CHS Q1 net falls 54% on sluggish ag earnings

by Eric Schroeder
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ST. PAUL, MINN. — Net income at CHS Inc. in the first quarter ended Nov. 30 fell to $137,251,000, down 54% from $300,900,000 in the first quarter of fiscal 2008.

Revenues for the period, meanwhile, rose 19% to $7,733,919,000 from $6,525,386,000 in the same period a year ago. Improved sales were attributed to higher prices for commodities such as grain and crop nutrients.

The company’s Ag Business segment, which consists of CHS’s agronomy, grain marketing and retail operations, posted operating earnings of $24,589,000, down sharply from $118,105,000 in the first quarter of fiscal 2008. Sales in the segment totaled $4,953,722,000 in the most recent quarter, up 29% from $3,835,251,000 a year ago.

"Our grain marketing earnings decreased by $32.6 million during the three months ended Nov. 30, 2008, compared with the same three-month period in fiscal 2008, primarily from net decreased grain product margins and reduced earnings from our joint ventures," CHS said in a Jan. 13 filing with the Securities and Exchange Commission. "Volatility in the grain markets created opportunities for increased grain margins during the first quarter of fiscal 2008."

Earnings within CHS Processing operations, which include its oilseed processing, wheat milling, food production and renewable fuels operations, rose during the quarter. Operating earnings in the third quarter were $11,559,000, up from $4,682,000, while sales rose to $310,890,000 from $243,296,000.

CHS said earnings from oilseed processing operations increased $7.2 million during the first quarter behind improved margins in crushing and refining operations, while earnings from wheat milling joint ventures declined by $3.1 million. The company’s share of earnings from Ventura Foods, its packaged foods joint venture, fell $5.5 million during the quarter.

Energy earnings rose to $194,068,000 from $124,387,000 during the first quarter. Sales were $2,550,552,000, up only narrowly from $2,521,688,000.

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