LXU - Earnings call transcript Q2 2022

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Operator

Good day, ladies and gentlemen, and welcome to your LSB Industries Second Quarter 2022 Earnings Call. All lines have been placed in a listen-only mode, and the floor will be opened for your questions and comments following the presentation. [Operator Instructions] At this time, it is my pleasure to turn the floor over to your host, Fred Buonocore, President of Investor Relations. Sir, the floor is yours.

Fred Buonocore

Good morning, everyone.

Mark Chief Chief Financial are Cheryl Officer, today our Maguire, Officer. me Behrman, Executive our and Joining Please note company's materially. that of could and and because cause today's they future call will statements projections, results variety based include performance are the and on of not actual the are current a expectations, the intent, guarantees forward-looking factors statements differ to

for of press include information lsbindustries.com, As non-GAAP the this At the to to the statements turn will forward-looking to reconciliations further ahead over like go see references non-GAAP release this our to Investors and Section call please results, in Mark. time, results I’d call and website, results. regarding of GAAP

Mark Behrman

about our second and priority Fred. its Golsen, but and was turn and importantly, we the of see LSB touched a our told and believed Jack outlook who passed a a results lives We're balance and first after prosper, XXXX for this to LSB former person. always our April. acknowledge to he He team me Jack successful you, generous child. that take but year. Founder had like opportunity to Recently, happy his and very Jack's that, happy Jack future. many I'd a creation was was he more today very Chairman was family, entrepreneur, past But to moment our was first, his highly fourth to around the the quarter Thank you have speak away to CEO, and bright

Jack's have grateful a reality is and Our be belief are legacy. his of to opportunity day a goal every part the to to make we

We for capitalized making on to their The of execution. another eventful as excellent that products I'd page results business three had growing and and performance. for were our again doing line employees with quarter by top and second summarized XXXX this to improving once and thank pricing and safely. environment strong quarter favorable our our our record to for delivered an driven solid strong our the Turning we bottom quarter it like on commitment presentation.

ongoing the the planted, and yields of America drought to number of reducing maintain our last wet we invasion and in at corn spring, hard as capitalization of being provide all average historic below part exacerbated higher this acres South page Ukraine. of And impacting heat remains the be natural levels, this demand strong our markets. pleased to including to price largely market our our demand continuing factors in for of driven a much of time were ratios remains XXXX ethanol was this an overview multi-year continued to of averages, favorable are variety selling large than a a and and prices June, result, strong demand Adding its and As been work and livestock. On export be for US strong and their of supply international conditions constrained for domestic a by year. we Indexes. in of it is on the and to for spite US due by market to Russell of end we the continued for a reflection recent of Russia's the gas Western contributions, added weather has conditions presentation, and of volatility stock-to-use In outlook four XXXX pressure prices, global above and corn poor corn, now corn The for for China spring, due products. late corn, impact feed

unfortunately, the that Sea routes which ports and of Ukrainian export should supplies, address will the Black is bombing unblocking for sea in low for struck been it fertilizers, Port deal increase the stocks. of now Odesa. not has deal recent doubt the with our of But the for While of grain current

corn, attractive. corn supply a demand short and believe we profitability increased that remain will the prices result and will of As of that remain farm elevated

acres farmers yields, creating corn and will planted that robust fertilizer. maximize will their to that We remain seek for of strong expect demand

to and which addition a in of pass continued respect in corn Additionally, is natural of towards adds translate US in demand stock-to-use in gas our would the three ratios. Overall, higher the in for ammonia With weakening crop. competition reflected yields volatility, the promote order demand, higher harvest, remainder Pricing Demand spring replenish already across contracts making costs. to Ammonia which Tampa fertilizer market, fertilizer is acres ammonia growth. nitrogen through trends seasons for we the product well to nitrogen in strong are back year's next for in very the the mining for business products flow price of profitability the of as application to the seeing product heavy of remains XXXX, supplies enabling to forecast to farmers soil, nutrients industrial our in confidence tightening current natural our for for reduce year continued to cost-plus the yields as lack increases with industrial the industrial low corn will good planted the our indexed. applied stock-to-use reflecting nature, pricing growing in creating for further reducing bring are levels, corn and global and for fall we're despite our a This and the two which could export to averages. cash prospects and stable of in-line feedstock remains take our strong years ratios to well to for the Longer products economic term, number it industrial believe strength price above that many historical point XXXX. ago products, majority us contracts gas

call will I results the outlook. will to Cheryl, our Now, QX over turn Cheryl? who our and discuss

