CHS INC

CHS Inc. is the nation's leading integrated agricultural cooperative, providing grain, food, agronomy, and energy resources globally ¹. The company is owned by farmers, ranchers, and member cooperatives across the United States, and also has preferred shareholders whose shares are listed and traded on the Global Select Market of The Nasdaq Stock Market LLC ¹. For the fiscal year ended August 31, 2025, CHS reported total revenues of $35.5 billion ¹ and net income attributable to CHS of $597.9 million ¹. The company's core business model revolves around buying commodities from and providing products and services to individual agricultural producers, local cooperatives, and other companies, both domestically and internationally ¹. Revenue generation includes initial agricultural inputs like fuels, farm supplies, crop nutrients, and crop protection products, as well as agricultural outputs such as grain and oilseed, processed grain and oilseed, renewable fuels, and food products ¹. A portion of its operations are conducted through equity investments and joint ventures, with their income or loss included in net income using the equity method of accounting ¹. Earnings from cooperative business are allocated to members and, to a limited extent, nonmembers on a patronage basis, in the form of cash, capital equity certificates, or both, with patrons' equities redeemable over time at the Board of Directors' discretion ¹. Earnings from nonmembers not treated as patronage are taxed at federal and state statutory corporate rates and retained as unallocated capital reserves ¹.

The Energy segment generates revenues through refining, wholesaling, and retailing of petroleum products, including gasoline, diesel fuel, and other energy products, as well as blending, sale, and distribution of lubricants, and wholesale supply of propane and other natural gas liquids ¹. For fiscal 2025, Energy segment revenues, after elimination of intersegment revenues, were $7.6 billion ¹. The segment operates refineries in Laurel, Montana, and McPherson, Kansas, processing approximately 65,000 barrels of crude oil per day ¹ and 115,000 barrels of crude oil per day ¹, respectively. Approximately 75% of refined fuel products are marketed to members, with the balance sold to nonmembers ¹. In fiscal 2025, the company sold approximately 1.5 billion gallons of gasoline ¹ and 1.7 billion gallons of diesel fuel ¹.

The Ag segment encompasses global grain and processing, ag retail, and wholesale agronomy businesses, facilitating the production, purchase, sale, and use of grain and other agricultural products ¹. In fiscal 2025, Ag segment revenues, after elimination of intersegment revenues, were $27.7 billion ¹. Global grain marketing operations purchase grain from agricultural producers and elevator operators, primarily in the midwestern and western United States, and through its ag retail business ¹. The processing business crushes approximately 147 million bushels of soybeans and canola annually ¹, producing about 3.1 million short tons of meal and flour ¹ and 1.9 billion pounds of edible and inedible oil ¹. The renewable fuels business annually produces 267 million gallons of fuel-grade ethanol ¹, 71 million pounds of inedible corn oil ¹, and 645,000 tons of dried distillers grains with solubles ("DDGS") ¹. The ag retail business operates approximately 400 agri-operations locations ¹ through 28 business units ¹ across the midwestern and western United States, manufacturing animal feed through nine owned plants and three limited liability companies ¹. The wholesale agronomy business delivers crop nutrients and crop protection products from manufacturers or through 11 warehouse terminals and other nonowned storage facilities ¹, and operates a bulk chemical rail terminal in Brooten, Minnesota, with over 6 million gallons of chemical storage capacity ¹.

The Nitrogen Production segment consists of an approximate 8.38% membership interest ¹ in CF Industries Nitrogen, LLC ("CF Nitrogen"), a strategic venture with CF Industries Holdings, Inc., and allocated expenses ¹. As of August 31, 2025, the investment in CF Nitrogen was approximately $2.5 billion ¹. Under a supply agreement, CHS is entitled to purchase up to 1.1 million tons of granular urea ¹ and 580,000 tons of urea ammonium nitrate ("UAN") ¹ annually through fiscal 2096 ¹. CF Nitrogen has six production facilities and produces nitrogen-based products, including methanol, UAN, and urea ¹.

