The Andersons, Inc. (ANDE - Free Report) has entered into a strategic partnership with ICM, Inc., to form a joint venture (JV) — ELEMENT, LLC — in order to build a bio-refinery at Colwich, KS. Per the JV, both companies will operate a technologically-advanced facility which will produce 70-million gallon ethanol annually.
This collaboration brings together two leading players in the corn-ethanol industry. The JV will feature ICM's innovative equipment and next-generation technologies, along with Andersons' merchandising, risk management and logistics expertise.
The above-mentioned venture is in sync with Andersons’ strategic priorities which involve capacity growth, production of higher value co-products and expansion of services through highly efficient and profitable ethanol production facilities. With the ELEMENT, the company will have the potential to produce the highest yielding, highest margin and lowest carbon intensity ethanol gallon in the United States.
Notably, the ethanol facility will be different from other plants in the industry, featuring waste-wood heat and power generation, high protein distillers dried grains (DDGs), industry-leading cellulosic ethanol production and advanced corn-oil production.
Phase one of the plant shall commence in second-quarter 2019. The ELEMENT is expected to be fully operational by the end of the same year which will produce ethanol yields in excess of 3.1 gallons per bushel. Ethanol produced from the plant will be sold primarily in California under the state's progressive Low Carbon Fuel Standard and in other emerging low carbon markets as well.
Andersons expects investment in this plant to be accretive within a year of the commencement of its operations. This deal will significantly benefit the company’s performance, especially contributing to its ethanol business. In addition, both companies will be able to score low carbon intensity through the JV, maintaining commitment to environmental sustainability.
Andersons generates majority of its revenues from the Grain and Ethanol Group. It contributed nearly 81% of revenues in fourth-quarter 2017. The company makes continued efforts to upgrade the business and strengthen its market position to counter the heightening competition. Further, the Ethanol Group continues to work in a bid to improve production efficiently.
In the last year, Andersons has underperformed its industry with respect to price performance due to oversupply and lower margin issues. The stock has lost 5.5%, while the industry has recorded growth of 0.2% during the same time frame.
Zacks Rank and Other Key Picks
Currently, Andersons sports a Zacks Rank #1 (Strong Buy).
Other top-ranked stocks in the same space include Cosan Limited (CZZ - Free Report) , KapStone Paper and Packaging Corporation , and LyondellBasell Industries N.V. (LYB - Free Report) . All three stocks flaunt a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.
Cosan Limited has a long-term earnings growth rate of 25%. Its shares have soared 47.5%, over the past six months.
KapStone Paper has a long-term earnings growth rate of 14%. The company’s shares have rallied 56.6% during the same time frame.
LyondellBasell has a long-term earnings growth rate of 9%. The stock has gained 19.8% in six months’ time.
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