The Andersons, Inc. (ANDE) Q4 2021 Earnings Report, Transcript and Summary

00:04 Thank you for standing by, and welcome to The Andersons 2021 Fourth Quarter Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speakers’ presentation, there will be a question-and-answer session. [Operator Instructions] As a reminder, today’s program may be recorded. 00:22 And now, I'd like to introduce your host for today's program, Mike Hoelter, Vice President, Corporate Controller and Investor Relations. Please go ahead, sir.

00:32 Thanks, Jonathan. Good morning, everyone and thank you for joining us for The Andersons fourth quarter earnings call. We have provided a slide presentation that will enhance today's discussion. If you are viewing this presentation via 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. 00:58 Please direct your attention to the disclosure statement on Slide 2 of the presentation, 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. 01:29 We encourage you to review these factors. This presentation and today's prepared remarks contain non-GAAP financial measures. Reconciliations of non-GAAP measures to the most directly comparable GAAP financial measure are included within the appendix of this presentation. On the call with me today are Pat Bowe, President and Chief Executive Officer; and Brian Valentine, Executive Vice President and Chief Financial Officer. After our prepared remarks, we'll be happy to take your questions. 01:58 I'll now turn the call over to Pat.

02:02 Thank you, Mike and good morning, everyone. Thank you for joining our call to review our fourth quarter performance. We're excited to review our overall operating results that include a best ever fourth quarter. In addition, some of our reporting segments had record performances, and I'll touch on them as we walk through each business. 02:23 As we noted in yesterday's earnings release, ag fundamentals have been strong during 2021 and our team's performance has been outstanding. We've been focused on solid operational and commercial execution and are seeing the benefits from recent growth in new markets. 02:44 Our adjusted EBITDA from continuing operations of $130 million and $353 million for the fourth quarter and full year respectively were also records. The Trade business had a very strong fourth quarter, earning adjusted pretax income of $26.9 million, which capped a record year for the Group. 03:07 Our fourth quarter results were led by good performance across our asset footprint. The Food and Specialty Ingredients business also had a strong fourth quarter with results better than 2020. Merchandising results remained healthy, but didn't match the exceptionally strong fourth quarter of last year. Also performing well in their full -- their first full quarter were our Swiss trading office and the recently acquired Southwestern U.S. Dairy Feed Ingredients business. 03:40 We've recently renamed our Ethanol segment, Renewables, reflecting the diverse growth opportunities in this broader category of products and services. Renewables had its best fourth quarter since 2013, which was at the height of the ethanol build-out. Crush margins were very strong, as industry production struggled to meet demand. 04:01 We experienced good operational performance at our ethanol plants. Corn oil sales at record prices contributed to our performance and continuing high commodity prices also increased the value of our feed ingredients. Our ethanol and renewable feedstock trading team had a very successful quarter, nearly doubling our 2020 results. 04:30 The Plant Nutrient business closed out its best year ever with a record fourth quarter driven by strong margins within our ag supply chain and industrial product lines. These results reflect optimal weather during application periods, higher yields requiring replacement of nutrients, increased grower income and industry concerns over limited supply. These were partially offset by the labor challenges and input cost inflation that was continued in our manufactured products business. 05:04 I'm very proud of our team and their performance over the past quarter and for the entire year, executing well in these volatile markets and staying focused on serving our customers. We're also excited to have recently been recognized in the Forbes list of America's Best Employers. 05:25 I'm now going to turn things over to Brian to cover some key financial data. When he's finished, I'll be back to discuss our early outlook for 2022.

