low on decent amount of production. So that's indicating that, you know, it's being taken off domestically and internationally.
Speaker Change: On <unk>, but we.
Speaker Change: We have seen kind of ending stocks low on a decent amount of production so that's indicating that.
Speaker Change: It's being taken off domestically and internationally.
Peran Sharma: But if you could just speak to kind of the trade down in ethanol prices in this quarter recently, and then your go forward outlook, and what gives you confidence in ethanol fundamentally?
Speaker Change: But if you could just speak to kind of the trade down and ethanol prices.
Speaker Change: In this quarter.
Speaker Change: And then your go forward outlook, what gives you confidence.
Speaker Change: Ethanol fundamentals.
Bill Krueger: Okay, thank you for the question.
Speaker Change: Okay. Thank you for the question.
Bill Krueger: There's a, that's a pretty complex question to just dive in with a single answer. But, you know, I will start on the ethanol side of that question. And, you know, specifically the increased export demand that we've seen in 2024 feels like it's going to continue into 2025. We're going to be at or very close to 1.9 billion gallons exported, which is up about from 1.43 billion last year. We also continue to see slightly higher blend rates, which will... give us a nice, strong lift in the demand side. But the other side of the equation that is the reduced.
Speaker Change: There is a.
Speaker Change: That's a pretty complex question to just dive in with the single answer but.
Speaker Change: We'll start on the ethanol side.
Speaker Change: That question.
Speaker Change: Specifically the increased export demand that we've seen in 2024 feels like it's going to continue into 2025.
Speaker Change: We're going to be at or very close to $1 9 billion gallons exported which is up about from 143 billion last year. We also continue to see slightly higher blend rates, which will.
Speaker Change: Ed.
Speaker Change: Give us now.
Speaker Change: Nice strong lift.
Speaker Change: Lift and the demand side, but the other side of the equation.
Speaker Change: The reduced.
Brian Valentine: corn basis levels that we're able to buy our corn at going into the plants this year. The co-product values, as I mentioned, are lower. still value add, but they're lower due to the overall commodity values. So when you take the summary of the ability to run our plants efficiently, which we continue to be impressed with our operating results, you add to that stable to slightly increasing demand and then add on to it that your key input is at a lower value than we've seen in the last couple of years. That would be the reason for us continuing to see the opportunities in the ethanol market.
Speaker Change: Corn basis levels that were able to buy our corn at going into the plants. This year.
Speaker Change: Co product values as I mentioned are lower still still value add but they are lower due to the overall commodity values. So when you take that.
Speaker Change: The summary of the ability to run our plants efficiently, which we continue to be impressed with our operating results you add to that stable to slightly increasing demand and then add onto it that your key input.
Speaker Change: Is it a lower value than we've seen in the last couple of years that would be the reason for us being opportunistic.
Speaker Change: For us continuing to see the opportunities in the ethanol market.
Brian Valentine: Thank you for that. The only thing I would add to that is, you know, you've heard us talk about this before.
Speaker Change: Thank you for that.
Speaker Change: The only thing I would add to that as you've heard us talk about this before we really like if we think about that longer term strategy, we really like the larger plants that are highly efficient that are well located from a geographic perspective. So some of that is where the end user consumers are if you think about our plants in the east and also the.
Brian Valentine: We really like, if we think about that longer term strategy, we really like the larger plants that are highly efficient, that are well located from a geographic perspective. So some of that is where the end user consumers are if you think about our plants in the east. And also the ability to continue to lower the CI score, the carbon intensity score of those plants. So that's something that continues to make us optimistic about this space is that when you're operating large scale, highly efficient plants, whereas Bill said you have a favorable corn draw and then also are close to end consumers and potentially have the ability to lower your CI score, that's facilities that we believe are going to continue to have the opportunity to win over the long term.
Speaker Change: To continue to lower the Ci score the carbon intensity score of those plants. So that's something that continues to make us optimistic about this space is that when youre operating large scale highly efficient plants.
Speaker Change: Whereas bill said you'd have a favorable corn draw and then also are close to end consumers and potentially have the ability to lower your Ci score. That's that's facilities that we believe are going to continue to have the opportunity to win over the long term.
Peran Sharma: Okay, no, that makes sense. I can certainly appreciate the corn basis aspect of it as well. I don't think I was kind of factoring that in.
