Q3 2025 Andersons Inc Earnings Call

Good morning, ladies and gentlemen, and welcome to the Andersons, Inc. 2025 third quarter earnings conference call.

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

At this time, all participants are in a listen-only mode and later we will facilitate a question and answer session.

to ask a question, you may press star then 1 on your telephone keypad,

Into withdrawal question. Please press star then 2

As a reminder, this conference is being recorded for replay purposes.

I will now hand the presentation to your host for today Mr. Mike hoelter vice president, corporate controller and investor relations. Please proceed.

Thanks Joe. Good morning everyone. And thank you for joining us for the Anderson's third quarter earnings call, we have provided a slide presentation that will enhance today's discussion.

This webcast is being recorded and the recording and the supporting slides will be made available on the investors page of our website shortly.

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 4 would looking statements are subject to various risks and uncertainties actual results. Could differ materially, as a result of many factors, which are described in the company's reports on file with the SEC. We encourage you to review these factors.

This presentation and today's prepared, remarks contain non-gaap Financial measures reconciliations of the gaap to non-gaap measures are included within the appendix of this presentation.

On the call with me today are Bill Krueger president and chief executive officer and Brian Valentine, Executive Vice, President and Chief Financial Officer.

After our prepared remarks, we will be happy to take your questions.

I will now turn the call over to Bill.

Thanks, Mike and good morning everyone. Thank you for joining this, call to discuss our third quarter results, and outlook for the remainder of 2025,

This quarter represents the first reporting period. Since we completed the purchase of the minority, share in our ethanol, plants at the end of July supporting strategic growth in renewable fuels.

In the third quarter, we recognized income for 45z tax, credits on our share of gallons produced and sold today. In 2025,

as we move into 2026, We are continuing to make investments to further improve plant production, efficiency for ethanol and co-products.

Strategy.

In Agra business, we are executing on our strategy to selectively invest in facility expansions and improvements to support our customer base.

We have talked previously, about 2 significant long-term construction projects that we expect to have fully operational in 2026.

They include the addition of soybean meal, export capacity and other operational improvements at our Port of Houston facility. And the addition of a mineral processing plant at our Carlsbad New Mexico, transload facility.

We're also investing additional growth capital in our premium ingredient business. At our Mansfield Illinois location to meet customer demand for cleaned corn being used in the chip tortilla and Pet Food Markets.

Once again, our Renewables business had a solid quarter with higher production and yield supported by strong demand.

However, corn and production costs were higher than the prior year.

We expect to see a reduction in the price of corn as we move through Harvest.

In Agra business, we had improved year-over-year. Fertilizer results with increased volume and margin.

The egg cycle remains in a trough due to Abundant domestic Supply and uncertainty around trade policy, resulting in limited export trade flows for some commodities.

We remain focused on supporting our customers in the current environment.

We continue to evaluate potential growth opportunities within our strategy and expect that more m&a opportunities may come to Market because of the current economic pressures.

Next Brian will discuss our quarterly results.

Thanks Bill and good morning, everyone. We're now turning to our third quarter results on slide, number 5,

Attributable to the Anderson's of 20 million or 59 cents per diluted share.

And adjusted net income of 29 million or 84 cents per diluted share.

This compares to adjusted net income of 25 million or 72 cents per diluted share in the third quarter of 2024.

Revenues increase slightly with the addition of Skyland despite overall lower commodity prices.

Gross profit decline due to challenging egg fundamentals, combined with higher input costs in Renewables.

Expenses also increase with the majority relating to the addition of Skyland.

Adjusted pre-tax earnings were 31 million for the quarter compared to 35 million in 2024 with the decline coming from Agra business.

This was partially offset by the net company impact of 45z, tax credits of 9 million, which included a cumulative, catch up for various costs to achieve as well as incentives.

Adjusted Evita for the third quarter was 78 million compared to 97 million in 2024.

Our effective tax rate, varies each quarter based primarily on tax credits to earned and the amount of income or loss attributable to non-controlling interests.

In addition, in the current quarter, we eliminated certain reserves against uncertain tax positions,

We now expect our full-year adjusted effective tax rate to be in the range of 15 to 18%.

Next, we'll move to slide 6 to discuss, cash liquidity and debt.

We generated cash flow from operations before changes in working capital of 68 million in the third quarter of 2025 compared to 86 million in the third quarter of 2024.

