CHS reports year-end profit decline but remains upbeat for 2018

09 Nov 2017 --- US farmer-owned cooperative and a global energy, grains and foods company, CHS Inc. has reported a heavy drop in income in its year-end results, partly caused by a South American partner entering into bankruptcy-like proceedings.

CHS experienced headwinds reporting a net income of US$127.9 million for the year ending Aug 31, 2017, compared to net income of US$424.2 million for the previous year.

Consolidated revenues totaled US$31.9 billion for fiscal 2017, approximately a five percent increase over consolidated revenues of US$30.3 billion for fiscal 2016.

“It's been a challenging year, but we're committed to meeting the long-term needs of our cooperative owners and customers. We will continue to take prudent actions to ensure the company is well positioned for future opportunities,” says CHS President and Chief Executive Officer Jay Debertin.

For fiscal 2017, CHS experienced a loss before income taxes of US$54.8 million, down from income before income taxes of US$419.9 million in fiscal 2016.

This reflects significant charges that relate to a Brazilian trading partner entering into bankruptcy-like proceedings under Brazilian law, intangible and fixed asset impairments and bad debt and loan loss reserve charges, of which a significant portion related to a single large producer borrower.

“As fiscal 2018 unfolds, CHS is focusing on three key priorities: strengthen relationships with owners and customers, sharpen the focus on operational excellence, and restore financial flexibility,” Debertin adds. 

“I'm happy to report that we've seen progress on these priorities already. We are making significant headway towards managing credit risk consistently across the organization and are leveraging our ongoing asset review to drive decisions that will further strengthen our balance sheet.”

Ag segment
The CHS Ag segment includes domestic and global grain marketing, wholesale crop nutrients, renewable fuels, local retail operations, and processing and food ingredients. CHS Ag experienced a loss before income taxes of US$230.8 million, compared to income before income taxes of US$30.9 million in the previous year. 

Grain marketing earnings decreased primarily due to charges associated with a trading partner in our Brazilian operations entering bankruptcy-like proceedings under Brazilian law. 

Country operations experienced a decrease in pretax income due to changes in reserves related to a single producer borrower and asset impairments, which were significantly offset by higher grain margins and volumes. 

A decrease in processing and food ingredients pretax income was primarily caused by long-lived asset impairment charges. Pretax income for crop nutrients and renewable fuels increased due to higher volumes and higher margins, respectively.

Food
The Foods segment is comprised of the company's investment in Ventura Foods, LLC and generated income before income taxes of US$26.0 million, compared to US$64.8 million the previous year. The decreases were primarily due to reduced margins at Ventura Foods.

Corporate and other
The Corporate and Other category is primarily comprised of the company's wheat milling joint venture and Business Solutions operations. 

Year over year income before taxes increased to US$43.4 million, compared to US$14.7 million during fiscal 2016.