Speaker Change: Okay, no that makes sense.
Speaker Change: Certainly appreciate the corn basis aspect of it as well I don't think it was.
Peran Sharma: But in light of kind of you talking about lowering your CI score here and, you know, 45Z rolling around the corner, I was wondering if you're able to talk about if you're kind of trying to position yourself to capture any carbon credits. And maybe you could speak to how you think the initiative will play out on perhaps your corn oil business or any other benefits that you kind of see as we roll into the new year. the The question around 45Z. really is tied to the final rules setting for the Inflation Reduction Act, which I mentioned.
Speaker Change: Kind of factoring that in.
Speaker Change: But in light of kind of you're talking about 40.
Speaker Change: Lowering your Ci score here and.
Speaker Change: 45 Z.
Speaker Change: Rolling around the corner.
Speaker Change: I was wondering if.
Speaker Change: You are able to talk about if you're kind of trying to position yourself to.
Speaker Change: To capture any carbon credits.
Speaker Change: And maybe you could speak to.
Speaker Change: How do you think the initiatives will play out on perhaps here youre corn oil business or any other.
Speaker Change: <unk> that you kind of see.
Speaker Change: As we roll into the new year.
Speaker Change: The.
Speaker Change: The question around 45 Z.
Speaker Change: Really.
Speaker Change: Is tied to the final rules setting.
Speaker Change: For the inflation reduction Act, which I mentioned, yes, a really good question, though.
Bill Krueger: You ask a really good question, though. We are assuming that the industry is going to continue to be rewarded for low CIF. whether that comes from regenerative ag programs or sequestering carbon or a combination of both. So the answer to your question is yes. We have a focus on both reducing the CI on the corn coming in to our plants and looking at sequestration and utilization projects for our three eastern plants. Dennis and Iowa plant obviously will be tied to the Summit pipeline, as will most plants in Iowa. So we have an approach for all four plants that we're working on, while also working on the reduction of the CI for the corn.
Speaker Change: We are assuming that we're in.
Speaker Change: He is going to continue to be rewarded for low <unk>.
Speaker Change: And all weather.
Speaker Change: Whether that comes from regenerative AG programs or sequestering carbon or a combination of both so the answer to your question is yes. We are focused on both reducing the ci on the corn coming in top of plants and looking at sequestering.
Speaker Change: <unk> and utilization projects for our three eastern plants.
Speaker Change: The.
Speaker Change: Denison, Iowa plant, obviously will be tight to the summit pipeline as will most.
Speaker Change: Plants in Iowa, So we have an approach for all four plants that we're working on.
Speaker Change: While also working on that.
Speaker Change: The reduction of corn of the Ci for corn.
Peran Sharma: Great, great.
Peran Sharma: And I just had just one more quick question. You guys have had a nice kind of acquisition strategy, been able to kind of put in a lot of successful businesses into your portfolio. Now you mentioned on the call, you know, there's opportunities out there. I was wondering if you were able to share with a bit more detail into any potential opportunities that you may see on the horizon.
Speaker Change: Alright, great and I just had just just one more quick question.
Speaker Change: You guys have had a nice kind of.
Speaker Change: On acquisition strategy <unk> been able to kind of put in a lot of successful businesses into your portfolio that you mentioned on the call.
Speaker Change: There's opportunities out there I was wondering if you are able to share.
Speaker Change: That's a bit more detail.
Speaker Change: Any potential opportunities that you may see on the horizon.
Bill Krueger: I would say we continue to have a really robust and active project pipeline. I would say that it spans a variety of different projects. You heard us talk today about Houston and Skyland, which fit really, really well with our trade strategy. We also will continue to evaluate and would be interested in acquiring additional ethanol plants. Again, it kind of goes back to that same criteria of what we would look for from a geographic footprint and ability to reduce the carbon intensity score.
Speaker Change: I would say.
Speaker Change: We continue to have a really robust and active project pipeline I would say that it that it spans a variety of different projects and you've heard us talk today about Houston in Scotland, which fit really really well with our trade strategy.
Speaker Change: We also will continue to evaluate and would be interested in acquiring.
Speaker Change: Additional ethanol plants again, it goes kind of goes back to that same criteria of what we would look for from a geographic footprint and ability to reduce the carbon intensity score I think it's fair to say as we think about opportunities to continue to grow our.
