ST. PAUL, MINNESOTA, U.S. — Net income at CHS Inc. in the year ended Aug. 31 increased to $775.3 million, up sharply from $70.9 million in fiscal 2017. Revenue rose to $32.683 billion from $32.037 billion a year ago.
“Our fiscal 2018 results show the progress we are making on the priorities we set for CHS,” said Jay Debertin, president and chief executive officer. “Our year-over-year financial performance shows good improvement, our balance sheet is solid, and our relationships with cooperative owners are strong. The diverse CHS business platform allowed us to deliver improved earnings and enables us to return $150 million in cash patronage and equity redemptions to owners even as we navigated challenging market conditions.”
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 $74.3 million during fiscal 2018, which compared with a loss of $270.2 million a year ago.
CHS said the gains in the Ag business reflected lower demand and uncertainties primarily associated with international trade, which resulted in decreased margins across multiple businesses in the unit. The decreased margins were partially offset by increased margins within the company’s processing and food ingredients business.
Also affecting year-over-year changes were significant reserve and impairment charges recorded in fiscal 2017 that did not recur in fiscal 2018, including the most significant of which was related to the bankruptcy-like proceedings of a Brazilian trading partner.
CHS also said it recorded $26.3 million related to international investments that it has exited or is in the process of exiting.
Looking ahead to fiscal 2019, CHS said its Ag business continues to operate in a challenging environment characterized by lower margins, reduced liquidity and increased leverage that has resulted from reduced commodity prices.
“In addition, trade relations between the United States and foreign trade partners, particularly those that purchase large quantities of agricultural commodities, are strained resulting in unpredictable impacts to commodity prices within the Ag industry now and in the future,” the company noted in a Dec. 3 filing with the U.S. Securities and Exchange Commission. “We are unable to predict how long the current environment will last or how severe it will ultimately be at this time. As a result, we expect our revenues, margins and cash flows to continue to be under pressure during fiscal 2019.”
The company’s Energy segment posted a pretax income of $452.1 million during the year, up from $61.1 million in fiscal 2017.
CHS said the increase in part reflects “improved market conditions in the refined fuels business due to higher refinery margins and favorable crude oil discounts, which drove higher pretax earnings. These benefits were partially offset by planned maintenance activities at the company’s Laurel, Montana, refinery.”
Gains of $65.9 million associated with the sale of the Council Bluffs, Iowa, U.S., pipeline and terminal and 34 Zip Trip stores located in the Pacific Northwest, also were a factor in fiscal 2018 results, CHS said, as was an impairment charge of $32.7 million recorded during fiscal 2017 related to the cancellation of a capital project, which did not recur in fiscal 2018.
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 $106 million in fiscal 2018, which compared with $69.1 million in the same period a year prior.
“As we move into fiscal 2019, we continue to build on the momentum and strong performance we started in fiscal 2018,” Debertin said. “This includes evolving and growing our core businesses in a changing marketplace and capitalizing on the value of this diverse organization to make CHS our owners’ and customers’ first choice. We are focused on serving those who grow food to feed the world.”