CHS: reported fiscal 2016 six-month earnings

St. Paul / MN. (chs) CHS Inc., the United States’ leading agricultural co-op and a global energy, grains and foods company, in April reported net income of 235.5 million USD for the first six months of its 2016 fiscal year (sorry for the late publishing here…).

CHS net income of 235.5 million USD for the period from September 01, 2015 through February 29, 2016, reflected a 50 percent decline from net income of 471.5 million USD for the first six months of fiscal 2015. 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. These have combined to significantly reduce CHS profitability. Revenues through February 29, 2016, were 14.4 billion USD, down nearly 20 percent from 17.9 billion USD 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 CHS President and Chief Executive Officer Carl Casale. «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 (December 01, 2015 through February 29, 2016), CHS reported a net loss of 31.0 million USD compared with earnings of 92.8 million USD 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 USD, down 20 percent compared with 8.4 billion USD 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.

In addition to significantly reduced refining margins, CHS Energy segment earnings for the first six months of fiscal 2016 included a significant non-cash charge to revalue inventories to market value. The company’s lubricants and transportation businesses also experienced lower earnings for the six-month period, while propane earnings increased.

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 USD, resulting from its February 2016 equity method investment of 2.8 billion USD 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.