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spk03: Good morning, ladies and gentlemen, and welcome to the Andersen's 2022 Third Quarter Earnings Conference Call. My name is Joe, and I will be your coordinator for today. At this time, all participants are in a listen-only mode. Later, we will facilitate a question-and-answer session. To ask a question, you may press star, then 1 on your telephone keypad. To withdraw your question, please press star, then 2. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero on your telephone keypad. As a reminder, this conference is being recorded for replay purposes. I will now hand the presentation to your host for today, Mr. Mike Holter, Vice President, Corporate Controller and Investor Relations. Please proceed.
spk02: Thanks, Joe. Good morning, everyone, and thank you for joining us for the Anderson's Third Quarter Earnings Call. we have provided a slide presentation that will enhance today's discussion. If you are viewing this presentation on our webcast, the slides and commentary will be in sync. This webcast is being recorded, and the recording and the supporting slides will be made available on the investors' page of our website at andersonsinc.com shortly. Please direct your attention to the disclosure statement on slide two, as well as the disclaimers in the press release related to forward-looking statements. Certain information discussed today constitutes forward-looking statements that reflect the company's current views with respect to future events, financial performance, and industry conditions. These forward-looking statements are subject to various risks and uncertainties. Actual results could differ materially as a result of many factors which are described in the company's reports on file with the SEC. We encourage you to review these factors. This presentation and today's prepared remarks contain non-GAAP financial measures. Reconciliation of non-GAAP measures to the most directly comparable GAAP financial measure are included within the appendix of this presentation. On the call with me today are Pat Bowe, President and Chief Executive Officer, and Brian Valentine, Executive Vice President and Chief Financial Officer. After our prepared remarks, we will be happy to take your questions. I will now turn the call over to Pat.
spk01: Thank you, Mike, and good morning, everyone. Thank you for joining our call today to review our third quarter results. We're excited to discuss our third quarter, which was our best ever adjusted third quarter from continuing operations. Both trade and renewables posted very solid improvements over last year, and while plant nutrient results declined in their seasonally low quarter, our overall company performance was strong. with trailing 12 months adjusted EBITDA from continuing operations totaling nearly $440 million. With this Q3 result, we anticipate a very strong and potentially record-setting year. Trade group results were a record third quarter on an adjusted basis and reflect improvement in many areas. Our Louisiana assets performed well during the corn harvest, capturing strong elevation margins. Weed ownership in our grain terminal assets is earning space income. In merchandising, our new profit centers have contributed more than $5 million this quarter to our pre-tax earnings. We continue to have very strong results in our western grain belt and animal feed ingredient merchandising, as well as in our food and specialty ingredients businesses. In particular, our UK subsidiary again delivered strong results with our organic feed business. Renewables had another solid quarter. Our eastern ethanol plants delivered positive results on weaker corn bases in spite of declining ethanol prices and inflation in natural gas and other production costs. Our Kansas plant experienced high corn basis due to the ongoing drought in the region. We continue to benefit from strong values of coproducts, particularly distillers corn oil used as a renewable diesel feedstock. All the plants have now completed their planned fall maintenance shutdowns. Plant nutrient followed a very strong first half with mixed results. Our agricultural product lines performed well for the typically slow third quarter on good margins and well-positioned inventory. Within our manufactured lawn products, we were challenged with lower demand, inflation and production costs, and also took an inventory right down in the quarter. Brian will now cover some key financial data. After that, I'll be back to discuss our outlook for the remainder of 2022 and into 2023. Brian?
