CHS reports fiscal 2019 net income of $829.9 Million

Energy, Nitrogen production increases helped drive 7 percent growth in net income

machinery harvesting soybeans

CHS reported net income of $829.9 million for the fiscal year ended Aug. 31, 2019. The results reflect an increase of $54.0 million — or 7 percent — compared to fiscal year 2018.

Key financial drivers for fiscal year 2019 include:

  • Consolidated revenues of $31.9 billion for fiscal year 2019 compared to $32.7 billion for fiscal year 2018.
  • Net income of $829.9 million for fiscal year 2019 compared to $775.9 million for fiscal year 2018.
  • Improved market conditions in our refined fuels business, primarily driven by favorable purchasing of Canadian crude oil.
  • Increased equity earnings from investments, including a $53.5 million increase related to CF Nitrogen. In addition, the CF Nitrogen investment distributed $186.5 million of cash to CHS Inc. in fiscal year 2019.
  • Acquisition of the remaining 75 percent interest in West Central Distribution, LLC, that was not previously owned by CHS.
  • Pressure on the volumes and margins of grain and agronomy products, including increased costs of operations due to ongoing weather- and trade-related issues.
  • A combination of recoveries on previously recorded reserves, impairment charges and gain contingencies, which more than offset additional reserves and impairment charges taken during the year.

“We are pleased with our results on behalf of our owners in fiscal year 2019. We focused on our priorities, built on our strategies, continued to improve our control environment and leveraged the strength of our supply chain to deliver value to the farmers and co-ops that own us,” said Jay Debertin, president and CEO of CHS. “Improving customer experience and innovations led to better results including increased diesel production at our refinery in McPherson, Kansas. Our acquisition of the remaining 75 percent interest in West Central Distribution that we previously didn’t own expanded our distribution channels and grew market access in agronomy.

“When flooding made major riverways impassable, we leveraged our supply chain to reposition fertilizer to ensure our cooperatives and customers had the crop nutrients they needed for spring planting,” he said. “We identified new markets for our owners’ grain to help them navigate the difficult trade situation. And we began construction on a fertilizer storage facility in North Dakota and a grain shuttle loader in Minnesota. In each of these, the driving force was to be our customers’ first choice.

“We know the headwinds agriculture faced in fiscal year 2019 have carried over to fiscal year 2020, and CHS feels those same challenges. No one, however, feels them more and understands the impact more than the farmers and cooperatives that own us,” Debertin continued. “We remain focused on delivering value to our owners and creating connections to empower agriculture. And we’re committed to continuing to raise our owners’ voices to policymakers and elected officials and identifying opportunities to continue to build our business, leveraging our supply chain and helping our owners navigate fluctuating markets.”

Fiscal Year 2019 Business Segment Results

The fiscal year 2019 segment results are:

Energy

Pretax earnings of $618.2 million represent a $166.1 million increase versus the prior year and reflect:

  • Improved market conditions in our refined fuels business driven primarily by favorable pricing on heavy Canadian crude oil, which is processed by our refineries in Laurel, Montana, and McPherson, Kansas.
  • Positive resolution of a gain contingency.
  • The increase was partially offset by gains associated with the sale of the Council Bluffs pipeline and terminal and 34 Zip Trip stores located in the Pacific Northwest during fiscal year 2018 that did not recur during fiscal year 2019.

Ag

Pretax earnings of $43.0 million represent a $31.3 million decrease versus prior year and reflect:

  • Poor weather conditions – including flooding during the spring of 2019 that prevented and delayed planting of crops – and ongoing global trade issues between the United States and foreign trading partners resulted in generally decreased margins and volumes across most of our Ag segment.
  • The decrease was partially offset by gains associated with fiscal year 2019 acquisition of the remaining 75 percent interest in West Central Distribution that CHS previously did not own.
  • The net positive impact of recoveries on previously recorded reserves and impairment charges more than offset additional impairment charges taken during fiscal year 2019.

Nitrogen Production

Pretax earnings of $72.9 million represent a $34.1 million increase versus prior year and reflect:

  • Improved market pricing of urea and UAN, which are produced and sold by CF Nitrogen, of which CHS has partial ownership.

Corporate and Other

Pretax earnings of $81.5 million represent a $24.5 million decrease versus prior year and reflect:

  • A gain from the sale of CHS Insurance during fiscal year 2018 that did not recur in fiscal year 2019.
  • The decrease was partially offset by higher earnings from our investment in Ventura Foods, LLC, and from our financing business.

Read the full press release.

CHS income by segment chart

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