CHS(US:CHSCN)2026-01-07 16:00Financial Performance - CHS Inc. reported strong performance in the Energy segment, driven by strengthened refining margins and record premium diesel sales volumes [124]. - Revenues for the three months ended November 30, 2025, were $8,864,104 thousand, a decrease of $430,008 thousand or 4.6% compared to $9,294,112 thousand in 2024 [135]. - Gross profit for the same period was $389,352 thousand, representing 4.4% of revenues, compared to $400,676 thousand or 4.3% in 2024 [135]. - The Energy segment's revenues increased by $68,407 thousand or 3.0%, with income before income taxes soaring by 868.9% to $152,347 thousand [138]. - The Agronomy segment reported revenues of $1,238,005 thousand, a decrease of $26,029 thousand or 2.1% from $1,264,034 thousand in 2024, while income before income taxes increased by 30.9% to $36,804 thousand [144]. - The Grains segment experienced a revenue decline of $463,818 thousand or 8.2%, with income before income taxes dropping by 78.3% to $36,242 thousand [140]. Market Dynamics - The Grains segment faced continued headwinds due to global trade factors and commodity market dynamics, impacting profitability [124]. - The Agronomy segment showed solid performance, largely attributed to the CF Nitrogen joint venture, but was partially offset by a weaker U.S. farm economy [124]. - The Grains segment's profitability is largely driven by throughput and production volumes, which are affected by market-driven commodity prices and weather-related conditions [129]. - CHS Inc. anticipates macroeconomic factors will continue to drive uncertainty in global energy and agricultural commodity markets throughout fiscal 2026 [120]. - The company expects reduced margins for energy and agricultural commodities to persist throughout fiscal 2026 due to various headwinds [121]. Cost and Expenses - Cost of goods sold decreased by $418,684 thousand or 4.7%, primarily due to lower retail and domestic feed grains margins [147]. - Marketing, general and administrative expenses rose by $5,270 thousand or 2.0%, attributed to depreciation related to the enterprise resource planning system [151]. - Interest expense increased by $9,703 thousand or 35.1%, due to a higher short-term notes payable balance compared to the previous year [152]. Cash Flow and Capital Expenditures - Net cash used in operating activities increased by $43.8 million to $337.8 million for the three months ended November 30, 2025, primarily due to increased inventories [167]. - Net cash used in investing activities rose by $241.2 million to $247.9 million, reflecting increased purchases of investments [168]. - Net cash provided by financing activities increased by $680.3 million to $644.2 million, primarily due to increased net cash inflows from notes payable [169]. - Total capital expenditures for fiscal 2026 are expected to be approximately $575.1 million, down from $728.6 million in fiscal 2025, with $116.0 million spent on property, plant, and equipment in the three months ended November 30, 2025 [161]. Inventory and Working Capital - Working capital increased by $128.0 million to $2.9 billion as of November 30, 2025, driven by a $1.8 billion increase in current assets, primarily due to higher inventories [163]. Commodity Prices - The average Group 3 2:1:1 crack spread increased to $26.61 per barrel for the three months ended November 30, 2025, from $16.88 per barrel in the prior year [128]. - The average price of D6 ethanol RINs rose by 51% to $0.9987 during the three months ended November 30, 2025, compared to $0.6632 in the same period of 2024 [126]. - The average price of D4 biodiesel RINs increased by 54% to $1.0190 during the same period, up from $0.6632 [126]. - Urea prices rose to $381.31 per ton in 2025 from $318.29 per ton in 2024, indicating a positive trend in commodity pricing [133]. Other Income and Tax - Other income increased by $8.5 million, or 32.2%, to $34.9 million for the three months ended November 30, 2025, primarily due to unrealized gains on investments and increased interest income [153]. - Equity income from investments rose by $31.2 million, or 25.5%, to $153.5 million, driven by higher equity income from CF Nitrogen due to increased urea and UAN prices and decreased natural gas costs [154][155]. - Income tax expense decreased by $1.5 million, or 11.4%, to $11.7 million, with effective tax rates of 4.3% for the three months ended November 30, 2025, compared to 5.1% in the prior year [156]. Preferred Stock and Market Risk - As of November 30, 2025, the company had approximately $2.3 billion of preferred stock outstanding [161]. - The company expects to pay approximately $168.7 million in preferred stock dividends during fiscal 2026, with $42.2 million paid in the three months ended November 30, 2025 [161]. - No material changes in market risk exposures were experienced for the period ended November 30, 2025 [178].