The Andersons Inc. has released third quarter 2018 financial results, reporting strong quarterly performance for its ethanol group, but cautioning that the group’s strong performance is not expected to last into the fourth quarter or 2019.

“The ethanol group performed very well in the third quarter, but we see some difficulties on the horizon as ethanol prices remain at multi-year lows,” said Pat Bowe, president and CEO of The Andersons, during an investor call.

According to Bowe, the ethanol group’s success during the quarter was derived from continuing good plant operations, improved distillers dried grains (DDG) values, and timely hedging. “The results are especially gratifying give the market conditions created by continued high industry production and stocks,” he said, noting that exports continued to be strong despite China’s absence from the market.

Brian Valentine, senior vice president and chief financial officer of The Andersons, noted that while margins continue to be stressed by higher industry ethanol production and inventories, the ethanol group prevailed during the third quarter by selling comparatively more ethanol and E85, and hedging effectively.

Moving into the fourth quarter, Bowe said margins have declined over the past couple of months and don’t show signs of improving anytime soon. He said the ethanol group has comparatively less of its margins hedged going into the fourth quarter than it did entering the third quarter. Despite high export demand, he said high production and moderating seasonal driving demand have the company concerned about margins for the balance of 2018 and 2019. He said the company expects the group’s fourth quarter results to be somewhat lower than the fourth quarter of last year.

Bowe also briefly discussed a delay in the construction of the plant The Andersons is building with ICM Inc. in Colwich, Kansas. He said construction of the 70 MMgy facility has been delayed by 60 days due primarily to near record rainfall at the construction site. According to The Andersons, the project remains on budget. While production is expected to commence in mid-2019, the company said realization of the plant’s premium products may be delayed until early 2020. 

The ethanol group reported $9.1 million of pretax income during the third quarter, up from $6.1 million during the third quarter of 2017.

Overall, The Andersons reported a pretax loss of $3.6 million for the quarter, compared to pretax income of $5 million during the same period of last year. The company reported a net loss of $2.1 million, or 7 cents per diluted share, compared to a net income of $2.5 million, or 9 cents per share, during the third quarter of last year.