spk08: Thanks, Pat, and good morning, everyone. We're now turning to our third quarter results on slide number five. In the third quarter of 2022, the company reported net income from continuing operations attributable to the Andersons of $17 million, or 50 cents per diluted share. This compares to adjusted net income from continuing operations attributable to the company of $5 million or 15 cents per diluted share in the third quarter of 2021. Gross profit increased 34 percent despite this being a seasonally low quarter. EBITDA for the third quarter of 2022 was $83 million compared to adjusted EBITDA of $56 million in the third quarter of 2021. Trailing 12 months adjusted EBITDA was almost $440 million. All of these measures exclude discontinued operations. Our effective tax rate varies each quarter based primarily on the amount of income or loss attributable to the non-controlling interests. We recorded taxes from continuing operations for the quarter at a 28% effective tax rate. we still expect a full-year effective tax rate between 18 and 21 percent. Next, we'll move to slide number six to discuss cash, liquidity, and debt. We generated quarterly cash flow from operations before changes in working capital of $51 million in 2022 compared to $56 million in 2021. High relative commodity prices and business growth are the primary causes of our continuing higher working capital and related short-term borrowing levels when compared to the third quarter of 2021. The short-term debt balance of approximately $650 million at September 30th is supported by readily marketable inventories of over $1.1 billion. At the end of the third quarter, we had available short-term borrowing capacity of over $1.3 billion. We continue to have good support from our banks as they understand the key role that we play in the ag supply chain. We continue to take a disciplined approach to capital spending, which we expect will be approximately $100 million for the year, about half of which will be related to maintenance capital. Our long-term debt to EBITDA remains well below our stated target of less than 2.5 times. We recently announced two separate bolt-on acquisitions, Bridge Agri in the trade group and Moat Farm Services in plant nutrient. We continue to evaluate growth projects in our pipeline, including additional M&A opportunities. We have a balance sheet that will support growth investment for those that meet our strategic and financial criteria. We also have begun to utilize our previously announced share repurchase program, executing over $7 million of share repurchases in the quarter. We continue to repurchase shares during October, bringing the total cash used to date for this program to about $12 million. Now, we'll move on to a review of each of our business segments, beginning with trade on slide number seven. Trade reported pre-tax income of $41 million compared to adjusted pre-tax income of $28 million in the same period of 2021. Our merchandising profit centers had a great quarter, with gross profit and pre-tax earnings growth of more than 40% over last year. This includes solid contributions from our new businesses that Pat mentioned earlier. The food and specialty ingredients business continued their strong results, and our assets had improved gross profit capturing increased elevation margins. With the current global supply disruptions, yield reductions due to the western U.S. drought are significant and should continue to keep grain markets volatile. Fortunately, we are experiencing a good harvest in our elevator draw areas with the majority of our assets located in the eastern grain belt. This tight supply environment is conducive to continued merchandising opportunities. Trades EBITDA for the quarter was $61 million, up from adjusted EBITDA of $44 million in the third quarter of 2021. Moving to slide eight, renewables had third quarter pre-tax income attributable to the company of $8 million, which was a significant improvement from the third quarter 2021 pre-tax loss of $4 million. The renewable segment results reflected strong ethanol margins early in the quarter combined with solid plant operations. Co-product values and in particular corn oil remain high and have added to plant profitability. Renewable diesel feedstock merchandising activities continue to expand and also contributed to the positive quarterly results. Renewables had EBITDA of $34 million in the third quarter of 2022 an increase of almost $15 million from the third quarter of last year. Turning to slide nine, the plant nutrient business reported a pre-tax loss of $12 million in the third quarter compared to a pre-tax loss of $6 million in the third quarter of 2021. The third quarter in this business is typically our lowest quarter due to the crop cycles. In our ag product lines, We continue to experience good margins on well-positioned inventory, although with lower volumes. The higher year-over-year loss was nearly all related to our manufactured lawn products business, where we have lower demand, production challenges, and recorded some excess and obsolete inventory reserves. Plant nutrients EBITDA for the quarter was a loss of $3 million, compared to EBITDA of $2 million in the third quarter of 2021. And with that, I'll turn things back over to Pat for some comments about our outlook.
