MAUMEE, OHIO — Near term, The Andersons, Inc. hopes to get performance of its cornerstone grain business back on track, while longer term the company has its sights set on expanding capabilities in handling and services for specialty grains and food ingredients and achieving cost and capability benefits from its new enterprise resource planning system, said Corbett J. Jorgenson, president of the Grain Group for The Andersons.
|Corbett Jorgenson, president of the Grain Group for The Andersons|
“We love our asset base,” Mr. Jorgenson said during a Dec. 7 investor day conference call. “We love our presence in the eastern Corn Belt. We’re really proud of the team of people who have built this business over the last 70 years. And we’re really confident in that team of people doing the things we need to do to achieve … growth objectives.”
The growth objectives he referenced include both near- and long-term goals.
Mr. Jorgenson said the company wants to grow its physical share in the grain business by 20 million bus, which would represent about $2 million of gross profit in the business over the next one to two years. The Andersons also aims to grow total trade flow growth by 40 million bus, representing $4 million of gross profit over the next three to five years.
“The trust that we built with farmers over that period of time gives us a chance to build that risk management business and to become a bigger player in the food and specialty grain space over the next three to five years,” he said. “The trust with the farmer is a huge key to doing that. We understand the cyclicality of the basic grain industry, and we know that we need to build resiliency into our earnings stream, and that’s what we're working constantly every day on.”
Mr. Jorgenson said the company’s efforts should generate $70 million to $75 million of EBITDA in the short term for the Grain Group and $85 million to $95 million of EBITDA in the three-to-five-year window, helping the company achieve an overall $300 million EBITDA target in three to five years.
One area the company has its eyes on is the food ingredients and specialty grains space. The Andersons already has made a move in the space both organically and with small bolt-on acquisitions such as Purity Foods in April. Mr. Jorgenson said that is only the tip of the iceberg.
“We’re a big food-grade corn handler already,” he explained. “We connect farmers who grow trade-specific food-grade corn to people who make chips and tortillas and all these things. We connect oat growers to the biggest oat users, oatmeal manufacturers, in the world. We are building a bigger business in Saskatchewan, accessing the specialty and ancient grains that are going up there and bringing them to the market that need them. The point in this space is that the capability of connecting that farmer in Saskatchewan or in Nebraska or in Illinois or in Texas to the end-use markets that need their crops is really similar to what we do on 500 million bus of corn and soybeans and wheat every day. The assets are similar. The capabilities are similar. And we’ve got a good opportunity to provide that clarity and transparency to the supply chain … and to be trusted by the food companies and to be trusted by the farmers.
“This is the space that we want to grow as much as 300% over the coming five years and make it a pretty significant part of our earnings stream.”
The Andersons also is benefitting from the implementation of enterprise resource planning (ERP) software from SAP, Mr. Jorgenson said. The company has deployed the software to about 80% of its Grain Group.
“We’re operating every day with SAP as our backbone,” he said. “It’s brought efficiencies to us, and it’s given us information flows in a faster way, and we’re making more real-time decisions as the result of having it. It’s hard work, and it’s a significant investment, but we’re happy to have it today, and we think it’s scalable.”