The Andersons Inc.
) second-quarter 2012 earnings were $1.56 per share, missing the
Zacks Consensus Estimate of $1.64 as well as the year-ago quarter
earnings of $2.42.
Total revenues decreased 1.7% to $1.32 billion during the
quarter, missing the Zacks Consensus Estimate of $1.37.
Cost and Margin
Cost of sales and merchandising revenues decreased 0.2% year
over year to $1.21 billion. Gross profit decreased 16.4% to $102.7
million. Consequently, gross margin declined 140 basis-points (bps)
Operating, administrative and general expenses increased 2.6% to
$59.2 million. Operating income decreased 33.2% to $43.4 million.
Operating margin dropped 160 bps to 3.3%.
The Grain Group
: Total revenues decreased 9.8% in the quarter to $718.9 million.
Operating income also dropped 58.2% to $15.3 million. The decline
was due to a more normal space income in the reported quarter
compared with high wheat space income in the year-ago
The Ethanol Group
: Total revenues increased 1.9% to $167.8 million. Operating loss
was $2.1 million compared to operating income of $8.8 million in
the year-ago quarter, as a result of lower earnings from ethanol
investment affiliates due to a rise in corn cost and reduced demand
The Plant Nutrient Group
: The group reported total revenues of $308.8 million, up 18.8%
from the year-ago quarter. Operating income increased 16.1% to $28
million, driven by volumes.
The Rail Group
: Total revenues increased 8.6% to $32 million in the quarter.
Operating income increased at a whopping rate of 160.6% to $7.2
million. The growth was due to higher sales of railcars and lease
rates as well as non-recourse transactions.
The Turf & Specialty Group
: Total revenues rose 5.5% to $43.8 million. Operating income
increased 54.8% to $2.8 million in the quarter.
The Retail Group
: Revenues in the segment decreased 2.2% to $44.5 million.
Operating income declined 23.9% to $1.4 million.
Cash and cash equivalents were $23.9 million as of June 30,
2012, compared with $20.4 million as of December 31, 2011.
Long-term debt, excluding current portion, amounted to $317.6
million as of June 30, 2012, compared with $239 million as of
December 31, 2011.
The company expects that the current draught conditions will
affect both the Grain and Ethanol businesses for the remainder of
the year. However, it anticipates that the current Ethanol
environment will benefit the Ethanol segment moving forward.
The Andersons recently completed Iowa Ethanol Plant which
consists of ethanol production facility with an adjacent 2.7
million grain terminal. The new facility will render greater
efficiency to the grain market and other related services of grain
producers based in Iowa, adding benefits to the Ethanol Group.
However, it is expected that the second half of 2012 will remain
somewhat difficult for The Andersons. It is apprehended that wheat
production will slide in the second half of 2012 as compared to the
second half of 2011.
Therefore, lower wheat storage is likely to be headwinds for
Grain margins. Moreover, Andersons faces tough competition from
Archer Daniels Midland Company
) and privately-held Cargill, Inc.
Andersons retains a short-term Zacks #3 Rank (Hold). We have a
long-term Neutral recommendation on the stock.
ARCHER DANIELS (ADM): Free Stock Analysis
ANDERSONS INC (ANDE): Free Stock Analysis
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