spk01: Thanks, Brian. We remain optimistic about our outlook. Strong global market fundamentals, including supply chain disruptions, should exist for some time, keeping commodity prices historically high. Worldwide supplies are projected to remain tight for the next few years. Our trade business outlook remains very positive. In addition to production and transportation challenges globally, demand remains strong for grains and oilseeds. U.S. dollar strength and logistics concerns with low water levels on the Mississippi River may keep more grain in the U.S. than was expected. Our inland grain elevators that ship by rail and our domestic merchandising teams are well prepared for this volatile environment. Our international team is also meeting the challenge of finding additional sources of supply amid the complicated logistics and lost production due to the ongoing conflict in Ukraine. We're investing in our North American infrastructure to provide better service to our customers. We continue to evaluate M&A opportunities that align with our strategy, such as the recently announced bridge agri-acquisition which expands our presence in the pet food ingredient space. We knew it would be challenging to match last year's strong second half trade group results. However, at this point, we see the potential for another strong fourth quarter and a possible improvement over the second half of 2021. In our renewables segment, we have experienced an overall margin decline unlike the significant margin expansion in the fourth quarter of 2021. We believe that our eastern ethanol plants are favorably located, while western plants are facing much higher corn bases. We continue to see strong demand and good values for coproducts, particularly distillers corn oil, which supports our overall margins. In addition, our renewable diesel feedstock merchandising business is performing well. And we're evaluating additional renewable diesel low carbon intensity feedstock opportunities. We don't expect to be able to match last year's outsized fourth quarter ethanol crush margins, but we'll continue to operate our plants efficiently and profitably, as well as grow our third party merchandising opportunities. The plant nutrient business outlook is mixed. With strong farm income and a need to cover lost worldwide grain production, we expect continued strong global demand that should keep prices higher than historical averages. We have favorable harvest weather that should allow for good fall application. With more stable supply as compared to the fourth quarter of 2021, we do not expect to repeat last year's record fourth quarter fertilizer results where we capitalized on an outsized margin environment. Overall, our strategy remains focused on our key role in serving the needs of our customers in the North American ag supply chain. We've announced recent acquisitions of Bridge Agri and Moat Farm Services, each of which align closely to our growth strategy and are expected to be accretive in 2023. With a strong balance sheet, sustainable operating cash flows, and this strategic focus, we expect to continue to grow profitably in these dynamic ag markets. We continue to evaluate growth projects that are centered around our core grain, renewables, and fertilizer segments, and are a mix of capital investments and M&A. We remain committed to adding value for our customers, managing risk and operating safely and efficiently. We're on a path to end this year strongly and could achieve a new earnings record through improvements in our base operations combined with gross investments. I'm very proud of our team for their outstanding performance to date in 2022 and remain excited about our future growth prospects. With that, I'd like to hand the call back to Joe, and we'll be happy to entertain your questions.
spk03: We will now begin the question and answer session. To ask a question, you may press star, then 1 on your telephone keypad. If you are using a speakerphone, please pick up your handset before pressing the keys. If at any time your question has been addressed and you would like to withdraw your question, please press star, then 2. At this time, we'll pause just momentarily to assemble our roster. And our first question will come from Ben Bienvenu with Stevens. Please go ahead.
spk07: Hey, thanks. Good morning, and congrats on the quarter.
spk01: Good morning, Ben.
spk07: So I want to ask on a follow-up on a comment you made, Pat, related to the low water levels we're seeing on the Mississippi River. Can you talk about the opportunities that presents for you guys, you know, with port terminals in places like Port of Houston and Great Lakes exposure? Does that give you guys an advantaged position? Are you still grappling with the same logistical challenges that your larger peers who send more product out of the Gulf might be? How should we think about your relative positioning with respect to that dynamic?
spk01: Yeah, I think you pointed out a very good point, Ben, is that we're well-positioned given this environment. We're not a river shipper, and we don't ship a lot of our rail thermal asset ship that much to the Gulf. We did have a very good Louisiana harvest early and shipped a lot of that product already. It goes to various domestic and Mexican markets. The Houston asset for exports is well-positioned, and we're in a good position for exports out of that terminal. So that's doing well. And we've recently had some really nice sales out of the Great Lakes. So we've seen some margin improvement into lake shipments. So we're well-positioned. We continue to have very good business on our rail supply to, you know, crushers and cattle feeders. And with the shortfalls of western production, there's going to be great movements into those feedlot markets, maybe different than normally would happen because of the drought conditions out west. So short answer, yes, we're very well positioned given the Mississippi River challenges.