Cheryl Maguire

morning. Thanks, Mark, and good

of summary a see Quarter five, page our XXXX. Second the of you'll results for to Turning

all pricing across products reflects Our strong the our our for to businesses. increased performance relative XXXX

adjusted second of million quarter record. company $XXX is a EBITDA Our

Additionally, $X.XX quarter. the EPS per of generated we share adjusted in

trailing $X ratio further million, we translating leverage of free million, the of EBITDA into highest currently situation. expect in more $XXX below cash million approximately our in history. of short-term XXXX. We Our total $XXX we cash has had second company's from improved flow and investments. with cash in that one second free greatly $XXX the including Notably have to quarter ended cash strong and second during our flow the capital quarter, profitability a flow and million million the $XXX liquidity, operations half time of decline XX-month contributed than liquidity of generated to of expenditures We

these shareholders. authorized stock As our return leverage than million $XX is $XX repurchase mid-market pricing to approximately average we have our target capital a at a a mentioned our price period, date into our XXth, we we went now before, at would be of up or May of normalized I repurchased as program of and shares share. per less To believed share our slightly buying until in stock than Board ratio our X.X volume-weighted $XX levels quarterly blackout On less back was our and million a environment. undervalued times

view impact that shareholders. we Mark our expect later substantial with second Page bar EBITDA one value adjusted of in green just buyback in for program, sheet balance million other of of continue multifaceted selling adjusted We have discuss to light the on quarter to six part of this approach our results. The initiatives call. to to the strong illustrates quarter out trends to deliver are the buyback blackout bridges million. continue period. XXXX EBITDA our $XXX will second to a We our $XX stock as now some using our of our price

increased take of selling done product price net current market versus mix the second an costs, optimizing approximately by million quarter primarily XXXX. $XX is of to raw Our increased team impact advantage positive dynamics. job commercial costs, of has material variable shown our outstanding The which

Our natural and XXXX, second through remain of rose elevated course in cost XXXX quarter over third substantially the the and quarter. gas the of

natural the had benefit purchases volume, was This has to to higher selling particularly and rising bar thus dynamic Partially EBITDA increased continue prices in gas weather in the wet green the of year. related in certain farmers, the this benefit fertilizer and expect of prices sales the we HDAN to modest however, half product $X impact by As million. selling the to approximately price from of delayed elsewhere. areas an of which US indicates, a of conditions exceeded due offsetting second decline of ammonia and dry far

environment higher we've increase costs Page supplies, for other contractors, primarily current in to the in all by the we've to the customer several quarters seven to past period favorable the we've facilities, resources. made at the is improvement higher new our in related illustrates mix. million, $X result made strong trends, bottom were addition our years. delivered costs and improvements approximately underscored of by investments materials, pricing and an talent the line over inflationary distribution Lastly, and product This operational optimize contracts

second further quarter, ton. NOLA XXXX. With these the factors a from the to half over is the in pricing to of expect benchmark third We respect benefit UAN currently $XXX

