AdvanSix Inc. (ASIX) Earnings

Management highlights

- Strategic Priorities • Core long-term priorities are commercial execution, operational excellence, and disciplined capital deployment to drive through-cycle value creation and shareholder returns. • All capital investments target greater than 20% returns, with the sustained growth program generating returns in excess of 30%. • The company remains on track to complete 75% conversion of ammonium sulfate to granular product, aligning output with growing demand for sulfur nutrition. - Commercial Execution • The company leverages both formula and market-based pricing mechanisms to fully pass through inflationary raw material costs; in Q2 2026, strong pricing across all three segments fully offset $72 million in YoY raw material cost headwinds from higher benzene and sulfur prices. • Net pricing impact overall was neutral YoY in Q2, a marked improvement from the net pricing headwind faced in Q1 2026. • Product mix is actively shifted toward higher-value applications and domestic customers to maximize integrated enterprise economics. - Operational Execution • The planned ammonia plant turnaround, rescheduled to Q2 2026 to align with a third-party natural gas pipeline inspection, was completed on schedule and in line with expectations. • Operational utilization rates were lower in Q2 due to the planned turnaround and weak plant nutrient demand, with Hopewell operations running at ~75% capacity during the quarter. • The company has shifted from time-based to risk-based capital prioritization for maintenance, using real-time data and quantitative assessments to schedule spending, reducing unnecessary near-term outlays without creating future deferred maintenance backlogs. • The company's cash conversion cycle ranks in the top quartile among industry peers, with disciplined inventory management driving year-over-year working capital improvements. - Strategic Growth Initiatives • The company is planning to apply for a new USDA FIELDS grant to fund expansion of domestic ammonia capacity, which would increase nitrogen nutrition availability for domestic farmers; the grant offers a 50% government cost match, higher than the 20% match from the company's already successful existing USDA SUSTAIN grant. • The previously announced DEF expansion project, which unlocks additional value from the company's integrated ammonia platform, remains on schedule with front-end engineering design work progressing; a final investment decision is targeted for H1 2027, with full operations targeted for 2029.

Guidance

- Overall: Management continues to expect significant sequential improvement in adjusted EBITDA and free cash flow in the second half of 2026 compared to the first half, building momentum into 2027. - Earnings: The company expects a $10-15 million sequential headwind to Q3 earnings from the annual reset of the North American fertilizer fall fill program, a larger headwind than historical averages due to current high sulfur input costs and remaining channel inventory. The 2026 full-year effective tax rate is expected to be 10-15% prior to any additional 45Q carbon capture tax credit claims. - Ammonia Sales: Full-year 2026 ammonia sales volume is expected to be 30% higher than 2025's prior record annual volume, driven by debottlenecking and targeted maintenance investments. - Cost Savings: The multi-year fixed cost reduction program remains on track to deliver $10 million in annualized cost savings by the end of 2026. - 45Q Tax Credits: The total expected value of all eligible 45Q credits remains in the 100-125 million range, unchanged from prior guidance; receipt of the $18 million in accrued credits from previously approved claims is still expected in the second half of 2026. - Cash Flow: Significant sequential cash growth is expected in H2 2026 driven by reduced CapEx run rate, working capital tailwinds from the Q4 plant nutrient pre-buy program, timing of annual payments that are typically made in the first half, and 45Q credit cash receipts.