spk07: Okay, great. Thanks for that. And then maybe thinking about M&A, you guys have done a number of bolt-ons. You mentioned that they would be accretive in 2023. Forgive me, you might have said this, I might have just missed it. Was that to EPS or to EBITDA? And then also, when you think about kind of sizing the contribution, maybe EBITDA would be helpful of the M&A you've done over the last, let's say, 12 months. Can you give us a ballpark for kind of how we should be thinking about contribution just in the bucket, total bucket of bolt-ons you've done?
spk08: Yeah, so Ben, this is Brian. That's a great question. I think that, you know, the two that we've most recently announced, Bridge Agri and Milk Farm Centers, I would say on an EBITDA basis for 2023. I would put it in the range of a kind of $5 million to $7 million range. And if we think about a year ago at this time, I think when we were talking about Capstone and some of the international expansion, we said we expected that to contribute in the range of $10 million to $15 million, kind of on a run rate in 2022. I would say... We're tracking, you know, above that right now. So that's kind of the range that we originally were talking about. And, you know, again, doing better than that on those two.
spk01: Ben, I'd maybe like to add on to the comments Brian made, which were right on the money. I think you recall, it might have been the last call, we talked about our strategy in M&A, and I was using the baseball analogy of singles and doubles. While we've looked at some pitches for home runs, you know, on big M&A deals, we haven't seen a valuation that is something that we were attracted to But these recent ones, in the case of Moat Farm Services, it's a farm service center in our region, Indiana, Ohio, as well as Bridge Agri, which is in the pet food ingredient space that we really like. These are what you'd call singles and doubles. They're very attractive for our strategy and on point with where we're headed. We have others like that in the pipeline. And again, it's the World Series going on right now. Maybe we're not going to hit as many home runs as the Phillies, But I'll be happy to have plenty of singles and doubles of solid acquisitions that are close to our strategy, and those are things we're looking at right now.
spk07: Okay, that's great. One more question for me on the debt profile of the business. How should we be thinking about your aspirations for debt pay down from here, in particular long-term debt, putting aside kind of the swings we'll see in working capital?
spk08: Yeah, I would say, you know, our long term, as you know, we target long term debt to EBITDA below two and a half times. I would say right now, you know, we're actually on kind of a trailing 12 months basis. We're actually a little bit below one and a half times. So if anything, we feel like we have. the balance sheet well-positioned to fund growth and some of these singles and doubles that Pat is talking about. And as you alluded to, the short-term side can swing around with, you know, working capital changes and commodity inventory. So I would not look for, call it a, you know, a meaningful long-term debt pay down strategy, if that's kind of what you're asking. I would say, you know, we feel like we're well-positioned to fund growth.
spk07: Okay, great. Good luck with the fourth quarter. Thank you, Ben.
spk03: Again, if you have a question, please press star then 1 to join the queue.
spk05: Please just give us a moment to assemble our roster. Our next question will come from Ben Clevey with Lake Street Capital Markets.
spk03: Please go ahead.
spk09: All right, congratulations on a good quarter here, and thanks for taking my questions. A couple questions. Pat, you commented within the trade group, new facilities contributing about $5 million to earnings in the quarter. I think I know the answer to this, but I want to clarify. That $5 million, is that inclusive of the acquisitions that you were actually just talking about, or is any material amount of that $5 million due to organic growth from new facilities? If you could elaborate on that, that'd be helpful.
spk08: Hey, Ben, this is Brian. Good question. That $5 million is actually related to new businesses that were announced, call it, in 2021. And so it would be thinking about Swiss Trading Office, Capstone, and some of the other new profit centers. That would not include anything from the recently announced stuff or call it base organic growth.
spk09: Okay, but it doesn't. It doesn't include Capstone. It doesn't include Capstone, no. That's right.
spk08: And to be clear, that number is an EBT number, not an EBITDA number.
spk05: Got it. Okay, perfect.
