Andersons Q2 2024 Earnings Call Transcript

Quartr
Provided by Quartr
August 7, 2024

There are 8 speakers on the call.

Operator

Good morning, ladies and gentlemen. Welcome to The Andersons' 2024 Second Quarter Earnings Conference Call. My name is Alan, and I will be your coordinator for today. As a reminder, this conference is being recorded for replay purposes. Relations.

Operator

Please proceed.

Speaker 1

Thanks, Alan. Good morning, everyone, and thank you for joining us for the Anderson's 2nd quarter earnings call. We have provided a slide presentation that will enhance today's discussion. If you are viewing this presentation from our webcast, the slides and commentary will be in sync. This webcast is being recorded and the recording and the supporting slides will be made available on the Investors page of our website at andersonsinc.com shortly.

Speaker 1

Please direct your attention to the disclosure statement on Slide 2 as well as the disclaimers in the press release related to forward looking statements. Certain information discussed today constitutes forward looking statements that reflect the company's current views with respect to future events, financial performance and industry conditions. These forward looking statements are subject to various risks and uncertainties. Actual results could differ materially as a result of many factors, which are described in the company's reports on file with the SEC. We encourage you to review these factors.

Speaker 1

This presentation and today's prepared remarks contain non GAAP financial measures. Reconciliations of the GAAP to non GAAP measures are included within the appendix of this presentation. On the call with me today are Pat Bowe, Chairman and Chief Executive Officer Brian Valentine, Executive Vice President and Chief Financial Officer and Bill Krueger, Chief Operating Officer. After our prepared remarks, we will be happy to take your questions. I will now turn the call over to Pat.

Speaker 2

Thanks, Monique, and good morning, everyone. Thank you for Can we do a test now? Testing 1, 2, 3.

Operator

Yes, sir. I can hear you. Please proceed.

Speaker 2

Okay. I'll go back to our Lena of West office. This is Pat Baughn to introduce our 3 comments. Results in trade were up with improvements on wheat space income in our Eastern assets and within our growing trading food and pet food and ingredients business. As expected, merchandising opportunities were lower year over year in these well supplied markets.

Speaker 2

Farmers have been slow to celebrate at prices well below what they experienced in recent years and a high percentage of last year's crop remains in on farm storage. We expect much of this grain to move off farm prior to harvest. Operating performance in the renewables business was very good with continued very strong performance at our ethanol plants. We have record 2nd core production in our current operations, benefiting from higher ethanol yields and well managed costs. Ethanol margins were higher than last year on lower core basis at our plants.

Speaker 2

The teams at our facilities executed very well, but overall results continue to be impacted by lower values of feed ingredients, which fall closer to the price of corn. Our renewable diesel feedstock merchandising business continues to grow with volumes, but it's seen margin compression on industry fundamentals. Our 2nd quarter Nutrient and Industrial business was solid, but negatively impacted by lower fertilizer price volatility and delayed application season that resulted in a decline in both volume and margin. When we look at the first half of twenty twenty four compared to 2023, our volumes are comparable by reduced margins in a lower fertilizer pricing volume this year. Brian will now cover some key financial data.

Speaker 2

After that, I'll be back to discuss our outlook for the remainder of 2024. Brian?

Speaker 3

Thanks, Pat, and good morning, everyone. We're now turning to our Q2 results on Slide number 5. In the Q2 of 2024, the company reported net income attributable to the Andersons of $36,000,000 or $1.05 per diluted share and adjusted net income of $39,000,000 or $1.15 per diluted share. This compares to net income of $55,000,000 or $1.61 per diluted share and adjusted net income of $52,000,000 or $1.52 per diluted share in the Q2 of 2023. Adjusted pre tax earnings were $45,000,000 for the quarter compared to $72,000,000 in 2023, with trade showing improvement and the other businesses generating solid results, but were unable to match an outsized prior year.

Speaker 3

Adjusted EBITDA for the Q2 of 2024 was $98,000,000 compared to adjusted EBITDA of $144,000,000 in 2023. Trailing 12 months adjusted EBITDA totaled $355,000,000 Our effective tax rate varies each quarter based primarily on the amount of income or loss attributable to non controlling interest. This quarter also was impacted by the reversal of uncertain tax positions relating to research and development and other tax credits. We recorded taxes for the quarter at a 9% effective tax rate. We now expect a full year adjusted effective tax rate between 14% 18%.

