The Andersons, Inc.
(
ANDE
) has entered into an agreement with two companies, Amaizing Energy
Dennison LLC and Amaizing Energy Holding Company, LLC, to buy a
Dennison-based ethanol production business. The value of the deal
is undisclosed as yet.
The new ethanol production plant, which will carry out its
operation in the west of Mississippi, would be included in the
Ethanol Group of The Andersons Dennison Ethanol, LLC, a subsidiary
of Andersons. The Ethanol Group generated nearly about 12.7% of the
total revenue in the fourth quarter of 2011.
Andersons' Ethanol Group already manages the operations of three
plants like Andersons Albion Ethanol LLC in Michigan, The Andersons
Clymers Ethanol LLC in Indiana and The Andersons Marathon Ethanol
LLC in Ohio.
Following the acquisition, Andersons will extend its
geographical boundaries aiming at diversification and also augment
the customer base in the Ethanol Group of the company; spreading
out both its production and marketing services in the new area. The
company's strategy to diffuse in larger area would also help in
gaining arbitrage and risk management facilities with the plants
already operating under its wings.
Management plans to shift some of the administrative staff
already working with it to the new plant after completion of the
acquisition process. It also contemplates slashing down the costs
per gallon by utilizing same technology in the four plants of the
Ethanol Group.
Furthermore, the new facility would also assist in rendering
greater efficiency to the grain market and other related services
of grain producers based in Iowa. In addition, the new plant is
expected to complement the Iowa Northern Railway Company and
Lansing Trade Group.
Andersons generates the majority of its revenue from the Grain
& Ethanol Group. It contributed nearly 80% in the fourth
quarter of 2011. The company thus makes constant efforts to upgrade
the business and strengthen its market position in the face of
growing competition.
The company's weak Retail segment, however, is a cause for
concern for the company. Andersons is also witnessing a decline in
customer count as well as a lower average sale per customer, as
customers are cutting down on discretionary spending.
Currently, the shares of Andersons retain a Zacks #3 Rank
(short-term "Hold" recommendation). It competes with companies like
Archer Daniels Midland Company
(
ADM
),
CHS Inc
. (
CHSCP
) and privately held Cargill, Inc.
Based in Maumee, Ohio, The Andersons is a diversified company
operating in five different business segments ranging from buying,
selling and storing grain to leasing railcars and running retail
stores, catering to the latest home hardware needs. The company has
operations across the U.S. and in Puerto Rico, in addition to rail
equipment leasing interests in Canada and Mexico.
ARCHER DANIELS (
ADM
): Free Stock Analysis Report
ANDERSONS INC (
ANDE
): Free Stock Analysis Report
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