ANDE — Q2 2026 Financial Report Analysis

Q2 2026: ethanol plants and a new tax credit carry the quarter; grain merchandising edges up

The Andersons, an Ohio-based grain handler, fertilizer seller and ethanol producer, earned $56.6 million, or $1.65 per diluted share, in the quarter to June 30, 2026, up from $7.9 million ($0.23) a year earlier. Revenue slipped 1.2% to $3.10 billion. For this kind of company revenue says little: grain and ethanol prices pass straight through to both sales and costs, so management itself points readers to gross profit (revenue minus the cost of what was sold), which rose 41% to $223.7 million. Almost all of that gain came from the Renewables (ethanol) segment, helped by $24.2 million of new federal clean-fuel tax credits and by the company now owning 100% of its ethanol plants.

At a glance

• $1.65 EPS vs $0.23 — roughly $0.71 of it comes from tax-free 45Z clean-fuel credits that did not exist a year ago.
• Renewables pretax income $65.0 million vs $17.4 million — the segment's best second quarter on record, on wider ethanol margins and full ownership of four plants.
• Cash $66.5 million vs $351.0 million a year ago, short-term debt $314.4 million vs $104.5 million — the $425 million buyout of the ethanol plants' minority partner was paid for in cash, and the company now leans more on its credit lines.

Key figures

Operating margin here is a thin number by nature: a grain trader moves billions of dollars of crops for a margin of a few cents on each dollar. The filing has no "operating income" line, so the figure above is gross profit minus operating, administrative and general expenses, divided by revenue.

Segment performance

The company now reports two operating segments plus corporate "Other".

Renewables. Gross profit tripled. The 10-Q attributes $40.8 million of the $50.6 million increase to the ethanol plants, on "strong ethanol margins" — the filing cites strong export demand and healthy US consumption widening the "board crush" (the spread between the ethanol price and the corn used to make it), partly offset by higher local corn prices. Another $9.0 million came from the merchandising business, which benefited from market swings around the EPA's final Renewable Volume Obligation (the federal biofuel blending mandate) and higher prices for RINs (tradable credits that prove a gallon of renewable fuel was blended). Below gross profit, other income rose $23.7 million, almost all of it the $24.2 million of Section 45Z clean fuel production credits — a federal tax credit for low-carbon fuel that the company began booking this year. Segment expenses rose $25.1 million, mostly on two one-offs: a $10.6 million write-off of engineering and design work for possible plant expansions, and $11.6 million of extra litigation costs tied to the receivership of a former subsidiary.

One figure the filing does not explain: ethanol gallons sold fell 20% (181.1 million vs 226.5 million) even as the company called this "record production." Renewable feedstock volumes (corn oil, soybean oil and other fats) rose 69%, which is what drove the segment's revenue up 37%.

Agribusiness. Revenue fell 12.5%, which the 10-Q says is mostly deliberate: "portfolio optimization efforts, including actions taken to reduce its participation in underperforming merchandising businesses." Gross profit still rose $14.7 million, of which $9.8 million came from merchandising on higher commodity prices and "favorable market volatility early in the quarter," partly offset by higher fuel surcharges. Fertilizer earned higher margins on lower volumes. Grain elevators were flat year over year: basis (the local premium or discount to futures prices) stayed muted and farmers held on to stored grain. Pretax income rose only $1.0 million because incentive pay lifted expenses $8.1 million, interest rose $2.0 million, and property insurance recoveries were $5.5 million lower than a year ago.

What the headline numbers hide

• About 43% of EPS is a tax credit. The $24.2 million of 45Z credits is booked in other income and is not taxed, so it adds roughly $0.71 to the $1.65 of EPS. The company's adjusted figures keep it in. Strip it out and adjusted EPS would be about $1.44, still far above last year's $0.24, but the credit's value depends on each plant's carbon-intensity score and on how the rules evolve. The 10-Q says changes to that calculation "may significantly affect credits."
• Owning all the plants changed the math. On July 31, 2025, the company bought Marathon's 49.9% stake in its ethanol joint venture (TAMH, now The Andersons Renewables) for $425 million in cash. A year ago, $7.8 million of Renewables' pretax income went to that partner; now all of it stays with shareholders. The cost shows up elsewhere: cash is down $284 million year over year and short-term borrowing is up $210 million, which helped push interest expense up 36% to $15.6 million.
• GAAP vs adjusted: a $0.50 gap. Adjusted EPS of $2.15 excludes $12.8 million of legal settlement costs (the receivership case, now reserved at $15.0 million net of expected insurance, plus a $5.0 million reserve for a commodities/antitrust class action, both settled in principle), $15.7 million of asset impairments, and $0.9 million of deal-related pay. It also takes out $6.7 million of insurance recoveries that helped GAAP profit. The impairments and settlements look like genuine one-offs. The company says it expects no material further loss on either lawsuit.
• A lower tax rate helped. The effective tax rate fell to 19.9% from 32.3%, mostly because the 45Z credits are tax-free. Share count was flat (34.3 million diluted), so buybacks added nothing.
• Cash flow is fine for the first half. Operating cash flow was $94.2 million for the six months against $83.3 million of net income (it was an outflow of $50.7 million a year earlier). This business swings a lot with grain inventories from quarter to quarter, so the half-year view is the fairer one.
• Inventory up 24.5% year over year ($961.0 million vs $771.9 million) while revenue fell. Management attributes this to higher commodity prices, and much of it is readily marketable grain; it is still the main reason short-term borrowing rose.
• A small subsidiary breached a loan covenant. Skyland Grain, 65% owned, failed its debt service coverage ratio test at June 30 and received a waiver after the quarter. Its debt is non-recourse to the parent, so the parent company does not guarantee it, and Skyland's loss is part of why minority interests took a $2.6 million loss this quarter.

Takeaway: The jump in profit is real but narrow. Ethanol margins and owning the plants outright did most of the work, and a single tax credit supplied over 40% of EPS. The grain business, which is still two-thirds of revenue, earned about the same as a year ago.

Year to date

For the first six months, revenue was $5,724.9 million (-1.2%), net income attributable to the company $89.8 million vs $8.1 million, and diluted EPS $2.62 vs $0.24. Renewables earned $104.6 million pretax (including $50.4 million of 45Z credits) and Agribusiness $27.3 million, up from $9.2 million.

Outlook

Management did not give an earnings forecast. It did give these markers:

• Capital spending of about $225 million in 2026, roughly half on growth projects (including a debottlenecking project, which removes production bottlenecks, at the Clymers, Indiana ethanol plant) and half on maintenance. A soybean meal export capability at the Port of Houston is expected to start operating in Q4.
• Full-year adjusted effective tax rate of about 14%–18%, again because of the 45Z credits.
• Ethanol: management expects demand to stay strong as other countries raise blending rates and US blending stays economic. It also expects renewable feedstocks to benefit from demand for bio-based diesel.
• Agribusiness: favorable growing conditions in the eastern corn belt could support harvest volumes this fall, while drier western regions could hurt elevator earnings but create trading opportunities. Above-average corn acreage should support fall fertilizer demand, though the filing notes that farmers' finances could weigh on purchases.

Our read: the second half depends on the fall harvest and on ethanol margins holding up. Two things to watch in Q3: whether the 45Z credit stays near $24–26 million a quarter (it was about $26.2 million in Q1), and whether short-term debt falls back as inventories are sold. Lower debt would ease the higher interest costs that have followed the plant buyout.