Speaker 3

Next, we'll move to Slide 6 to discuss cash, liquidity and debt. We generated cash flows from operations before changes in working capital of $89,000,000 in the Q2 of 2024, demonstrating our ability to generate consistent operating cash flows in a less volatile market. This strong cash flow generation combined with lower commodity prices and delayed farmer engagement resulted in a cash position of more than $500,000,000 and negligible short term borrowings at the end of the quarter. Next, we'll take a look at capital spending and long term debt on Slide 7. We continue to take a disciplined responsible approach to capital spending and investments, which we expect to be in the range of $150,000,000 to $175,000,000 for the year, roughly half of which is typically related to maintenance capital.

Speaker 3

Our long term debt to EBITDA is approximately 1.6 times, which is well below our stated target of less than 2.5 times. We have a strong balance sheet with significant capacity to support growth investments that meet our strategic and financial criteria. We continue to evaluate growth projects in our pipeline, including several M and A opportunities at various stages of completion. This includes the recently announced intent to acquire an ownership interest in Skyline Grain LLC, pending completion of diligence and negotiations. Our project pipeline remains very active and we are excited about additional capital investment and M and A opportunities that align with our growth strategies.

Speaker 3

Now, we'll move on to review of each of our businesses, beginning with Trade on Slide 8. Trade reported pretax income of $5,000,000 and adjusted pretax income of $9,000,000 compared to adjusted pretax income of $7,000,000 in the Q2 of 2023. We had a slight improvement in our operating results our trade business portfolio when compared to last year. The financial results for our grain assets were up, driven by weak income opportunities, but domestic producers are still hesitant to forward sell due to lower commodity prices combined with limited basis appreciation to start the year. Our assets are well positioned to support the needs of our customers when the grains are brought to market.

Speaker 3

With the reduction in commodity prices and limited forward selling by producers, financing costs supporting inventory and forward contracts have also declined. Our premium food and pet food ingredients business has shown growth year over year with recent acquisitions and internal growth projects providing positive impacts to these product lines. As Pat mentioned earlier, merchandising businesses are being impacted by an oversupply grain market with lower commodity prices and less volatility. As expected, we saw a decline in results of these businesses in the current quarter as compared to 2023. Trade's adjusted EBITDA for the quarter was $24,000,000 compared to $27,000,000 for the Q2 of 2023.

Speaker 3

Moving to Slide 9, renewables had another solid quarter generating pretax income attributable to the company of $23,000,000 compared to $39,000,000 $32,000,000 on an adjusted basis in the Q2 of 2023. Ethanol prices remained favorable in the quarter and our operating performance resulted in record production in our 4 plants. But overall profitability was negatively impacted by the values of co products, including feed and cornrowing. Renewable diesel feedstock volumes continue to grow, but margins are down year over year due to overall industry fundamentals. Feed ingredients demand remains strong, but at lower values as prices are tied to the value of corn.

Speaker 3

Renewables had EBITDA of $52,000,000 in the 2nd quarter compared to $81,000,000 $74,000,000 on an adjusted basis in the Q2 of last year. Turning to Slide 10. The Nutrient and Industrial business reported pretax income of $23,000,000 compared to an outsized $43,000,000 in 2023. Overall, fertilizer prices declined in the quarter after several years of higher prices and market volatility. In addition, a late and wet spring planting season in much of the core geography that we serve negatively impacted sales volume.

Speaker 3

This was offset in part by improvements in our manufactured products as we continue to streamline our operation. Nutrient and Industrial had EBITDA of $32,000,000 for the quarter compared to $52,000,000 in 2023. And with that, I'll turn things back over to Pat for some comments about our outlook for the remainder of 2024.

Speaker 2

Thanks, Brian. Overall, we remain optimistic about our 2024 outlook. Our study business outlook remains solid with the expectation of sizable grain volume to handle in the upcoming harvest. We completed smaller but good quality wheat harvest in July in the Eastern assets and expect to continue to earn space income on the grain and accumulate. We're also very pleased with the growth in our premium food and Feeding Green products and anticipate continued growth, both organically and for acquisitions.

