CHS reports net loss of US$45.2m in Q3, underlying business performance stable

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17 Jul 2017 --- CHS Inc. has reported a net loss of US$45.2 million for the third quarter of its 2017 fiscal year (three-month period ended May 31, 2017), compared to net income of US$190.3 million for the same period one year ago. Consolidated revenues for the third quarter were US$8.6 billion, compared to US$7.8 billion for the third quarter of 2016, representing a 10 percent increase. 

“Despite the economic challenges in agriculture and energy, several of our underlying businesses are having a solid year,” said CHS President and Chief Executive Officer Jay Debertin. “Unfortunately, we've experienced three negative one-time events this fiscal year that have resulted in charges leading to a loss in the third quarter and a significant earnings decline for the year to date. In response to these events, we are implementing measures to better identify risk management gaps in some of our processes and when necessary enhance our ability to effectively manage our risks.”

Pretax income for the nine-month period ended May 31, 2017, was US$40.0 million, compared to US$407.9 million for the nine-month period ended May 31, 2016. The decrease is primarily the result of charges related to a Brazilian trading partner entering into bankruptcy proceedings under Brazilian law, loan loss reserve charges, of which a significant portion relate to a single large producer borrower, and asset impairment charges. 

Revenues for the nine-month period ended May 31, 2017, were US$24.0 billion, compared to US$22.2 billion for the nine-month period ended May 31, 2016, an increase of 8 percent.

“Throughout the world, agriculture and energy markets remain unpredictable and our owners and customers depend on us, so it's our job to be prepared to succeed in any economic environment,” said Debertin. “That's why we're committed to improving our risk management practices across our businesses. Additionally we are refocusing on the areas we know best and in parts of the world where we need to be to serve the US farmer. We will do this based on the core values and tenets CHS has built on for more than 85 years: trust, partnership and opportunity.”

Grain marketing earnings decreased primarily due to a US$230 million charge driven by a trading partner in Brazil entering bankruptcy proceedings under Brazilian law. The wholesale crop nutrients and renewable fuels businesses experienced decreases due to lower margins. The processing and food ingredients business earnings decreased primarily due to impairment charges taken on certain assets during the three months ended May 31, 2017. 

The company's foods segment, previously reported as a component of corporate and other, generated pretax earnings of US$7.0 million during the third quarter of fiscal 2017, compared to US$17.0 million in the same period the previous year. The decreases were primarily due to reduced margins at Ventura Foods, LLC, the investment that makes up the foods segment.

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