Net income in the nine months ended May 31 totaled $178.5 million, down 59% from $425.8 million in the same period a year ago. Revenues for the nine months totaled $24 billion, up 8% from $22.2 billion.
|Jay Debertin, president and CEO.
“Despite the economic challenges in agriculture and energy, several of our underlying businesses are having a solid year,” said Jay Debertin, president and chief executive officer. “Unfortunately, we’ve experienced three negative one-time events this fiscal year that have resulted in charges leading to a loss in the third quarter and a significant earnings decline for the year to date. In response to these events, we are implementing measures to better identify risk management gaps in some of our processes and when necessary enhance our ability to effectively manage our risks.”
He added, “Throughout the world, agriculture and energy markets remain unpredictable and our owners and customers depend on us, so it’s our job to be prepared to succeed in any economic environment. That’s why we’re committed to improving our risk management practices across our businesses. Additionally, we are refocusing on the areas we know best and in parts of the world where we need to be to serve the U.S. farmer. We will do this based on the core values and tenets CHS has built on for more than 85 years: trust, partnership and opportunity.”
One of the one-time events that had a significant impact on earnings in the third quarter involved a $230 million charge driven by a trading partner in Brazil entering bankruptcy proceedings under Brazilian law. CHS said the event played a major part in the cooperative’s Ag segment sustaining a loss of $221.2 million in the third quarter, which compared with income of $24.2 million in the same period a year ago.
CHS said its wholesale crop nutrients and renewable fuels businesses experienced decreases due to lower margins during the quarter, while processing and food ingredients business earnings fell as a result of impairment charges taken on certain assets during the third quarter.
The company’s Foods segment, which previously was reported as a component of Corporate and Other, posted pre-tax earnings of $7 million in the third quarter, down from $17 million a year ago. CHS said the decline reflected reduced margins at Ventura Foods LLC, which is the investment that makes up the Foods segment.
Meanwhile, the cooperative’s Corporate and Other segment generated pre-tax income of $5.6 million, which compared with $18.9 million during the same period a year ago. Earnings in the category primarily are derived from CHS’s equity investment in the Ardent Mills, LLC wheat milling joint venture and the cooperative’s Business Solutions operations.
In the Energy segment, CHS sustained a loss of $9.3 million, which compared with income of $109.4 million in the same period a year ago.
“Results were primarily due to significantly reduced refining margins and a $32.7 million charge incurred due to a cancelled capital project,” CHS said. “The company’s propane, transportation and lubricants businesses experienced decreases in earnings compared to the same period a year ago.”