This continues to demonstrate our ability to generate positive, cash flows throughout the egg cycle.

Our readily marketable grain inventories, continue to be well in excess of our short-term debt.

And we ended the quarter with a cash balance of 82 million.

Next, we'll take a look at Capital spending and long-term debt on slide number 7.

Third quarter. Capital spending was 67 million compared to 38 million in 2024.

With the increase attributable to spending on long-term growth projects, as well. As normal maintenance capital on the addition of the Skyland grain assets.

We continue to take a disciplined responsible approach to Capital spending.

Which we expect will be approximately $200 million for the year excluding acquisitions.

Our long-term debt to ibitta is approximately 2 times.

Which remains well below, our stated Target of less than 2 and a half times.

We continue to have a balance sheet with significant capacity to support further growth Investments. Even after the 4255 million in cash paid to acquire the full ownership of our ethanol plants during the third quarter,

We are evaluating additional Capital Investments, including projects to improve efficiency, and increase capacity at our existing facilities.

As well as further m&a opportunities that align with our growth strategy.

Next, we'll move on to a review of each of our businesses beginning with aggro, business on, slide 8.

The aggro business segments, reported adjusted pre-tax, income attributable, to the company of 2 million dollars compared to 19 million in the third quarter of 2024.

We completed wheat Harvest during the quarter and were pleased with the volumes and quality in both the eastern and western grain belts.

We earned wheat carry income in the third quarter and our positioned for continued space income.

However, similar to the first half of the Year oversupplied grain markets and global trade uncertainty, negatively impacted our grain asset locations for other commodities.

Farmers remained hesitant to sell at current prices and corn harvest delays resulted in limited inventory builds in the third quarter.

In addition customers, continue to make short-term purchasing decisions reducing our merchandising opportunities.

Finally, our fertilizer business benefited from increased margins and volume in this typically quiet quarter as producers focus on grain harvest.

And integrate our former trade and nutrient business segments, as well as Skyland.

During the third quarter, we made the decision to exit a few underperforming businesses that no longer aligned with our strategy.

Which led to some additional write Downs.

We continue to review our portfolio, which could result in further changes going forward.

ARA business had adjusted ebit of 29 million in the third quarter. Compared to 45 million in 2024.

Moving to slide 9 renewable had another solid quarter, generating adjusted pre-tax income attributable of 46 million compared to 26 million in the third quarter of 2024.

included in the third quarter segment results our year-to-date 45z tax credits of 20 million

Our ethanol plants continue to perform well with increased yields for both ethanol and corn oil.

Ethanol board Crush was similar to last year, but higher Eastern corn, bases and natural gas costs impacted profitability.

Corn, oil, prices improved while feed values, remain challenged.

As Bill mentioned third, quarter results include 2 months of our full ownership of the ethanol plants which added 12 million of pre-tax earnings, including the value of tax credits relating to August and September.

Renewables had adjusted ibitta of 67 million in the third quarter compared to 63 Million last year.

And with that, I'll turn things back over to bill for some comments about our Outlook.

Thanks Brian in our renewal segment. Fourth quarter demand has remained consistent with 2025 exports expected to reach record volumes.

The recent rally in corn, Futures has reduced board Crush. However, corn bases has retreated to harvest values and we are filling our space.

With the fall maintenance, shutdown, safely behind us. Our plants are set up well for strong, fourth quarter production.

We have approved additional Capital focused on further increasing yields for both ethanol and corn oil.

We will continue to invest in these well-maintained assets, looking for incremental opportunities to improve efficiency, increased capacity, and lower the carbon intensity of our ethanol.

Our expected Q4 production should enable us to generate additional 45z tax credits, resulting in 10 to 15 million dollars of ebitda after accounting for the incremental qualification expenses.

Looking ahead the rate at which we generate 45z. Tax credits is expected to increase based on the guidelines effective for 2026 through 2029.

As we mentioned previously, we are preparing for the opportunity to sequester Carbon on site at our climbers, Indiana production facility.

The class 6. Well, permit filed on our behalf, continues to move through regulatory review processes.

We will further reduce the carbon intensity score of the ethanol enabling us to generate additional tax credits.

Our Agri business segment is focused on wrapping up.

The Harvest for 2025, with soybeans nearly completed.

Western us Corn Harvest at an estimated 80% complete.

