LSB Industries(LXU) - 2025 Q2 - Quarterly Results

Second Quarter 2025 Results and Recent Highlights LSB Industries reported its second quarter 2025 financial performance and highlighted recent operational and strategic developments CEO Commentary CEO Mark Behrman reported a 6% sales volume increase from enhanced ammonia production and high-margin products, with rising natural gas costs offsetting UAN price gains - Sales volume increased by 6% year-over-year, primarily due to higher ammonia production and increased sales of high-margin upgraded products[3] - Stronger UAN sales prices were offset by a significant year-over-year increase in natural gas prices, negating gains from operational improvements and higher sales prices[3] - Robust end-market demand for industrial businesses, especially nitric acid and ammonium nitrate, benefited from a surge in US copper mining activity[3] - The El Dorado low-carbon project remains on track for operation by late 2026, with EPA approval for the Class VI permit application being the primary hurdle[3] - The company further reduced balance sheet risk and future interest expenses by repurchasing debt, while continuing investments in plant reliability projects[3] Key Financial and Operational Highlights Q2 2025 saw net sales rise to $151.3 million, but net income and diluted EPS declined, with adjusted EBITDA also slightly decreasing, alongside debt repurchases and zero recordable injuries Q2 2025 Key Financial Data | Metric | Q2 2025 (million USD) | Q2 2024 (million USD) | YoY Change (%) | | :------------------- | :-------------------- | :-------------------- | :------------- | | Net Sales | 151.3 | 140.1 | 8.0% | | Net Income | 3.0 | 9.6 | -68.8% | | Diluted EPS | 0.04 | 0.13 | -69.2% | | Adjusted EBITDA | 38.3 | 41.9 | -8.6% | - Repurchased $32.4 million in principal amount of senior secured notes during Q2 2025[4] Financial Position as of June 30, 2025 | Metric | Amount (million USD) | | :--------------------- | :------------------- | | Cash, Cash Equivalents, and Short-Term Investments | 124.9 | | Total Debt | 452.6 | - Achieved zero recordable injuries for both Q2 2025 and the first half of the year[4] Market Outlook and Strategic Initiatives This section provides an overview of market conditions for industrial, ammonia, UAN, and corn, alongside updates on the El Dorado low-carbon ammonia project Market Outlook The company maintains a positive outlook for industrial, ammonia, UAN, and corn markets, driven by stable demand, attractive pricing, and supportive agricultural dynamics - Industrial business remains stable with strong nitric acid demand and ammonium nitrate benefiting from commercial mining (especially copper and gold) and infrastructure upgrades[8] - The ammonia market is healthy with attractive pricing, driven by balanced distribution channel inventories, Middle East supply disruptions, rising European production costs, and delayed US new capacity startups[8] - UAN pricing is strengthening due to stable exports, reduced imports, strong demand leading to tight US supply, and a robust global urea market[8] - Corn market dynamics support strong fertilizer demand, with USDA projecting increased US corn exports, lower ending stocks, and above-average corn acreage for spring 2025[8] Low Carbon Ammonia Project Summary The El Dorado CCS project aims to capture 400,000-500,000 metric tons of CO2 annually, reducing Scope 1 emissions by 25% and producing 305,000-380,000 metric tons of low-carbon ammonia by late 2026, pending EPA approval - The El Dorado Carbon Capture and Sequestration (CCS) project is projected to capture and sequester 400,000 to 500,000 metric tons of CO2 annually, reducing Scope 1 emissions by 25%[8] - The project is expected to produce 305,000 to 380,000 metric tons of low-carbon ammonia annually[8] - The project awaits EPA approval for its Class VI permit application and is anticipated to begin operations by late 2026[8][11] - Partner Lapis Low Carbon Solutions completed drilling of the stratigraphic injection well in June to provide data supporting EPA's technical review[3][11] Detailed Second Quarter Financial Performance This section provides a detailed breakdown of LSB Industries' financial results for Q2 2025, focusing on product sales, volumes, pricing, and input costs Product Sales Overview Q2 2025 net sales grew 8% to $151.3 million, driven by increased UAN and