November 15, 2010

CHS posts fiscal 2010 earnings of US$502.2 million

Press Release

CHS Inc., a leading energy, grains and foods company, recently reported fiscal 2010 net income of US$502.2 million, the fourth-highest in the farmer-owned cooperative's nearly 80-year history.

The US$502.2 million in net income from company operations reported for fiscal 2010 (September 1, 2009 to August 31, 2010) compared with US$381.4 million for fiscal 2009.  Revenues of US$25.3 billion for fiscal 2010 were down 2% from the US$25.7 billion generated in fiscal 2009 reflecting overall lower volatility in values for the grains and crop nutrient commodities that make up the majority of CHS sales.

For the fourth quarter of fiscal 2010 (June 1 to August 31, 2010), CHS reported earnings from company operations of US$154.1 million on revenues of US$6.6 billion.  That compared with earnings of US$97.3 million and revenues of US$6.7 billion for the fourth quarter of fiscal 2009.

"Fiscal 2010 once again demonstrated the value of the diverse CHS business portfolio which allowed us to achieve strong financial performance amid a continued weak global economy," said John Johnson, CHS president and chief executive officer.  "While some of our businesses faced market challenges in 2010, many others achieved record or near-record performance in 2010."

As a producer-owned cooperative, CHS returns a portion of its earnings to eligible owners.  In 2010, based on fiscal 2009 performance, the company issued US$237 million in cash patronage, equity redemptions, preferred stock and dividends.  Based on 2010 earnings, CHS is expected to return about US$231 million to owners during fiscal 2011.

Performance was led by the company's Ag Business segment.  The company's retail Country Operations unit posted record earnings, while grain marketing generated strong profits through its ability to manage through numerous global origination and demand challenges. Crop nutrients achieved a strong recovery in fiscal 2010 after posting significant losses the previous year precipitated by rapid global devaluation of product inventories.

Fiscal 2010 was a period of market fluctuations for the Energy segment.  The year opened with record fall propane demand for crop drying, followed by a strong winter heating season.  CHS lubricants and renewable fuels marketing businesses also captured market opportunity to generate record earnings. Petroleum refining margins fell dramatically for the first six months, as a continued weak economy depressed demand and crude oil inventories grew, but recovered in the third and fourth quarters, 2010, resulting in solid fiscal 2010 profitability for refined fuels, as well.

The CHS Processing segment includes its own oilseed crushing and refining operations, along with ownership in Horizon Milling, LLC and Ventura Foods, LLC. Slightly improved demand and near-record volumes contributed to CHS Oilseed Processing performance. Vegetable oil-based food manufacturing joint venture, Ventura Foods, drew on strong customer relationships to achieve strong earnings during a continued downturn for the foodservice sector while the flour joint venture, Horizon Milling, combined increased demand with solid margins and risk management to achieve its second-best year. Overall earnings for the Processing segment were strong in fiscal 2010, with all businesses contributing solid performance. 

CHS Business Solutions operations, recorded within the "Corporate and other" category, reported lower earnings for fiscal 2010, the result of an ongoing soft market for insurance services along with continued slow activity within the company's hedging and risk management and financing businesses, driven by reduced market volatility and continued record low interest rates.