Derivative Financial Instruments

9 Months Ended

Jan. 31, 2026

Derivative Instruments and Hedging Activities Disclosure [Abstract]

We are exposed to market risks, such as changes in commodity prices, foreign currency exchange rates, and interest rates. To manage the volatility related to these exposures, we enter into various derivative transactions. We have policies in place that define acceptable instrument types we may enter into and establish controls to limit our market risk exposure. By policy, we do not enter into derivative transactions for speculative purposes.

Commodity Derivatives: We enter into commodity derivatives to manage the price volatility and reduce the variability of future cash flows related to anticipated inventory purchases of key raw materials, notably green coffee, wheat, soybean meal, corn, and edible oils. We also enter into commodity derivatives to manage price risk for energy input costs, including diesel fuel and natural gas. Our derivative instruments generally have maturities of less than one year.

We do not qualify commodity derivatives for hedge accounting treatment, and as a result, the derivative gains and losses are immediately recognized in earnings. Although we do not perform the assessments required to achieve hedge accounting for derivative positions, we believe all of our commodity derivatives are economic hedges of our risk exposure.

The commodities hedged have a high inverse correlation to price changes of the derivative instrument. Thus, we would expect that over time any gain or loss in the estimated fair value of its derivatives would generally be offset by an increase or decrease in the estimated fair value of the underlying exposures.

Foreign Currency Exchange Derivatives: We utilize foreign currency derivatives to manage the effect of foreign currency exchange fluctuations on future cash payments primarily related to purchases of certain raw materials and finished goods. The contracts generally have maturities of less than one year. We do not qualify instruments used to manage foreign currency exchange exposures for hedge accounting treatment and believe all of our foreign currency derivatives are economic hedges of our risk exposure.

Interest Rate Derivatives: From time to time, we utilize derivative instruments to manage interest rate risk associated with anticipated debt transactions, as well as to manage changes in the fair value of our long-term debt. At the inception of an interest rate contract, the instrument is evaluated and documented for qualifying hedge accounting treatment. If the contract is designated as a cash flow hedge, the mark-to-market gains or losses on the contract are deferred and included as a component of accumulated other comprehensive income (loss) and generally reclassified to interest expense in the period during which the hedged transaction affects earnings. If the contract is designated as a fair value hedge, the contract is recognized at fair value on the balance sheet, and changes in the fair value are recognized in interest expense. Generally, changes in the fair value of the contract are equal to changes in the fair value of the underlying debt and have no net impact on earnings.

In November 2024, we entered into reverse treasury locks to manage our exposure to interest rate fluctuations related to the tender offers. In December 2024, concurrent with the pricing of the tender offers, we settled the reverse treasury locks and realized a net loss of $4.5 during the three months ended January 31, 2025, recognized in earnings within other debt gains (charges) – net on the Condensed Statement of Consolidated Income, netting with the gain on extinguishment associated with the tender offers. For additional information, see Note 8: Debt and Financing Arrangements.

The following table presents the gross notional value of outstanding derivative contracts.


	January 31, 2026		April 30, 2025
Commodity contracts	$	403.1	$	1,698.1
Foreign currency exchange contracts	101.2		122.4

The following tables set forth the gross fair value amounts of derivative instruments recognized in the Condensed Consolidated Balance Sheets.


	January 31, 2026
	Other Current Assets		Other Current Liabilities		Other Noncurrent Assets		Other Noncurrent Liabilities



Derivatives not designated as hedging instruments:
Commodity contracts	$	10.4	$	4.8	$	—	$	—
Foreign currency exchange contracts	0.1		1.1		—		—

Total derivative instruments	$	10.5	$	5.9	$	—	$	—


	April 30, 2025
	Other Current Assets		Other Current Liabilities		Other Noncurrent Assets		Other Noncurrent Liabilities



Derivatives not designated as hedging instruments:
Commodity contracts	$	81.5	$	18.7	$	—	$	—
Foreign currency exchange contracts	0.8		1.5		—		—
Total derivative instruments	$	82.3	$	20.2	$	—	$	—

