Q1 2025 The Andersons Inc Earnings Call
Joe: Good morning ladies and gentlemen and welcome to the Andersons 2025 first quarter earnings conference call. My name is Joe and I will be a coordinator for today. At this time all participants are in a listen only mode. And should you need any assistance on today's call please signally conference specialist by pressing the star key followed by zero.
Joe: Later, we will facilitate a question and answer session. To ask a question, you may press star, then one on your telephone keypad. To withdraw a question, please press star, then two. And as a reminder, this conference is being recorded for replay purposes.
Speaker Change: I will now hand the presentation to your host for today, Mr. Mike Hoelter, Vice President, Corporate Controller, and Investor Relations. Please proceed.
Speaker Change: Thanks Joe, good morning everyone and thank you for joining us for the Andersons first quarter and it's called. 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 in sync.
Speaker Change: This webcast has been recorded and the recording and the supporting slides will be made available on the investors page of our website at Andersonsinc.com shortly.
Speaker Change: Please direct your attention to the disclosure statement on Flight 2, as well as the Disclaimers in the press release related to forward-looking statements.
Speaker Change: Certain information discussed today constitutes forward-looking statements that reflect a company's current views with respect to future events, financial performance, and industry conditions. These forward-looking statements are subject to various risks and uncertainties.
Speaker Change: Actual results could differ materially as a result of many factors which are described in the company's reports on file of the SEC. We encourage you to review these factors.
Speaker Change: This presentation and today's prepared remarks contain non-GAAP financial measures. Reconciliation of the gap to non-GAAP measures are included within the appendix of this presentation.
Speaker Change: On the call with me today, our Bill Krueger, President and Chief Executive Officer, and Brian Valentine, Executive Vice President and Chief Financial Officer.
Speaker Change: After our prepared remarks, we will be happy to take your questions. I will now turn the call over to Bill.
Speaker Change: Thanks, Mike. Good morning, everyone. Thank you for joining the call to discuss our first corner results and outlook for the remainder of 2025.
Speaker Change: We had mixed results in the first quarter with a strong performance from renewables while agribusiness was weaker than expected
Speaker Change: Global trade uncertainty resulting from threatened tariffs and pork fees disrupted typical grain flows and negatively impacted commodity values.
This resulted in limited merchandising activity beyond immediate customer needs.
Speaker Change: The nutrient and agronomy teams had a solid start to the planning season and are well positioned to support the expected increase in corn acres.
Speaker Change: At the same time, our renewables group had one of its best first quarters.
Speaker Change: with improved yields and solid margins from ethanol production coupled with contributions from ethanol and renewable diesel feed stock merchandise.
Speaker Change: Results in agribusiness were down as our egg supply chain assets were hit particularly hard by domestic demand challenges and the overall trade flow uncertainties.
Reducing exports of wheat and sorghum
Speaker Change: These broad market conditions, which we believe are temporary and unusual, impacted the entire network but were amplified in the Western corner belts.
Speaker Change: A bright spot through the group was our agronomy business where we experienced increased volumes and margins [inaudible]
and we remain pleased with our operating performance and renewables.
Speaker Change: We again had increased year-over-year production, including higher ethanol and corn yields.
Speaker Change: Increased board crash margins, also positively impacted our results and our ethanol and co-product merchandising provided comparable uplift.
Speaker Change: Contributions from dry distillers grains for lower year-over-year on reduced values considering an oversupply of alternative protein sources.
Speaker Change: Brian will now cover some key financial data. After that, I'll be back to discuss our outlook.
Thanks, Bill, and good morning everyone.
Speaker Change: We're now turning to our first quarter results on the slide file.
Speaker Change: In the first quarter of 2025, the company reported net income attributable to the Andersons of $300,000 for one cent per diluted share and adjusted net income of $4 million or 12 cents per diluted share.
Speaker Change: This compares to net income of $6 million or $16 cents per diluted share in the first quarter of 2024.
Revenues to climb slightly on overall lower commodity prices.