Speaker 2

Merchandising opportunities remain, but we expect that they will continue to be muted compared to results in terms of higher commodity prices and market volatility. Our renewables segment continues to expect strong ethanol prices, untreated demand and the growing export market. We expect values of our feed ingredient co products to remain soft as they follow lower corn prices. Our production volumes have remained very strong and we believe this should continue. Focused on improving and maintaining our core production facilities for optimal efficiency.

Speaker 2

3rd carbon merchandising of ethanol, feed ingredients and renewable diesel feedstock will also continue to be an important component of the business and we expect continued volume growth in renewable diesel feedstocks. Renewables business is an important part of our longer term growth strategy and we continue to make progress on plans to lower the carbon intensity of our assets. This includes enhancements at our production facilities as well as developing supportive farm programs that should position us to acquire lower CI corner as a feedstock in the future. The outlook for this business remains strong. The Nutrient Industrial Business nearby outlook is mixed with continued relatively low grain prices and reduced farmer income.

Speaker 2

The time of harvest and market fundamentals will influence post harvest fertilizer applications. We're also focused on continued operational enhancements in our manufacturing products facilities. With our strong balance sheet position and the desire for continued growth, we're excited about the significant opportunities in each of our key segments. Already mentioned renewables opportunities that are longer term and implementation. We continue to work on the Skyline Brain LLC opportunity, which could significantly expand geographic reach of our grain business and increase the size of our farm center fertilizer business within Nutrien and Industrial.

Speaker 2

We're also evaluating a number of organic growth initiatives and the pipeline remains robust. We're focusing on organic and acquisition opportunities within some of our businesses like commodities, premium ingredients, ethanol, renewable diesel feedstocks and nutrients. We'll continue to make responsible decisions that benefit our customers and maximize shareholder value as we execute on growth opportunities within our stated strategy. With that, I'll turn it back over to our operator, where we can take your questions.

Operator

We will now begin the question and answer session. Our first question comes from Ben Klieve of Lake Street Capital Markets. Please go ahead. All

Speaker 4

Congratulations, nice quarter here in the face of some suboptimal conditions in the market. So congratulations on the quarter here. A handful of questions. First on the dynamic you all discussed on the elevated level of inventories throughout the grain complex. I'm wondering if, first of all, if you can if you have an expectation that this is going to work its way through truly by harvest time or if there is a risk of elevated inventory levels on old crops staying in bins even after the new harvest comes in?

Speaker 4

And then second, as that unwinds, do you guys expect to see some kind of an increase in volatility? Or is this kind of stale state something that you're expecting for the foreseeable future?

Speaker 2

I'll get started then and turn it over to Bill. I think the shift in the markets has done some good things for us. Mainly in the East, we have not as big a software fry meat harvest as we had in past years, but a very good quality one. So we're able to purchase a lot of soft sweet at harvest and have that in storage where we're earning share now including one of the Asar kits. So that's a good thing.

Speaker 2

And as spirits have moved into the core market, that's a good thing for elevator operators like ourselves. We think the farmer will need to come to market because we have very high on farm storage right now. And as they see their current crops, which probably is really good. These Midwest rains of late have been a really nice boost to the crop this year. I think we're going to see a big harvest this year, and thus farmers will be leading the move grain to market here before we get to full harvest.

Speaker 2

And maybe Bill, if you could comment on this.

Speaker 1

Yes. Good morning, Ben. I would agree with Pat. We have a near record on farm stocks for corn and we're looking at potentially a record breaking corn yield. So I think it would be very hard to make the assumption that the producers not going to move their corn that's on farm before harvest.

Speaker 4

Got it. Okay. That's very helpful for me both. And then I guess as a follow-up to this, in the last quarter call, you guys noted an expectation that the trade group is going to see some seasonality shift to later in the year. I guess, has this shift been slower than you maybe anticipated a few weeks excuse me, a few months ago?

Speaker 4

And then on a full year basis, can you kind of comment on your expectations for the trade group, especially in the merchandising side of the business for 2024 versus 2023?

