Calumet Specialty Products Partners(CLMT) - 2025 Q4 - Earnings Call Transcript

Financial Data and Key Metrics Changes - For the full year 2025, the company delivered $293 million of adjusted EBITDA with tax attributes, nearly a 30% increase year-over-year [5] - Restricted debt was reduced by more than $220 million, and net recourse leverage improved from 8.2 times to 4.9 times [5][14] - Operating costs at Montana Renewables averaged $0.41 per gallon in the second half of the year, a 60% improvement over two years ago [10] Business Line Data and Key Metrics Changes - The Specialty Products and Solutions segment generated $88.5 million for the quarter and $291.8 million for the full year, reflecting continued benefits from commercial excellence initiatives [16] - The Performance Brands segment achieved adjusted EBIT of $5.4 million for the quarter and $47.9 million for the full year, marking the third consecutive year of growth despite the divestiture of Royal Purple Industrial [18] - Montana Renewables reported adjusted EBIT with tax attributes of negative $5.4 million for the fourth quarter and positive $31.3 million for the full year [19] Market Data and Key Metrics Changes - Specialty sales volumes exceeded 20,000 barrels per day during every quarter of the year, reflecting strong demand and operational improvements [9] - The regulatory environment for biofuels is improving, with expectations for a stronger Renewable Volume Obligation (RVO) to enhance industry utilization and margins [12] Company Strategy and Development Direction - The company aims to execute the Max SAF 150 project safely, on time, and on budget in the second quarter of 2026, while continuing to improve cost levels and leverage its early mover advantage in Sustainable Aviation Fuel (SAF) [22][23] - Capital allocation priorities remain disciplined, focusing on driving durable free cash flow and enhancing deleveraging while expanding specialties and executing the Max SAF 150 strategy [23] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's ability to navigate regulatory uncertainties and emphasized the importance of being a low-cost provider in a volatile market [27] - The outlook for 2026 includes expectations for increased production and operational efficiencies despite a heavy turnaround year [15][22] Other Important Information - The company plans to invest $115 million to $145 million in capital expenditures for 2026, primarily due to scheduled maintenance [15] - The Montana Asphalt segment is expected to continue producing in the $30 million-$50 million EBIT range, supported by improved asphalt margins and cost reduction initiatives [21] Q&A Session Summary Question: Can you talk about the macro setup and operational level at Max SAF? - Management acknowledged regulatory uncertainty but emphasized their position as a low-cost provider and the durability of the Max SAF project [27][28] Question: What are your views on the RINs market and utilization? - Management noted that the industry is currently running at variable margins and that the restart of idle plants will depend on the final RVO [33][36] Question: What is the expected ramp-up for the Max SAF project? - The company expects to ramp up to a run rate of 120-150 million gallons annually, with improvements in cost efficiency as production increases [43] Question: How are SAF contracts structured regarding pricing? - Management clarified that SAF contracts are designed to be robust against market dynamics, with a fixed premium over renewable diesel [59][65]