CHS(US:CHSCO)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 were $35,462.6 million, a decrease of 9.1% from $39,261.2 million in fiscal 2024 [190]. - Gross profit margin decreased to 3.2% in fiscal 2025 from 4.5% in fiscal 2024, reflecting a gross profit of $1,136.8 million compared to $1,751.3 million [190]. - Net income attributable to CHS Inc. was $597.9 million, down 45.7% from $1,102.3 million in the previous year [190]. - The Energy segment reported a revenue decrease of $1,131.5 million, or 12.9%, totaling $8,766.5 million in fiscal 2025 [205]. - The Ag segment experienced an 8.8% decline in revenues, totaling $27,748.5 million, down from $30,416.9 million [208]. - The Energy segment's income before income taxes showed a significant loss of $7.0 million, a decrease of 101.6% compared to a profit of $429.1 million in fiscal 2024 [194]. - The Ag segment's income before income taxes decreased by 28.3%, totaling $342.7 million compared to $245.7 million in the prior year [199]. Market Conditions - Average market prices for WTI crude oil decreased to $68.08 per barrel in fiscal 2025 from $79.41 per barrel in fiscal 2024, while the WTI-WCS crude oil discount narrowed to $11.57 per barrel from $17.24 per barrel [188]. - The average price of soybeans fell to $10.16 per bushel in fiscal 2025 from $11.88 per bushel in fiscal 2024, while corn prices remained relatively stable at $4.36 per bushel [189]. - CHS Inc. anticipates unfavorable global supply and demand factors for energy and agricultural commodities in fiscal 2026, leading to reduced margins and profitability [180]. - The company expects ongoing macroeconomic uncertainties, including geopolitical conflicts and fluctuating tariffs, to impact its segments significantly in fiscal 2026 [180]. Operational Metrics - 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]. Expenses and Income - Marketing, general and administrative expenses decreased by 10.4% to $1,046.1 million, down from $1,167.0 million due to lower performance-based compensation [221]. - Interest expense increased by 40.4% to $146.1 million, up from $104.1 million, attributed to higher short-term notes payable and interest rates [222]. - Other income decreased by 27.0% to $100.4 million, down from $137.6 million, primarily due to reduced interest income from a smaller cash balance [223]. - Equity income from investments for fiscal 2025 was $479,863,000, a decrease of $89,802,000 or 18.7% compared to $569,665,000 in fiscal 2024 [224]. Cash Flow and Capital Expenditures - Net cash provided by operating activities for fiscal 2025 was $635,787,000, a decrease of $637,093,000 from $1,272,880,000 in fiscal 2024 [238]. - Net cash used in investing activities decreased by $550,993,000 in fiscal 2025, reflecting increased proceeds from the sale and maturity of investments [239]. - The company expects total capital expenditures for fiscal 2026 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 [230]. Balance Sheet and Obligations - 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 [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 [232]. - The company had approximately $2.3 billion of preferred stock outstanding as of August 31, 2025, with expected dividends of approximately $168.7 million during fiscal 2026 [230]. - Total estimated future contractual obligations as of August 31, 2025, amounted to $8,713,102,000, including both short-term and long-term payments [235]. Tax and Valuation - 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 assesses the need for a valuation allowance on deferred tax assets based on future taxable income and other factors, with potential adjustments impacting income if realizability is determined to be unlikely [245]. - Tax benefits related to uncertain tax positions are recognized if there is more than a 50% probability of being sustained upon examination, using a cumulative probability approach [246]. Risk Management - The company incurs commodity price risk related to price changes and performance, with hedging activities in place to mitigate exposure to price volatility [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, indicating increased exposure management [260]. - The company has variable rate short-term notes payable totaling $1.15 billion with average interest rates of 5.0% and 4.8% for different notes [259]. - Fixed rate long-term debt amounts to $1.78 billion with varying average interest rates, including 4.0% to 5.7% across different maturities [259]. - The company’s risk management policies include established net physical position limits for commodities, reviewed annually by senior leadership [254]. - The company has not experienced significant nonperformance events on open contracts historically, managing counterparty exposure through fixed-price contracts with preapproved producers [255].