Speaker 1

Yes, I'll take that one. No, Ben, I think that our expectations at the end of Q1 are playing out like we thought they would. At that time, we weren't nearly as confident in the upcoming perm prop. So I do think that we are going to remain in these lower price environment. But I do believe that we should have an opportunity to handle even more fall harvest crops as the crop does continue to look good as in early August.

Speaker 1

The other thing is we have to really pay attention to the value of the wheat of U. S. Wheat compared to competitors around the globe. And I think that's going to provide some opportunity for us also. And to your last question, we do think that the last half of twenty twenty four will be more challenging than the last half of twenty twenty three was just because we're in a lower price environment and volatility is a little lower.

Speaker 4

Got it. Okay, that's very helpful. Thanks, Bill. On the renewable side question on the renewable diesel initiative, you noted that volumes were up, margins were down. Can you comment on overall earnings from that initiative?

Speaker 4

Did the volume growth more than offset the margin declines or was the opposite true?

Speaker 1

I would tell you that the volume growth was not offset it did not offset the reduction in overall margins produced on the renewable diesel feedstock.

Speaker 4

Okay, very good. And then last sorry, go ahead, Pat.

Speaker 2

As new RD plants came online, we still continue to see robust demand. We'd like the diversity of our portfolio and we see this as a business opportunity to continue to be important for the initiatives. Like all commodity markets since they have its ups and downs and balances of supply demand and that plays right into our merchandising capabilities. So it's a business we're committed to continue to grow

Speaker 4

at. Got it. And last one for me, you guys talked about considering a few different M and A opportunities at kind of various stages of diligence process. The Skyland Grain acquisition seems to be a sizable one, but I'm wondering if you can characterize these opportunities that you're in diligence for from the perspective of your towards your 2025 EBITDA target or are the other things you're considering beyond Skyland kind of more talking

Speaker 3

in nature? Sure, Ben. This is Brian. I'll start and then maybe Bill can add some color. I would say, yes, our pipeline does remain pretty robust.

Speaker 3

We've seen it be even more active this year. We're seeing more deal flow, probably in part due to the higher interest rate environment over the past year or 2. And so I would say there are various stages of completion. And I would probably characterize more of them as we've talked about singles in the past. I would call more of these doubles, triples as we think about some of the growth projects, both internal growth as well as some of the M and A growth.

Speaker 3

We're going to continue to be disciplined. And I know with regard to the $475,000,000 run rate target that's out there, we've talked about in these

Speaker 1

sort of changing and dynamic Ag markets over

Speaker 3

the past several quarters. It will require more M and A to get there, but we're going to continue to be disciplined and responsible and make sure that we're going to generate appropriate returns for our shareholders. And Bill, maybe you want to comment about some of the deal flow as well.

Speaker 1

Yes. I would say in Brian's comment there around it. We'll take maybe more M and A than we had originally expected to achieve the $475,000,000 but we are seeing the opportunities that both tied directly into our core business. Skyland is a very good example of that where geographically product mix it fits right at the center of our core. We're also taking a look at where the industry is going to be at in 2 to 3 years' time and trying to get in front of those opportunities, which would also be larger in size compared to what we've done in the last 3 years.

Speaker 4

Got it. Got it. Very good. All right. Well, I appreciate you guys taking my questions and I'll get back in queue.

Operator

Our next question comes from Scott Fortune of ROTH Capital Partners. Please go ahead.

Speaker 5

Yes. Good morning, afternoon and thanks for the questions. Just want to follow-up a little bit on the scale and your focus of kind of the northern portion of the U. S. And just provide a little more color strategically on the footprint with the Skyland kind of more in the Midwest, just kind of a little more color on the focus of those assets and as they become integrated within your footprint from expanding footprint.

Speaker 5

Just kind of take us through that a little bit more, that'd be great.

Speaker 2

Sure, Scott. This is Pat. I think as you know that Anderson's original footprint was an Eastern Rain Hill footprint here in terms of Miami, Ohio, very big in Ohio, Michigan, Indiana, Illinois, so Eastern Rain Hill. And with the acquisition of Lansing in 2019, we moved quite a bit sizeably into the Western Corn Belt as far out as Idaho and down south into Louisiana. But we don't have a big physical presence with assets in the Texas and Southeast Kansas and most of the hard week state model country and into the Panhandle, where we have a big growing demand for dairy and feedlot demand for grains.