Speaker Change: Gross profit improved while expensive increased, with a large portion of resulting from the addition of skylands results.
Speaker Change: Adjusted pre-tax earnings were $3 million for the quarter, compared to $7 million in 2024 with the decline coming from the agribusiness segment.
Speaker Change: Adjusted even to offer the first quarter of 2025 was $57 million compared to $51 million in 2024.
Trailing 12-months-adjusted EBITDA, total $369 million dollars.
Speaker Change: Our effective tax rate varies each quarter, based primarily on the amount of income or loss attributable to non-controlling interests.
Speaker Change: We recorded a $2 million tax benefit for the quarter, which was impacted by a discreet adjustment for research and development tax credits related to prior periods.
Speaker Change: We continue to expect a full-year adjusted effective tax rate between 18 and 22 percent.
Speaker Change: Next, we'll move to slide six to discuss cash, liquidity and debt.
Speaker Change: We generated cash flow from operations before changes in working capital of $57 million in the first quarter of 2025 in increase of more than $8 million from 2024.
Speaker Change: This continues to demonstrate our ability to generate strong cash flows throughout the egg cycle.
Speaker Change: This strong cash flow generation, combined with continuing lower commodity prices, resulted in a cash position of $219 million at the end of the quarter.
Speaker Change: Next, we'll take a look at capital spending and long-term debt on slide 7th.
Speaker Change: First quarter capital spending was $47 million compared to $27 million in 2024 with the increased attributable suspending on long-term growth projects, as well as normal maintenance capital on the addition of the skyland grain assets.
Speaker Change: We continue to take a disciplined, responsible approach to capital spending and investments.
which we expect could reach $200 million for the year.
Speaker Change: Our long-term death to Ibiza is approximately 1.8 times, which is well below our stated target of less than 2.5 times.
Speaker Change: We continue to have a balance sheet with significant capacity to support growth investments that meet our strategic and financial criteria.
Speaker Change: We are evaluating additional capital projects in our pipeline, including projects to improve efficiency and add capacity at our existing facilities, as well as M&A opportunities that align with our growth strategy.
Speaker Change: Now we move on to a review of each of our businesses.
Beginning with Agra Business on slide 8.
Speaker Change: The agribusiness segment reported a pre-tax loss attributable to the company of $5 million and breakeven adjusted pre-tax income.
Speaker Change: As Bill mentioned, the threat of tariffs and additional port fees had a dampening impact on the commodity markets in the first quarter.
Speaker Change: This resulted in stagnant conditions across much of our asset footprint.
Speaker Change: Our Western Axe Supply Chain Assets, including Skyland, were faced with declining grain bases.
[inaudible]
Speaker Change: Cross-country commodity merchandising and the premium ingredients portfolio were also impacted by the overall market conditions.
Speaker Change: On the Agronomy Front, we saw improved volumes and margins as customers prepare for potential record corn acres.
Speaker Change: Everbusiness suggested EBITDA for the quarter was $31 million, compared to $29 million for the first quarter of 2024.
Speaker Change: Moving to slide 9, renewables had an outstanding first quarter generating pre-tax income attributable to the company at $15 million, compared to adjusted pre-tax income of $14 million in the first quarter of 2024.
Speaker Change: That's in all margins, remained favorable in the quarter on higher yields and board crush.
Plast production remained high and gallons produced exceeding last year.
Speaker Change: As Bill noted, feed values were lower and are expected to remain challenged.
Bill Krueger: Overall, ethanol and RG feedstock merchandising were up here over here.
Bill Krueger: Renewables had EBITDA of $37 million in the first quarter, compared to adjusted EBITDA of $34 million last year
Bill Krueger: And with that, I'll turn things back over to Bill for some comments about our outlook for the remainder of 2025.
Thanks, Brian .
Bill Krueger: Overall, we remain positive about our outlook despite the near-term market challenges we've noted in our agribusiness segment.
Bill Krueger: With this being the first quarter reporting in our new segment structure of agribusiness and renewables, I want to acknowledge the work that is occurring to bring together the nutrient and trade groups.
