Andersons Q2 Earnings, Sales Beat Estimates - Analyst Blog

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The Andersons Inc. ( ANDE ) reported second-quarter 2013 earnings of $1.57 per share, up 1% from $1.56 per share earned in the year-ago quarter and beat the Zacks Consensus Estimate of $1.52 by 3%. Record operating profit at the Ethanol and Rail Groups, and increased profit in the Retail Group were partially offset by decline in operating profit in the rest of the segments.

Operational Updates

Revenues in the reported quarter augmented 19% year over year to $1.57 billion. The results were way ahead of the Zacks Consensus Estimate of $1.38 billion.

Cost of sales increased 21% to $1.46 billion in the quarter from $1.2 billion in the year-ago quarter. Gross profit edged up 1% year over year to $103 million. However, gross margin contracted 120 basis points (bps) to 6.6% in the quarter.

Operating, administrative and general expenses went up 4% year over year to $61 million. Operating profit declined 4% to $41.8 million. Thus, operating margin reduced 60 bps to 2.7% in the quarter.

Segment Performance

The Grain Group: Revenues increased 24% year over year to $891 million in the reported quarter due to the addition of the Green Plains Grain facilities, resulting in higher sales volume and grain pricing. Operating income plunged 87% to $2 million, as it remains affected by the droughts in 2012 that resulted in lower space income.

The Ethanol Group: Revenues grew 32% year over year to $222 million, helped by incremental volumes stemming from the Denison, Iowa, plant acquisition in the second quarter of 2012. The segment reported a record operating income of $10.6 million, a substantial improvement from a loss of $2.1 million in the year-ago quarter. The improvement came on the back of improved ethanol margins and increased co-product income as well as added volume from the Denison plant.

The Plant Nutrient Group: The group reported revenues of $330 million, up 7% from the year-ago quarter. The group reported an operating profit of $23 million, a 17% decline from $27.9 million in the prior-year quarter due to a slow start to the planting season and limited inventory price appreciation.

The Rail Group: Revenues spiked 20% to $38.6 million in the quarter. Operating income increased 34% to a record $9.7 million. The increase was attributable to higher lease rates and increased income from car financings.

The Turf & Specialty Group: The segment posted revenues of $43 million, a 2% year-over-year decline. Operating income, however, declined 20% to $2.2 million in the second quarter.

The Retail Group: Revenues in the segment decreased 7% year over year to $41.3 million. However, operating income increased 8% to $1.5 million in the second quarter.

Financial Update

Cash and cash equivalents were $75.9 million as of Jun 30, 2013 compared with $23.9 million as of Jun 30, 2012. Long-term debt amounted to $409 million as of Jun 30, 2013 compared with $317 million as of Jun 30, 2012. The debt-to-capitalization ratio stood at 43.5% as of Jun 30, 2013 compared with 37.1% as of Jun 30, 2012.

Acquisitions

In July, Andersons, in association with Lansing Trade Group, finalized the acquisition of Blenheim, Ontario-based Thompsons Limited, a grain and food-grade bean handler and agronomy input provider. Thompsons operates through 12 Andersons' grain and nutrient businesses and is expected to be accretive to earnings for full year 2014.

This week, Andersons announced that it is acquiring Kansas City, Miss.-based railcar repair and cleaning provider Mile Rail, LLC. The acquisition is expected to be finalized in the third quarter, pursuant to customary closing conditions. The acquisition is a strategic fit with Andersons' Rail Group and is expected to increase its railcar repair revenues by 25%.

Outlook

Andersons expects the Rail Group to continue to perform well based on proficiently managed railcar portfolio. Even though margins improved in the ethanol business, the company cautions that the ethanol market will continue to be volatile. The 2012 drought will continue to be a headwind for the Grain Group and affect results in the third quarter. However, a projected record corn crop will provide support to the group's results in the fourth quarter.

Maumee, Ohio-based Andersons is a diversified company operating in six different business segments ranging from buying, selling and storing grain to leasing railcars and running retail stores catering to the latest home hardware needs. It belongs to the agricultural products industry along with Cosan Ltd. ( CZZ ), Archer Daniels Midland Co. ( ADM ) and Bunge Ltd ( BG ). Andersons carries a Zacks Rank #2 (Buy).



ARCHER DANIELS (ADM): Free Stock Analysis Report

ANDERSONS INC (ANDE): Free Stock Analysis Report

BUNGE LTD (BG): Free Stock Analysis Report

COSAN LTD-A (CZZ): Free Stock Analysis Report

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.



This article appears in: Investing , Business , Earnings , Stocks

Referenced Stocks: ADM , ANDE , BG , CZZ

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