05:36 Thanks, Pat. We're now turning to our fourth quarter results on Slide number 5. In the fourth quarter of 2021, the company reported net income from continuing operations attributable to The Andersons of $32.8 million or $0.95 per diluted share and adjusted net income of $39.2 million or $1.14 per diluted share on revenues of $3.8 billion. This compares to the fourth quarter of 2020 when we reported net income from continuing operations attributable to the company of $17.3 million or $0.52 per diluted share and adjusted net income of $18.5 million or $0.56 per diluted share on revenues of $2.5 billion. 06:30 Adjusted pretax income attributable to the company nearly doubled to $52.5 million when compared to the fourth quarter of 2020 due to the sizable increase in the performance of Renewables and Plant Nutrient, coupled with continuing strong performance in Trade. Operating, administrative and general expenses increased $10.6 million or 11% for the quarter when compared to the same period in 2020, with much of the increase relating to variable incentive compensation expense on the strong performance, operating costs relating to our new merchandising profit centers, and some stranded costs previously allocated to our Rail business. 07:14 Adjusted EBITDA from continuing operations was $130 million in the fourth quarter of 2021, a quarterly record that exceeded the 2020 fourth quarter by $59 million or over 80%. For the full year, adjusted EBITDA was $353 million, more than double our 2020 adjusted EBITDA, and as Pat mentioned, an all-time record. In addition to the full year EBITDA record, we also set full year records for revenue and gross profit. 07:50 Now let's move to Slide 6 to review liquidity and debt. We generated fourth quarter cash flow from operations before working capital changes of $84.4 million in 2021 compared to $74.6 million in 2020. Full year cash flow of $322 million exceeds our 2020 cash from operations by over $120 million. We have seen a seasonal increase in short-term debt, as the volume of readily marketable inventories has increased from year end 2020 and commodity prices have remained elevated. 08:34 Short-term debt has increased somewhat, but after deducting cash on the balance sheet at year end, our net short-term debt position is below 2020. Futures prices in the grain markets remain high, but down from the levels earlier this year. Typically our highest borrowings occur in the spring as a result of our seasonal businesses. We continue to take a disciplined approach to capital spending and investments, which were $82 million for the year. 09:05 We expect 2022 capital spending to be in the range of $100 million to $125 million. We have reduced total long-term debt by more than $320 million and have met our stated target of having a long-term debt to EBITDA ratio of less than 2.5 times. With lower leverage and a stronger balance sheet, we are well positioned to invest in our core agricultural businesses. 09:33 Now, we'll move on to a review of each of our businesses beginning with Trade on Slide number 7. Trade reported pretax income of $18.3 million and adjusted pretax income of $26.9 million compared to pretax income of $28.3 million and adjusted pretax income of $29.3 million in the same period of 2020. Fourth quarter 2021 adjusted pretax income excluded approximately $8.3 million in asset impairment charges primarily related to sand assets. 10:13 Elevation margins in our grain assets increased significantly from the fourth quarter of 2020. Merchandising income remained solid in the quarter, and our Swiss trading office and recently acquired Southwest U.S. feed merchandising profit centers also contributed to the second half results. Trade had adjusted EBITDA for the quarter of $41.9 million compared to adjusted EBITDA of $45.8 million in the fourth quarter of 2020. For the full year of 2021, Trade recorded a best ever adjusted EBITDA of $150.9 million compared to $95.5 million for the full year of 2020. 11:01 Moving to Slide number 8, Renewables reported strong fourth quarter pretax income attributable to the company of $26.5 million compared to a fourth quarter 2020 pretax loss attributable to the company of $3.5 million. Ethanol crush margins were considerably higher during the quarter and high corn oil prices continue to add to our results. Sales volumes were up as a result of production combined with additional third-party ethanol trading. 11:36 Merchandising of co-products and renewable feedstocks also contributed to the strong results. Renewables recorded a best ever EBITDA of $78 million in the fourth quarter of 2021 compared with $16.2 million in the fourth quarter of 2020. For the full year, Renewables generated record EBITDA of $166.3 million, a significant increase from the $33.3 million of EBITDA it posted in 2020. 12:07 Turning to Slide 9, the Plant Nutrient business posted record fourth quarter pretax income of $15.9 million, up sharply from $3.2 million in the fourth quarter of 2020. For the full year, Plant Nutrient's pretax income was $42.6 million, more than double the 2020 results and also a record for the segment. Continuing the story from earlier in the year, well positioned inventory with continued demand led to solid margins per ton in our agricultural and industrial product lines. 12:46 Our manufactured products business, which includes our turf and specialty and agricycle products experienced a small volume decrease, and was challenged by inflation in labor and raw material costs. Plant Nutrient's EBITDA for the quarter was $23.5 million, more than double the $10.8 million of EBITDA it had in the fourth quarter of 2020. For the full year, EBITDA was $72.9 million, which was up over 54% for the year. 13:20 And with that, I'll turn things back over to Pat for some comments about our early 2022 outlook.

