Virus Keeping Cars Off Roads Deepens Trader Andersons’s Loss

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(Bloomberg) -- Crop handler Andersons Inc. posted its biggest quarterly loss since 2015 as the coronavirus kept cars off the roads, slashing demand for corn-based ethanol. Shares plunged the most in more than a month.

The Maumee, Ohio-based trader posted a net loss of $37.7 million, more than double the same period last year, the company said in a statement. The ethanol business took a hit as fuel demand plunged, while its trade group suffered losses due to the lack of demand for corn.

“Most parts of our business were off to a decent start to the quarter, but the COVID-19 pandemic had a profound negative impact on our operating results,” said Chief Executive Officer Pat Bowe. “Stay-at-home orders reduced vehicle miles traveled, which in turn dramatically reduced demand for gasoline, ethanol and corn.”

Still, the firm expects to bring ethanol production back on line throughout the second quarter as demand, logistics and margins improve. The company also expects a large U.S. corn crop to benefit its trade group, and is positive about exports to China in the later part of the year, Bowe said in a call with analysts.

Key Takeaways

  • Trade Group losses widened to $8.7 million “as lower ethanol demand caused significant depreciation in corn basis.”
  • The ethanol business, which had managed to remain profitable at this time last year, lost $24 million.
  • Andersons had already warned it would suspend operations at its ethanol plants. Margins have sunk further into negative territory as lockdowns leave roads empty and a price war between Saudi Arabia and Russia led to a crude oil meltdown.
  • While some U.S. ethanol plants may close permanently, the Andersons says its facilities are efficient and well-positioned when demand returns.
    • Still, the company has no forward cover for ethanol, Bowe said.
  • Andersons is taken an even stronger approach to cost controls and cash management, now targeting $20 million in cuts this year, up from a previous target of $10 million.
  • The company expects to spend about $100 million on capital projects in 2020 after averaging more than $200 million in the last three years.

Share Reaction

  • Andersons shares, which had been down about 39% this year, slumped as much as 20% and were down 16% at 11:49am in New York.

Get More

  • Adjusted loss came in at $1.32 a share versus the average analyst estimate for a loss of 27 cents and last year’s 16 cents loss.
  • READ: Trader Andersons Takes Down Ethanol Plants on Virus Demand Blow

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