CHS Announces Earnings

Giant ag cooperative CHS (Cenex Harvest States) has announced earnings for the year ending 8/31/2021.

Earnings were up 31% from the prior year. While the refining business carried them last year they actually lost money in refining this year while agriculture carried the company.

The earnings press release can be found here.

The actual annual report on 10-K can be found here.

The company has 5 high yield preferreds outstanding at this time which can be seen here. All issues trade at very high prices between $28 and $31/share.

5 thoughts on “CHS Announces Earnings”

  1. CHSCP and CHSCO are both trading as if these issues will not be called. They are callable in July and September 2023.

    I believe the CP issued was restructured when the CO was issued

    1. A substantial amount of the Cenex preferred issues are owned by large agricultural groups/individuals who work with Cenex all the time. Consequently, there is pressure on Cenex to not necessarily call the issues because these owners enjoy the high yields. It’s not a straightforward issue.

  2. I own CHSCM at $25. It is a 6.75% coupon trading at $28 and on 9/30/24 (just under 3 years) changes to 3 month libor plus 4.16%. I already have a lot of cash, so if I sell, it’s not like there are a lot of buying options. Really not sure what to do. Wait another year and then sell hoping that the premium remains intact, OR, sell now and wait patiently for a better investment opportunity? Any advice/opinions?

    1. I also own CHSCM, bought just below par quite some time ago.

      Like you, I have enough cash available, so have no need to sell any securities to generate cash.

      I have decided to continue holding, and see what develops as interest rates rise in the future. If LIBOR goes away, will they replace it with SOFR, or create something new in its place?

      1. Some discussion under the Dividend caption in the Prospectus at page 23. DYODD. Looks to me like you end up with a 3-month rate of some sort plus the spread. Or, maybe, 2.595 plus spread.

        Possibly will end up with the lawyers. There is plenty of discussion out there on that topic. [On the other hot button reset topic, I didn’t see (and didn’t look for) anything on sub-zero.]

        FWIW, there are two interesting sentences in the Prospectus. The company contemplated shopping for comparable rates among 4 prime banks in London in the LIBOR market, but…

        “If fewer than two such quotations are provided, the Calculation Agent will request each of three major banks in The City of New York to provide such bank’s rate for loans in U.S. dollars to leading European banks with a term of three months….”

        This rate should be readily available. If not, they kick the can down the road:

        “If fewer than two such rates are so provided, then three-month LIBOR for the Dividend Period related to such Reset Rate Determination Date will be set to equal the three-month LIBOR for the then current Dividend Period or, in the case of the Dividend Period commencing on the First Reset Date, 2.595%”

        Lather, rinse and repeat.

        https://www.sec.gov/Archives/edgar/data/823277/000104746914007513/a2221379z424b5.htm

        Just my opinion.

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