Financial Performance - CHS Inc. reported a decline in its Ag segment performance due to softening grain and oilseed product margins, lower oilseed crush margins, and declining commodity prices, impacting overall profitability[182]. - Revenues for fiscal 2025 decreased to $35.46 billion, down 9.1% from $39.26 billion in fiscal 2024[190]. - Gross profit margin declined to 3.2% in fiscal 2025 from 4.5% in fiscal 2024, reflecting increased cost of goods sold[190]. - Net income attributable to CHS Inc. was $597.92 million, a decrease of 45.7% compared to $1.10 billion in the previous year[190]. - The Energy segment reported a revenue decline of 12.9%, totaling $8.77 billion, primarily due to decreased selling prices for refined fuels[205]. - The Ag segment's revenues fell by 8.8% to $27.75 billion, driven by decreased selling prices across product categories[208]. Segment Performance - The Energy segment's results significantly decreased, attributed to lower Western Canadian Select crude oil discounts and unfavorable crack spreads, with planned maintenance at the McPherson refinery further affecting sales[182]. - Average market prices for WTI crude oil decreased to $68.08 per barrel in fiscal 2025 from $79.41 per barrel in fiscal 2024, contributing to reduced profitability in the Energy segment[188]. - The Ag segment's grain and oilseed throughput increased to 2,433,258 thousand bushels in fiscal 2025, compared to 2,382,219 thousand bushels in fiscal 2024, indicating strong volume performance despite margin pressures[189]. - The overall decrease in IBIT for the Energy segment was $436.1 million, reflecting lower crude oil discounts and reduced refined fuels production volumes[198]. - The Nitrogen Production segment's IBIT increased by 5.5% to $159.54 million, attributed to favorable market conditions for urea[202]. Costs and Expenses - Marketing, general and administrative expenses decreased by 10.4% to $1.05 billion, attributed to lower performance-based incentive compensation[221]. - Interest expense increased by 40.4% to $146.08 million due to a higher short-term notes payable balance and increased interest rates[222]. - Other income decreased by 27.0% to $100.43 million, primarily due to reduced interest income from a smaller cash balance[223]. - Income tax expense increased by $21.6 million, or 444.4%, to $16.8 million in fiscal 2025, primarily due to lower research and development tax credits and changes in state law[226]. Cash Flow and Capital Expenditures - Cash and cash equivalents decreased by $467.0 million to $327.8 million as of August 31, 2025, compared to $794.9 million in 2024[228]. - Working capital decreased by $504.1 million to $2.8 billion as of August 31, 2025, driven by a lower cash balance due to decreased cash provided by operations[232]. - Net cash provided by operating activities decreased by $637.1 million to $635.8 million in fiscal 2025 from $1.3 billion in fiscal 2024[238]. - Total capital expenditures for fiscal 2026 are expected to be approximately $575.1 million, down from $728.6 million in fiscal 2025[230]. - Major maintenance costs for fiscal 2026 are expected to be approximately $53.3 million, significantly lower than $271.4 million in fiscal 2025 due to reduced turnaround activities[230]. Debt and Compliance - Total long-term debt as of August 31, 2025, was $1.8 billion, down from $2.2 billion in 2024[228]. - The company remains in compliance with all debt covenants and restrictions as of August 31, 2025, and expects continued compliance based on current projections[231]. - The company expects to pay approximately $168.7 million in preferred stock dividends during fiscal 2026, with $2.3 billion of preferred stock outstanding as of August 31, 2025[230]. Risk Management - The company incurs commodity price risk related to price changes and performance, with hedging activities in place to mitigate this risk[251]. - As of August 31, 2025, the notional amount of foreign exchange derivative contracts was $1.7 billion, up from $1.5 billion in 2024[260]. - The company has variable rate short-term notes payable totaling $1.15 billion with average interest rates of 5.0% and 4.8%[259]. - Fixed rate long-term debt amounts to $1.78 billion with varying average interest rates, including 5.7% for 2030[259]. - The company’s risk management policies include established net physical position limits for commodities, reviewed annually[254]. - The company has not experienced significant nonperformance events on open contracts historically, but continues to evaluate counterparty exposure[255]. Strategic Outlook - CHS Inc. anticipates unfavorable global supply and demand factors for energy and agricultural commodities in fiscal 2026, leading to continued margin pressure and lower profitability[180]. - The company expects to navigate less favorable market conditions by maximizing integrated supply chains and capitalizing on domestic and global opportunities[181]. - Equity method investments, including CF Nitrogen and Ventura Foods, continued to provide solid contributions to CHS income, highlighting the importance of strategic partnerships[182]. - Equity income from investments decreased by $89.8 million, or 18.7%, to $479.9 million in fiscal 2025 from $569.7 million in fiscal 2024, primarily due to a gain on the sale of a business recognized by Ventura Foods[224][225].
CHS(CHSCM) - 2025 Q4 - Annual Report