CHS earnings fall as ag business profit softens

by Eric Schroeder
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ST. PAUL, MINN. — Net income at CHS Inc. fell 17% to $343,707,000 in the first quarter of fiscal 2013 ended Nov. 30, down from $416,208,000 in the same period a year ago.

Revenues, meanwhile, increased 20% to $11,709,938,000 from $9,734,159,000. CHS said the sales gain reflected continuing strong values for the energy, grain and crop nutrients products that make up the majority of CHS’s business.

The company’s Ag Business segment, which consists of CHS’s agronomy, grain marketing and retail operations, posted operating earnings of $122,639,000 in the first quarter of fiscal 2013, down 4% from $128,107,000 in the same period a year ago. Sales in the segment totaled $8,501,741,000, up 32% from $6,449,821,000 a year ago.

“Our grain marketing earnings decreased by $14.8 million during the three months ended Nov. 30, 2012, compared with the three months ended Nov. 30, 2011, primarily as a result of decreased margins,” CHS noted in a Jan. 10 filing with the Securities and Exchange Commission. “Our processing and food ingredients businesses experienced an increase in earnings of $5.6 million for the three months ended Nov. 30, 2012, compared to the same period of the previous year, primarily related to increased margins from our soybean crushing and refining businesses.”

The company’s share of earnings from its 50% ownership of Ventura Foods, L.L.C., a vegetable oil-based food manufacturing business, improved due to stronger margins, while those from its 24% CHS share of Horizon Milling, L.L.C., a wheat miller, remained flat compared with the same period in fiscal 2012.

Energy earnings in the first quarter of fiscal 2013 fell 26% to $296,915,000 from $398,903,000, while sales decreased 2% to $3,324,228,000 from $3,396,974,000. CHS said that during the three months ended Nov. 30, the company sustained a loss on the mark-to-market for its refinery margin hedges of $42.3 million compared with a net gain of $113 million during the same period of the previous year. Without this impact, margins in the company’s refined fuels would have improved, CHS said.
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