A huge decline in CHS Inc.’s ag business segment, which includes fertilizer, was the major reason for reduced third-quarter and nine-month results for the company. Ag business income before taxes was $23.8 million on sales of $4.4 billion for the third quarter ending May 31, 2009, versus the year-ago $179.9 million and $6 billion. During fiscal 2008, CHS recorded a gain of $91.7 million on the company’s sale of stock in CF Industries Holdings Inc.
Company-wide, CHS reported net earnings of $64.6 million on sales of $6.2 billion for the third quarter ending May 31, 2009, versus the year-ago $188.7 million and $9.3 billion, respectively.
Wholesale crop nutrient earnings were off $80.4 million during the third quarter. Revenues were $675.9 million versus the year-ago $935.1 million. Of the $259.2 million decrease (28 percent), $22.5 million was due to decreased average fertilizer selling prices and $236.7 million was attributable to a 25 percent drop in volumes. The drop was blamed on a late planting season caused by excessive moisture in late April. The average sales price of all fertilizers sold reflected a decrease of $15/st (3 percent) over the year-ago period.
CHS said wholesale crop nutrients cost of goods for the third quarter was $682.3 million, versus the year-ago $866.8 million. The company made a lower-of-cost adjustment of $83 million in fiscal 2009, of which $8.2 million remained at the end of the quarter.
Non-grain and non-wholesale crop nutrients had revenues of $703.5 million from the year-ago $729.3 million. The decrease was attributed to the country operations business of retail energy and feed products, partially offset by increased revenues of retail agronomy products. These prices averaged a bit higher than the prior year because contracts entered into by producers earlier in the year, despite the fact that spot prices for most agronomy products this spring, were considerably lower than year-ago levels.
CHS said third-quarter earnings were led by the company’s energy segment, with strong performance from its refined fuels and propane businesses. Third-quarter energy income was $38.8 million, versus the year-ago $12.5 million. Nine-month energy income was $298.7 million, up from the year-ago $165.7 million.
The CHS processing segment results reflected reduced oilseed crushing margins, offset by strong earnings from both the company’s ownership of Ventura Foods, LLC, a vegetable oil-based food processor and manufacturer, and Horizon Milling, LLC, a flour milling joint venture. During the third quarter, CHS wrote off the remaining $3.6 million of its ownership in ethanol producer VeraSun Corp., bringing the loss recorded on this investment in fiscal 2009 to $74.3 million.
Third-quarter processing income was off at $14.2 million from the year-ago $17.1 million, while nine-month results were in the loss column at $29.3 million versus the year-ago income of $65.3 million.
The weak economy also contributed to lower earnings for the company’s insurance, risk management, and financial services businesses, recorded under corporate and other segments.
CHS nine-month net earnings were $284.1 million on sales of $19.1 billion, versus the year-ago $657.6 million and $22.8 billion, respectively.
Nine-month ag income was $56.5 million on sales of $12.76 billion, versus the year-ago $504.6 million and $14.1 billion, respectively.
Wholesale crop nutrient earnings were off $174.8 million during the nine-month period. Revenues were $1.6 billion, down from the year-ago $1.9 billion. CHS said there was a $525.4 million drop in volumes, partially offset by $294.2 million due to increased average fertilizer prices during the nine-month period. The average sales price of all fertilizers sold reflected a $87/st increase over the year-ago period. Overall volumes were off 28 percent for the nine-month period. Cost of goods sold was $1.7 billion, versus the year-ago $1.8 billion.
Non-grain and non-wholesale crop nutrient revenues were up, at $1.4 billion compared to the year-ago $1.32 billion. This reflected increased revenues in the country operations business of retail crop nutrients, crop protection, and feed products, partially offset by decreased prices in retail energy.