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Andersons (ANDE) Divests 3 Grain Elevators in Tennessee

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The Andersons, Inc. (ANDE - Free Report) has completed the previously announced divestiture of its three grain elevators in Tennessee to a subsidiary of Tyson Foods, Inc. (TSN - Free Report) .
 
Andersons owns three additional elevators in Trenton, Como and Union City, TN which are not part of the purchase agreement with Tyson. However, the company stated that it is evaluating options for these three remaining facilities.
 
Focus on Strategic objectives in Grain Business to Aid Results
 
Andersons’ Grain business generated around 57% of its fiscal 2017 revenues. The segment primarily operates grain elevators in various states in the U.S. Corn Belt and income is earned on grain bought and sold or “put thru” the elevator, grain that is purchased and conditioned for resale, and space income. Additionally, the business offers a number of unique grain marketing, risk management and corn origination services to its customers and affiliated ethanol facilities for which it collects fees.
 
The segment’s sales decreased 11% year over year to $2.1 billion in fiscal 2017 due to a decrease of 24% in bushels sold. This decrease can primarily be attributed to more bushels being strategically stored due to strong space income opportunities in the market. Also, there was an intentional reduction in bushels sold directly from supplier to customer given the group’s focus on the most profitable markets to boost margins. Adjusted operating profit for the fiscal for the segment was $23.9 million against a loss of $4.4 million in the prior fiscal.
 
The Grain Group's performance reflects continued recovery from the prior year. Holding corn, beans, and wheat led to higher space income while risk management services, trading income, and earnings from affiliates have improved. While the 2017 harvest quality and yield was good, a drawn out harvest prevented strong margins on bushels sold. The Group continues to refine its portfolio and signed an agreement in February 2018 to sell grain elevators in Humboldt, Kenton and Dyer, TN. Assets associated with these locations were part of the sale, including approximately 3.4 million bushels of inventory.
 
Normal weather conditions during planting and growing seasons should create good storage and merchandising opportunities in 2018. The company remains confident about its strong ownership positions and anticipates earning solid storage income. It also anticipates its affiliates particularly Lansing Trade Group to be poised for improvement in 2018. Focus on strategic objectives in Grain Group will also aid results.
 
Other Factors Likely to Drive Growth at Andersons
 
Growth opportunities in the value-added Nutrient sector will reinforce its Plant Nutrient business’ performance. The company remains focused on developing new products to help farmers maximize yield and meet environmental challenges. Productivity and cost-saving efforts in the Retail Group will also drive its results.
 
Additionally, Andersons has made good progress on its second $10-million run-rate cost savings goal. The company remains confident that it will reach the overall goal of $20 million by the end of 2018. It anticipates benefiting from a substantial decrease in its effective tax rate in 2018. The company believes the new tax reform will keep the company’s effective tax rate in the range of 23-25% for the year.
 
 
Andersons has outperformed the industry in the past three months. The stock has gained 1.6%, while the industry dipped 0.2%.
 
Andersons currently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
 
Some other top-ranked stocks in the same sector include KapStone Paper and Packaging Corporation and Veritiv Corporation . While KapStone  sports a Zacks Rank #1, Veritiv carries a Zacks Rank #2 (Buy).
 
KapStone Paper has a long-term earnings growth rate of 14%. The company’s shares have rallied 40% during the past three time months.
 
Veritiv has a long-term earnings growth rate of 6%. The stock has gained 13% in three months’ time.
 
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