spk01: And I just kind of want to add on that, just kind of linking it back to the strategy. As we said a year ago, with the opening of our office in Switzerland, we were really looking at how we could expand our to the growth of population markets of the Middle East and Africa, kind of the strategy of skating to where the puck's going to be. That's worked out very well for us. It's been a very complicated time, as you can imagine, with the Ukraine conflict and lots of challenges to supply chain. I got a photo from one of our traders who was flying from the airplane over the Black Sea, and it showed, you know, right now there's 109 vessels waiting in Istanbul to pass the Bosphorus Line, to go into load in Ukraine, and there's 57 loaded vessels awaiting inspection, again, at the Bosphorus to get out into the Black Sea. So this on-again, off-again, what's happening with Ukraine exports where the Russians said they were going to pull out of the joint agreement, with the UN and Turkey. Now this morning they said they will continue to operate under that agreement. Russian-loaded vessels from Russian origins are coming out just fine, but there's a very active international trade going on, especially to Middle East and Africa. So we have a normal complicated environment with a strong dollar and different crop conditions around the world, but when we threw this Ukrainian conflict into the mix, It's really created a very robust environment for trading, and so far we've favored very well, and we're glad that we made the move when we did.
spk09: Yeah, I hear a lot. I didn't catch the news this morning. It's good to hear that that agreement is back up and running. I'd like to pivot over to your comments on renewable diesel, and I have two questions, and then we'll get back in queue. My first question, Pat, you know, you mentioned that merchandising opportunities in this space are growing in a nice clip. My first question here is, you know, given that so many of these facilities are, you know, still coming online, you know, still ramping to capacity, I'm wondering the degree to which this, you know, growth rate that you're seeing is nice on a, you know, raw dollar basis or more just on a percentage basis given kind of the low demand the kind of entry-level position here, you know, in this space. You know, how material of a contributor is this today?
spk01: Right, right. Completely understand where you're coming from. No, the RD demand has really picked up, and the feedstock demand for that going in will continue into 23. So that should have a very positive impact to crush margins for the soybean crushers and for our corn oil demand. We've... As we mentioned before, we put in new technology, TruScent, and we're putting it in four of our five plants to clean up finished corn oil products to make those more readily usable for RD. We're looking to also sell those to third parties, so we're kind of excited about that piece of technology. We've also been able to add both used cooking oil and other RD feedstock ingredients to our portfolio, and so that marketplace has been robust, and our trading team is doing quite well in growing the volume in that segment. So we see this RD feedstock impact to be a very bullish signal to the oilseed complex in North America, and that's going to continue well into 2023.
spk09: That's great, and you might have just answered my second question here. In your prepared comments, you noted efforts in expanding the renewable diesel feedstocks, and so I was curious if you could kind of you know, characterize that a bit further. And I'm also wondering, you know, kind of the degree to which you're, you know, looking at, you know, new crush facilities coming online as a, you know, source of volume for you, the degree to which you're looking at, you know, kind of new crops that are emerging, you know, new oilseed crops that are emerging that can participate in this play. You know, are you looking at all of the above? Is there any kind of source that you're, you know, more intensely focused on?
spk01: Yeah, the answer is all the above. We don't have any intentions to enter into the soy crushing industry. There's lots of our colleagues in the industry that are very strong in that space and have multiple plants and been at it for many, many years and do a great job there. There are some newer plants that are coming online or have expanded, and those are opportunities for us to get originations from those facilities, as well, as you mentioned, other cover crops that and new oilseed products that are coming to the marketplace, specialty seeds that add to, you know, one, the carbon recovery at the farm and can be crushed and used as a feedstock. So those are early days, and they're relatively small in acreage, but shows some promise, and we're having good discussions with people in that space. And in general, this convergence of energy and agriculture is really exciting for our industry, right? So With not just the RD demand, but where the future of ethanol is going and higher inclusion rates as well as SAF and other potential products, we're quite bullish on the segment in a broad basis.
spk09: Very good. Very exciting. All right. Well, thanks for taking my question. Congratulations again on a good quarter, and I'll get back to you.
spk05: Thank you very much.