Speaker 2

So it's a very active part of the country. And for us to expand geographically to that region would be attractive. As Bill mentioned earlier, we think a perfect fit with our overall portfolio. We can't really comment more on it with little due diligence, but strategically from our direction of the company and geography, it's a really nice set for the Andersons.

Speaker 5

Perfect. Thanks. And then just kind of switching to the opportunity kind of update on the ethanol business, kind of the turnover a bit and crush margins there. But outlook on ethanol as we head into the fall and the inventory levels there and production across the industry versus demand? And then just a follow-up, just kind of an update on ethanol jet fuel opportunity.

Speaker 5

Your sense of the farmers starting kind of implement various initiatives towards the opportunity, just kind of sense of that timing overall, as we focus on the ethanol side?

Speaker 2

Before I let Bill get started with something else, and before I go to correctly, just add that this was the California team talking about, I said southeast Kansas and I should have said south or west Kansas. I apologize about that. The Texas Panhandle and South West Kansas. So I want to get my geography correct, that's what I said a few minutes ago. At a high level, I think I'm understanding your line of thought here, Seth, is we mentioned in our script, our commitment to the future of our chloroethanol plant.

Speaker 2

And it's not just only about carbon intensity, which is a big part of it and looking at sequestration projects and the like and working with growers on renewable ag. But we have been working on efficiency both how we run our combined heat and power of our plants, how we get better yields and more productivity. And those investments that we've continued to make and those plants have put us in the top quartile, the top decile of the industry. And I think if you look at our continued production performance and yield performance and profitability. Methanol plants, you can see we're maybe one of the leaders in the industry here.

Speaker 2

We want to continue to do that. So we're going to continue to invest in those plants and make them as low CI as well as most modern, efficient and large scale as we can. So that's a focus on bolt on capital projects that we continue to do at our optimal plants. Bill will comment a little bit more about the other parts of that and what you're bringing out.

Speaker 1

Thanks, Scott, for the question. First, I'd like to start with, we believe alcohol to jet is a few years down the road. And from the Anderson's perspective, I think we demonstrated over the last several quarters that we're able to operate in the renewable space, specifically our ethanol plants very efficiently and profitably. We're not going to wait until we have more clarity around staff from ethanol. We really want to grow in this space now.

Speaker 1

And so we're looking at opportunities from growing our current footprint to acquisitions and other opportunities to take advantage of an area that we feel is really core to our company. And that comes from not just running the ethanol plants. It's the understanding of originating corn, selling DCO, selling DDGs and selling the ethanol. So we see opportunities there

Speaker 2

before

Speaker 1

we get to a SaaS product from ethanol and really want to take advantage of it sooner than that.

Speaker 2

This is Doctor. Pat again here. I wanted to let Scott comment. I think you were asking about our outlook for the ethanol margin outlook for the balance this year. And we're really good for shape as an industry this year.

Speaker 2

We had some very high margins last year. The reduction of corn has impacted co product values, but overall ethanol demand has really been strong and that's mostly been boosted by exports. Year to date, we're at 963 year to date exports. Last year, we finished the year at 1.43. Range of estimates are 1.7 to 1.9.

Speaker 2

From the year, we think it can be all in 1.9. And with that kind of a boost in exports, ethanol value in the global market, it's very inexpensive for U. S. Ethanol. And so we see strong demand and thus bullish upside to ethanol margins going into the balance of the year.

Speaker 2

So it's got a solid year for ethanol results and we think that will continue for the year end.

Speaker 5

I appreciate that color. And then one last one, if possible, just kind of along those lines, kind of update on the trade business and the carry in the market kind of with the largest crops here is just a little more color on the trade contribution as we see in the second half on pretax earnings kind of into the second half twenty twenty four, just kind of more little bit of expectations there from your guidance?

Speaker 1

Sure. I'll take that one. As I mentioned earlier, we see a lot of opportunity coming out of our grain assets, capturing elevation margins and space income going forward. All expectations are we're going to have a large crop, which will benefit us from our assets. And then when you look at the opportunities in the merchandise, thing, it's going to be a little slower than it has been historically.