For the fiscal year ended August 31, 2025, CHS reported total revenues of $35,462,608 thousand ², a gross profit of $1,136,814 thousand ², and a gross margin of 3.2% ². Operating earnings were $90,755 thousand ², resulting in an operating margin of 0.3% ². Net income was $597,995 thousand ², with net income attributable to CHS Inc. of $597,917 thousand ². Diluted EPS is not explicitly stated in the provided text. Free cash flow is not explicitly stated in the provided text. Cash and cash equivalents stood at $327,826 thousand ³ as of August 31, 2025. Total notes payable were $1,152,457 thousand ³, and long-term debt, including current maturities, was $1,835,833 thousand ³. Net debt is not explicitly stated in the provided text.

Comparing fiscal 2025 to fiscal 2024, total revenues decreased by $3,798,621 thousand ², from $39,261,229 thousand ² to $35,462,608 thousand ². Gross profit decreased by $614,513 thousand ², from $1,751,327 thousand ² to $1,136,814 thousand ², leading to a gross margin contraction from 4.5% ² to 3.2% ². Operating earnings declined from $584,358 thousand ² to $90,755 thousand ². Net income attributable to CHS Inc. decreased from $1,102,319 thousand ² to $597,917 thousand ². Energy segment revenues decreased by $1,131,462 thousand ⁴, or 12.9% ⁴, primarily due to decreased selling prices for refined fuels ⁴. Ag segment revenues decreased by $2,668,378 thousand ⁵, or 8.8% ⁵, driven by decreased selling prices across most product categories, including a $2.7 billion decrease for grain and oilseed ⁵, a $453.5 million decrease for oilseed processing ⁵, and a $111.3 million decrease for renewable fuels ⁵. These decreases were partially offset by increased volumes of $590.7 million for wholesale and retail agronomy products ⁵ and $446.7 million for grain and oilseed ⁵. Energy segment IBIT decreased by $436,095 thousand ⁶, or 101.6% ⁶, mainly due to significantly lower Western Canadian Select crude oil discounts and crack spreads ⁶, and decreased refined fuels production volumes due to planned major maintenance ⁶. Ag segment IBIT decreased by $97,017 thousand ⁷, or 28.3% ⁷, primarily due to decreased margins for grain and oilseed and oilseed processing ⁷. Equity income from investments increased by $89,802 thousand ⁸, or 18.7% ⁸, largely due to a gain on the sale of a business recognized by Ventura Foods ⁸.

During fiscal 2025, CHS acquired West Central Ag Services ("WCAS"), resulting in $59.5 million ⁹ in goodwill and $62.5 million ¹⁰ in intangible assets [9, 10]. The company also received notice from the EPA that its petitions seeking an extension of the small refinery exemption ("SRE") for its Laurel, Montana, refinery were granted for compliance years 2019 through 2024, resulting in a benefit of approximately $90 million ¹¹ during the fourth quarter of fiscal year 2025 ¹¹. On October 10, 2025, CHS announced a mutual agreement with MKC to start the process of ending their joint venture in Producer Ag ¹.

CHS anticipates that various macroeconomic factors will continue to drive uncertainty and instability in global energy and agricultural commodity markets, as well as global financial markets, which could significantly impact each of its segments during fiscal 2026 ¹². These factors include the ongoing war between Russia and Ukraine, further conflict in the Middle East, shifts in global trade flows for commodities, potential changes in U.S. trade policy, increased or fluctuating tariffs, a changing interest rate environment, and continued pricing pressures impacting costs of labor, freight, and materials ¹². The company currently expects global supply and demand factors impacting energy and agricultural commodities to be unfavorable for fiscal 2026, with a trend of reduced margins for energy and agricultural commodities expected to persist ¹².