We have elected to not offset fair value amounts recognized for our exchange-traded derivative instruments and our cash margin accounts executed with the same counterparty that are generally subject to enforceable netting agreements. We are required to maintain cash margin accounts in connection with funding the settlement of our open positions. Our cash margin

accounts represented collateral pledged of $2.7 and $37.5 at January 31, 2026, and April 30, 2025, respectively, and are included in other current assets in the Condensed Consolidated Balance Sheets. The change in the cash margin accounts is included within investing activities in the Condensed Statements of Consolidated Cash Flows. In the event of default and immediate net settlement of all of our open positions with individual counterparties, all of our derivative liabilities would be fully offset by either our derivative asset positions or margin accounts based on the net asset or liability position with our individual counterparties. Cash flows associated with the settlement of derivative instruments are classified in the same line item as the cash flows of the related hedged item, which is within operating activities in the Condensed Statements of Consolidated Cash Flows.

Economic Hedges

The following table presents the net gains and losses recognized in cost of products sold in the Condensed Statements of Consolidated Income (Loss) on derivatives not designated as hedging instruments.


	Three Months Ended January 31,				Nine Months Ended January 31,
	2026		2025		2026		2025
Derivative gains (losses) on commodity contracts	$	25.1	$	60.1	$	(142.8)	$	50.7
Derivative gains (losses) on foreign currency exchange contracts	(1.7)		3.8		(0.1)		5.5
Total derivative gains (losses) recognized in cost of products sold	$	23.4	$	63.9	$	(142.9)	$	56.2

Commodity and foreign currency exchange derivative gains and losses are reported in unallocated derivative gains and losses outside of segment operating results until the related inventory is sold. At that time, we reclassify the hedge gains and losses from unallocated derivative gains and losses to segment profit, allowing our segments to realize the economic effect of the hedge without experiencing any mark-to-market volatility.

The following table presents the net change in cumulative unallocated derivative gains and losses.


	Three Months Ended January 31,				Nine Months Ended January 31,
	2026		2025		2026		2025
Net derivative gains (losses) recognized and classified as unallocated	$	23.4	$	63.9	$	(142.9)	$	56.2
Less: Net derivative gains (losses) reclassified to segment operating profit	(35.9)		3.9		(52.1)		14.5
Change in net cumulative unallocated derivative gains and losses	$	59.3	$	60.0	$	(90.8)	$	41.7

As of January 31, 2026, the net cumulative unallocated derivative losses were $10.0, and at April 30, 2025, the net cumulative unallocated derivative gains were $80.8.

Cash Flow Hedges

The following table presents information on the pre-tax gains and losses recognized on all contracts previously designated as cash flow hedges.


	Three Months Ended January 31,				Nine Months Ended January 31,
	2026		2025		2026		2025
Gains (losses) recognized in other comprehensive income (loss)	$	—	$	—	$	—	$	—
Less: Gains (losses) reclassified from accumulated other comprehensive income (loss) to interest expense – net (A)	(3.1)		(3.0)		(9.4)		(9.8)
Less: Gains (losses) reclassified from accumulated other comprehensive income (loss) to other debt gains (charges) – net (B)	—		(56.9)		—		(56.9)
Change in accumulated other comprehensive income (loss)	$	3.1	$	59.9	$	9.4	$	66.7

(A)Interest expense – net, as presented in the Condensed Statements of Consolidated Income (Loss) was $94.5 and $95.4 for the three months ended January 31, 2026 and 2025, respectively and, $293.3 and $294.5 for the nine months ended January 31, 2026 and 2025. The reclassification includes terminated contracts which were designated as cash flow hedges.

(B)Other debt gains (charges) – net, as presented in the Condensed Statement of Consolidated Income was $30.3 for the three and nine months ended January 31, 2025. The reclassification is related to the debt extinguishment due to the tender offers, as discussed in Note 8: Debt and Financing Arrangements.

Included as a component of accumulated other comprehensive income (loss) at January 31, 2026 and April 30, 2025, were deferred net pre-tax losses of $108.0 and $117.4, respectively, related to the terminated interest rate contracts associated with the Senior Notes due March 15, 2030 and March 15, 2050, which were terminated in 2020. The related net tax benefit recognized in accumulated other comprehensive income (loss) at January 31, 2026 and April 30, 2025, was $25.1 and $27.3, respectively. Approximately $12.5 of the net pre-tax loss will be recognized over the next 12 months related to the terminated interest rate contracts.

J M SMUCKER Co 10-Q