spk03: Our next question will come from Ken Zaslow. with Bank of Montreal. Please go ahead.
spk06: Hey, good morning, guys. Morning, Ken. A couple questions. One is, can you talk about the Inflation Reduction Act? How is that going to impact you guys, and how do you see it playing out? It seems like there are a lot of nuances to it, and maybe this may not be the call to get into all the nuances, but I feel like there are a lot of things that maybe you could kind of shed some light on.
spk01: I don't think specifically in the near term. There were things a while back ago that related to tax structures, et cetera, and a little bit of the payments that occurred in ethanol last year. Going forward, the money that is going in to try to decarbonize ag supply chains is a plus. We've not personally benefited from that at this point. There could be opportunities on new technologies as we get into 23 and 24 where you could capitalize on some government programs that helps that decarbonization to happen. So those are things that we're interested in, nothing to announce at this time.
spk06: Okay. And I know it's a little early for 2023, but can you talk about the puts and takes as you see them now? And again, not looking for exact guidance, but what do you see – kind of laying out, you know, from the returns on your investments, I know you have, you know, the $10 to $15 million, but can you kind of lay out some sort of, you know, picture of what the puts and takes are for 2023?
spk01: Sure, Ken. Let's first start with our merchandising grain business, where we see a very attractive fundamentals going into 23. So we continue to have global, you know, problems, not just only because of the Ukraine situation, but But we have had weather issues. We've had a good crop now in Australia with some rains. It's very dry in Argentina early, so we'll have to see how things progress. And this continuation of a, quote, La Nina environment, you know, we had a very difficult drought in the western U.S., so that's going to create merchandising opportunities for us to move grain domestically to locations that are short this year due to the drought. The good part for the Andersons with our traditional eastern assets is in particular what we call the tri-state area, Indiana, Ohio, Michigan, we've had really good crops. So harvest has progressed well this year. The national average for corn is about 76%. In the east, we're only about 50% done so far, but ahead of great weather, and we look to make some really good progress on corn harvest here in early November. And beans nationally are 88%, and we're 80% done in the east. We had good yields yesterday. in our tributary areas on soybeans. Farmers in very good position. They've sold probably maybe 30, 40% ahead of time when markets rallied earlier this year. But we'll have grain to sell. They're very well healed, as you know, with the high commodity prices and are storing quite a bit of grain on farm. But it should be some movement that will happen in Jan, Feb, March, mainly to make fertilizer payments. We're fundamentally feeling very good about our grain business. We like the opportunities of international trade that we've gone into and where our assets are positioned to supply that. So feeling very positive about our overall trade business. On the renewable side, crush margins, as you've seen, came down quite a bit. So fourth quarter crushed. It's quite a bit lower than last year. I think you remember, Ken, that we kind of went really high on strong crush margins as we ended the year. We're not going to see a repeat of that. Having said that, we think we'll be positive and profitable for the fourth quarter. And we're positioned well from a basis standpoint in our eastern assets. A little more troubled in Kansas at our location in Colwich with, I think, basis levels are over 100 over right now. So, you know, that's just kind of the marketplace this year. So excited about renewable diesel. Our volumes will increase as we're going to 23 in feedstock. And that's a bullish area for us that we're excited to participate in. And then we go to the fertilizer side. Fundamentals on the ag side are very strong. Farmer income is still very good. Farmers being incented to strongly fertilize its crops and make good production of both corn and soybeans. So we feel good about our ag and our farm center business. One of the reasons we bought the Mote Farm Center. On the retail side, we mentioned we took a little bit of a hit in the quarter because the retail margins on lawn, I think you remember in the uh, COVID period, everybody was working on their lawn and sales of lawn retail products just really jumped. Uh, some have seen some other, uh, natural retailers announced some of the challenges they've had with full supply chains and sales that have, uh, slumped that impacted our lawn segment. Uh, we took some write downs of obsolete product and, uh, have said, you know, slowed down on sales there. That's been a nice business historically for us. We think it will come back, but we just took a short term, uh, hit in that business in the quarter. But we're overall friendly to the fertilizer business in 23. So bottom line, we see the momentum continuing into 23 and feel good about the year.