And the Eastern crop. An estimated 70% completed.

There are pockets of harvest that are Behind These levels due to higher than normal rainfall.

Corn, yield expectations are coming down from late summer estimates due to less than ideal finishing conditions in some areas.

But we still anticipate record production across the green belt.

Clarity on trade policy and tariffs will reduce market, uncertainties, and should provide merchandising and sales opportunities.

This combined with the larger corn and wheat crop, providing elevation, and space income would allow for better results in the next few quarters.

We welcome the positive direction of the trade discussions and will closely monitor details, which should emerge over the next few months.

Without this Clarity, markets are expected to remain challenged through the first half of 2026,

fertilizer activity in the fourth quarter is expected to be at higher margins, but volumes may be challenged if Farmers delay purchases because of continued uncertainty,

We remain very focused on integration activities in the Agri business segments.

As well as the completion of our previously announced growth projects.

We will continue to invest in our safety practices and culture, particularly around assets newer to our portfolio.

As mentioned earlier with the near-term macro challenges. In US, agriculture markets, we will continue to optimize our portfolio of businesses and the Enterprise organizations that support them to extract more value for the shareholder.

We believe that the current environment is causing others to do the same and will look at opportunities to achieve growth through Acquisitions where we might be a better owner.

I want to point out that cash generated through our operations and the variety of tax credits in our Renewables business is expected to provide us with additional dry powder for continued, reinvestment in, both Renewables and Agro business.

With the strength of our balance sheet and the desire to grow. We expect to evaluate opportunities within our existing facility footprint, as well as Acquisitions, that fit our financial and strategic criteria.

Last quarter I shared with you, a conversion of our run rate, 2026 Financial Target to EPS of $4.30.

We anticipate reaching that Target with improved Agri business results, increased ethanol, plant ownership and the impact of tax credits.

As I noted in the earnings release, we are hosting an investor day on December 9th, where we will update, our long-term targets through 2028 and provide additional details about our strategy and Outlook.

I am proud of our team's resilience in this Dynamic and challenging environment.

We will continue to make responsible decisions that benefit our customers and maximize shareholder value as we execute our strategy.

And with that, we are happy to answer your questions.

We will now begin the question and answer session.

to ask a question, you may press star then 1 on your telephone keypad,

If you are using a speakerphone, please pick up your hands for pressing the keys. And if at any time your question has been addressed and you would like to withdraw your question, please press star, then two.

At this time, we will pause this momentarily to assemble our roster.

And our first question here will come from Kuran Sharma with Stevens. Please go ahead.

Uh, good morning, uh, thanks for. Thanks for the the question here and, uh, and congrats on, uh, on posting the, the strong results.

Um just wanted to maybe focus on uh 45z, uh tax credits. You, you did mention that there's the potential um, or or that we should expect to see, um, an increase, um, in in contribution from these credits. And, and we're just doing some rough math. Do, do you think that increase gets to like 10 cents per gallon uh, for for for 4 q and just wondering and if you can maybe provide some some some details around, you know, how that gets monetized. Um, And in regards to the 2026, um, do, do you think that your CI score with the with the CI score adjustments that you could get to around a 20 cent per gallon uh tax tax credit in in 2026?

Pouring pain.

Uh, both or all 3 of those are really good questions. Let's let's start with Q4. Um, as I mentioned in the script we're expecting uh, a 10 to 15 million dollar ibida benefit from 45 Z tax credits on a net basis for 2024 or 2025 Q4.

For 2026, as we mentioned at the, uh, nrq call. And again today is, we will give more guidance on 2026 forward at our investor day and uh, on December 9th,

Great great. Um, appreciate appreciate you pointing that out there for me. Um,

Maybe just shift into um, Agri business and and understand that, you know, with with the uh uh policy kind of clarity trade policy Clarity. Um, you know, you you you can maybe start to see uh, a little a little more Improvement. Um, and and just wondering if, if you do get that and if you do get China to kind of uh, actually uh,

Start to purchase um, on that 12 million metric tons this year. Even just the the 25 million metric tons annually. Do you think that, um,

You know how quickly do you think you can get back to a more normalized earnings kind of environment for Agri business? Um, I if you do get those kind of 2 pieces, uh, for that business. And then, how quickly can that change in in the China? Trade policy have an impact on the Sorghum Market. Um, and, and, and sorry, it just lastly, just wanted to also understand how Skyland is fairing. Um, if you could, uh, confirm your, uh, ebita contribution expectations for, for that business,

I will, uh, take the the first 2.

