CHS reports lower ethanol margins, increased production volumes

By Kassidi Andres | January 18, 2016

CHS Inc. has released financial results for the fiscal first quarter of 2016, the three months ended Nov. 30. The company reported $385.3 million in revenue from its renewable fuels business, down $109 million, or 22 percent, compared to the same period of the previous year.

According to information filed with the U.S. Securities and Exchange Commission, the company experienced an aggregate $65 million, or 28 cent-per-gallon, decrease in the average sales price of its marketing and production renewable fuels products for the quarter, compared to the same period of the prior year. The decrease was also comprised of an aggregate $44 million, or 9 percent, decrease the company’s marketing and production renewable fuels sales volumes

Renewable fuels manufacturing, marketing and distribution were down $2.6 million for the quarter, due primarily to lower ethanol margins caused by lower ethanol prices, partially offset by an increase of production volumes.

Overall, earnings declined by 30 percent throughout the three-month period when compared to the first quarter of fiscal year 2015. The decrease was caused by lower margins for the company’s energy and agricultural businesses.

Other factors, such as lower selling prices for energy and grain products, caused revenue to drop to $7.7 billion for the quarter, compared to $9.4 billion during the same period of the previous year.

Agricultural segment earnings dropped from $139.3 million to $69.3 million, a 50 percent decrease due to a lower logistics performance and decreased grain volumes and margins. Earnings for CHS wholesale crop nutrients also declined due to decreased margins. Energy sector earnings for the quarter were $192.9 million, down from $279.2 million. A slight increase in earnings was derived from a combination of CHS Hedging, Capital and Insurance businesses. Also, the CHS share of food manufacturer and distributor Ventura Foods, LLC increased, but declined from its share of earnings from Ardent Mills wheat milling. CHS reported net income of $266.5 million, down from $278.7 million during the same period of 2015.

CHS has purchased two ethanol plants in recent years. In April 2014, the company acquired the former Illinois River Energy LLC plant from London-based Sinav Ltd. The plant has the capacity to produce 133 MMgy of fuel ethanol. Last year, CHS acquired the former Patriot Renewable Fuels ethanol plant from Patriot Holdings LLC. The facility, located in Annawan, Illinois, has a nameplate capacity of 125 MMgy.