spk08: And Ken, just to frame that kind of in an overarching way, as you know, we had strong EBITDA in 2021 with EBITDA just north of $350 million in We expect to exceed that this year in 2022. I think, you know, as Pat was just summarizing, our 2023 outlook is really expecting continued strong fundamentals. And so, in total, we believe we should be able to maintain these levels of EBITDA looking ahead to 2023, which aligns really with our original targets that we outlined back in kind of late 2020. Okay.
spk06: Just one more, just maybe two more, but... We've got plenty of time.
spk05: Go ahead.
spk06: How come you didn't, the write-down, how much was the write-down and why didn't you keep it as an XO item?
spk05: I didn't hear the second part you said. How much was the write-down and what did you say?
spk06: And why wasn't it an extraordinary item? Because it's not recurring, is it not?
spk08: Yeah, so the amount of the write-down was about $4 million in the quarter. We didn't line it out as an extraordinary item just because it was slow-moving, obsolete. But you're right, we don't anticipate a recurrence of that item.
spk06: Because you've reset the lawn business, I'm assuming. So next year you won't get that. It's not a reset, right? It's just a write-off.
spk08: Correct. The way you're thinking about it is correct.
spk06: And then my last question is, The $100 million, you said $50 million is maintenance. What are you spending the other $50 million for growth on? Can you talk about some of the projects, at least illustratively?
spk08: Yeah, so if you think about, I mean, it's really all of these strategic areas that we've been talking about. If you think about some of the things, well, you know, Pat mentioned on renewables, some of the truce and investments that are happening. There's a lot of things going on with additional projects. corn oil extraction in the facilities, and if we think about the renewable side of the business, it's all on operating efficiency and extracting more things in the corn oil space. You know, if you think about our plant nutrient side of the business, it could be things that are going to be in the organic space in a variety of other areas in some of the newer fertilizers. And I don't know, Pat, if you want to talk about some of the things in trade.
spk01: Yeah, no, that was terrific. You know, again, just strengthening our assets. We're, you know, catching up on capital deployment in our core grain elevators and fertilizer, as Brian mentioned. We also have some projects in organics that are interesting. We like this pet food ingredients segment. We announced this acquisition here the last couple days. We think there will be opportunities for additional growth in that segment. That is a high-margin growth segment. And another is in our food segment. We put more capital into our corn assets. We make food-grade corn for chip manufacturers. That's been a solid growth segment for us. And so we have strengthened some of those assets by putting some more investment there. And Brian mentioned the opportunities that look interesting or anything related to the organic, I'm sorry, organic, I meant to say renewable diesel feedstock business. So we've had some growth opportunities there we're evaluating. We'd like to maybe partner and align with other people where we can get additional volumes of feedstocks. to this really solidly growing category. So that's an area of focus for us going into next year.
spk08: And Ken, one other one that I would mention, and this is particularly in the plant nutrients side of the business, there's some projects that we're looking at from an automation perspective of automating some things in our facilities that previously those numbers didn't, the economics didn't work, but with what's been happening with markets and margins and inflation, some of those projects now make a lot more economic sense.
spk01: Also to clarify, in that lawn segment, while sales really slowed during the quarter, we had some obsolete inventory, we still see this as a very attractive business. It's historically been a good margin and growth business for us, and we would look to grow in that segment if we see the right opportunities.
spk06: And you would argue that if you go back to pre-COVID to now, even if you take out that $4 million, the business has grown over those years. It just grew too quickly, and then you're just resetting it a little bit.
spk01: Exactly. Yes, it had kind of a rapid rise up and then an inventory kind of oversupply period.
spk05: Great. I appreciate it, guys. Our next question will come from Eric Larson with Seaport Research Partners.
spk03: Please go ahead.
