Profit statements

CHS sees big profit gains as global trade and energy demand skyrocket

A hiatus in the US-China trade war and surging demand for petroleum energy are fueling a strong financial rebound at CHS Inc., the country’s largest farmers’ cooperative.

The Inver Grove Heights-based company released its fiscal 2022 first quarter results on Wednesday that reflect a reversal of some of the more troubling trends it faced at the start of the pandemic.

The CHS reported a profit of $ 452 million for the quarter ended Nov. 30, thanks in large part to a global agricultural economy triggered by the trade ceasefire between the United States and China. Its energy sector has also stabilized after being out of balance in 2020 and early 2021 due to the supply-demand imbalance caused by the sudden change in consumers’ transportation habits.

With American farmers now exporting goods to China and higher commodity prices, the company’s agricultural sector is booming. The cooperative’s quarterly net income was more than six times higher than in the same period a year ago.

“This is a record quarter for us,” said Olivia Nelligan, chief financial officer of the company, in an interview. “We are very happy with the momentum we have as we head into the rest of the year.”

Formerly known as Cenex, CHS ranks 103 on the Fortune 500 with companies in energy, nutrients and crop protection, seeds, food and feed ingredients, animal nutrition products. and financial services.

It operates oil refineries and pipelines, and manufactures and sells the Cenex brand of fuel, lubricants, propane and renewable energy products.

The CHS recorded a loss of net income in the second quarter of last year, posting an overall loss of $ 38.2 million which the company said was due to low refining margins in an oil market still in shock of the pandemic.

For the quarter just ended, the CHS said its energy sector’s net profit was $ 69.1 million, compared to the previous year, when it reported a loss of $ 67. , $ 1 million in the energy sector. “Our energy segment continues to see margins and volumes increase due to increasing global demand,” CHS chief executive Jay Debertin said in a statement.

But it was in its agriculture segment that CHS experienced its strongest financial growth, with a profit of $ 286 million in its most recent quarter. This is an increase of more than 70% in the profits generated by agriculture compared to the same period a year ago.

Other Minnesota-based farm businesses, like Cargill and Land O’Lakes, have also recently seen their profits rise as the pandemic economy increases food sales, with consumers spending more time cooking at home. However, Debertin recently said that the CHS benefited more from a rebound in global trade than from the overhaul of consumer habits from the pandemic, which has been discussed often.

“The past few years have seen tough times for agriculture,” Debertin said in an interview at the company’s annual meeting last month. “And I think the farmers took more than their share of the pain when it did. But what we’ve seen is that some of those business issues have reopened. We’ve had crop yields. reasonably good, despite some impact of the drought, and it’s really leading to higher commodity prices and agriculture is really in better shape right now. “

The company has also seen significant increases in profits in its nitrogen production. The only segment where net income fell was in what he calls “businesses and the like” – which was still profitable, but less than a year earlier. The company said this was due to lower share income from its purchase of Ventura Foods, “which has seen less favorable market conditions for edible oils.”

The signs point to continued improvements in the energy sector, Nelligan said, although company executives are taking a cautious view of that potential given the uncertainty surrounding the latest wave of the COVID-19 pandemic.