ST. PAUL, MINNESOTA, U.S. — CHS Inc., a farmer-owned cooperative and a global energy, grains and foods company, reported on April 11 a net income of $235.5 million for the first six months of its 2016 fiscal year, down 50% compared to $471.5 million in the same period of last year.
The lower earnings were attributed to the down economic cycles in the agricultural and energy sectors, which have resulted in reduced commodity prices and lower margins globally, the company said. These have combined to significantly reduce CHS profitability. Revenues through Feb. 29, 2016, were $14.4 billion, down nearly 20% from $17.9 billion for first half of fiscal 2015, and primarily reflected lower selling prices for the energy, grain and fertilizer products the company handles.
"Like others in our energy and agricultural space, CHS is experiencing the earnings impact of depressed global prices and reduced demand for refined fuels, grain and fertilizer," said Carl Casale, CHS president and chief executive officer. "We've experienced these types of cycles throughout our more than 85-year history and will navigate this period by finding ways to run our businesses more efficiently and effectively while continuing to serve our owners' and customers' needs."
For the second quarter of fiscal 2016 (Dec. 1, 2015 through Feb. 29, 2016), CHS reported a net loss of $31 million compared with earnings of $92.8 million for the same period in fiscal 2015. Results for the quarter also were attributed to the current down cycle in the company's agricultural and energy businesses. Revenues for the second quarter of fiscal 2016 were $6.7 billion, down 20% compared with $8.4 billion for the second quarter of fiscal 2015.
Through the first six months of fiscal 2016, operating income reflected lower pre-tax earnings in the CHS Energy and Ag segments. These were partially offset by increased earnings in the Corporate and Other category, as well as the addition of the company's new Nitrogen Production segment.
Year-over-year earnings also declined within the CHS Ag segment, which includes the company's crop nutrients, renewable fuels, Country Operations retail, animal nutrition and sunflower processing; grain marketing, and processing and food ingredients businesses. Lower earnings in this segment were largely attributed to soft market conditions across the agricultural sectors CHS serves. Lower margins affected earnings within the crop nutrients, Country Operations retail and grain marketing businesses. In the renewable fuels business, earnings declined primarily due to lower market prices.
CHS processing and food ingredients earnings decreased primarily due to a non-cash impairment charge on assets held for sale.
With one month of operation in fiscal 2016, CHS generated income before taxes in its newly established Nitrogen Production segment of $1.3 million, resulting from its February 2016 equity method investment of $2.8 billion in CF Industries Nitrogen, LLC.
CHS reports results for its business services operations and its two food processing-related joint ventures under the Corporate and Other category. Corporate and Other earnings for the first six months of fiscal 2016 increased over the previous year primarily due to higher earnings associated with the company's investment in Ventura Foods, LLC, a manufacturer, packager and distributor of vegetable oil-based food products.