spk04: Yeah. Thanks guys. And congratulations on the quarter. So just a couple, you've alluded to some of the things, Pat, I think that are relevant to this question, but you know, late in the third quarter, you know, we saw, we saw basis weak and pretty sharply in the Eastern Corn Belt basis in the Western Corn Belt is, is off the charts. Um, and, uh, I guess I thought maybe that would have a negative impact on your third quarter basis appreciation in the grain business, in your trade business. And now I'm looking at $1.3 billion of available liquidity, and I think it was only about a half a billion at the end of the last quarter. Are you not seeing with these low eastern corn belt, with the favorable basis that you guys should be buying cheap grain on, are you not seeing those opportunities to put more business on your books? What am I missing here?
spk01: Eric, I think you pointed something out at the very beginning. The drought in the west caused basis levels to rise pretty dramatically quickly, especially in the desert southwest and into those feedlot markets. That is actually a good opportunity for us from a merchandising standpoint. And what we call our Midwest truck segment that sells to those markets has done very well with this appreciation of the basis. So actually, that's a good thing. The one area it hurt us is in our Kansas ethanol plant has high basis levels, and that has made margins very difficult in Colwich. A little bit higher also in Denison, Iowa, as Iowa basis levels are a little bit higher. It's really a Kansas-Nebraska phenomenon. When it comes to the east, as you pointed out, we've had good, we had a good book on early with growers in the east. I'd say it's been a normal harvest activity in the last month with kind of a steady supply and steady selling of grain. Nothing like, you know, backlog and huge lines or anything like that. So it's been kind of a very orderly progression this harvest. So we're in very good shape. We like the position we're in. We're gaining traction. storage on wheat in the delivery market here in Toledo for soft red wheat, which is a nice ability to clip some coupons there. And we really like our ownership and basis levels have been firm for export sales, and we like the position we're in. So simple answer to your question, it's going quite well. And then we have good volumes and a very healthy farmer, so it's a good environment for us.
spk04: Okay, good. I mean, that sounds great. And it sounds like that if only... and I know that the east is not as far along on harvest as the west is, but the weather has been just phenomenal. We're progressing pretty quickly, I think, around the whole country. So if you're only, let's say, 50, 55 percent harvested, should that not give you more opportunities in the fourth quarter? Maybe you've answered this. Fourth quarter, you should be able to pick up, you know, some really good cheap grain and have some pretty good momentum going into the first half of next year. Is that a fair way to look at it?
spk01: Yeah, as of the Monday's crop report, we're 50% in the Indiana, Ohio, Michigan market. So harvest is progressing rapidly right now because the weather is perfect. And so, yeah, we're hoping to capture quite a bit of grain here in the second half of harvest. So it's a good outlook on harvest. both for fertilizer application and for corn coming straight out of the field. Beans were very dry, and so corn is probably normal right now. So our drying and blending of corn is probably on a normal basis right now. So it's a good year, especially in the east. So we're very pleased with eastern harvest thus far.
spk04: So what kind of moisture levels are you seeing in corn right now?
spk01: It's sort of spotty, Eric, so kind of in the high teens, some spots low 20s, but that's why growers have waited. They took the beans. We're almost done. I think we're 80% on beans, and that will be done probably by this week. But some growers have waited to get corn dried down in the field. It's beautiful 60-degree sunny days here, probably the best Halloween we've seen in a long time. So we've had just a beautiful weather this fall.
spk04: Yeah, no, it's the same here. We're going to set record highs today. It's just beautiful weather, perfect for harvest, perfect for fall application stuff. So, you know, all good seems to be on the agricultural front. So thanks for your comments, Pat and Brian and Mike.
spk01: Thanks, Eric. Good luck with the rest of your harvest.
spk03: Yeah, thank you. This concludes our question and answer session. I would like to turn the conference back over to Mike Holter for any closing remarks.
spk02: Thanks, Joe. We want to thank you all for joining us this morning. Our next earnings conference call is scheduled for Wednesday, February 15, 2023 at 11 a.m. Eastern Time, when we will review our fourth quarter results. As always, thank you for your interest in the Andersons, and we look forward to speaking with you again soon.
spk05: The conference has now concluded. Thank you for attending today's presentation. You may now disconnect your lines.
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