CHS(US:CHSCN)2025-11-05 16:32Financial 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 [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 fiscal 2024 [190]. - The Energy segment reported a revenue decrease of $1.13 billion, or 12.9%, primarily due to lower selling prices for refined fuels [205]. - The Ag segment's revenues fell by $2.67 billion, or 8.8%, 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, alongside planned maintenance at the McPherson refinery [182]. - Refinery throughput volumes for fiscal 2025 were 174,837 barrels per day, down from 189,424 barrels per day in fiscal 2024, primarily due to a planned shutdown for maintenance [184]. - 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 [189]. - The Nitrogen Production segment's income before income taxes increased by 5.5% to $159.54 million, attributed to favorable market conditions [202]. Cost and Expenses - Interest expense increased by 40.4% to $146.08 million due to higher short-term notes payable and interest rates [222]. - Marketing, general and administrative expenses decreased by 10.4% to $1.05 billion, primarily due to lower performance-based compensation [221]. - The overall cost of goods sold for the Energy segment decreased by 8.7% to $8.04 billion, influenced by lower refined fuels costs [213]. Future Outlook - CHS anticipates unfavorable global supply and demand factors for energy and agricultural commodities in fiscal 2026, leading to reduced margins [180]. - The company expects continued margin pressure in fiscal 2026 due to macroeconomic uncertainties, including geopolitical conflicts and fluctuating tariffs [180]. - Total capital expenditures for fiscal 2026 are expected to be approximately $575.1 million, a decrease from $728.6 million in fiscal 2025 [230]. - 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]. - Major maintenance costs for fiscal 2026 are projected to be around $53.3 million, significantly lower than $271.4 million in fiscal 2025 due to reduced turnaround activities [230]. Cash Flow and Working Capital - As of August 31, 2025, total cash and cash equivalents decreased to $327,826,000 from $794,865,000 in 2024, reflecting a significant decline in cash provided by operations [228]. - Working capital as of August 31, 2025, was $2,803,865,000, a decrease of $504,104,000 from $3,307,969,000 in 2024, primarily due to a lower cash balance [232]. - Net cash provided by operating activities for fiscal 2025 was $635,787,000, down $637,093,000 from $1,272,880,000 in fiscal 2024 [238]. - Cash flows from investing activities decreased by $551,000,000 in fiscal 2025, reflecting increased proceeds from the sale and maturity of investments [239]. Tax and Compliance - The increase in income tax expense for fiscal 2025 was primarily due to lower research and development tax credits, resulting in an effective tax rate of 2.7% compared to (0.4)% in fiscal 2024 [226]. - The company has deferred tax assets that may require a valuation allowance if future taxable income does not support realization [245]. - Tax benefits related to uncertain tax positions are recognized if there is more than a 50% probability of being sustained upon examination by tax authorities [246]. 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, indicating exposure to foreign currency fluctuations [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, overseen by corporate compliance teams [254]. - The company has not experienced significant nonperformance events on open contracts historically, but continues to evaluate counterparty exposure [255].