Segment performance

Overall Q2 2026 total sales were $421 million, a 3% increase year-over-year (YoY), driven by 18% favorable pricing that offset a 15% volume decline. Adjusted EBITDA was $32 million, down $24 million YoY, and adjusted EPS was 19 cents, down $1.05 YoY. 1. Plant Nutrients: This segment saw lower-than-expected volume, a $17 million unfavorable impact to adjusted EBITDA YoY primarily due to weaker farmer purchasing amid pressure on grower profitability from lower crop prices and high input costs. Domestic granular ammonium sulfate still achieved near-record full fertilizer year volume, supported by on-going product mix optimization. Pricing for plant nutrients improved 5% overall YoY, reflecting higher nitrogen pricing amid rising sulfur input costs. 2. Nylon Solutions: Nylon Solutions performed at or above management expectations. Resin volumes increased YoY on improved operational performance, while Capra Lactam volumes moderated due to soft demand for carpet applications. Export volumes declined sequentially in Q2 as production was constrained by planned turnaround activities, leading the company to prioritize serving higher-value North American customers. 3. Chemical Intermediates: This segment performed at or above management expectations, with broadly stable end-market demand across construction, coatings, and downstream industrials. Phenol demand remains soft, which has driven lower global operating rates and reduced US acetone imports, leading to tighter domestic acetone supply-demand dynamics.

Risks & headwinds

- Near-term agricultural market risks: Persistently weak grower profitability due to lower crop prices and high input costs has reduced fertilizer demand, created excess inventory in the distribution channel, and increased competitive intensity as market participants liquidate positions without regard to producer economics, pressuring near-term plant nutrient pricing and margins. - Raw material price volatility: Sulfur prices have reached record highs, amplified by the Middle East conflict, which has created significant cost headwids for the industry. Sulfur price exposure is material: a $100 per long ton change in sulfur prices impacts annual costs by approximately $35 million. - Macro supply chain risks: Ongoing geopolitical conflict in the Middle East creates uncertainty for hydrocarbon raw material prices (benzene, propylene, sulfur) and global logistics. - Regulatory and policy risk: 45Q carbon capture tax credit claims are subject to ongoing IRS and DOE review and audit, creating uncertainty around the timing of cash receipts. - Operational risk: Lower utilization rates during turnarounds and weak demand constrain near-term output and revenue.

Analyst Q&A

• Q: Is lower Hopewell utilization the result of demand weakness or post-turnaround operational delays, and what is the plan to raise rates when conditions improve? /

  A: Hopewell ran at ~75% utilization in Q2, primarily constrained by reduced ammonia production during the planned turnaround. The company optimizes operating rates and product mix dynamically based on current market economics across the entire integrated value chain, and will adjust output as demand conditions evolve. Chesterfield operational performance has improved YoY, supporting future flexibility to raise utilization when economically justified. (238 words)

• Q: Given full raw material cost pass-through in Q2, what net pricing impact do you expect for Q3? /

  A: Sulfur pricing dynamics relative to ammonium sulfate fall fill program pricing will be the largest driver of Q3 net impact. Benzene and propylene prices move with oil and are subject to ongoing volatility from Middle East geopolitics; benzene costs are automatically passed through via formula pricing contracts. Management currently expects a $10 to $15 million year-over-year net headwind for Q3, aligned with prior guidance. (152 words)

• Q: How are you approaching the option of selling more merchant ammonia and sulfuric acid rather than processing these inputs into downstream products during the slow fertilizer season? /

  A: Increasing merchant ammonia sales is a core strategic priority to add operational flexibility; first half 2026 ammonia sales reached 49,000 short tons, up from 33,000 short tons in first half 2025, and full year 2026 sales are on track to be 30% above 2025's prior record. All production decisions are made based on integrated enterprise economics across the full value chain (including nylon intermediate and resin products), not just isolated input margins, so the company actively adjusts the product mix to maximize overall returns. (191 words)

• Q: What is the current status of the DEF project and the new USDA FIELDS grant opportunity? /

  A: The DEF project remains on track: front-end engineering design is progressing as planned, with a final investment decision targeted for H1 2027 and commercial operations targeted for 2029. The company's successful track record with the existing USDA SUSTAIN grant makes it eligible for the new FIELDS grant, which offers a 50% government cost match for ammonia capacity expansion (compared to 20% for the existing grant). The company plans to submit an application to expand domestic ammonia capacity to serve domestic farmer demand for nitrogen nutrition. (174 words)