AN volumes and UAN price hikes, though operating income and adjusted EBITDA declined due to higher natural gas costs Q2 2025 Product Net Sales | Product Category | Q2 2025 (thousand USD) | Q2 2024 (thousand USD) | YoY Change (%) | | :--------------- | :--------------------- | :--------------------- | :------------- | | AN & Nitric Acid | 61,707 | 58,442 | 6% | | UAN | 52,262 | 42,808 | 22% | | Ammonia | 26,830 | 28,448 | (6)% | | Other | 10,497 | 10,375 | 1% | | Total Net Sales | 151,296 | 140,073 | 8% | - Net sales growth was primarily attributed to increased UAN and AN sales volumes and higher UAN pricing[9] - Operating income and adjusted EBITDA declined, mainly due to rising natural gas costs[9] Key Product Volumes and Pricing Q2 2025 saw AN & Nitric Acid and UAN volumes grow 9% and 10%, respectively, while ammonia volume decreased 9%, with UAN average selling price up 14% to $308/short ton Q2 2025 Key Product Volumes (short tons) | Product Category | Q2 2025 | Q2 2024 | YoY Change (%) | | :--------------- | :------ | :------ | :------------- | | AN & Nitric Acid | 161,509 | 147,619 | 9% | | UAN | 151,807 | 137,499 | 10% | | Ammonia | 66,069 | 72,294 | (9)% | | Total | 379,385 | 357,412 | 6% | Q2 2025 Average Selling Prices (USD/short ton) | Product Category | Q2 2025 | Q2 2024 | YoY Change (%) | | :--------------- | :------ | :------ | :------------- | | AN & Nitric Acid | 328 | 337 | (3)% | | UAN | 308 | 271 | 14% | | Ammonia | 369 | 368 | 0% | Q2 2025 Average Benchmark Prices (USD/ton) | Benchmark Price | Q2 2025 | Q2 2024 | YoY Change (%) | | :-------------- | :------ | :------ | :------------- | | Tampa Ammonia | 416 | 440 | (5)% | | NOLA UAN | 344 | 246 | 40% | Input Costs Q2 2025 saw significant year-over-year increases in natural gas costs, with average costs for materials and production rising 106% and 76%, respectively Q2 2025 Average Natural Gas Costs/MMBtu | Input Cost Category | Q2 2025 (USD) | Q2 2024 (USD) | YoY Change (%) | | :------------------ | :------------ | :------------ | :------------- | | Average Natural Gas Cost/MMBtu in Materials and Other Costs | 3.50 | 1.70 | 106% | | Average Natural Gas Cost/MMBtu Used in Production | 3.37 | 1.92 | 76% | Consolidated Financial Statements This section presents LSB Industries' consolidated statements of operations and balance sheets for the second quarter of 2025 and year-to-date Consolidated Statements of Operations Q2 2025 net sales increased to $151.3 million, but gross profit and operating income declined due to rising costs, leading to a decrease in net income and diluted EPS Q2 2025 Consolidated Statements of Operations Summary (thousand USD, except per share amounts) | Metric | Q2 2025 | Q2 2024 | H1 2025 | H1 2024 | | :------------------- | :------ | :------ | :------ | :------ | | Net Sales | 151,296 | 140,073 | 294,728 | 278,277 | | Cost of Sales | 128,123 | 112,658 | 257,171 | 228,584 | | Gross Profit | 23,173 | 27,415 | 37,557 | 49,693 | | Operating Income | 10,493 | 14,403 | 14,961 | 25,663 | | Net Income | 3,006 | 9,555 | 1,366 | 15,178 | | Diluted Net Income Per Share | 0.04 | 0.13 | 0.02 | 0.21 | Consolidated Balance Sheets As of June 30, 2025, total assets were $1.128 billion, a decrease from year-end 2024, with reduced cash and short-term investments, increased net receivables, and a decrease in net long-term debt to $446 million Consolidated Balance Sheets Summary (thousand USD) | Metric | June 30, 2025 (thousand USD) | December 31, 2024 (thousand USD) | | :------------------- | :--------------------------- | :------------------------------- | | Cash and Cash Equivalents | 5,614 | 20,230 | | Short-Term Investments | 119,278 | 163,971 | | Accounts Receivable, Net | 51,289 | 38,760 | | Total Current Assets | 255,212 | 309,714 | | Property, Plant and Equipment, Net | 838,035 | 847,570 | | Total Assets | 1,128,083 | 1,187,188 | | Total Current Liabilities | 96,511 | 135,634 | | Long-Term Debt, Net | 446,370 | 476,163 | | Total Liabilities and Stockholders' Equity | 1,128,083 | 1,187,188 | | Total Stockholders' Equity | 495,800 | 491,640 | Non-GAAP Financial Measures This section provides reconciliations for non-GAAP financial measures, including EBITDA, Adjusted EBITDA, and netback sales prices for key products EBITDA and Adjusted EBITDA Reconciliation LSB Industries uses EBITDA and Adjusted EBITDA to assess core operations, with Q2 2025 Adjusted EBITDA