CHS earnings buoyed by ag, energy segment

by Holly Demaree-Saddler
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CHS facility
Photos courtesy of CHS.
 
ST. PAUL, MINNESOTA, U.S. – Earnings at CHS Inc. for the third quarter were pushed up due to higher operating margins in the company's Ag and Energy segments, primarily driven by higher margins in feed and farm supplies, crop nutrients, processing and food ingredients and refined fuels.

For the third quarter ended May 31, CHS posted net income of $229.3 million, compared to a loss of $45.2 million in the same period a year ago. Revenue for the third quarter was $9 billion, up from $8.6 billion for the third quarter of fiscal 2017.

For the first nine months of fiscal 2018, CHS posted a net income of $576.1 million, up compared to $178.5 million for the same period a year ago.  Revenue for the first nine months of fiscal 2018 were $23.9 billion.

Jay Debertin
Jay Debertin, CHS president and CEO
"Thanks to the hard work of many throughout CHS, we've made great strides this year in strengthening relationships, optimizing operations and improving results from our core businesses," said Jay Debertin, CHS president and CEO. "The steps we've taken will better position us to navigate the inevitable cycles in agriculture and energy. I am proud of our team and their dedication and commitment to operating with excellence."

The Ag segment, which includes domestic and global grain marketing and crop nutrients, renewable fuels, local retail operations, and processing and food ingredients businesses, generated pretax income of $111.4 million for the quarter compared to a loss of $221.2 million for the same period in the previous year.

In addition to the non-reoccurrence of significant reserve and impairment charges recorded in the third quarter of fiscal 2017, the $332.6 million increase was also the result of increased volumes and margins in feed and farm supplies, processing and food ingredients and retail operations. CHS noted the increase was partially offset by reduced crop nutrients volumes resulting from the compressed planting season across the U.S. Midwest. 

Energy generated a pretax income of $95.4 million during the third fiscal quarter compared to a loss of $9.3 million during the same period last year.

“The $104.7 million increase reflects improved margins in the refined fuels business, and gains associated with the sale of the Council Bluffs pipeline and refined fuels terminal in Council Bluffs, Iowa, U.S. and 34 Zip Trip stores located in the Pacific Northwest,” CHS said. 

The company’s Corporate and Other segment include the company's wheat milling joint venture (Ardent Mills), its investment in Ventura Foods, LLC (Ventura Foods), and its financing and hedging operations. Prior to its sale on May 4, 2018, the company's insurance subsidiary was also included within Corporate and Other. The combined businesses generated pretax income of $63.8 million in the third quarter compared to $12.6 million in the same period a year prior.

The $51.2 million increase was due to a gain on the sale of CHS Insurance which was partially offset by lower Ventura Foods earnings and reduced interest revenue from the company's finance business.

"We're on the right path, and the cooperative system's strengths and capabilities were evident during the compressed spring season," said Debertin. "We will continue to focus on meeting the needs of farmers and rural communities, leveraging our strong supply chain to help improve profitability for our owners."
 
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