The Andersons, Inc. Q2 FY2025 earnings call

Management Statement and Operational Highlights

• Purchased partner's share of 4 ethanol plants, which is accretive to EPS and aligns with the company's strategy. The transaction was funded with cash on hand and borrowings under existing credit facility.
• Two significant long-term construction projects expected to be fully completed by mid-2026: improvements to the grain facility at the Port of Houston and expansion for soybean meal export, and a project for a major energy company. These projects are expected to contribute financially starting in 2026.
• Completed projects to convert excess capacity at 4 grain elevators for light processing of premium ingredients for CPG companies to better serve customers and improve farmer relationships.
• Renewables had a solid quarter with strong production numbers, including record yields and increased demand. Agribusiness had improved fertilizer results but was impacted by grain oversupply in the Western grain belt.

Segment Performance

• Agribusiness: In the second quarter of 2025, pretax income attributable to the company was $18 million with adjusted pretax income of $17 million, compared to $33 million in the second quarter of 2024. Adjusted EBITDA was $46 million in Q2 2025 vs. $56 million in Q2 2024. The Nutrient business benefited from strong demand due to high corn plantings, but oversupplies of grain and weak demand in the Western grain belt impacted asset locations and merchandising.
• Renewables: Pretax income attributable to the company was $10 million in Q2 2025 vs. $23 million in Q2 2024. Ethanol margins were favorable due to efficient plant operations and elevated demand, but were partially offset by lower ethanol board crush and increased input costs. EBITDA was $30 million in Q2 2025 vs. $52 million in Q2 2024.

Guidance

• Full year adjusted effective tax rate is expected to be in the range of 22% to 25%.
• Anticipate meeting the run rate EPS target of approximately $4.30 per share by the end of 2026.
• Renewables segment expects improved margins in the second half due to uptick in board crush and demand. Agribusiness expects improvement with wheat harvest conclusion and large fall harvest potential, along with reduced market uncertainties from trade negotiations.

Risks

• Macro conditions in the ag industry pose challenges to financial performance.
• Regulatory and market changes could impact the company's ability to achieve expected margins and growth.
• Integration risks with acquisitions and long-term construction projects may affect operational efficiency and financial outcomes.

Q: Congratulations on the transaction you announced. Did the timing of the ethanol transaction correlate to regulatory tailwinds? Also, characterize nonstrategic exits in Agribusiness and their financial impact.

A: William E. Krueger stated the transaction was in the works for a few months prior to recent regulatory changes. Brian A. Valentine mentioned nonstrategic exits included minority investments (impact of about $7 million in adjustments), sale of a facility in Idaho, and closure of some contract manufacturing business on the fertilizer side, with a small gain on one sale and modest other adjustments.

Q: Why was acquiring the balance of TAMH ethanol assets the right move now? And update on EBITDA vs EPS outlook.

A: William E. Krueger said it was a better capital deployment with little integration risk. Brian A. Valentine explained that previously shareholders only benefited from ~50% of plant EBITDA, now with 100% ownership, full earnings and cash flow benefits are realized, and pro forma EPS impact is ~$0.70 to $0.75 annually, potentially higher in peak years.

Q: Ask about Skyland revenue and updated outlook. Also, details on 45Z tax credits for plants.

A: William E. Krueger said Skyland had lower profitability in first half due to market conditions, but second half may meet/exceed expectations. Brian A. Valentine provided revenue details ($200 million year-to-date). William E. Krueger stated they are still working on clarity regarding 45Z tax credits and will be better prepared to discuss by end of Q3.