Bill Krueger: I think it's fair to say as we think about opportunities to continue to grow our footprint, number one, we're going to remain disciplined and stay focused on generating appropriate returns. It's also going to continue to be focused on things that are really close to our core businesses. When you think about something like Skyland, it is a very logical, natural extension. In many ways, it could be analogous to, albeit on a smaller scale, to when the Andersons acquired Lansing, because you have a complementary footprint, a place where we already do some point-to-point trading, and now we're going to have a very logical asset footprint extension into some other areas.
Speaker Change: Footprint.
Speaker Change: Number one we're going to remain disciplined and stay focused on generating appropriate returns.
Speaker Change: Also going to be continue to be focused on things that are really close to our core businesses. When you think about something like Sky land. It is a very logical natural extension in many ways it could be analogous to albeit on a smaller scale to win the Andersons acquired Lansing, because you have a <unk>.
Speaker Change: Memory footprint, a place where we already do some <unk>.
Speaker Change: Point to point trading and now we're going to have a very logical asset footprint extension into some other areas.
Bill Krueger: Same thing is true with the soybean meal out of Houston. I would say it's going to continue to be those things that are close to our core and enable us to generate appropriate returns.
Speaker Change: Same thing is true with the soybean meal out of Houston, So I would say, it's going to continue to be those things that are close to our core and enable us to <unk>.
Speaker Change: Generally appropriate returns for shareholders.
Peran Sharma: Great.
Peran Sharma: I appreciate the color. I will pass it off.
Speaker Change: Alright, I appreciate the color I'll pass it off congrats again on the quarter.
Peran Sharma: Congrats again on the quarter.
Craig Irwin: And our next question will come from Craig Irwin with Roth Capital Partners.
Speaker Change: And our next question will come from Craig Irwin with Roth Capital Partners. Please go ahead.
Craig Irwin: Please go ahead. Good morning, and thanks for taking my questions. So I was hoping you could give us a little bit more of an update on your capital investments, your growth investments that you're making this year in the existing platform. $150 million is a good level of investment. Can you maybe run through some of the details of projects that should be completed over the course of the next year and expected returns around those individual projects?
Craig Irwin: Hi, good morning, and thanks for taking my questions.
Craig Irwin: So I was hoping you could give us a little bit more of an update on your capital investments growth investments that you're making this year in the existing platform.
Speaker Change: $50 million is a good level of investment.
Speaker Change: Can you maybe run through some of the details.
Speaker Change: It should be completed.
Speaker Change: Over the course of the next year.
Speaker Change: And expected returns around those individual projects.
Brian Valentine: Thanks for joining.
Brian Valentine: This is Brian. Sure, I mean, one, it will certainly be, I think, well, just to kind of frame it, we've said we expect to, we expect our total capital, it could reach $150 million. This year, we've not talked about a specific target next year yet, but we will certainly have the investment in the, in the Port of Houston, that is expected to be, a little bit of that could start in the fourth quarter of this year, but that will the majority of that will all occur during 2025. We also continue to have a number of projects in our ethanol facilities.
Speaker Change: Thanks for joining this is Brian sure I mean, one that will certainly be well.
Speaker Change: To kind of frame it.
Speaker Change: We've said that we expect to we expect our total capital that could reach $150 million this year.
Speaker Change: Not talked about a specific target next year, yet, but we will certainly have the investment.
Speaker Change: In the in the Port of Houston that is expected to be a little bit of that could start in the fourth quarter of this year, but that the <unk>.
Speaker Change: Majority of that will all occur during 2025.
Speaker Change: We also continue to have a number of projects.
Brian Valentine: Some of them are around the ability to extract additional corn oil. There's also things in the space, when we look at things like combined heat and power, and also potentially capacity expansion and the ability to either utilize or sequester carbon going forward. I would say when we think about our nutrient industrial business, there are a number of things, and you heard us talk about the improvements in our engineered granules product lines. There's a number of things that we are looking at from an efficiency perspective to automate in those facilities. There, some of those are projects that maybe three, four, five years ago didn't necessarily make good economic sense, but now it makes sense from the standpoint of leveraging automation.
Speaker Change: Our ethanol facilities some of them are around.
Speaker Change: Ability to extract additional corn oil.
