CHS Inc. reported net income of $137.3 million on revenues of $7.33 billion for the first quarter ending Nov. 30, 2008, versus the year-ago $300.9 million and $6.5 billion, respectively. The higher revenues were attributed to higher values for crop nutrients and grain products.
The Ag Business segment, which includes the CHS crop nutrient business, saw a big drop in earnings (income before taxes), to $19.7 million on sales of $4.95 billion from the year-ago $204.7 million and $3.83 billion, respectively. However, the year-ago period included a sale of stock in CF Industries Holdings with a pre-tax gain of $91.7 million.
CHS noted that market prices for crop nutrients fell significantly during the quarter, and that coupled with a wet fall season, the company had higher quantity inventories on hand at the end of the quarter than is typical. In order to reflect net realizable values as of Nov. 30, CHS recorded $84.1 million of lower of cost or market adjustments in the Ag Business related to crop nutrients and feed and farm supplies inventories based on committed sales and current market values. CHS said the share of the adjustment for wholesale crop nutrients was $56.8 million. Crop nutrient values were at $346.7 million as of Nov. 30, compared to the year-ago valuation of $192.8 million.
Wholesale crop nutrient revenues were $633.6 million for the first quarter, up from the year-ago $533.5 million. Of this $100.1 million increase, $310.4 million is due to increased average fertilizer selling prices and $210.3 million is attributable to decreased volumes during the quarter. The average sales price of all fertilizers sold reflected an increase of $326/st (96 percent) over the year-ago quarter. Volumes decreased 39 percent versus the year-ago quarter.
CHS said that Agriliance LLC, the retail chain that it still jointly owns with Lake O’Lakes Inc., had a first quarter net loss of $11.7 million on sales of $96.4 million, versus the year-ago loss of $23.5 million and $210.6 million, respectively.
The CHS Energy segment saw improved earnings to $184.7 million, up from the year-ago $108.5 million, while the Processing segment reported a loss of $52.7 million compared to year-ago earnings of $20.2 million. Also in the Processing segment, CHS recorded a $70.7 million impairment on the value of its ownership in VeraSun Energy Corp., the ethanol producer that is in bankruptcy. This, coupled with the inventory adjustments, brings total company impairments up to $155 million. CHS previously recorded a $71.7 million impairment due to VeraSun in the fourth quarter ending Aug. 31, 2008.