13:27 Thanks, Brian. Coming off a strong 2021, we're excited about the momentum we have coming into this year. Ag fundamentals remain strong and we're well positioned to execute in this environment. Global grain supply and demand is expected to remain tight and volatility and commodity prices are likely to be impacted by any potential supply disruptions. We expect U.S. demand for soybeans to increase, help us fulfill growing global vegetable oil demand and for domestic renewable diesel production. 14:06 Global feed demand for protein production should also continue to be strong. We expect that 2022 ethanol production demand for corn will also exceed 2021. South American weather continues to be our concern and we're also influencing grain volatility worldwide. Northern Hemisphere spring planting conditions will be critical to meet this growing worldwide demand. Our broad Trade portfolio benefits both from merchandising grains for consumptive demand, as well as providing storage space, which we see as continuing complementary opportunities. 14:48 We expect to continue to navigate well in these volatile markets, while maintain a keen focus on risk management. This year-to-date seasonally weak winter driving demand has reduced current ethanol crush margins from the highs of last quarter. We continue to look for opportunities to hedge our crush when available and should benefit early in 2022 from hedges we placed in the fourth quarter. 15:18 Currently, ethanol prices are low, but we expect production declines during the inventory -- I'm sorry, the industry maintenance season and increased driving demand will help us to improve pricing into the second quarter. The feed ingredients we produce are currently supported by high overall grain prices, we expect corn oil values to remain strong due to the growth in renewable diesel. 15:45 Our intention is to continue to expand our presence in renewable diesel feedstock supply. We anticipate that our Plant Nutrient business will maintain momentum into early 2022. Producer concerns over input pricing and availability have generated early orders for the new planting season. Planting decisions by growers that we serve, as well as timing of planting windows will influence our results. 16:19 We're closely monitoring risk in our core fertilizer positions to help guard against any potential fertilizer market price resets. We anticipate further growth in our industrial product lines. A positive nearby outlook and our refresh strategy, which I'll discuss in a minute, makes us excited about our prospects for growth, particularly in sustainable ag opportunities. We remain committed to adding value for our customers, managing risk and operating safely and efficiently. 16:52 We will celebrate our 75th anniversary in 2022. We have grown into a much larger, stronger and more nimble and innovative company in the North American ag supply chain. We look forward to providing continued extraordinary service to our customers, supporting our suppliers and communities, and rewarding our employees and shareholders for many years to come. 17:18 Now I'd like to close our comments by turning to Slide 11 and comment about our growth strategy. Over the last year, we've introduced a refresh strategy with a focus tied to our core agricultural markets. The Andersons play a key role in the ag supply chain, servicing customers from farm to the fork. Agriculture is being impacted by the desire to produce more sustainably and we intend to be a part of that solution, as this impacts all participants in the ag supply chain. 17:56 We're firmly entrenched in the U.S. ag supply chain and are extending our presence into international markets. With our stronger balance sheet, sustainable cash flow and tighter strategic focus, we anticipate being able to participate profitably in these growing markets. We continue to evaluate opportunities for growth within our core agricultural verticals of grain and fertilizer. We executed on two of these projects in the last half of 2021 and have a variety of projects that are within our growth pipeline. 18:33 Another specific area of growth is in the supply of raw materials to renewable diesel manufacturers. We established a trading desk over a year ago supplying new renewable diesel plants, and we look forward to expand our product offerings into this growing sector. We're also enhancing our own corn oil production processes and evaluating technologies to improve yield and quality. 19:00 In addition to focusing on current product lines, we're evaluating opportunities in new growth areas like carbon capture, carbon trading and assisting growers in their carbon reduction efforts. We're also building on our strong position in pulses by exploring additional supply to plant-based protein manufacturers. 19:23 As in the past, premium food and feed product supply chains are areas that we will continue to grow and develop new products. We plan to expand our organic fertilizer offerings through alignment with partners, which should create new organic products for us to market. We're developing innovative new fertilizer specialty products for customers and growers of crops beyond traditional row crops. 19:51 We will also consider M&A within our core areas of strength and product line extensions for our manufactured products including industrial applications. We will continue to take a disciplined approach to capital allocation and stay true to investing within our core. With our strengthened balance sheet and strong team, we're well prepared for this strategic growth. 20:18 With that, I'd like to hand the call back over to Jonathan and we'll be happy to entertain your questions.