So,

You know, for for the Anderson's, we will benefit more uh, from China purchasing sorghum than soybeans.

The opportunity, uh exists, as soon as they buy us, sorghum and soybeans.

We're unable to to provide guidance until we actually see them come into the market and, and purchase product. As we read, uh, the summaries of the meeting, the

Metric tons of soybeans. Need to be purchased by the end of the year, but don't need to ship by the end of the year. So we'll need to see Clarity around. Uh, those purchases on sorghum, it would uh, likely be a strong uplift uh, pretty immediately for us. Uh, we we are asset and Houston are uh, Western grain assets, uh have seen uh, very robust, sorghum harvests. So we look forward to the opportunity to uh see any export uh business uh for sorghum.

Question all that. Brian handle that 1? Yeah, sure. I mean p. When we originally talked about Skyland, our original ibaas and it was a run rate of about 30 to 40 million dollars a year, um, with the headwinds that we've seen this year, we probably will be closer to about half of that number for 2025, um, but to your point and, and just following on Bill's comments, depending on what happens with sorghum exports. Um, we, we should be able to get back to that run rate. Um, if things normalized from that perspective,

Great. Great. Appreciate the caller. Thank you.

And our next question will come from Ben Mayhew with BMO Capital markets. Please go ahead.

Hey, good morning, guys. Uh, first of all, congratulations on a really strong quarter. Um so my first question has to do with ethanol demand and just kind of thinking about

You know, as we head deeper into fourth quarter board, crush is coming off from third quarter.

How are you thinking about?

Just kind of the run rate of margins. Um, the outlook now that we have E15 approval in California.

I mean, what's the impact of that? Do we maybe? Do we expect, uh, lighter export volumes, or do you expect export volumes to remain strong and just trying to get a sense of how we exit the year, um, with ethanol margins, which uh, you know, seem to be overall in a lot better place than uh, historically.

Yep. Been

good questions. The, the start, the first part of the, or I'm going to take the second part first, the approval in California.

Is just that it's approval and they have to still work through some uh Minor Details uh with carb that we think will be completed by your end. So we do look at the E15 as a very positive move in California today.

We believe that there's there's plenty of production capacity to, um, handle. The, the additional California barrels, that will be consumed in 2026. We also think that uh, as the US is priced today that we, we expect demand in

2026 to be relatively flat on both exports. And domestic with the potential of a slight uptick in California, once the car, uh, regulations are finalized.

In, in terms of the board Crush coming off. That's, uh, you are correct. It has, it has fallen off. Um, but

The, the corn basis levels have come down substantially as we're uh, entering into the uh, final parts of this 2025 Harvest. So if you look at a net effect, I I'm not so sure that you can just make the broad assumption that overall ethanol margins are down. Uh, you should likely want to take into play the various regions and the uh, reduction of corn basis, driving the corn values down lower.

Got it, if that makes sense. Um,

my second question, has to do with your comments on you know your financial position and

Just kind of getting back into the m&a search, if you will. So it sounds like

you know, you think this environment is

to the point where things are fundamentals, are poor enough in certain areas where assets will come likely come to sale.

so I'm just wondering like, what are some examples of of of these asset types that we, we could think about

And you know maybe you can't answer this. Maybe this is an investor day thing but

When you think about the sheer amount of cash flow, you're just going to get from these 45z tax credits. I mean, assuming it all

Kind of plays out. Um, as as we as we think it's going to uh, in the moment.

Over time. I mean, how do you think about that? Cash, accumulation? And

Can't like fully go into that until the investor day. But can you give us like a teaser or a hint as to like what you're thinking in the near term?

Yeah. Uh, you are correct. That is uh, the plan for the investor day, um, and just a little over a month but the, the 1 thing, I do want to, uh, remind everyone is over the last several years, we've been very disciplined with our Capital allocation. So, um, we we don't plan to deviate from uh that mindset. We think it's uh, rewarded our shareholders well and and we do believe there will be opportunities. I, I don't, uh, feel that it's appropriate to be commenting on what we're going to be spending the money on today. Um, as I I did State my script though.

We like our core area of operations and we're going to continue to be focused on our our course, strengths as a company and looking for opportunities to deploy Capital um in those areas.

