Andersons (ANDE) Q4 2025: Renewables EBITDA Jumps 68%, Anchoring Multi-Year Expansion

2026-02-18 | By EarningsIQ Research

Renewables delivered a decisive EBITDA surge, offsetting agribusiness softness and validating Andersons' capital allocation shift. The company’s full-ownership ethanol strategy and disciplined asset investment drove record fourth quarter profitability, while management outlined a path to higher run-rate EPS and targeted growth in both segments. Investor attention now turns to execution on capital projects and policy tailwinds in 2026.

Summary

• Renewables Outperformance: Full-ownership of ethanol assets drove a step-change in segment profitability.
• Strategic Project Pipeline: Major capital projects in processing and export infrastructure are set to come online in 2026.
• Policy and Market Watch: Biofuels incentives and export clarity will be central to next year’s upside.

Performance Analysis

Andersons posted record fourth quarter profitability, propelled by a sharp rebound in renewables. Renewables pre-tax income rose to $54 million from $17 million in the prior year, with EBITDA up 68 percent to $69 million. This step-change was driven by the company’s move to full ownership of its four ethanol plants, which delivered record production volumes and improved board crush margins. The renewables segment now comprises over half of total company EBITDA, underscoring a business model pivot toward value-added processing and stable cash flow generation.

Agribusiness results were more mixed. While large Western harvests enabled asset-based income and favorable basis values, merchandising opportunities remained limited due to well-supplied, low-price grain markets. The Skyland acquisition, grain handling and export expansion, and premium ingredients contributed positively, but overall segment EBITDA declined year-over-year. Cash flow from operations remained robust, supporting continued reinvestment and project execution despite a modest increase in short-term debt from the ethanol acquisition.

• Renewables Margin Expansion: Board crush margins increased 15 cents per gallon, partially offsetting higher input costs.
• Skyland Integration: Skyland contributed just under $20 million EBITDA, in line with revised expectations and poised for further normalization.
• Capital Allocation Shift: Strategic investments in processing, storage, and export infrastructure are being prioritized over incremental merchandising expansion.

The company’s balance sheet remains conservative, with long-term debt to EBITDA at 1.8x, supporting flexibility for further M&A and internal growth projects. The fourth quarter’s strong operational execution sets a foundation for the targeted run-rate EPS above $4.30 as Andersons enters 2026.

Executive Commentary

Strategic Positioning

1. Renewables Ownership and Scale

Full ownership of ethanol plants is now the cornerstone of Andersons’ growth thesis. The company’s move to consolidate ethanol assets has structurally increased segment profitability and cash flow, with management targeting further efficiency, yield, and carbon intensity improvements. The recently announced expansion at the Climbers Indiana facility will add 30 million gallons of annual capacity by 2027, while investments in feedstock storage and blending are set to unlock new supply channels for bio-based diesel and specialty feed markets.

2. Asset-Backed Agribusiness Model

Andersons is doubling down on physical asset leverage in grain handling, processing, and export. The Skyland acquisition and Port of Houston expansion are designed to capture basis appreciation and export arbitrage, especially in the Western footprint. The company is also expanding mineral processing and specialty grain cleaning to support consumer packaged goods (CPG) customers, signaling a pivot toward higher-margin, value-added channels.

3. Policy Leverage and Biofuels Incentives

Regulatory tailwinds are central to Andersons’ forward earnings power. The 45Z tax credit is expected to contribute $90 to $100 million in 2026, with the removal of indirect land use penalties and ongoing RVO (Renewable Volume Obligation, a regulatory requirement for biofuel blending) clarity providing additional upside. Management is actively positioning to benefit from year-round E15 legislation and new sequestration opportunities, which could further enhance the renewables margin structure.

4. Disciplined Capital Deployment

Management is maintaining a conservative leverage profile while accelerating strategic project spend. Long-term debt to EBITDA remains well below target, and capital allocation is focused on projects with clear visibility to returns, including processing upgrades and export infrastructure. The company continues to evaluate M&A, but only for assets that meet strict strategic and financial criteria.

Key Considerations

The quarter showcased Andersons’ ability to generate cash and earnings across volatile ag cycles, but execution and policy will dictate the next leg of growth.

Key Considerations:

• Renewables Profitability Step-Change: Full-ownership model delivered record volumes and margin expansion, now the largest EBITDA contributor.
• Skyland and Western Asset Leverage: Basis appreciation and export arbitrage are critical to sustaining agribusiness earnings normalization in 2026.
• Processing and Export Project Execution: Timely completion of Port of Houston, mineral processing, and feedstock upgrades will determine operational leverage.
• Biofuels Policy and 45Z Credit: Earnings sensitivity to regulatory clarity and incentive realization remains high, with management highlighting $90–100 million in expected credits for 2026.

Risks

Andersons faces material risks from regulatory uncertainty, especially around biofuels policy, RVOs, and the timing of E15 legislation. Grain margin volatility, farmer selling delays, and input cost inflation (notably natural gas and corn basis) could pressure both segments. Execution risk around major capital projects and M&A integration remains, as delays or cost overruns would impact profitability and cash flow. Management’s optimism is grounded in current market signals, but external shocks or policy reversals could quickly alter the outlook.

Forward Outlook

For Q1 2026, Andersons expects:

• Seasonally lower ethanol board crush, but continued export strength and operational efficiency gains.
• Agribusiness to benefit from basis appreciation in the West and higher elevation margins in the East, with fertilizer volumes dependent on spring planting dynamics.

For full-year 2026, management raised its run-rate EPS target above $4.30 and reaffirmed its long-term goal of $7 EPS by 2028:

• Completion of major capital projects in processing and export infrastructure.
• 45Z tax credits projected at $90–100 million, with further upside from regulatory clarity.

Management highlighted several factors that will shape the year:

• Timing of farmer grain sales and the impact of farm gate economics.
• Biofuels policy developments and the realization of new incentives.

Takeaways

Andersons’ business model pivot to renewables and asset-backed agribusiness is delivering tangible earnings strength, but the path to multi-year growth relies on flawless execution and favorable policy outcomes.

• Renewables as Growth Engine: Full-ownership of ethanol assets is now the economic anchor, with further yield and efficiency upside tied to ongoing plant investments and carbon intensity reduction.
• Agribusiness Normalization Hinges on Exports and Basis: Western asset leverage and export infrastructure upgrades are essential to recapturing segment profitability, with Skyland poised to reach its original EBITDA target range.
• Policy and Project Execution Are the Swing Factors: Realizing the full value of 45Z credits, completing major projects on time, and navigating policy shifts will determine whether Andersons can sustain its new earnings trajectory.

Conclusion

Andersons exits 2025 with a structurally stronger earnings base, fueled by renewables outperformance and a disciplined asset investment strategy. The company is well positioned for 2026, but investors should closely monitor execution on capital projects and the evolving policy landscape, which remain the key levers for value creation and risk.

Industry Read-Through

The Andersons’ results underscore the growing importance of biofuels integration and asset-backed grain handling in the ag value chain. The outperformance of renewables, driven by full-ownership and regulatory incentives, signals a broader industry pivot toward value-added processing and margin insulation from commodity cycles. Competitors with exposure to U.S. ethanol and specialty processing will be watching policy developments and capital allocation trends closely. Export infrastructure and basis management are rising in strategic importance, with implications for both traditional grain merchants and emerging biofuels players as they navigate a more policy-driven and asset-intensive landscape.

ANDE Consumer Staples Agriculture Biofuels Renewables Asset-backed Export Infrastructure Policy Risk