$XXX per the Europe in ammonia very Additionally, August in high due increase region. could in settled ton metric last at benchmark natural ton per impacting $XX further pricing and gas versus August, production prices Ammonia that Tampa to metric

five very remain a significantly foreseeable foundation earlier, peak importantly, future. out at Most have prices pricing higher to solid levels current for above very as pointed selling we levels strong years. still the from While down year, of than last this earlier or is and the Mark believe

and Dorado to also acid for quarter. for tons, combined we are approximately maintenance also expected nitric and sales turnaround we third ammonia and products. the result XX,XXX of reminder, a sales in weeks is days will the ammonia downstream which pipeline, third other of ammonia lower ship and scheduled Pryor production lower NuStar which the to third As El planned eight in during turnarounds approximately Each our Dorado in six our will at approximately utilize facility ammonia XX quarter impact facilities El further the performing Furthermore, UAN quarter. from and last production is to down

sale of because expect some complete this just at we inventory would we quarters. that for However, El production as our resume subsequent in timing, and production turnaround move to Dorado into ammonia is

to costs the expected double compared quarter third gas are XXXX. approximately of Additionally, to be

and above pipeline own XXXX. gas planned, $XX in third our to which ammonia EBITDA the quarter. two turnarounds the XXXX $XX go expect costs, planned of for to of quarter range significant of However, despite third be adjusted is higher NuStar the scheduled of the million, these quarter And we assuming turnarounds third planned maintenance as the million

which year's costs gas average months, last natural Looking for exceed coming in assuming of would out anticipate increase us year quarter, we and in $X.XX to modest summer fourth $X for the range, typically we fourth see to of adjusted MMBtu EBITDA pricing, the the million EBITDA quarter, per $XXX and some the in adjusted full fourth put to the quarter around XXXX.

of This As is on adjusted full expenses, seeing expected approximately reminder, maintenance to EBITDA we excludes our year. the on One outlook. cost turnaround, which $XX caveat and are a million the are today. for be based information contractor

know, commodity volatile you last over been has months. pricing As XX the

our I that so, And said, forward providing on to turn call. third quarter I'll being now, And to look back over Mark. with further it updates

Mark Behrman

half US currently Page XXXX Thank through European course natural major role spread widened to you, our over prices the gas XXXX. are of selling which first Natural between the products. volatile European a illustrates I and have an to costs, be prices prices how gas the continue eight gas what Historically in a play MMBtu, a high continue per taken $X,XXX costs last $XX down Cheryl. production number levels over over rising of for remain At seen elevated would ammonia of global of these ammonia at shortage months. the demand. ton. levels, facilities production gas the already natural closures. is then supply puts nitrogen exacerbating disruption in If we anticipate face prices additional these other over products This of that and several of current and is

the shareholders. pricing pursue generate value grow on On ammonia year to us gas We XXXX and in create this well gas European nitrogen multiyear US a intend facilities. we significant cost our for dynamic, our the the and cash environment our significant of show key prices ammonia XXXX, represents advantage safety full balance capitalize strong day, to lower producers. in summary decline flow, our result free nine, to by a of and our of coming we allowing if opportunities result a arbitrage business additional primary even of followed to the reliability growth Employee months. for focus of of priorities. averages single remain to page the expect This every for is to cost production based As natural above

and opportunities make for both We further have fronts on improvements continue to improvement. significant

we As Cheryl Dorado and summer turnarounds this facilities. El performing mentioned, at Pryor our are

We best-in-class the chemical respect locations debottlenecking initiatives to and and expect the production both we safety various believe move work initiatives, our goal reliability to we to are being a capacity closer performing plants us at advance through increase manufacturing growth both organic initiatives. our company. can With we of of our that

our of this Over in this the our in M&A meet year our and recently Director multiple believe Development, Corporate activities, profitability projects that focus Bryan contribute efforts to in an course respect and our of plan order we With profile. Jenson that area. evaluate return we brought to to we sales to of increase potential volumes aboard will

we as in these represent our ammonia believe favorable initiatives, position this emerging a clean and a we M&A are actively continue projects markets. and to the respect With blue accretive become initiative. and energy advance us cash we outlook, opportunities, pursue energy green substantial to liquidity a Given leader to flow were to pursuing clean our strong in opportunity strategy for we that our compelling