The company's fiscal 2026 capital expenditure priorities include maintaining assets through repairs and maintenance, complying with environmental, health, and safety requirements, enhancing information technology capabilities, improving productivity, and growth ¹³. Total capital expenditures for fiscal 2026 are expected to be approximately $575.1 million ¹⁴, a decrease from $728.6 million ¹⁴ in fiscal 2025 ¹⁴. Major maintenance expenditures are projected to be approximately $53.3 million ¹⁵ for fiscal 2026, significantly lower than $271.4 million ¹⁵ in fiscal 2025, due to reduced turnaround activities at refineries compared to the McPherson refinery turnaround in fiscal 2025 ¹⁵.

CHS expects to pay dividends on its preferred stock of approximately $168.7 million ¹⁶ during fiscal 2026 ¹⁶. The Board of Directors authorized approximately $30.0 million ¹⁷ of fiscal 2025 patronage-sourced earnings to be paid to member-owners during fiscal 2026 ¹⁷. Additionally, approximately $90.0 million ¹⁸ of equity redemptions are authorized for distribution in fiscal 2026 ¹⁸.

The company is subject to the Renewable Fuel Standard, which requires refiners to blend renewable fuels or purchase Renewable Identification Numbers ("RINs") ¹¹. The EPA generally establishes new annual renewable fuel percentage standards ¹¹. In June 2025, the EPA proposed standards for compliance years 2026 and 2027, which, if implemented as proposed, could result in a significant increase in compliance costs ¹¹. While CHS generates RINs through blending activities, it cannot generate enough to meet its refining capacity needs, requiring open market purchases ¹¹. The price of RINs can be volatile, with D6 ethanol RINs and D4 biodiesel RINs increasing by 24% ¹¹ and 29% ¹¹, respectively, during fiscal 2025 ¹¹.

