CHS Inc. — FY2022 Form 10-K
Reporting period: Fiscal year ended August 31, 2022. This is an annual filing; it does not provide standalone fourth-quarter results. CHS is a farmer- and cooperative-owned agricultural cooperative with Energy, Ag, and Nitrogen Production segments. It reported $47.8 billion of revenue and $1.7 billion of net income attributable to CHS.
Financial performance
| Metric | FY2022 | FY2021 |
|---|---|---|
| Revenue | $47.79 billion | $38.45 billion |
| Gross profit / margin | $2.13 billion / 4.5% | $951.4 million / 2.5% |
| Operating earnings / margin | $1.13 billion / 2.4% | $205.8 million / 0.5% |
| Income before income taxes | $1.81 billion | $515.3 million |
| Net income attributable to CHS | $1.68 billion | $554.0 million |
| Net cash from operating activities | $1.95 billion | $757.8 million |
| Cash and cash equivalents at year-end | $794.0 million | $413.2 million |
| Working capital / current ratio | $2.43 billion / 1.3 | $1.67 billion / 1.3 |
Interest expense was $114.2 million, up from $104.6 million. Year-end notes payable were $606.7 million and long-term debt, including current maturities, was $1.96 billion, versus $1.74 billion and $1.62 billion, respectively, in FY2021. Total equities were $9.46 billion. CHS reported compliance with debt covenants. The $2.75 billion five-year revolving credit facility had no borrowings outstanding at year-end; the securitization facility also had no balance outstanding.
Material changes versus FY2021
- Revenue rose 24%, while net income attributable to CHS more than tripled. Results benefited from higher commodity prices, strong demand, and improved margins.
- Energy segment revenue increased 61.5% to $10.29 billion; income before taxes improved to $616.6 million from a $10.6 million loss. Higher refining crack spreads and wider WCS crude discounts were key drivers.
- Ag revenue increased 16.9% to $37.46 billion, and income before taxes rose 120.6% to $657.6 million. Stronger margins across grain and oilseed, wholesale agronomy, oilseed processing, and feed and farm supplies contributed. Grain and oilseed volumes declined.
- Nitrogen Production income before taxes increased to $478.0 million from $121.0 million, primarily reflecting higher urea and UAN prices and strong demand, partly offset by higher natural gas costs.
- Equity income from investments more than doubled to $771.3 million, mainly due to CF Nitrogen. CF Nitrogen distributed $618.7 million in cash to CHS, compared with $193.9 million in FY2021.
- Operating cash flow increased by $1.19 billion. Investing cash outflow rose to $457.1 million, in part because of increased CHS Capital lending; financing cash outflow rose to $1.11 billion, reflecting lower net borrowing inflows and higher patronage and equity-redemption payments.
Outlook, commentary, risks, and unusual items
- Management expects continued uncertainty and volatility in FY2023 due to the Russia-Ukraine war, inflation, rising interest rates, higher labor, freight and materials costs, and unpredictable weather. It cited current expectations for strong agricultural demand, supply imbalances, volatility, and favorable pricing, but did not provide specific earnings guidance or quantify how long conditions may persist.
- CHS expects approximately $887.2 million of FY2023 capital expenditures, excluding about $236.0 million for major refinery maintenance. It also expects approximately $168.7 million of preferred dividends and plans to distribute about $500 million in FY2022 cash patronage and up to $500 million of equity redemptions during FY2023.
- The war disrupted CHS operations in Ukraine and limited access to grain inventories there; the filing says these inventories face increased risk of damage or expropriation. Sanctions and disrupted global fertilizer supply may also affect sourcing and costs.
- Renewable identification number (RIN) prices rose in FY2022 and negatively affected earnings. Hedging-related losses and reversals of prior unrealized gains also weighed on Energy results; commodity derivatives recorded net pretax losses of $556.7 million across the disclosed derivative categories. FY2021 included a $35.3 million benefit from liquidation of historical LIFO inventory layers that did not recur.
- Other risks include commodity-price and margin cycles, seasonality, supply-chain constraints, counterparty and credit risk, interest-rate exposure, environmental and climate regulation, cybersecurity, and the ongoing enterprise resource planning system implementation. Higher costs may not be fully passed through to customers.
- CHS said pending litigation and environmental matters were not expected to have a material effect, individually or in aggregate. It had $173.6 million of guarantees outstanding for related nonconsolidated companies and $522.9 million of long-term unconditional purchase obligations. The filing identifies valuation of grain inventories and grain forward contracts as a critical audit matter.
Important facts for investors to verify
- Whether FY2022’s unusually strong Energy, Ag, and CF Nitrogen earnings and margins persist as commodity prices, supply, demand, and refining spreads normalize or change.
- Whether the planned FY2023 capital spending, refinery maintenance, patronage, equity redemptions, and preferred dividends can be funded while preserving liquidity and covenant headroom.
- How the Ukraine conflict, fertilizer availability, weather, and supply-chain conditions affect operations, grain inventories, and customer demand.
- The cash-flow and earnings effects of commodity hedging, RIN costs, higher interest rates, and changes in working capital.
- Developments in material contingencies, guarantees, purchase commitments, and the valuation of commodity inventories and forward contracts.