Thursday, June 21, 2007

Ethanol Producer Boosts Earnings Estimate

I though high corn prices were supposed to be hurting ethanol producers?

Andersons Inc., (ANDE) boosted its 2007 per-share-earnings estimate to a range of $2.80 to $3.05 from $2.35 to $2.60. On average, analysts expect $2.62, according to Thomson Financial.

The company noted that its Plant Nutrient Group has specifically benefited from the increased corn acreage and associated higher volume and margins. Additionally, its new ethanol plant in Clymers has started producing ethanol, and both ethanol plants are realizing better margins and throughput than the earlier projections envisioned.

Commenting on the earnings revision, the company's President and Chief Executive Officer Mike Anderson, said: ``When we last provided guidance, planting progress within our region was behind historical norms. Planting has now been successfully completed. This has had a positive impact on the earnings outlook for our Grain & Ethanol and Plant Nutrient Groups.

Now, granted they are getting a boost from fertilizer sales but they are also experiencing better than expected ethanol production margins.

The anticipated margin decline was something that has been much touted in calling for an "earnings crunch" for ethanol producers. It seems to be just not happening. Now, this may be on a case by case basis as the better run companies are able to manage their way through the corn price increase so do not extrapolate this out to all ethanol producers. Firms like The Andersons and Archer Daniels (ADM) that have a history of success are the safe bets here.

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