CHSCP

CHS Inc. 10-Q Summary: Fiscal 2026 Q2

Business Context and Reporting Period

This report covers the quarterly period ended February 28, 2026 (Fiscal 2026 Q2) for CHS Inc., a Minnesota cooperative corporation. Effective September 1, 2025, the company reorganized its segment reporting to align with a new product-line operating model, recasting prior periods. The three reportable segments are Energy, Grains, and Agronomy, with remaining operations classified as Corporate and Services.

Key Financial Metrics

Material Changes vs. Prior Period

• Revenue Growth: Q2 revenues increased 7.2% year-over-year (YoY) to $8.35 billion, driven by higher volumes in Energy and Grains, despite lower commodity selling prices in some categories.
• Profitability Decline (Q2): The company reported a net loss of $147.2 million in Q2 2026, compared to a net loss of $76.0 million in Q2 2025. This was primarily due to a significant operating loss of $241.8 million, driven by increased RINs expenses, unrealized hedging losses, and higher interest expense.
• Segment Performance (Q2):
  • Energy: Revenues up 15.2%, but Income Before Income Taxes (IBIT) dropped 68.2% to a loss of $133.6 million due to higher RINs costs and hedging losses.
  • Grains: Revenues up 4.0%, but IBIT turned negative ($17.9 million loss) from a profit of $8.4 million, impacted by lower oilseed crush margins.
  • Agronomy: Revenues up 9.2% due to higher crop nutrient prices, though volumes declined. IBIT remained relatively flat with a small loss of $11.5 million.
• Debt and Interest: Interest expense surged 73.6% YoY in Q2 to $43.8 million due to higher short-term notes payable and long-term debt balances.

Outlook, Risks, and Management Commentary

• Market Volatility: Management anticipates continued volatility in global energy and agricultural commodity markets due to geopolitical conflicts (Russia-Ukraine, Middle East), trade policy shifts, and supply chain disruptions.
• RINs Compliance: The EPA issued a new Renewable Volume Obligation (RVO) in March 2026, the highest ever, creating price uncertainty and potential cost increases for Renewable Identification Numbers (RINs). Prices for D6 and D4 RINs increased approximately 72% in Q2.
• Capital Allocation: The company expects fiscal 2026 capital expenditures of approximately $522 million and major maintenance of $76.3 million. It plans to pay approximately $168.7 million in preferred stock dividends and $30.0 million in cash patronage for fiscal 2026.
• Liquidity: The company maintains a $2.8 billion revolving credit facility and a securitization facility. It remains in compliance with all debt covenants.
• Investment Activity: CHS finalized its exit from the Producer Ag joint venture in December 2025, receiving working capital in exchange for its equity interest with no impact on the Statement of Operations.

Key Facts for Investor Verification

• RINs Cost Impact: Verify the magnitude of the 72% increase in RINs prices and the specific financial impact of the new EPA RVO on future Energy segment margins.
• Segment Recasting: Confirm that prior period comparisons are adjusted for the new segment structure (Energy, Grains, Agronomy) effective September 2025.
• Debt Utilization: Review the utilization of the $2.8 billion revolving credit facility and the $850 million securitization facility to assess liquidity headroom.
• Inventory Levels: Note the significant increase in inventories to $4.89 billion (from $3.27 billion at year-end), driven by seasonality, and monitor for potential valuation risks.
• Equity Method Investments: Monitor the performance of CF Nitrogen (Agronomy) and Ventura Foods (Corporate), which contributed significantly to equity income but showed volatility.