Speaker Change: There is also things in this space. So when we looked at things like combined heat and power and also potentially.
Speaker Change: City expansion and the ability to.
Speaker Change: Either utilize their sequester carbon going forward I would say when we think about our nutrient and industrial business. There are a number of things and you heard us talk about the improvements in our engineered granules.
Speaker Change: Product lines. There is a number of things that we are looking at from an efficiency for us.
Speaker Change: Two.
Speaker Change: And those facilities there some of those are projects that maybe 345 years ago Didnt necessarily make good economic sense.
Speaker Change: But that makes sense from the standpoint of leveraging automation.
Brian Valentine: If we think about relative returns on these projects, growth projects in particular, I would say, I would think of them in kind of the low, double digits to potentially low teams, depending on the project. Some could be a little bit higher. Some could also be high single digits. I don't know if there was any other call you wanted. The one area that Brian mentioned earlier on the previous question is... Our balance sheet is built for growth today, but we're also going to remain disciplined on deploying that capital.
Speaker Change: If we think about relative returns on these projects.
Speaker Change: Projects in particular, I would say I would think of them in kind of the.
Speaker Change: Low double digits to potentially low teens, depending on the project could be a little bit higher.
Speaker Change: Could also be high single digits I don't know bill if there's any other color you want to.
Bill Kruger: I agree.
Speaker Change: The one area that.
Speaker Change: Brian mentioned earlier on a previous question is.
Speaker Change: Our balance sheet is.
Speaker Change: For growth today, but we're also going to remain disciplined on deploying that capital.
Brian Valentine: Understood, understood.
Brian Valentine: So, actually, my second question dovetails nicely to that. You guys have been, actually, very conservative in the way you've deployed capital over the last many years. You know, most of the time, it's actually worked out in your favor. And, you know, a consequence of that is that you're under leveraged today, as you outlined in your prepared remarks, you know, having, you know, at least a full turn in debt capacity on existing EBITDA. Can you maybe talk a little bit about your buyback optimization, whether or not, you know, there are market conditions that could allow you to be, you know, more active than the $15 million you've bought back over the last few years?
Speaker Change: Understood understood. So actually my second question dovetails nicely to that.
Speaker Change: You guys have been actually very conservative in the way you deploy capital over the last many years.
Speaker Change: Most of the time, it's actually it's actually worked out in your favor.
Speaker Change: In consequence of that is that you are under leverage today as you outlined in your prepared remarks.
Speaker Change: Having.
Speaker Change: At least a full turn in that capacity on an existing existing EBITDA can you maybe.
Speaker Change: Talk a little bit about your.
Speaker Change: Your buyback authorization, whether or not.
Speaker Change: There are market conditions that could allow you to be more active in the $15 million you bought back over the last few years.
Brian Valentine: And then, you know, is there something that, you know, might catalyze a more active M&A environment for you guys? You know, you did just complete a material acquisition, but I think there's potentially more capacity to do more. But would this be an environment that that could be achievable, or is this something where you're going to patiently look and wait for things that meet your return threshold?
Speaker Change: Then.
Speaker Change: Is there is there something that might catalyze.
Speaker Change: A more active M&A environment for you guys.
Speaker Change: You did you did just complete a material acquisition, but I think there's potentially more more capacity to do more.
Speaker Change: Would this be an environment that that could be achievable or is this something where youre going to patiently look and wait for things that meet your return thresholds.
Brian Valentine: Yeah, that's a great, this is Brian, that's a great question and a lot to talk about there. I think from a share repurchase perspective, you're right, we do have $100 million share repurchase authorization on the shelf. It is something that I expect us to use from time to time, but, and we're trying to really balance the approach that we're taking with our overall growth objectives, and, you know, you raise an important point.
Speaker Change: Yes.
Speaker Change: That's a great. This is Bryan Thats, a great question and a lot to talk about there I think from a from a share repurchase perspective, youre right. We do have a $100 million share repurchase authorization on the shelf. It is something that I expect us to use from time to time, but.
Speaker Change: We're trying to really balance the approach that we're taking.
Speaker Change: With our overall growth objectives, you raised an important point, we have the $475 million EBITDA target out there now by the end of 2026.