Bill Krueger: We're working very hard on this and we'll continue to focus on it through 2025 as we anticipate additional commercial, operational and functional synergies.
Bill Krueger: We are also continuing to invest in our safety culture, particularly around assets new to our portfolio.
Bill Krueger: Our agribusiness outlook remains optimistic and we expect that the additional clarity recently provided on tariffs and port fee regulations will reduce some of the market uncertainties that we experienced throughout the first quarter.
Bill Krueger: Farmers are in the fields, and planning progress is above the five-year average average.
Bill Krueger: With a solid growing season, we anticipate additional storage and handling opportunities in the last half of the year.
Bill Krueger: The upcoming wheat harvest is being closely watched as both soft red and hard red wheat contracts
Bill Krueger: Outlook for the fertilizer and agronomy business for the second quarter is strong as we were well positioned prior to the start of the planning season and the large expected corn plantings require higher higher levels of nitrients.
Bill Krueger: We continue to evaluate additional growth projects and acquisition opportunities while staying focused on execution of previously approved projects.
Bill Krueger: In addition to the integration of Skyland, this includes the improvements and expansion at the port of Houston to support soybean meal exports.
Bill Krueger: We have several other organic growth capital projects that are in process to support key customer contracts at various stages of completion.
Bill Krueger: In our Renewable segment, we have now successfully completed our spring maintenance shutdowns and expect our plans to continue their highly efficient production.
Bill Krueger: Demand remained solid for ethanol and co-products used in production of renewable diesel which should benefit from the expected change in the RVO requirements.
Bill Krueger: Since quarter and there has been a drawdown of US ethanol supply corresponding to the industry
Bill Krueger: We believe export demand will remain strong. However, we expect higher eastern corn basis and natural gas costs.
Bill Krueger: We're very focused on maintaining and improving our four production facilities for optimal efficiency.
Bill Krueger: The Renewables business is an important part of our long-term gross strategy.
Bill Krueger: We continue to make progress on plans to increase ethanol production efficiency and capacity and to lower the carbon intensity of our ethanol.
Bill Krueger: We are implementing process enhancements at two of our plans to improve the yield of distillers car oil.
Bill Krueger: Also, as we have previously disclosed, we are evaluating potential acquisitions of ethanol production facilities that align with our strategy.
Bill Krueger: I am proud of our team's resilience in this dynamic environment.
Bill Krueger: We increased our cash flow from operations before changes in working capital and our balance sheet is strong
Bill Krueger: With our growth projects and potential acquisition opportunities, we remain very excited about our future We will continue to make responsible decisions that benefit our customers and maximize shareholder value as we execute our strategy
And with that, we're happy to answer your questions.
We will now begin the question and answer session.
Bill Krueger: To ask a question, you may press star than one on your telephone keypad.
Bill Krueger: If you're using a speaker phone, please pick up your handset before pressing the keys.
and to withdraw a question, please press star, then two.
Speaker Change: And our first question will come from Ben Mayhew with BMO Capital Markets. Please go ahead.
Ben Mayhew: Hey, good morning guys and congrats on the solid performance in a really difficult environment.
So, my first question has to do, um...
Ben Mayhew: with a fertilizer business. So it sounds like you have some good visibility on second quarter fertilizer profits given the strong corn plant.
Ben Mayhew: So, I'm just wondering if you can frame it against maybe the last two years Deccan quarter performance. Do you expect it to maybe be a little bit higher from a profit standpoint? And that will be my first question. Thanks.
Ah, thanks for the course ship.
Yeah.
Ben Mayhew: This year's planning season, compared to the last two, has really started off well. We are obviously looking at a much larger geographic area with the addition of the Skylay and Farm Centers doubly our size.
Ben Mayhew: But compared to last year, we've seen the opportunities in the fertilizer and nutrient business expand.
Ben Mayhew: Not only due to increased corn acres, but also we just had a solid plan working with our suppliers coming into this planning season which is really benefit it does.