Speaker 1

But the thing that we always consider is the fact that our end users want to buy green from us. So we're going to have the opportunity. It's just how much opportunity we create from the volatility. It will be the question in the last half. But I think elevation margins are going to be higher than we assumed and likely offset by some lower opportunities with our merchandise.

Speaker 5

Thanks. I'll jump back in the queue. Appreciate the color.

Operator

Our next question comes from Ben Mayhew of BMO Capital Markets. Please go ahead.

Speaker 6

Hey, good morning guys. Thanks I was wondering if you could talk about the demand you're seeing from the animal feed side. And can you also talk about the shift between premium and value pet food channels? Just trying to get a sense of what you're seeing in terms of demand? Thanks.

Speaker 1

Thank you, Ben. I will start with the animal numbers. Obviously, pork industry has had a little bit of struggles. Beef industry is doing very well. And in our specific areas, let's talk about the Western Corn Belt, we're seeing a definite pickup in demand from the beef cattle, dairy markets and expect to see probably in the first half of twenty twenty five on quarter.

Speaker 1

And so I think we have a real good opportunity there. And what was the second part of your question? Sorry, Ben.

Speaker 6

Yes. So also just trying to get a sense of the demand between the premium and value pet food channels. Like do we see a shift to premium or are we seeing a shift to value? And how does that translate to your business model?

Speaker 1

Yes, I apologize for that. Yes, we are definitely seeing a shift from the premium a continued shift from the premium to the value products and that actually fits the Anderson's especially in your dance model better than the premium. We're able to hit some of our with the products that they need for those value products versus the premium ones.

Speaker 2

And I think, Pat, this is Pat again. Just it kind of accentuates what we do as a company. We are merchandisers of domestic grains and we've worked for decades with these customers in the swine, beef cattle, poultry, as well as ethanol, flour milling or pet food ingredient customers. And whether the prices are low on the board margin level, we are focused on the domestic supply for those individual customers and that kind of demand is very robust and those relationships are very strong. So that's critical for us to continue to supply those customers what they need.

Speaker 6

Great. And if I can just ask one more. And I believe it was sort of asked before, but I just want to return to it. So I'm just wondering the various ways that the ag market can sort of correct itself to higher prices. Like does this just happen?

Speaker 6

Are we just waiting on an exogenous shock? Or can the industry does the industry really have the wherewithal to correct oversupply in corn, for instance?

Speaker 2

It's interesting, Ben, being the senior merchant here over 40 years in this business, when I started, it was under $2 in the 80s and always interactions by demand globally. And we've continued to increase demand on a global scale and we've continued to increase production on a global scale. And mother nature always saw its hurdle in one part of the world or another. This last season though we've had a good cross globally coming off the shock and the Ukraine war and imbalance we saw in some parts of the world where prices skyrocketed. We had a 3 year period with elevated prices and elevated farmer income, which is great for the U.

Speaker 2

S. Farmer. Now we have abundant stocks and abundant crops. It's in the market And I think the market will correct by itself. It's no And I think the market will correct by itself.

Speaker 2

It's no one can do anything to make the market change in that regard. It's going to be what production is fine and handles. It looks as though going into the fall, we're going to have a big corn crop in the Midwest. So it should keep very muted sense to especially corn prices going into 25%. So that's the environment we're in right now, more softer overall commodity price.

Speaker 6

Great. Thank you for the color. I'm going to hop back in the queue.

Operator

The next question comes from Jason Miner of Bloomberg Intelligence. Please go ahead.

Speaker 7

Thanks. Good morning, everybody.

Speaker 2

First, just

Speaker 7

on the renewable diesel feedstock trading. I know we were sort of on the path to £2,000,000,000 And I'm just wondering about the sort of the give and take here. I wonder if we're building up some pent up activity that could mean a pop later on or just your thoughts on the path to sort of £2,000,000,000

Speaker 1

Yes, I'll take that. Thank you for the question. We are as confident today as ever that we will get to £2,000,000 The opportunities as we're getting closer to what I'm going to say is max capacity in renewable diesel now is going to shift to better utilization and having run times increase at those plants. But we continue to see quarter over quarter volume increases that would indicate that we are going to be able to achieve that and likely even exceeded.