20:25 Certainly, our first question -- from the line of Ben Bienvenu from Stephens. Your question, please.

20:30 Hi. Thanks. Good morning, guys, and congrats on a great year.

20:35 Thank you.

20:36 Pat, I want to start following up on your comments around some of the sort of decarbonization endeavors that you guys are looking at. And specifically, I think I understand how carbon capture would influence the CI score of your plant production. I'm curious if I think about assisting farmers with reducing the carbon intensity of their crops, is that something that you can incorporate into like a pathway to the LCFS market in California, as you think about a plant like ELEMENT or something like that or how should we think about the impact of that to the value of your production?

21:17 Very good question, Ben, and thanks for bringing that up. I think this macro trend of decarbonization is with our ag supply chain business across the U.S. and we hear a lot about it. I wasn't specifically talking about carbon capture at an ethanol production asset. We do some of that today with the production of CO2 for beverages, but that isn't the same type of environmental benefit. I think what we're really focusing on is we're working with farmers on because of our fertilizer business and because of our consultation with them about different types of cover crops and different farming practices for them to capture carbon at the farm and be able to trade those carbon credits and move them into the carts -- parts of the markets that people want to pay for that. 22:09 We think we can play an interesting position. We're a little bit of a unique company in that we have a fertilizer business and we work closely at the farm with the fertilizer inputs with growers and our grain buyer and an ethanol producer, so we work across the whole chain to the end market. So we think there's opportunities there. We don't have any major announcements at this time to talk about, but it's something we're all going to be learning about. And we feel there's going to be lots of opportunities in this decarbonization type space or overall environmental focus in agriculture. So stay tuned for more specific actions we're taking. So far, it's been a little bit more trials and working on a smaller scale, but it is definitely an area of opportunity.

22:58 Okay. I understand now. Very helpful. Thank you. My second question, you alluded to this in your comments about hedging some of your ethanol production in the first quarter. Two part question, one is, are you guys able to run at more full capacity utilization? Actually, three part question, I lied, that's part one. Part two, are you able to talk about how much of your production in the first quarter you've hedged? And then bolting on a third part of the question, you talked about kind of a bottoming out of trends in the ethanol market and improving gasoline driving demand. Can you talk about your near intermediate term outlook on the ethanol markets?

