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Grain Group
We are strengthening our competitive position by reaching into new regions and increasing our storage capacity while continuing to stay close to the farm gate. In addition to the new physical assets, we are obtaining market intelligence that, when combined with our central merchandising operations, enhances our ability to be both proactive and responsive for our customers to provide them with relevant value-added services beneficial to their success. The Grain Group is well positioned to pursue growth opportunities and provide solid returns. In 2012, we underwent substantial growth, increased our bushels sold and achieved operating income of $63.6 million, despite lower space income. The prior year's operating income of $87.3 million included unprecedented wheat basis appreciation and was not impacted by the drought.
Rail Group
With a diversified fleet of railcars capable of moving a variety of products across North America, we are well positioned to meet the transportation needs of our customers. Our growing railcar repair network and the types of services we offer continue to garner a national reputation. Fortified with a renewed confidence in the sustainability of transporting goods by rail, we are in a strong position to seize the opportunities of a strengthening economy. The Rail Group is already seeing a significant improvement in operating income posting a record $42.8 million in 2012, eclipsing its 2011 operating income of $9.8 million. In 2012, the rail fleet increased more than 600 cars to approximately 23,300 cars.
Plant Nutrient Group
By enhancing our existing assets to improve capacity, efficiencies and to meet the 24/7 service expectations of our customers we are strengthening our position as a partner of choice. The growth of our geographical footprint enables us to participate in core markets and to serve customers throughout the Midwest and Southeast, expanding our markets and enlarging the range of products and services for our customers. Leveraging our geographical reach, utilizing our new skill sets and nurturing new relationships enhances our position for future opportunities. This was evident in 2012 as the Plant Nutrient Group achieved record operating income of $39.3 million, surpassing 2011 earnings by $1.0 million. Both income and revenues increased during the year, despite lower margins vs. prior year.
Ethanol Group
Amidst the high level of uncertainty and volatility currently within the ethanol industry, we continue to strengthen our position in the marketplace by developing ancillary products and implementing operational efficiency improvements. Leveraging our proficiency in commodity trading to effectively manage the price at which we purchase corn inputs keeps us well positioned to manage the current challenges and pursue future growth. In 2012, the Ethanol Group had an operating loss of $3.7 million, compared to operating income of $23.3 million the prior year. The operating income decline was due to significantly lower ethanol margins resulting from weak gasoline demand, an oversupply of ethanol and high corn costs caused by the 2012 drought.
Turf & Specialty Group
With an acquisition late in 2012 that doubled our production capacity, we claimed a prominent position in the cob products industry. By continuing to introduce new, different and proprietary products, we are strengthening our position in the professional turf, horticulture and agriculture industries. In 2012, the Turf & Specialty Group's full year operating income was $2.2 million, compared to $2.0 million in 2011.
Retail Group
Focusing on differentiation in our respective markets, we continue to provide goods and services to support the needs of our customers, including a new look and product offerings in our housewares category. In 2012, the Retail Group had an operating loss of $4.0 million, which included charges associated with closing its Woodville store. In the prior year, the group's operating loss was $1.5 million.
With a proven growth strategy, diversification in complementary markets, a focused management team and strong financials, we are well-positioned to seize future opportunities resulting from global agricultural-related demand to continue growing our businesses while at the same time weathering the drought's impact on the agriculture market.
The old adage “no matter how far you go, you’re never far from home” applies to The Andersons’ growth in recent years. We have grown in a deliberate fashion during the past decade within our core segments. By combining our market knowledge and customer emphasis, we are presenting our value-added services in a manner that addresses the nuances of each new region and market. At the same time, we are leveraging the attributes of both our recently acquired and legacy locations. We are appropriately reinvesting in our existing infrastructure to expand and increase our capabilities, improve efficiency and quality, develop our product offering and enhance service to our customers. Our growth pipeline remains robust and we are well-positioned to selectively pursue both acquisition and greenfield opportunities.
Our desire to support our customers' long-term needs is at the core of our purposeful growth. That emphasis, coupled with our belief that the long-term fundamentals in our industries continue to be strong, guides our decisions regarding where and how we invest our capital. We evaluate our investments against the backdrop of the need to consistently improve earnings while maintaining balance sheet liquidity and flexibility. We design our capital structure to both support appropriate growth while maintaining a modest debt profile. Given the commodity nature of many of our businesses, we recognize that any new capital undertaking must present a compelling value. Our relationships with financial institutions, partners and customers strengthen our position for future growth.
Successfully growing a company requires more than just adding bricks and mortar. We are fortunate to have skillful employees who are aligned with the company's values and as a result are able to apply their market expertise and ingenuity to serve our customers. As our team unites new members with long-time veterans, we are blending new ideas with tried and true methods. We are applying a disciplined, measurable approach to continuously improve, while at the same time leveraging individual initiative and our entrepreneurial spirit to continually challenge the status quo. The alignment of senior leadership at both the corporate and group levels provides a clear, unified strategy and positions us well to keep up with the needs of a larger, more geographically diverse organization.
While the industries we serve are complementary to one another, they are just distinct enough to provide a counterbalance. While certain areas of our business are managing challenges from external forces, others are maintaining or gaining momentum. The impact of the same market conditions can vary even between business segments serving essentially the same customers. We believe our diversity enables us to grow amidst challenging times. At the same time, our similarities help us apply key competencies and market knowledge across adjacent industries. Our corporate structure provides financial strength and expertise in essential services beyond what any one business could support on its own. We leverage our differentiated go to market strategies by sharing best practices within our organization and amongst our partners.