Brian Valentine: We have the $475 million EBITDA target out there now by the end of 2026, and we do aspire to utilize the balance sheet if and when it makes sense, and we have the ability to generate those appropriate returns for shareholders. One of the things that's been interesting over the past 12 to 24 months is that there were a number of deals that we've looked at over the past two to three years where we simply couldn't make the economics work, and maybe another buyer was willing to pay an extra turn, and some of those were even larger deals at times, and what we've seen really over the last year or so is more deals coming to market, and with interest rates being higher than they were a few years ago, and with the ag cycle dynamics changing a bit, the question remains whether sellers, you know, whether sellers' expectations have tempered a little bit, and so we're seeing a lot of activity, and so we're trying to just balance the overall approach, but, you know, assuming that we can get the right economics and the deals to work and they fit with us from a strategic perspective, I think it's fair to say we aspire to continue to be active.
Speaker Change: And we do aspire to utilize the balance sheet, if and when it makes sense and we have the.
Speaker Change: Ability to generate those appropriate returns for shareholders one of the things that's been interesting over the past call. It 12 to 24 months is that there were a number of deals that we've looked at over the past two to three years, where we where we simply couldnt make the economics work and maybe another buyer was willing to pay.
Speaker Change: An extra turn in some of those were even larger deals.
Speaker Change: Times in what we've seen really over the last year or so is more deals coming to market and with.
Speaker Change: Interest rates being higher than they were a few years ago.
Speaker Change: And with the AG cycle dynamics changing a bit the question remains whether whether sellers.
Speaker Change: The sellers' expectations have have tempered a little bit and so so we're seeing a lot of activity and so we're trying to just balance balance the overall approach but.
Speaker Change: <unk> that we can get the right economics, and the deals to work and they fit with us from a from a strategic perspective, I think it's fair to say, we aspire to continue to be active.
Craig Irwin: Okay and then last question I guess is a policy question. Do you have any strong views on sustainable aviation fuel and your ability to participate there in the future?
Speaker Change: Okay and then last question I guess this is a policy question do you have any strong views on sustainability aviation Peel and your ability to participate there in the future and kind of it seems that if we have a.
Craig Irwin: It kind of seems that, you know, if we have a Harris administration, hopefully Treasury gets its act in gear and gives us clearer language in how people can actually pull down the related credits. And, you know, many people believe it's unlikely a Trump administration would pick a renegade from Oklahoma with no biofuels exposure or history to run EPA. So we're unlikely to see the damage repeated that he did back in the day. So it's actually a pretty favorable setup for SAF.
Speaker Change: Harriss administration, hopefully treasury against its acting gearing gives us clearer language and how people can actually pull down the related credits.
Speaker Change: And.
Speaker Change: Many people believe it's unlikely a Trump administration would pick a renegade.
Speaker Change: From Oklahoma with no <unk>.
Speaker Change: Fuel's exposure history to run EPA.
Speaker Change: So we're unlikely to see the damage repeated that he did back in the day, so it's actually pretty favorable setup for staff.
Bill Krueger: I mean, how do you see the situation? How do you see the Andersons potentially participating over the next few years?
Speaker Change: How do you see the situation how do you see the andersons potentially participating over the next few years.
Speaker Change: Okay.
Bill Krueger: Good question, Craig. I would tell you that we feel like, with our partnerships in the ethanol space and our continued monitoring of the technology and policy, that if there's an opportunity for the Andersons to participate at whatever level it is, as a supplier, as an investor, we are very focused on SAF.
Speaker Change: Okay.
Speaker Change: Good question, Greg I would tell you that we feel like with.
Speaker Change: Our partnerships in the ethanol space and our.
Speaker Change: <unk> monitoring.
Speaker Change: Of the technology and policy that.
Speaker Change: If theres an opportunity for the andersons to participate at whatever level. It is.
Speaker Change: As a supplier as an investor.
Speaker Change: We are very focused on staff.
Bill Krueger: Personally, I think that the window of getting SAF across the finish line for ethanol jet, obviously HEPA is viable today and continues to develop. We believe that we're in as good a position as anyone to take advantage as the sustainable aviation fuel rules for ethanol to jet unfold. So I don't know if I answered your question, but we do spend a lot of time working on it.
Speaker Change: Personally I think the window of getting <unk> across the finish line for ethanol.
Speaker Change: Alcohol to jet obviously huffer.
