Giant CHS has announced earnings today for the 1st quarter of 2025 and as expected they came in somewhat soft. Net income was $244 million compared to $523 million in the year ago quarter.
While the ag sector came in softer than the year ago quarter the big soft fall came from the companies oil refining sector where the company had net income of just $20 million–$247 million less than a year ago.
I had written a few times on my low expectations on earnings for this quarter (and probably next) because of the difficult ag economy–and additionally because ag giant Cargill (privately owned) had reported on the softness in their business and they are in virtually every commodity in the world.
While the earnings were announced during market hours they had no affect whatsoever on their 5 outstanding preferred issues.
I believe the CHS Montana refinery uses Canadian crude. Refining and retail gas earnings could be weak if tariffs are imposed on imports of Canadian crude. There may be risks from retaliatory tariffs on crops like soy. China is better positioned. It has cut its US soy imports by 50% and Brazil is open for business. Interest rates have been running high lately.
So there may be some opportunities to add on weakness in 2025. The preferreds seem fairly insulated from earnings variability at the corporate level. As a not-bank, a not-mREIT and a not-likely hedge fund target, IMHO CHS remains a good portfolio diversifier. JMO, DYODD.
I suspect grain and certainly energy is very cyclical. Cenex though has been around since 1929, the coop owners also make up a portion (probably significant) of the preferred owners. Not too worried about soft quarters. Just my take on it. Note too all their listed preferreds selling above par, four out of five on the list through this site also traded up today. fwiw. If some dip below par I might be buyer.
Tacitus–you have the same general thought as the ‘board’ has had on CHS—we have been through a few of these cycles. Thanks for your input.
Tim it’s not just Cargill, ADM has had lower earnings and hit a 52 week low today. That’s still quite a miss on the bottom line. Exxon said it’s refinery sales were down the last qtr. Due to higher refining costs I e. cost of oil. I expect that to be true for most of the refiners
Charles—I haven’t followed ADM, but doesn’t surprise me.