ongoing. filing of will thyssenkrupp green qualify that a at with announced anticipate approximately half preparation on the Our Class the as gray surprises deeper first convert a produce XX. to and design our of XX,XXX El and site agreements ammonia. investment first into we of are nearby In production or our of has design and programs, of of evaluation results capture with performing application or tons well feasibility conditions portion currently blue Bloom conventional our project our the Dorado which to X to progress May, project, consisted Pryor’s we at thyssenkrupp facility. facility permit year completed modeling existing metric per project plans the developing summarize, engineering simulation Oklahoma then the approval. no engineering small in ammonia into Energy board study, X assessing that as the a produced which and EPA permit modeling Uhde X we We develop in Pryor, includes a the carbon hydrogen to that highlighted federal zero work been Pending and application XXXX. ammonia page be wells green studies, entered by geological the Congress. To develop Phase incentive found formation continues green ammonia ammonia capacity credits process the we our [indiscernible] to seek project ammonia depleted could under were in of from The of electrolyzers feasibility for geological Class study, planned. tax potentially for will and green are such used production the is

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Operator

Instructions] we question The now floor you. And questions. go Rob is McGuire with into open Please our ahead. Research. your for [Operator go from first Granite Thank do

Rob McGuire

morning congratulations quarter. and your Good on

Mark Behrman

are How you? Thanks, Rob.

Rob McGuire

sales? pockets taking still that, have impact past Hey, are degradation witnessed some having And good. degradation you an where pricing Very are or on is place? Thank you. there pricing we

Mark Behrman

in of a this that the we're I choppy mean, say market, is of year kind right? time fertilizer where there would side. the the on a the is demand I lowest

say, there's are standoff a folks So of who between producers I'd always fertilizer. and kind a, of then a buying bit

urea, days week up, -- respect around last export US we've seen So, the a certainly earlier, world days. to I to and the over is Ammonia XX last and shortage move move opportunities as up moved urea week stabilize, XX With to there I the from prices pricing think we're US to and over I think Tampa mentioned we've seen ammonia up. the prices Gulf start seeing

to increases it we're degradation, guess, think I significant don't much not either. but I up, sum price So, seeing seeing we're

Rob McGuire

Thank drivers? And you. can that discuss there products you are to those has And if uptick what are in experienced ammonia significant addition so, inventory? if in

Mark Behrman

Cheryl think, I Well, pointed out.

inventory a of season more probably bit the have. planting coming little ammonia than out would carrying we we're normally So,

Ammonia of going we're the advantage prices. take higher Tampa However, to

probably more high it normally Probably out So density have lot we pasture with weather, thing. as dry, as really to well. and ammonium a bit And is have cattle do would nitrate think a to really high prices as a land. density I good first turned than little of that inventory being ammonium the well being has nitrate as then wet on used be

Rob McGuire

Thank And ammonia shifting Pryor on or green the you site green capacity in that ammonia replace project. you and to green have Will will then ramp there? production lastly you. existing your to the the ammonia case over gears, just ammonia capacity want continue

Mark Behrman

Yes.

the designing it [indiscernible] way we'll gray, run about we're megawatts -- metric the will look tons green have plant. natural the But XX,XXX of is, produce we tons install feed from way green approximately we'll just at ammonia. of in to into electrolyzer to the we’ve to want XX capacity to the asked thinking electrolyzers So switch where we're what it ability of to where gas

way traditional that upside if and prices didn't green, produce over to just could produce energy went today. we renewable somehow we in we the So want theory, and down switch produce

Rob McGuire

all answers questions. you. Thank That my

Mark Behrman

Thanks, Rob.

Operator

questions. for remarks. closing Behrman there no Mark further time to We this are At turn

Mark Behrman

today. that job our the of quarter. a I’m to the proud and Well, produce everyone team they've record thank I for really want done to call joining

will basis. to we make Thank a we on about those initiatives. progress on think have the great go-forward couple on aim a I further of of have lot a And next going things and talk over exciting value add that quarters a you we as of lot them day.

Operator

you. This Thank teleconference. today's for concludes participation. you your We thank

disconnect You at may time. this lines your

LSB Industries (LXU) 28 Jul 222022 Q2 Earnings call transcript