Ben Mayhew: And so my second question has to do with the ethanol business. So I think the first quarter came in on
Ben Mayhew: Probably stronger than, at least I expected, and it seems like most others expected, had another major competitor yesterday, opposed the pretty strong result and give a stronger outlook.
Ben Mayhew: You mentioned the difference in corn basis between the Eastern and Western belt, which I thought was pretty interesting for this year because the last couple of years the Eastern belt has been cheaper.
Speaker Change: So, I was hoping you could just dive into that difference this year and what's causing the Eastern Belt to be a little more expensive on basis versus the Western Belt.
Speaker Change: Yeah, that relates back to a couple of the comments that I made. So the Western Corn Bill has had less demand this year than it has the past couple of years with the pork fees and the looming tariff discussions.
We had substantially less [inaudible]
Speaker Change: in the Western Corn Belt, and we've had the last couple of years.
Speaker Change: Also, we've had a substantial drop in the catalog feed.
Numbers in the West, which is also a competing demand.
Speaker Change: So those would be the two largest reasons that I would tell you that we've seen a little higher
Speaker Change: versus the last couple of years. Freight has also been a little easier to get in the West again because of the lack of exports, but those would be the three reasons that I would tell you that we've seen kind of a shift.
This year versus the last two years [inaudible]
Speaker Change: Cool, and then if I could sneak in one more, I saw in the press release that you called out the Renewable Diesel Feet Stock Trading Desk as having a better performance.
So I'm wondering, are you seeing on...
Speaker Change: A head of maybe an expected RDO announcement in May, it would seem like we're starting to see more plants kind of step into the market.
Speaker Change: have a little more confidence and start buying some seed stocks ahead of this. So I'm just wondering what your internal visibility is on this and how it might pretend to the rest of the year.
Speaker Change: around the ag and refiners working together on setting the RVO.
There's a wide varying
Speaker Change: A range of numbers, a lot of people want to say over the next two years, we'll get North of 5 billion, we'll wait and see what the number comes out. We have heard...
Speaker Change: that will likely have more information by the end of May. But I agree with you, you're our spot on when we've talked a lot about both.
the RVOs, and trying to understand.
Speaker Change: The Eyeluck on soybeans and corn, and so there has been a focus or feeling of more positive results potentially for the renewable diesel processing plants.
Speaker Change: Okay, thank you so much. I'm gonna step back in the queue [inaudible]
Speaker Change: And our next question will come from Ben Klieve with Lake Street Capital Markets. Please go ahead.
Ben Cleavey: It seems like the macro condition has deteriorated over the last six months relative to what you guys are considered, but maybe that this business performed relatively well against that macro backdrop. I'm wondering if you can just talk about its performance relative to your expectations. Miner, if you're able to isolate the level of EBITDA, generated by that business here in the first quarter, that would be great too.
Thanks. I'll take the first portion of that question.
Ben Cleavey: As we mentioned, the entire network was hit by in Q1, we had a sharp run-up in the board early in the quarter, so we saw a second wave of a lot of farmer selling which put pressure on the basis.
Ben Cleavey: Generally that is exactly what we're looking for after the first of the year, but then February 21st, you have the announcement by the USTR of the pork fees
Ben Cleavey: That just absolutely put the brakes on any forward activity. And you can look at that as as I mentioned on the export. So
Ben Cleavey: All of our Western Corn Belt operations struggled just with the lack of trade flow.
Ben Cleavey: Skyland, in particular, is more of an asset-based business versus some of our merchandising businesses. So, yes, they did have that the same issue with their business as that portion of our business did as anyone else in the Western Corn Belt did.
In terms of thinking through the investment, we're actually...
Ben Cleavey: doing a very good job on integrating the business into the Andersons and we continue to find synergies and opportunities that look very positive for the long-term investment in society.
Ben Cleavey: Yeah, Ben, this is Brian , I would just add a few comments to that. I think when we talked in our conference call at the end of the year, we kind of sent the first couple of months of November to December , we're in the $5 to $10 million range of EBITDA.