23:41 Yeah. Look, you have the million dollar question there is about what the outlook is going to be. And it's always tough when we enter a year to forecast exactly what driving demand is going to be in the ethanol production outlook for the year, especially coming off a couple of COVID years, right. I think we're feeling pretty good, like I said, coming off of, if you want to call it COVID years with reduced driving that we could see some improved driving, we need other forecasts about Big Spring Great Lakes driving and people going back to work. So that's probably some positive news overall for fuel demand. We have a very high priced crude oil environment, as you know right now with geopolitical situation being what it is. 24:25 I think we'd like to see ethanol pick up going into the spring, as we get a return to normal driving miles, but also our seasonal plant shutdowns we'll see across the industry. We have done hedging in the fourth quarter or early in the first quarter of this year. You always look back, we wish you could have done more, right, but we try to take advantage of opportunities when we see them. But we do are probably optimistic about the outlook, because the fundamentals for ethanol look to be good, albeit margins today, during January have softened quite a bit, which is typical for this kind of a year. So I'd say that at this point early in the year and pretty optimistic about what they could be.

25:10 Okay. Great. My third last question is the railcar repair network, any progress there around the divestiture of that business and what is the receptivity of the market if you're free to talk about it?

25:26 Yeah, Ben. Thanks for asking that. This is Brian. I would say yes, we continue to make good progress. I think when we announced that transaction, we said we expected to close the sale repair within -- certainly within a year and more like within six to nine months. And so I'd say we continue to believe that we're on track to get that completed in line with what we've spoken about previously. So I think we feel good at the moment.

25:52 Okay. Great. I'll pass it on. Thank you.

25:55 Thank you. Our next question comes from the line of Ken Zaslow from Bank of Montreal. Your question, please.

26:01 Hey. Good morning, everyone.

26:04 Hi, Ken.

26:07 So you hit your 2023 target quite a bit earlier than you expected. So do you think that you have the foundation from which to all the capital spending in the efficiency programs to use this as a new base? Is this -- how do you kind of frame this year going forward? And again, I know you just put out the 2023 outlook. So it happened earlier than you expected, which is always a good thing, but nevertheless a high class problem. How do you kind of frame the next couple of years now that you're kind of in a better situation than you thought? Are you going to deploy more capital, how do you kind of play it out?

26:50 It's really good question, Ken and like you said a good problem to have. When we set the 2023 outlook targets for $350 million to $375 million, again also that was the time when we set the original goals, including Rail, we would have been over $400 million this year. So we're happy with the results of 2021, hitting $353 million. We're very pleased with that. We're pretty excited about the fundamentals across each of our business. However, we do acknowledge, there were a few market dynamics that happened in '21 that may not fully repeat. As you remember, we had a very steep inverse in the trading business, which we were able to capitalize on, whether that happens next year or not, that remains to be seen, but that was something unique in '21 that worked out very well for us. The margins that we just mentioned in Renewables, Ethanol margins in the fourth quarter were really outstanding. It'd be great if that happens again, but I'm not sure whether we'll see those exact same kind of numbers. 27:53 And then our fertilizer business had a really a one-time run up during the year, prices increased almost 200%. We don't see that happening again next year. Having said that, all three of them come from a much firmer base as you said. And we are holding firm to that 2025 long-term goal of $375 million to $400 million. In order to get there, we'll need some additional growth and bolt-ons like we did this year with our M&A of Capstone and adding our Swiss office. So we hope to continue to add growth to drive that EBITDA numbers out to '24, '25.

28:34 Okay. The second question I have is, you mentioned corn oil technologies and other, and you kind of just referenced, what technologies are you thinking about in terms of, are you looking at just on the oil side, are you looking at other parts of your businesses, where are you in that? And is that something that's incremental that we should start to think about and including that 2025 outlook, like how big are we talking about the technologies, because I think technology seems to be accelerating more than we've ever seen in my last 20 years?

29:09 Right. Good point. And with the historically high corn oil prices, everyone in the industry is trying to squeeze out every last ounce of corn oil, you can get through some technologies. We're putting in place to improve yields, but also, we're looking at different technologies that improve the actual quality of the oil that renewable diesel players would prefer. So those, I'd say those are still in evaluation stage and haven't been put to full scale yet. So those things we're looking to do to really help capture our feedstock supply to renewable diesel, customers not only just in corn oil, but other vegetable oils, fats and greases. We set up this trading desk over a year ago, it's been quite successful. We've expanded by getting several new supply agreements and are continuing to push in that area. We'd like to be one of the important players in that segment. So we see that as an area of growth and one we'll be talking about more this next year.