at $38.276 million, a decrease from $41.896 million in the prior year - EBITDA is defined as net income (loss) plus net interest expense and interest income, less gain on extinguishment of debt, plus depreciation and amortization, plus provision (benefit) for income taxes[28] - Adjusted EBITDA further adjusts for non-cash equity compensation, one-time/non-cash or non-operating items such as legal fees, asset impairment losses, turnaround costs, and growth initiatives[28] Q2 2025 EBITDA and Adjusted EBITDA Reconciliation (thousand USD) | Metric | Q2 2025 (thousand USD) | Q2 2024 (thousand USD) | | :----------------------- | :--------------------- | :--------------------- | | Net (Loss) Income | 3,006 | 9,555 | | Add: Net Interest Expense and Interest Income | 6,307 | 5,445 | | Gain (Loss) on Extinguishment of Debt | 59 | (1,879) | | Depreciation and Amortization | 20,682 | 18,784 | | Provision for Income Taxes | 1,084 | 1,250 | | EBITDA | 31,138 | 33,155 | | Equity Compensation | 2,088 | 2,099 | | Legal Fees and Specific Matter Settlements | (207) | 1,229 | | Asset Impairment Losses | 2,528 | 1,489 | | Turnaround Costs | 2,639 | 3,439 | | Growth Initiatives | 90 | 485 | | Adjusted EBITDA | 38,276 | 41,896 | Ammonia, AN, Nitric Acid, UAN Sales Price Reconciliation The company provides a reconciliation of net sales to netback sales for ammonia, AN, nitric acid, and UAN, with Q2 2025 netback sales at $123.958 million, up from $113.624 million year-over-year Q2 2025 Ammonia, AN, Nitric Acid, UAN Sales Price Reconciliation (thousand USD) | Metric | Q2 2025 (thousand USD) | Q2 2024 (thousand USD) | | :------------------------- | :--------------------- | :--------------------- | | Ammonia, AN, Nitric Acid, UAN Net Sales | 140,799 | 129,698 | | Less: Freight and Other | 16,841 | 16,074 | | Ammonia, AN, Nitric Acid, UAN Netback Sales | 123,958 | 113,624 | Company Information and Disclosures This section provides details on LSB Industries' upcoming conference call, company overview, and important forward-looking statements Conference Call and Investor Relations LSB management will host a conference call on July 30, 2025, to discuss Q2 2025 results and recent developments, with details available on the company's investor relations website - LSB management will host a conference call on July 30, 2025, at 10:00 AM ET / 9:00 AM CT to discuss Q2 2025 results[13] - Participants include Chairman and CEO Mark Behrman, Executive Vice President and CFO Cheryl Maguire, and Executive Vice President and CCO Damien Renwick[13] - A webcast and presentation for the conference call are available in the Investor section of LSB's website (www.lsbindustries.com)[14](index=14&type=chunk) About LSB Industries, Inc. Headquartered in Oklahoma City, LSB Industries, Inc. aims to lead in low-carbon and zero-carbon product manufacturing for agricultural, industrial, mining, and future energy markets - LSB Industries, Inc., headquartered in Oklahoma City, is committed to leadership in producing low-carbon and zero-carbon products[15] - The company currently provides essential products for agricultural, industrial, and mining end markets, with future expansion into energy markets[15] - The company operates ammonia and related product manufacturing facilities in Cherokee, Alabama; El Dorado, Arkansas; and Pryor, Oklahoma[15] Forward-Looking Statements This press release contains forward-looking statements subject to known and unknown risks, uncertainties, and assumptions, with no obligation for the company to update or revise them - Forward-looking statements involve business strategies, anticipated future operating results, cash flows, capital resources and liquidity, industry trends, low-carbon product production capabilities, and capital project costs and timing[16] - Significant risks and uncertainties include business and market disruptions, product and raw material price volatility, global and regional economic downturns, production facility interruptions, increased competitive pressures, financing capabilities, personnel recruitment and retention, raw material access, permit acquisition, and other financial, economic, competitive, environmental, political, legal, and regulatory factors[16] - The company does not guarantee future results, activity levels, performance, or achievements and undertakes no obligation to update or revise any forward-looking statements[17]