Duplicating performance not easy for Andersons

Company's profits in 2011 broke records

2/10/2012

Mike Anderson

THE BLADE
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The Andersons Inc. had a stellar 2011 with record-breaking profits, but duplicating that performance in 2012 may be difficult, company officials said Thursday during a conference call with Wall Street analysts.

"It is our intention to continue to grow," said Mike Anderson, chairman and chief executive officer of the Maumee-based agribusiness.

But Mr. Anderson said the company's grain group, which had a record operating income of $87.3 million in 2011 and greatly contributed to the company's record annual profit of $95.1 million, could have lower operating income due to potential drops in the income The Andersons generates through storing grain for others at its 110 million bushels of grain space, or through storing grain it buys and holds until market prices reach a certain level.

Last year, the company's grain storage space income was substantial because of rising wheat prices. This year, the company can't know what its situation will look like until the second half of the year.

Likewise, Mr. Anderson said the company's Plant & Nutrient Group, which also had a record operating income that totaled $38.3 million last year, is poised to do well again in 2012 because of an expected strong corn crop planting of 94 million acres this spring and rising commodity prices.

But part of the Plant & Nutrient Group's success in 2011 was because of fertilizer prices that started low and rose as the year went on.

Thus far in 2012, fertilizer prices have stabilized at higher levels, and while a strong year for fertilizer sales looks likely at this point, Mr. Anderson said the company can't count on another year of record operating income for the group because the opportunity for fertilizer price appreciation has lessened.

However, even if Grain and Plant & Nutrient income decreases slightly, there is a good chance those revenues could be balanced by rising income for the company's Rail Group.

The rail group had income of $9.8 million last year, a 10-fold increase over the previous year, and its prospects for 2012 look even better, possibly doubling 2011's income, Mr. Anderson said.

Mr. Anderson said in 2011 the company was able to renew leases of its rail cars and also refit cars and put them back into serviced lease rates that were 35 percent higher than their previous lease rate.

Overall, the average lease rate in 2011 was less than the average lease rate charged in 2010. But by year's end. The Andersons started charging a higher lease rate than 2010 for its rail cars and that is expected to carry forward through 2012, he added.

Mr. Anderson said the company will continue to look this year for possible acquisitions, like two it made for its Plant & Nutrient Group. However, The Andersons will remain prudent in its decisions. For example, the last few years it looked at acquiring several rail car fleets, but backed off because the price could not be justified.

"Our purposeful growth has demonstrated our ability to make good investments, appropriately integrate them into our company, and grow our income as a result," Mr. Anderson said.