30:10 And my last question, do you have peers that are a little bit larger than you guys? And they're talking about structurally different earnings power over the next couple of years. Again I know that you're -- you put out your forecast recently -- relatively recently. But the question is, is there a part of that portfolio now that you think is structurally different and then maybe there isn't? And I know maybe it might be too early for you to kind of change that 2025, we haven't gotten there, but are there things under looks like the corn oil there seems to be that the Chinese demand, is there certain things that may be give you a little a bit more confidence in getting to that base and then going further than that? And I'll leave it there and I appreciate it as always.

30:57 Good point, Ken. And I think the overall fundamentals across the ag sector are firmer and may be extending longer. So some people have concerns or is this a one-year blip with new Chinese demand coming in or is this a more longer sustained agricultural demand driven rally, it feels a lot more like the latter. All eyes right now are on weather forecasts in South America, as we've seen some dryness in Brazil, in Southern Brazil and Argentina, which are impacting especially focus on bean yields. So getting the U.S. crop in good position is going to be very important this year. We have a record year of exports of ag products last year and the outlook is that for us to continue in that space. 31:25 So there is a good fundamental base across all of our agriculture, which includes demand from the protein sector, both beef pork and chicken areas are doing well and requiring more feed inputs. There's a lot of interest around transparent supply chains and what kind of products that people are putting into finished food products where they come from. And we're continuing to focus on that in some of the more niche specialty food segment products, which we think that will continue to grow as well. 32:17 And coming off a very high price spike here in fertilizer, it's hard to believe that it will double again, but financial markets are firm. And it's really important to have that available supply. And we think there's some new specialty products, organic products and things like that in fertilizer that will continue to allow us to grow. So I'm giving you a little bit of a run-on answer of some of the things that we're excited about and agree with our peers feel like there is a strong fundamental base friendliness towards agriculture right now, that's going to last longer. It's not a flash in the pan kind of thing. So I think we're well positioned across the ag supply chain to perform strong as we go into the next two, three years.

33:02 Great. Appreciate it. Thanks, guys.

33:04 Thank you. Our next question comes from the line of Eric Larson from Seaport Research. Your question, please.

33:10 Yeah. Good morning, everybody. Congrats on a great year, Pat and Brian and all. So my first question is really a balance sheet question end of the year. I know you had a big tax liability for the sale of Rail. I don't see a corresponding tax liability on your balance sheet. Is that $216 million balance of cash net of what you've paid the U.S. government for your tax liability for sale of Rail?

33:40 So, Eric, this is Brian. So we did in the fourth quarter of '21, paid the tax liability on the gain and the taxable gain related to the Rail sales. So that's now been completed, that was in roughly, it was about $75 million of cash taxes paid on that. And I think probably what you're seeing on the balance sheet is a combination of some timing of check clearing and stuff like that, also a combination of some farmer deferred paids and prepaids stuff like that.

34:11 Okay. Sounds good. So next question is, it looks that 2022, we've had some record prices established on the futures market for the last two weeks, both in corn and/or particularly soybeans and corn. And yet we're still seeing -- it seems like acceleration in purchases from China even at these high prices. Now we also know that they cancel contracts pretty readily as well. Can you fill us in on your outlook for how this demand function is working? We have pretty tight global supplies. It just seems like, the setup here for '22 for you folks is pretty darn strong. So any comments on that, that would be great?

