CHS(US:CHSCP)2025-11-05 16:32Financial Performance - Total 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 revenues of $8,766.5 million, a decline of 12.9% from $7,635.0 million in fiscal 2024, primarily due to decreased selling prices for refined fuels[205]. - The Ag segment revenues decreased by 8.8% to $27,748.5 million from $30,416.9 million, driven by lower selling prices across product categories[208]. Segment Performance - The Ag segment experienced a decline in performance due to softening grain and oilseed product margins, lower oilseed crush margins, and declining commodity prices, despite strong volumes[182]. - Energy segment results significantly declined, driven by decreased Western Canadian Select crude oil discounts and unfavorable crack spreads, with planned major maintenance at the McPherson refinery impacting higher-margin refined product sales[182]. - The Ag segment's grain and oilseed throughput increased to 2,433,258 thousand bushels in 2025 from 2,382,219 thousand bushels in 2024, indicating growth in volume despite market price fluctuations[189]. Market Conditions - The company anticipates unfavorable global supply and demand factors for energy and agricultural commodities in fiscal 2026, leading to reduced margins and profitability[180]. - Average market prices for WTI crude oil fell from $79.41 per barrel in 2024 to $68.08 per barrel in 2025, while the WTI-WCS crude oil discount increased from $17.24 to $11.57 per barrel[188]. - The average price of corn remained stable at $4.36 per bushel in 2025, while soybean prices decreased to $10.16 per bushel from $11.88 in 2024[189]. Costs and Expenses - Cost of goods sold in the Energy segment decreased by 8.7% to $8,041.6 million, influenced by lower costs for refined fuels and a favorable impact from the small refinery exemption[213]. - The Ag segment's cost of goods sold increased by 8.5% to $29,478.2 million, reflecting higher costs associated with grain and oilseed products[217]. - Marketing, general and administrative expenses decreased by 10.4% to $1,046.1 million, primarily due to lower performance-based incentive compensation[221]. - Interest expense increased by 40.4% to $146.1 million, attributed to a higher short-term notes payable balance and increased interest rates[222]. - Other income decreased by 27.0% to $100.4 million, mainly due to reduced interest income from a smaller cash balance[223]. Cash Flow and Capital Expenditures - Cash and cash equivalents decreased to $327.8 million in fiscal 2025 from $794.9 million in fiscal 2024, a reduction of $467.1 million[228]. - Working capital decreased by $504.1 million to $2.8 billion in fiscal 2025, driven by a decline in cash provided by operations[232]. - Net cash provided by operating activities fell to $635.8 million in fiscal 2025, down $637.1 million 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 are projected to decrease to $53.3 million in fiscal 2026 from $271.4 million in fiscal 2025 due to reduced turnaround activities[230]. Debt and Dividends - 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]. - Total long-term debt, including current maturities, decreased to $1.8 billion in fiscal 2025 from $2.2 billion in fiscal 2024[228]. - The company reported a net decrease in cash and cash equivalents of $474.6 million in fiscal 2025, compared to a decrease of $970.7 million in fiscal 2024[238]. Tax and Valuation - Income tax expense increased significantly to $21.6 million in fiscal 2025 from a benefit of $4.9 million in fiscal 2024, reflecting a change in tax credits and effective tax rates of 2.7% and (0.4%) respectively[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 manages commodity price risk through hedging, entering into derivative contracts to mitigate exposure to price volatility[252]. - The average interest rate for variable rate short-term notes payable is 5.0%, while the average for fixed rate long-term debt is 5.1%[259]. - A 10% adverse change in market prices would not materially affect the company's results of operations, highlighting effective risk management practices[256]. - The company has established internal policies for managing commodity price risk, with position limits reviewed annually by senior leadership[254]. - The company has not experienced significant nonperformance events on open contracts historically, indicating effective counterparty risk management[255]. Investments - Equity method investments, including CF Nitrogen and Ventura Foods, continued to provide solid contributions to CHS income[182]. - Equity income from investments decreased to $479.9 million in fiscal 2025 from $569.7 million in fiscal 2024, a decline of $89.8 million or 18.7%[224].