Speaker Change: Is is viable today and continues to develop.
Speaker Change: <unk>.
Speaker Change: We believe that we're in as good a position as anyone.
Speaker Change: Take advantage as the sustainable aviation fuel rules for ethanol to jet.
Speaker Change: Unfold.
Speaker Change: So I don't know if I answered your question, but we do spend a lot of time working on it.
Bill Krueger: Epinaldo Jet is behind HEPA or renewable diesel SAF, but we continue to monitor both of those. live as we continue to progress.
Speaker Change: Ethanol the jet is behind.
Speaker Change: Or renewable diesel south, but we continue to monitor both of those.
Speaker Change: Yes.
Speaker Change: As we can.
Craig Irwin: Excellent, I like that.
Speaker Change: Given your progress.
Craig Irwin: So congratulations on the historic margins, the historic crush, and I'll hop back in to you.
Speaker Change: Excellent I like that so congratulations on the <unk>.
Speaker Change: Historic margins that historic crush and ill hop back in the queue.
Joe: As a reminder, to join the queue, you may press star then 1.
Speaker Change: As a reminder to join the queue you May Press Star then one.
Ben Mayhew: Our next question will come from Ben Mayhew with BMO Capital Markets. Please go ahead. Hey, guys.
Speaker Change: Our next question will come from Ben <unk> with BMO capital markets. Please go ahead.
Ben Mayhew: Congratulations, Bill. My question, my first question has to do with the merchandising environment. And I'm just wondering, it sounds like you guys loaded up on some low basis corn. Sounds like elevation margins are pretty solid. So, I mean, what is your general outlook for 25? It seems like the industry isn't, you know, too excited about the lack of volatility. But if there are any, like, if there's any framework you could put around it and the potential catalysts for more bullish action on commodity prices, that would be great. And maybe just also, like, where are, you know, the bright spots on the demand side, both domestically and internationally.
Ben <unk>: Hey, guys Congratulations bill.
Speaker Change: My question. My first question has to do with the merchandising environment.
Speaker Change: And I'm just wondering it sounds like you guys loaded up on some low basis corn.
Speaker Change: It sounds like elevation margins are.
Speaker Change: Pretty solid.
Speaker Change: So I mean, what is your general outlook for 'twenty five it seems like the industry is in.
Speaker Change: Too excited.
Speaker Change: About the lack of volatility.
Speaker Change: But if there are any like there's any framework you can put around it and the potential.
Speaker Change: Catalyst for more bullish action on on commodity prices.
Speaker Change: That would be great and maybe just also like where the.
Speaker Change: The bright spot on the demand side, both domestically and internationally.
Ben Mayhew: Thanks.
Speaker Change: Thanks.
Bill Krueger: Thanks, Ben. A lot of questions there, in one breath.
Speaker Change: Hi.
Speaker Change: Thanks Ben.
Speaker Change: Yeah.
Speaker Change: Lots of questions there.
Speaker Change: In one breath.
Bill Krueger: Let's talk about, I'll go kind of in reverse order. Demand. You know, export demand, we all can watch how it's kind of ebb and flowed. You know, we're really going to be focused on Brazil's 50% planted today, and how's that crop going to go in. It does feel like we've seen some corn export demand pick up recently, but we really are focused on domestic demand for the most part for the Andersons. And as you well know, domestic demand drives basis, global demand drives your futures price in general.
Speaker Change: Let's talk about.
Speaker Change: So kind of in reverse order.
Speaker Change: Sure.
Speaker Change: Demand.
Speaker Change: Export demand, we all can watch how its kind of ebb and flowed.
Speaker Change: We're really going to be focused on Brazil, 50% planted today and how is that going to go in.
Speaker Change: It does feel like we've seen some corn export demand pick up recently.
Speaker Change: But we really are focused on domestic demand for the most part.
Speaker Change: For the Andersons and as you well know domestic demand drives basis global demand dredge or futures price in general.
Bill Krueger: What?
Speaker Change: <unk>.
Bill Krueger: What I do want to be clear is lack of volatility is not a friend of a merchandising business and it's one of the reasons why we've talked for the last several years about the diversification of the portfolio. three to five years ago, we're talking about a lot of asset light opportunities. And then you see our announcement yesterday, where we had an opportunity to invest in a substantial grain asset and agronomy business. That's taking advantage of what the market dictates, and we're very pleased with the Skyland opportunity. So we want to continue to make sure that we have a diversified portfolio to take advantage of market conditions.