35:12 Yeah. Thanks, Eric. And again, you are right. Last year, on your outlook on fertilizer, you were a little more bullish than we were at the time, so I got to give you credit for that. Soy prices here above $15, they're up 18% year-to-date or something like that as of last week. This Brazil production, the current estimates are down 5 million tons, kind of 44 million tons, and Argentina off maybe 1.5 million tons, that's going to be a factor that will push demand, Chinese demand to the U.S. hopefully. So our demand we saw for U.S. grains that was posted earlier this week was a record, up 18%, $177 million (ph). So not only the value of those commodities, but the volume shipped. Having said that, we had a little softer demand out of China of late, that's kind of normal seasonal slowdown. 36:06 The question will be what will we see like you mentioned some cancellations at higher prices or will they come back strong once you get a clear outlook on what's happening in the South America, that remains to be seen. So, but it's coming off a fundamental strong base on exports. It may be hard for them to keep up that very high pace we saw last year, but nonetheless, domestic demand is really strong. So we think ethanol demand will be higher than corn demand for the year, as well as our protein demand and soy crush will be pushed again by renewable diesel. So U.S. fundamental domestic demand, I think is kind of an exciting thing for our industry. 36:48 So overall fundamental underpinnings of the grain sector are pretty strong. Of course, always volatile, always dependent on the weather forecast at any point in time. So a big issue now is like how many acres will be planted. And I think there's a lot of people talking about switching to beans. Given our fertilizer sales and things we see, we don't see it being quite as dramatic as maybe some others do in the industry, we think we'll still have a big corn crop this year. So we're excited about the outlook for the grain side and for fertilizer. Now I mentioned fertilizer, it's hard to see a spike like we had last year, but the underpinnings of pricing are still pretty firm across the fertilizer sector.

37:32 Yeah. No, I would totally agree. So when you look at -- again I'm going back to the balance sheet, you have $1.8 billion of inventory on the books, obviously that's inflated by the current -- the current grain pricing environment. So if you look at just pure volume tonnage that you have in storage and look at your store -- at your storage income outlook and particularly on the forward curve here obviously, we're still dealing with kind of an inverted curve, how do you -- do you have good grain storage, do you have good outlook for good grain income, storage income, can you kind of put all that in some perspective for us?

38:19 Yeah. That's a fair question, and the answer, of course, is always it depends, right. So the good thing is we had a good harvest last year, and we were able to make good originations for all of our facilities. We've had good pace of shipments of our products, given the boost we saw in demand last year. Really the only carry that we've seen of significant money has been in wheat. We're kind of optimistic that carry couldn't widen, but that remains to be seen. I think we'll probably stay pretty tight and inverted in some of the markets until we get U.S. production really in solid shape for next year. 38:55 So I think to answer your question from a volume standpoint, we're in good shape. The termination of carries kind of remains to be seen for the year. You did make one very good point that we would like to highlight that people look at our balance sheet and at the readily marketable inventories and that's true for all of our colleagues in this industry, with high prices like we have, that number tends to increase quite dramatically. But that's part of the way we do business and we have plenty of borrowing capacity. And this is a good thing for us to have readily available inventories to be able to supply the market. So I'm glad you pointed that out.

39:31 Okay. Thanks, Pat. And just one final question, and I'll pass it on. So, Ivan is getting a little bit more aggressive here at Glencore. They've obviously -- they bought Gavilon and were starting to see more consolidation in the U.S. or in the North American grain merchandising business. The Andersons is a much simpler, cleaner wonderful company today, and congratulations on that, Pat. So is The Andersons a consolidator or are they a -- or will they be a consolidator -- will they be consolidated to someone else?

40:11 Yeah. I don't know it's proper English, but I feel like consolidator better and that is our focus. And we've -- the kind of companies we're adding to our portfolio may not be a blockbuster headline of the size of Gavilon. But we're able with our balance sheet to make some significant moves and we're really targeting areas of growth that we talked about in this new environmentalism as its impact the agriculture, renewable diesel, feedstocks, other things that are kind of on trend, both in the ag markets and with consumers right now. So we think we'll be in a growth mode and really focused on driving the bottom line of our business. And we've done a lot of the hard work in the last few years of cleaning up our asset footprints and making our balance sheet stronger. Now we really want to focus on just driving the future of the company and returning good returns for our shareholders.