CHS faces material risks from changes in commodity prices for crude oil, natural gas, ethanol, fertilizer, grain, oilseed, flour, and crude and refined vegetable oils, which are influenced by factors beyond its control such as weather, supply and demand, and government regulations ¹⁹. Global operations expose the company to political, economic, and legal risks, including terrorism, war, civil unrest, changes in social or economic conditions, currency fluctuations, and trade restrictions ¹⁹. Ongoing global conflicts, such as those in Ukraine and the Middle East, have caused uncertainty and instability in commodity markets, leading to inflationary pressures and impacting fertilizer purchasing and increasing cybersecurity risks ¹⁹. Demand for products is highly dependent on global and regional demographics and macroeconomic conditions, with downturns potentially reducing demand and farm income, which could lead to members exiting agricultural activities ¹⁹. Fluctuations in freight and logistics costs, supply chain disruptions, and adverse weather conditions, including those due to climate change, could also negatively impact the business ¹⁹. Inflation is expected to continue affecting costs such as labor, freight, natural gas, and materials, with higher interest rates increasing borrowing costs ¹⁹. The company operates in highly competitive markets, and competitors may develop superior products or have more effective supply chains, potentially restricting CHS's ability to increase prices and maintain margins ¹⁹. The cooperative structure means members are not obligated to do business exclusively with CHS, and if they choose other companies, revenues and cash flows could be adversely affected ¹⁹. Declining demand for refined petroleum products due to alternative energy sources or government policies aimed at reducing reliance on petroleum-based products, including the announced phase-out of gasoline- and diesel-powered light-duty vehicles by the mid-2030s, could materially impact the Energy segment ¹⁹. Consolidation among producers and customers could lead to less favorable pricing and supply terms for CHS, or direct sales from input manufacturers to cooperative customers, bypassing CHS ¹⁹. The company is exposed to nonperformance and nonpayment risks from counterparties, including financial institutions and third-party warehouse operators, which could lead to significant losses ¹⁹. Risk management strategies, including hedging, may not be effective in mitigating exposure to commodity price fluctuations, transportation costs, energy prices, foreign currency exchange rates, and interest rates ¹⁹. Actual or perceived quality, safety, or health risks associated with products, including concerns about genetically modified crops or demand for organic/sustainably grown products, could lead to product recalls, liability claims, and reputational damage ¹⁹. Operations are subject to business interruptions from events like natural disasters, cyberattacks, equipment failures, and labor disputes, with uninsured losses or losses exceeding coverage limits possible ¹⁹. Epidemics, pandemics, or other public health developments could disrupt transportation, supply chains, and increase costs ¹⁹. Workforce factors, such as difficulty in hiring and retaining employees, increased turnover, and competition for talent, particularly in rural areas, could negatively impact the business ¹⁹. Technological improvements and sustainability initiatives, including genetically engineered seeds or alternative energy sources, could decrease demand for agronomy and energy products ¹⁹. Advancements in Artificial Intelligence ("AI") bring risks of system failure, data breaches, and inadvertent disclosure of sensitive information, potentially disrupting business processes and increasing cybersecurity risks ¹⁹. The ongoing multiyear implementation of an enterprise resource planning system ("ERP") requires significant capital and human resources, with potential flaws or delays posing risks to operations and internal controls ¹⁹. Increasing scrutiny and changing expectations regarding environmental, social, and governance ("ESG") practices may expose CHS to new risks, including regulatory fines, reputational damage, and increased costs for compliance ¹⁹. Failures or delays in achieving climate change strategies or meeting environmental expectations could adversely affect business, operations, and reputation, and increase litigation risk ¹⁹. Acquisitions, strategic alliances, joint ventures, mergers, and divestitures involve risks such as integration challenges, financing difficulties, and less control over joint venture decisions, potentially impacting financial returns ¹⁹. Government policies, mandates, regulations, and trade agreements, including tariffs and retaliatory tariffs, can adversely affect operations and profitability, as seen with China's suspension of soybean imports from certain U.S. companies ¹⁹. Changes in federal income tax laws or tax status, or changes to tax rules in jurisdictions of operation, could increase tax liability and reduce net income ¹⁹. Compliance with extensive anti-corruption, anti-bribery, anti-kickback, and trade laws and regulations, including the Foreign Corrupt Practices Act of 1977, is costly, and noncompliance could lead to fines, penalties, and reputational harm ¹⁹. Environmental and energy laws and regulations, such as the Paris Agreement and the Renewable Fuel Standard, may result in increased operating costs and capital expenditures, with new climate-related reporting requirements under SEC rules and EU Corporate Sustainability Reporting Directive ("CSRD") potentially increasing compliance burdens ¹⁹. Environmental liabilities and litigation, including lawsuits related to agricultural chemicals, could have a material adverse effect ¹⁹. The company's financial results are susceptible to seasonality, with revenues generally lower during the second and fourth fiscal quarters and highest during the first and third fiscal quarters ¹⁹. Impairment of long-lived assets, including property, plant and equipment, goodwill, and investments in unconsolidated affiliates, could require significant impairment charges ¹⁹. The business is capital-intensive and relies on cash generated from operations and external financing, with limited ability to access equity capital due to its cooperative structure ¹⁹.

Management's message to shareholders emphasizes an enterprisewide effort to empower customers to make CHS their first choice, expand market access to add value for owners, and transform core businesses by capitalizing on changing market dynamics ¹². To execute these strategies, the company is focused on implementing agile, efficient, and sustainable technology platforms; building robust and efficient supply chains; hiring, developing, and retaining high-performing, diverse, and passionate teams; achieving operational excellence and continuous improvement; and maintaining a strong balance sheet ¹². For fiscal 2026, management expects global supply and demand factors impacting energy and agricultural commodities to be unfavorable, with reduced margins for energy and agricultural commodities anticipated to persist ¹². The company will continue to execute its enterprise priorities for fiscal 2026, including maximizing platforms through integrated supply chains and capitalizing on domestic and global opportunities, as it navigates less favorable market conditions ¹². Total capital expenditures for fiscal 2026 are expected to be approximately $575.1 million ¹⁴, and major maintenance is projected at approximately $53.3 million ¹⁵. Preferred stock dividends of approximately $168.7 million ¹⁶ are expected, along with patronage payments of approximately $30.0 million ¹⁷ and equity redemptions of approximately $90.0 million ¹⁸ in fiscal 2026 [16, 17, 18].