The Andersons, Inc. (ANDE) first-quarter 2012 earnings were 98 cents per share, exceeding the Zacks Consensus Estimate of 90 cents as well as the year-ago quarter earnings of 93 cents.
Total revenues increased 13.5% to $1.137 billion during the quarter, driven by higher sales across all segments except for Turf & Specialty Group and Retail Group. Revenues surpassed the Zacks Consensus Estimate of $1.107 billion.
Cost and Margin
Cost of sales and merchandising revenues were $1.05 billion, up 13.9% from the year-ago quarter. Gross profit rose 9.1% to $85.9 million. Gross margin, however, declined 30 basis-points (bps) to 7.6%.
Operating, administrative and general expenses increased 11.9% to $60.1 million. Operating income increased 3.2% to $25.8 million. Operating margin dropped 20 bps to 2.3%.
Segment Performance
The Grain Group: Total revenues increased 9.7% in the quarter to $700 million. Improvement stemmed from higher average grain price and bushels sold. Operating income also increased 28.5% to $19.4 million. Strong first-quarter 2012 results from investment in Lansing Trade Group along with strong space income favored the group’s operating performance.
The Ethanol Group: Total revenues increased 13.5% to $151 million attributed to higher average price per gallon. Operating income decreased to $0.1 million in the quarter from $3.6 million in the year-ago quarter as a result of lower earnings from ethanol investment affiliates.
The Plant Nutrient Group: The group reported total revenues of $175 million, up 41.1% from the year-ago quarter. Higher average selling price and volume contributed to the growth in revenues. Operating income increased 14% to $5.8 million driven by volumes.
The Rail Group: Total revenues increased 24.1% to $36 million in the quarter. Operating income increased at a whopping rate of 126% to $8.0 million. The growth was due to higher utilization and lease rates.
The Turf & Specialty Group: Total revenues dropped 4.4% to $45 million. Operating income declined 50% to $2.2 million in the quarter.
The Retail Group: Revenues in the segment decreased 3.3% to $30 million. Operating loss remained flat at $2.7 million.
Financial Performance
Cash and cash equivalents were $31.9 million as of March 31, 2012, compared with $20.4 million as of December 31, 2011. Long-term debt, excluding current portion, amounted to $220 million as of March 31, 2012, compared with $239 million as of December 31, 2011.
Outlook
The company remains cautious about the second-quarter 2012 results as it fears wheat space income in the Grain Group will decline. It expects lower margins in the Ethanol Group as well as Plant Nutrient Group. However, the company predicts these negative impacts will be partially offset by better performance in the Rail Group.
Our Take
The company undertakes constant efforts to upgrade the business and strengthen its market position in the face of growing competition as most of its revenues are derived from the Grain & Ethanol Group. As part of the process, in the first-quarter it has completed the purchase of an ethanol facility in Denison, Iowa.
The new plant will carry out its operations in the west of Mississippi and be included in the Ethanol Group of The Andersons Dennison Ethanol, LLC, a subsidiary of Andersons. However, the impact of the generally weak economy on the company’s Retail Group remains a concern.
We have a long term Neutral recommendation on Anderson. The stock retains a short-term Zacks #2 Rank (Buy). It competes with companies like Archer Daniels Midland Company (ADM), CHS Inc. (CHSCP) and privately-held Cargill, Inc.
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