Speaker Change: Right.
Speaker Change: What I do want to be clear is lack of volatility.
Speaker Change: Is not.
Speaker Change: A friend of <unk>.
Speaker Change: Merchandise a business and it's one of the reasons why we've talked.
Speaker Change: For the last several years about the diversification of the portfolio. So.
Speaker Change: Yes.
Speaker Change: Three to five years ago, we were talking about a lot of asset light opportunities and then you see our announcement yesterday, where we had an opportunity to invest in a substantial grain asset and agronomy business that's <unk>.
Speaker Change: Taking advantage of what the market dictates and.
Speaker Change: We're very.
Speaker Change: Pleased with the Skyway and the opportunity. So we want to continue to make sure that we have a diversified portfolio to take advantage of market conditions.
Bill Krueger: i.e. lower volatility, generally drive more carry, generally gives you better return on space. And so we want to continue to develop both sides of that equation.
Speaker Change: I E lower volatility generally drive more carry generally gives you better return on space and.
Speaker Change: So we continue to develop both sides of that equation.
Bill Krueger: The other item that I think is important is that people don't always think about when talking about merchandising for the internet. Roughly 15-18% of all the corn that we originate goes north. And when you think about that as a backstop, the ethanol plants are a lot like great assets for many of our businesses. So what we feel like is we need to develop with the asset base and merchandising that we should be in a positive situation going into 2025. But the key is we need to have increased income at higher levels than it is today.
Speaker Change: The other item.
Speaker Change: I think it was important.
Speaker Change: Always.
Speaker Change: About when talking about merchandising for the Andersons.
Speaker Change: Roughly 15% to 18% of all the corn that we originate.
Speaker Change: Nor alcohol plants.
Speaker Change: And when you think about that as a backstop the ethanol plants.
Speaker Change: Assets for many of our businesses so be.
Speaker Change: Like us.
Speaker Change: You too.
Speaker Change: Asset base in merchandising.
Speaker Change: Should be in a positive situation going into 2025.
Speaker Change: But the key is we need to have produced income at higher levels than it is today volatility volatility is more preferable than what we have today, so it's a little bit more like hitting singles and doubles.
Bill Krueger: Volatility is more preferable than what we have today.
Bill Krueger: So it's a little bit more like hitting singles and doubles as we look into 2025 today from the trade center.
Speaker Change: Look into 2025 today from the trade side of the business.
Ben Mayhew: Got it. And then did I hear you earlier say or Brian say that you would you would potentially look at acquiring another ethanol plant? I know in the past you've kind of talked about just improving your own assets, and you guys clearly run, you know, top-notch ethanol plants.
Speaker Change: Got it.
Speaker Change: And then did I hear you earlier say, Brian say that.
Speaker Change: You would potentially look at.
Speaker Change: Acquiring another ethanol plant.
Speaker Change: I know in the past you've kind of all.
Speaker Change: Talked about just improving your own assets and you guys clearly one.
Speaker Change: Top notch ethanol plants.
Bill Krueger: What I guess what given kind of crush margins have come in and you know they've been volatile they've always been volatile but like Is the market attractive enough right now, valuation-wise, where you could add another ethanol plant, or is that just something that you're not interested in? And I guess just kind of generally how you think about ethanol crush assets, you know, moving forward into the, you know, the new world of policy that we find ourselves in.
Speaker Change: What I guess what.
Speaker Change: Given kind of crush margins have come in and they've been volatile they've always been volatile but like.
Speaker Change: Is the market attractive enough right now valuation wise.
Speaker Change: We could add another ethanol plant.
Speaker Change: Something that youre not interested in and I guess just the.
Speaker Change: Generally how you think about.
Speaker Change: <unk> crush asset.
Speaker Change: Moving forward into the.
Speaker Change: New World policy.
Speaker Change: That we that we find ourselves in.
Bill Krueger: Brian was actually the person who made that comment. I agree with him, and we've said that the last couple of calls is, yeah, we are interested in adding additional ethanol plants to our portfolio. They need to be the right size, in the right location, at the right price. And we've looked at a number of ethanol plants, and to date, we've not been able to find a valuation that we think is supportive or something that we'd be interested in.
