By Karl Plume
CHICAGO (Reuters) - U.S. grain handler The Andersons (NASDAQ:ANDE) plans to use $550 million from the sale of its rail leasing business to pay down debt and invest in sustainable farming and low carbon initiatives in its core grain and fertilizer units, Chief Executive Pat Bowe told Reuters on Tuesday.
Maumee, Ohio-based Andersons sold its rail leasing business this week to American Industrial Transport Inc. It also aims to sell its railcar repair business within the next year, Bowe said.
The divestments represent a shift in focus at the 74-year-old company, which was looking to expand its rail business as recently as five years ago as grain trading profits slumped.
Grain trading profits have since rebounded as agribusinesses capitalized on supply chain disruptions during the U.S.-China trade war and the coronavirus pandemic. The Andersons' larger rivals, including Archer Daniels Midland (NYSE:ADM) and Cargill, have seen earnings surge this year.
"We're committed to the ag side of our business. ... We feel we can make higher returns for our shareholders in those spaces than we were in rail," Bowe said in an interview with Reuters.
The company will pay down debt, which swelled with its 2018 acquisition of U.S. grain handler Lansing Trade Group.
"We want to get to our normalized 2.5-times debt to adjusted EBITDA ratio. We were on our way to achieve that. Now we'll achieve it sooner," Bowe said.
The Andersons is also eyeing investments to grow its renewable fuels and specialty food businesses and to capitalize on growing trends such as sustainable farming, agricultural carbon trading and plant-based protein, he said.
"We're not going to buy a beef slaughter facility or a soybean crush plant. ... It's about everything in the middle."
Initial moves include supplying more agricultural oils to renewable diesel producers, including The Andersons' ethanol venture partner Marathon Petroleum Corp (NYSE:MPC), Bowe said.
Other investments will focus on organic fertilizers and plant nutrient products that help crops sequester more carbon in soils, he said.