Milling & Baking News - June 5, 2018 - 21

become the Partner of Choice through
enhancing the services provided through
The Andersons Freedom Pricing Tools,
which offer a wide range of grain marketing services for grower customers.
"Productivity" is the fourth area of focus. The company launched a productivity initiative in 2016 to reduce run rate costs
by $20 million by the end of 2018. That
goal was reached a year early in December 2017. A new goal was added to capture
an additional $7.5 million in run rate cost
savings by the end of 2018, Mr. Bowe said.
The company completed the end-toend implementation of SAP in its Grain
Group in 2017 and has begun implementing it in its Plant Nutrient Group.
Regarding the company's portfolio,
Mr. Bowe said one of the difficult decisions was the closing of its remaining
four Ohio retail stores in 2017. Since the
stores were fixtures for years in the state,
the closings were tough given the loyal
customer following and dedicated workforce. However, the retail stores had been
unprofitable for many years and accounted for only 3% of annual sales.
Portfolio optimizing has included the
sale of other assets on a highly selective
basis, including grain elevators in northwest Iowa, fertilizer locations in Florida
and grain elevators in Tennessee.
"We took a hard look at the company's
assets and what we wanted to keep and
what didn't fit for us in the long term,"
Mr. Bowe said.
Wrapping up the lineup of P's is "Profitability," Mr. Bowe said. The company experienced a couple of difficult years, largely in line with the grain industry more
broadly, but conditions have improved.
"Our grain business really turned around
in '17 from '16, almost a $25 million dollar
improvement for our core business," Mr.
Bowe said. "While grain has made a strong
recovery, the fertilizer business has underperformed. We continue to be optimistic
about all four business groups."
Each of the company's four businesses

THE ANDERSONS

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The Andersons' new headquarters building in Maumee, Ohio, opened in October 2016.

is among the top 10 in the United States,
beginning with its grain business.
"We're primarily an eastern grain belt
company," he said. "We have some assets
outside of that, but when you talk about
Michigan, Ohio, Indiana, Illinois, that is
where are main key assets are. Many of
them are longstanding assets, but we've
kept them in good shape, and they're
key storage and distribution points in the
eastern Corn Belt."
The Andersons grain storage capacity
totals 144,306,000 bus, according to the
2018 Grain & Milling Annual published by
Sosland Publishing Company. The total
makes The Andersons the ninth largest
U.S. grain company. About two-thirds
of its storage capacity is concentrated in
the states of Ohio, Michigan and Indiana.
According to the company's fiscal 2018
10K filing, 92% of the company's 2017
grain sales went to U.S. grain processors
and feeders, and 8% were exported.
The Andersons strength in the grain
business is complemented by its 33% stake
in Lansing Trade Group, based in Overland Park, Kas. Lansing operates completely independently of The Andersons.
"Lansing Trade Group has been a very
good investment for The Andersons over
the years," Mr. Bowe said. "They are in
the core grain merchandising business like
us, but have some differences with more

The Andersons share price
NASDAQ exchange

$80

price per share

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merchandizing in the hard red wheat
market, DDG trading, feed ingredients,
pet food ingredients and frac sand supply chain business. Lansing and The Andersons are also partners in an Ontario,
Canada, business called Thompsons Ltd."
He described Thompsons (acquired in
2013) as a "smaller, Canadian version of
The Andersons" with fertilizer and grain
just across the border.
The Grain Group has been headed
since 2016 by Mr. Jorgenson, who earlier
spent 20 years at Cargill.
"I think we're positioned well for the future," Mr. Bowe said. "Corey brings a lot
of energy into the group, and we've really
focused on growing the food ingredient
space, improving our trading, expanding
our Freedom business and keeping our
grain handling assets strong."
The Andersons' food ingredient business is "small but fast growing," Mr. Bowe
said. It supplies consumer packaged foods
companies with oats and food grade corn.
The Andersons also sees this market as
one with the potential to provide higher
profit margins and less volatility than its
other businesses.
In oats, the company has expanded its
long-term position as commodity oats
supplier to a company focused on identify preservation. To support this objective, the company recently purchased
two elevators in western Canada.
The food grade corn business principally involves contract growing, cleaning, sorting, handling and shipping to
chip manufacturers.
"There are several new varieties of
corn being introduced to market, and we
work with farmers to produce them,"
Mr. Bowe said. "We have three regional
facilities - one in Nebraska, one in Illinois and one in Texas that supply U.S.
chip manufacturers. And those businesses have been growing, adding organic
and other new varieties."
From this base of business in food ingredients, The Andersons also has shifted
into specialty milling. In April 2017, the
Milling & Baking News

June 5, 2018 / 21

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Milling & Baking News - June 5, 2018

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