Speaker 7

Great. I'll stick on that for just a second. There's a little bit of investigation. It looks like underway on some possible counterfeit used cooking oil imports. I was wondering if there's some action taken against some of those.

Speaker 7

So that create opportunities or maybe even hinder some of your feedstock trading or is it just unrelated?

Speaker 1

I would say it's unrelated. The one net effect, if there is a restriction put into place on YouGov, which is what I think you're referencing there, that should drive DCO prices higher. And that will benefit us not only with our R and D feedstock business, but it will also help us on our

Speaker 3

ethanol profitability

Speaker 1

at the plant level. So we see whichever way that comes down, we don't think that affects the Andersons RV feedstock business. And if it does come down against the Yuko, likely will increase our ethanol results.

Speaker 2

And Jason, this is Matt. We're not involved in any importation of any oil or that is alleged that we still can't all imports that have come in. So it's something we don't participate in at all. But we do support our domestic suppliers of EUCO and other products that can feed the renewable diesel customers. So having that gets trained out is probably a good thing overall for the market.

Speaker 7

Got it. Thanks for that. Very clear. So just one other one, kind of stepping back. I think you've touched on a lot of this already.

Speaker 7

But when you look at this result, you kind of look at the second half of this year, how do you feel about the path to the 2025 EBITDA targets? And it sounds like more M and A, I'm hearing you say, but what's moving around and how do the buckets that get us there look?

Speaker 3

This is Brian. I'll start and then maybe Pat can add some color, Bill. I think as mentioned before, yes, we have well, our drilling tool once was about 355,000,000 of EBITDA. So to get to that run rate target goal by the end of next year is going to require more M

Speaker 1

and A than we originally expected.

Speaker 3

Our pipeline remains active and robust. And so if 2 or 3 of these things are able to come to fruition, we can make really good progress. But at the same time, we're going to be continue to be disciplined and responsible. We have a state of the process that we use to review projects. We're going to make sure that they fit strategically and are close to our core and also are going to generate appropriate shareholder returns.

Speaker 3

And we're actually in the process of doing some strategy refresh update work. You probably recall that 3 years ago, we did an deeper dive that ultimately led to us divesting the rail segment. This is more a refresh update, but there's been a lot of Act was not in place 3 years ago. So there's a lot of exciting opportunities in place, but then the timing and sequencing is going to be in a very disciplined logical manner. So I don't know if Pat or Bill can run out any.

Speaker 2

Yes, please. Just to add on Jason, as mentioned earlier, volatility came in our market with very high commodity prices and that's correctly coming in this year. You've heard that from other companies in the office. There's no surprise to that. Our strategy and where we want to play those very consistent and we see opportunities in the ag supply chain for us to grow.

Speaker 2

And now as Brian commented earlier, the Citroen environment has maybe brought some things to market that

Speaker 3

could

Speaker 2

fit for us well. And so we see this opportunity to deploy the cash that we generated over the last 3 years, integrated vessels to grow the company as well as improve the assets we have talked about ethanol plants earlier. So we see the North American Ag supply chain is a really good opportunity for growth long term and we want to continue to invest in that and think that we can reach our EBITDA targets by investing in the asset. So $475,000,000 similar our goal that we think we can achieve. We came up over $400,000,000 a year ago.

Speaker 2

It's somewhat in this lower commodity price environment now, but we're optimistic about the long term as we're in force. So we're pretty positive about how we can deploy capital and make good returns for that investment.

Speaker 7

Great. Looking forward to seeing what materializes. Thanks very much. I'll hop back in queue.

Operator

This concludes our question and answer session. I would like to turn the call back over to Mike Holter for closing remarks.

Speaker 2

Thanks, Alan. We want to

Speaker 1

thank you all for joining us this morning. Our next earnings conference call is scheduled for Tuesday, November 5, 2024 at 11 am Eastern Time when we will review our 3rd quarter results. As always, thank you for your interest in

Operator

conference has now concluded. Thank you for attending today's presentation. You may now

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