The Andersons(US:ANDE)2024-02-21 20:43Financial Data and Key Metrics Changes - The company reported adjusted pre-tax income of $159 million for 2023, marking the second-best year ever, with adjusted EBITDA at $405 million, just below the 2022 record [7][10] - Fourth quarter net income from continuing operations was $51 million, or $1.49 per diluted share, compared to adjusted net income of $34 million, or $0.98 per diluted share in Q4 2022 [10] - Gross profit for Q4 2023 was $218 million, up over 25% from $170 million in Q4 2022, while full-year gross profit increased 9% to $745 million from $684 million [10][11] Business Line Data and Key Metrics Changes - The Trade business reported fourth quarter adjusted pre-tax income of $47 million, down from $52 million in Q4 2022, with adjusted EBITDA for the quarter at $62 million compared to $72 million in the same period last year [12][13] - Renewables achieved record fourth quarter pre-tax income of $33 million, significantly up from $13 million in 2022, with adjusted EBITDA of $73 million, more than double the $36 million in Q4 2022 [14] - Nutrient and Industrial reported fourth quarter adjusted pre-tax income of $2 million, a slight increase from the previous year, with adjusted EBITDA for the quarter at $11 million, just above Q4 2022 [15] Market Data and Key Metrics Changes - The company noted a shift in agricultural fundamentals as global supply replenished low stocks, leading to declining commodity prices [17] - Expectations for higher wheat storage income faded due to large export purchases by China in Q4 [18] - The company anticipates significant quantities of corn in key dry areas for 2024, despite shifts in the mix of US crops [18] Company Strategy and Development Direction - The company remains optimistic about growth prospects while acknowledging a shift in agricultural fundamentals, focusing on leveraging a balanced portfolio of assets and merchandising product lines [17][18] - Investments in core assets and bolt-on acquisitions are part of the strategy to strengthen the business for long-term growth [17][22] - The company aims to achieve a run-rate EBITDA target of $475 million by 2025, relying on both internal growth and successful acquisitions [22] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism for 2024 despite a slower start due to farmers' reluctance to make forward sales on lower market prices [17] - The renewables segment is expected to see seasonal weak demand initially, but improvements in margins are anticipated as driving miles increase in the spring [19][55] - The company is exploring investments to lower carbon intensity in ethanol production and participate in sustainable aviation fuel initiatives [20][41] Other Important Information - The company ended 2023 with cash of $644 million, exceeding total debt, and maintained a long-term debt-to-EBITDA ratio of 1.5 times [11][12] - Capital expenditures for 2024 are targeted between $150 million to $175 million, with an equal balance between maintenance and growth CapEx [25] Q&A Session Summary Question: What are the expectations for capital expenditures in 2024? - The company targets capital expenditures of $150 million to $175 million, with an equal balance between maintenance and growth CapEx [25] Question: How does the company view stock buybacks versus pursuing acquisitions? - The company is focused on a balanced approach, considering both growth investments and potential returns to shareholders, while maintaining flexibility for future opportunities [26][29] Question: What is the outlook for the agricultural cycle in 2024 and 2025? - Management emphasized the importance of positioning the business to succeed regardless of the agricultural cycle, focusing on strong asset performance and diversification [30][33] Question: Can you discuss the impact of the renewable segment and carbon sequestration initiatives? - The company is actively planning for carbon sequestration projects and is focused on enhancing ethanol plants to participate in future sustainable aviation fuel markets [39][41] Question: What are the expectations for growth in the renewable diesel feedstock business? - The company anticipates continued growth in the renewable diesel feedstock business, aiming for £2 billion in sales by 2025, while acknowledging potential market fluctuations [42][44] Question: How is the merchandising business performing with current corn prices? - The merchandising business remains steady, with opportunities to add value through customer collaboration, despite lower commodity prices [46][49]