Speaker Change: Brian was actually.
Speaker Change: The person who made that comment I agree with them and we've said that the last couple of calls is yes, we are.
Speaker Change: Interested in adding additional ethanol plants to our portfolio I think need to be the right size in the right location at the right price and we've looked at a number of ethanol plants and to date, we have not been able to find a valuation that we think is.
Speaker Change: Supportive or something that we'd be interested in that.
Bill Krueger: The one thing, and I talk about this a lot, is we view the ethanol space as not just the four walls of the plant. We also view it as all the ancillary products, originating corn, selling the DDGs, marketing the ethanol, marketing the DCO. And when you could put that into the Andersons model... We come up with something that generally returns better than just maybe a standalone plant. So for us, it's a lot more complicated decision, but one that we're very interested in continuing to look at.
Speaker Change: The one thing and I talk about this a lot is we view the ethanol space.
Speaker Change: Not just the four walls of the plant we also view it.
Speaker Change: Has all the ancillary products originating corn selling the ddg's marketing the ethanol marketing the desio and when you could put that into the Andersons model.
Speaker Change: We come up with something that generally returns better than just may be a standalone plant. So for us. It's a lot more complicated decision, but one that we're very interested in continuing to look at.
Ben Mayhew: Thanks.
Ben Mayhew: And just one final question having to do with Stoicrush. So I think there's a general concern out there right now that new policy is going to disincentivize soybean oil use in biofuels, at least in the U.S., but at the same time, soybean meal demand seems to be stronger than ever, both domestically and internationally. Can you just speak to the current environment where we have, you know, increasing capacity? and the ability for demand to absorb that capacity, and what's kind of the breakdown between domestic and international, and I'll leave it there.
Speaker Change: Thanks, and just one final question, having to do with soy crush.
Speaker Change: No.
Speaker Change: I think theres, a general concern out there right now that new policy is going to dis incentivized.
Speaker Change: Soybean oil use in biofuels at least in the U S.
Speaker Change: At the same time soybean meal.
Speaker Change: <unk> seems to be stronger than ever both domestically.
Speaker Change: And internationally.
Speaker Change: Can you just speak to the current environment, where we have.
Speaker Change: Increasing capacity.
Speaker Change: And.
Speaker Change: The ability for demand.
Speaker Change: To absorb that capacity and what kind of the breakdown between domestic and international and I'll leave it there thanks guys.
Bill Krueger: Thanks, guys.
Bill Krueger: You know, I think a lot of people surprised in the last couple, three months with soybean meal price action. But we do believe that meal, at least during the winter months, is going to have to go to export parity. And we don't believe that the U.S. is gonna be able to grow domestic meal demand at the rate that we're producing or we're increasing crush.
Speaker Change: I think a lot of people are surprised.
Speaker Change: Last couple three months with soybean meal price action, but we do believe that.
Speaker Change: Neil at least during the winter months is going to have to go to export parity and we don't believe the U S is going to be able to grow domestic meal demand at the rate that.
Speaker Change: We are producing or we're increasing crush so that has been the impetus of our investment in Houston, We think it's a long term.
Bill Krueger: So that has been the impetus of our investment in Houston. We think it's a long-term play. And we do believe that the U.S. will be an exporter of the excess meal that we're going to produce.
Speaker Change: Play and we do believe that the U S will be an exporter of the excess meal that we're going to produce.
Ben Mayhew: Great, thanks guys and congrats on the quarter.
Speaker Change: Great Thanks, guys and congrats on the quarter.
Mike Hoelter: And this concludes our question and answer session.
Speaker Change: And this concludes our question and answer session I will now turn the call back over to Mike Holter for any closing remarks.
Mike Hoelter: I will now turn the call back over to Mike Hoelter for any closing remarks. Thanks, Joe. We want to thank you all for joining us this morning.
Mike Holter: Thanks, Joe we want to thank you all for joining US. This morning. Our next earnings conference call is scheduled for Wednesday February 19, 2025 at 830 am Eastern time, when we will review our fourth quarter results and as always thank you for your interest in the Andersons and we look forward to speaking with you again soon.
Our next earnings conference call is scheduled for Wednesday, February 19, 2025 at 830 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