Got it, thanks. I'll uh, I'll hop back in the queue.

And again, if you have a question, you may press star the 1 to join the queue.

Our next question will come from Jason Schmidt with Lake Street. Please go ahead.

Hey guys, appreciate you taking my questions. Uh, just given the current backdrop. Do you think that Agri business margins have troughed here in 23?

That's an excellent question.

As we look towards.

Q4.

Um, with the size of the wheat, Harvest that I got completed and the corn crop that we're finishing up right now.

I think it's fair to assume knowing what we know today that Q4 25 results should be trending back closer to a Q4 20 2024 results.

Obviously, stating that, you know, we still have a ways to go to get through, uh, Q4. But we do feel like the market dynamics are set up as long as we have, um, Clarity on trade policy that that 2026 should, uh, provide more opportunities in 2025 and

Jason back to, to comment that I made. Um, in the script is our assumptions come from increased aggra business results, our fertilizer business, um, is going to have a decent 2025. We need to, uh, focus on the, uh, grains and Grains product side of that business. And, uh, that's kind of where we're, we're looking at 2026 today.

Gotcha, that's really helpful. And then can you remind us what the remaining capacity requirements are for the 2 large construction projects?

Yeah, I would say look, we expect our our full year capex this year. We expect to be in the range of $200 million. Probably 60% of that is growth Capital. Um, and so I would say with regard to those projects, there's probably another 50 to 50 30 to 50 million dollars.

Okay perfect. And then just the last 1 for me and I'll jump back into Q. Just going out some of the previous questions. I know you mentioned sort of your discipline with your Capital allocation strategy but just kind of reconciling that with this excess cash flow that will be coming into the tax credits. Does that change or the size and scope of things? You'd look at in the future.

That's a a fair question and I think if you look back Json over the last 2 years um our size and scope have have altered um you know with the 425 million dollar Capital deployment for the ethanol plants. Uh the 75 million for Houston. I really do think that we've looked uh We've started to look at larger um opportunities that maybe have more scale.

Easy bolt-on uh that fits uh right down the Fairway for us. We're likely going to continue to look at those, but I do think uh that you make a good observation that our expected cash flows in the future will allow us to look at larger m&a projects.

Okay, makes sense. Appreciate the caller, guys. Thanks a lot.

And our next question will be a follow-up from Ben Mayhew would be a mo Capital markets. Please go ahead.

Hey guys, I'm back for 1 more. Um,

just a question on the fertilizer business.

And you noted you know, in third quarter which is typically a weaker quarter for this business volumes and margins were up. So like what is that?

Indicate to you ahead of the next.

Planting season and I guess, you know, attached to that question, is an update on on the US farmer, you know?

Now versus maybe a month or 2 ago, how, you know, what are you hearing from the farmers in terms of, uh, you know, level of optimism and willingness to kind of spend on inputs, um, for for the next, um, marketing year.

I, I will start with the sentiment portion of that.

I don't know that you could have uh, had a much lower, uh, farmer sentiment.

60 days ago.

We, we have had a nice rally in soybeans. I think, don't quote me on this, but somewhere around 15-month highs. So, with the recent rallies, uh, in the, in the future's Market, the, the optimism that there will be funds coming out of Washington DC once the, uh, government reopens I think is raised the the sentiment, uh, sentiment of of the US producer.

and, and so,

In comparing and looking at our fertilizer business, uh, in a silo comparing Q4 or excuse me, Q3 of 2025, to Q3 of 2024, uh, is where the uptick was was coming. I do think that, uh, the producer is going to be cautious, they're making a lot of their fall application decisions as we speak. Um, and you know, you could see as as I mentioned in the in the script is if there's uncertainty they could delay those decisions until the spring. And and that's uh, what we are. Um, we

We plan to figure out over the next 30 days just to be quite honest with you.

Thanks again.

And with that, we will conclude our question and answer session.

I'd like to turn the conference back over to Mike hoelter for any closing remarks.

Thanks, Joe. We want to thank you all for joining us this morning. Our next earnings conference call is scheduled for Wednesday. February 18th 2026 at 8:30, a.m. eastern time when we will review our fourth quarter results,

As always, thank you for your interest in The Andersons, and we look forward to speaking with you again soon.

The conference has now concluded, thank you for attending today's presentation. You may now disconnect your lines.