41:08 All right. Thanks guys. We'll talk later.

41:11 Thank you. Our next question comes from the line of Ryan Meyers from Lake Street Capital. Your question, please.

41:18 Yeah. Hi, guys. Thanks for taking my questions. So regarding the new Swiss trading office, can you comment on how meaningful of a contributor this has been over the past few quarters and then kind of what you guys see as the growth opportunity here in 2022?

41:33 Sure, Ryan, and thanks for joining the call. So I think we strategically made a decision over a year ago to kind of lengthen our supply chain. When we looked out into the long-term future of demand, you see a lot of that demand growth in the main population centers of the planet and that a lot of it being Middle East, North Africa. So we had historically been a shipper to those markets, and now we are doing direct sales to those geographies and built out a trading team in Switzerland late last year. It's off to a good start. We're doing a good volume of business both out of Eastern Europe and South America and the U.S. It fits in well with our U.S. assets, Houston and the Great Lakes as far as the supply chain. So we're doing this in very logical and methodical way to make sure we do it properly. So it -- near-term, it has added a good amount of earnings for our business. Is it seen as a massive needle mover, I'd say no, but it can be over time, continue to grow for us.

42:37 Yeah, Ryan. This is Brian. I think previously we had talked about the new Swiss trading office and Capstone likely contributing somewhere in the range of $10 million to $15 million on an annualized basis. I would say that continues to be our outlook and probably more towards the higher end of the combination of those two.

42:57 Okay. That's helpful. And then when we look beyond the Swiss office, you kind of alluded to this, but where you guys see a lot of the opportunity to expand international operations further in 2022?

43:08 Not particularly looking to do anything more in international areas. I don't see that as a key focus for our company. We don't want to be in country in different parts of the world. We have some major multinational competitors who are very good at that. We're doing what makes sense for us in our growth line and that's the Swiss office and the pipeline to Africa was a key lane that made sense for us. I see a lot of other domestic opportunities, particularly in diversifying our product mix both in fertilizer and grain, a lot of it relating to environmental impact and sustainability, which is going to be a key focus in the U.S. for some time to come, and we think that's going to create good opportunities for us to grow. So that's kind of our area of focus.

43:58 Got it. And then when you guys think about the $100 million to $125 million guidance for CapEx, is most of this spending going towards growth initiatives or is it just kind of maintenance CapEx or how are you guys thinking about that?

44:13 So I would say that probably $60 million to $70 million, so call it roughly half of that number is maintenance capital and the remainder would be growth. So if I had to ballpark maintenance would be call it $60 million to $75 million.

44:27 And I think it's important to note, Ryan, and building on Brian's comment that I think when we really tightened our belts two and three years ago when times were tougher, we have some catch-up to do on maintenance of our facilities, we're in good shape. We want to make sure we really are running well and we have some big capital projects we want to get done at our assets here this next year, which will be important for us to make sure we're operating really efficiently in this kind of tight market, where we're going to need that capacity. So it's timely execution of that maintenance capital.

45:02 Okay. And then last one for me kind of a housekeeping item. So in the Renewables segment, were there any material non-cash gains included in EBITDA during the quarter?

45:14 So we did have reversal of mark-to-market come through in the quarter. I don't know the answer off the top of my head, but we can certainly get that for you.

45:28 Okay. That's all I had. Thanks guys.

45:32 Thank you. [Operator Instructions] And seeing no further questions, I'd like to hand the program back to Mike Hoelter for any further remarks.

45:48 Thanks, Jonathan. We want to thank you all for joining us this morning. Our next earnings conference call is scheduled for Wednesday, May 4, 2022 at 11 A.M. Eastern Time when we will review our first quarter results. As always thank you for your interest in The Andersons, and we look forward to speaking with you again soon.

46:05 Thank you, ladies and gentlemen for you participation at today's conference. This does conclude the program. You may now disconnect. Good day.