Ben Cleavey: We talked about a $30 to $40 million expected ten annual run rate because Bill said, I mean, we remain talking about the long-term fundamentals. The first quarter was taught that it was, it was,
Ben Cleavey: I'm positive even though but just slightly positive and so I would say if we think about the full year for that business it's probably I would say we're still comfortable with that 30 to 40 million dollar range but I would lean it towards the low end of that range as opposed to the [inaudible]
Ben Cleavey: Okay, that's that fair enough, and that all tracks. Last one for me, and then look back and cute. You're you're it seems like the investments that you are making. [inaudible]
You know are kind of continuing
Ben Cleavey: without much change. And I'm curious, you know, the degree to which that's an accurate assessment on the investments, especially in Houston, location explicitly focused around international trade flows. Those investments, it seems like.
Ben Cleavey: are going on without any kind of change even against this uncertain macro backdrop. Is that a fair characterization?
Yeah, it should.
Ben Cleavey: Very fair characterization and if you think through the net effect of an increase in RVOs
That's going to generate more demand for soybean oil.
Ben Cleavey: which will create more supply of soybean meal exports. So we feel very...
Ben Cleavey: The investments that we are, as we've talked about in the press release, are long lead item investments as still being very strategic and quite honestly today may feel more comfortable than they had previously.
Speaker Change: Got it, very good. Why appreciate the color from both of you? Thanks for taking my questions and I'll get back and cute.
Peran Sharma: And our next question will come from Prawn Sharma with Stevens. Please go ahead.
and, meaningfully, up your date through March to Canada.
Speaker Change: I know we had a little bit of back and forth in terms of trade.
Trade Tariff Discussions
But I just wanted to ask if-
Speaker Change: You think some of the momentum that we're seeing thus far is a little bit of pull forward or do you expect this type of momentum to carry for the whole year? We'd just love to hear your thoughts on ethanol exports to Canada.
Speaker Change: It's good observation and looking at the Q1 exports year over year as we look at the market today.
Speaker Change: We would tend to agree with you that it is a little bit of a pull forward. Our thoughts are we're at 1.9 billion gallons of exports last year.
Speaker Change: It feels like the tariff potential is out there, so we're not materially lower, nor are we materially higher than that, if you wanted to say 1.85 to 1.9
Speaker Change: That's about as solid a guess as as we would have. Obviously there are a lot of outstanding variables and the terrorists are the one item that we have to be monitored.
Speaker Change: But, you know, exports have been very strong in Q1 and feel like they're going to at least keep pace with last year in Q2.
Speaker Change: I wanted to kind of just hone in about grain here and
Speaker Change: A, just ask, I think you addressed it in your prepared comments, but, you know, with
Speaker Change: reports that planting pace had a schedule so want it to see what this means for your ability to store for storage income within your great business.
Speaker Change: Yeah, that's, you know, first quarter, as we stated, was hit with a lot of headwinds.
Speaker Change: Simultaneously, we're looking at the potential of a relatively large weak crop with substantial carous, and we're looking at
North of 95 5
Speaker Change: in the Ohio River Valley that is struggling to get corn in.
But that's not going to be material. We don't we don't think [inaudible]
Speaker Change: So yeah, we are hopeful that we had the opportunity in the last half of the year to make up any shortfalls that we had in the first quarter.
Now that all is going to vary on the size.
and the assumption that we will see this recent
Speaker Change: Increase and weed exports coming out of the U.S. maintain. So there's a lot of variables we like to think that most of them are positive as we look at the market today.
Great. Appreciate the color.
Speaker Change: And this concludes our question and answer session. I'd like to turn the conference back over to Michael Hoelter for any closing remarks.
Mike Hoelter: Thanks, Joe. We want to thank you all for joining us this morning. Our next earnings conference calls scheduled for Tuesday, August 5th at 8.30 a.m. Eastern time when we will review our second quarter results. As always, thank you for your interest in the Andersons and we look forward to speaking with you again soon.
Mike Hoelter: The conference is now concluded. Thank you for attending today's presentation. You may now disconnect your lines.