Calumet, Inc. (CLMT) Earnings

Management highlights

- Overall Financial & Deleveraging Progress • Delivered $175 million total adjusted EBITDA with tax attributes for Q2 2026, despite three planned turnarounds at the start of the quarter • Restricted group leverage ratio fell below 4x, and management expects it to drop below 3x next quarter, faster than originally planned • Retired $100 million of notes post-quarter-end and terminated the CMR truck rack sale leaseback via a $115 million repurchase, eliminating high-interest debt; continued accelerated deleveraging is the top near-term priority • Generated over $90 million in operating cash flow during the quarter, with a $70 million intentional working capital build that is expected to unwind over time - Specialty Products Market Dynamics • Global paraffinic base oil capacity is over 10% offline, creating a structural market shortage: 1/3 of Middle Eastern capacity is offline from the Iran war (disproportionately impacting Group 3, which increased demand for Group 2), while Europe lost 1/3 of its Group 1 capacity from the Russia-Ukraine war • Skyrocketing logistics and shipping costs and record global refinery utilization with no spare capacity mean the imbalance is unlikely to resolve quickly • Calumet's integrated crude-based production model gives it a competitive advantage: domestic crude supply is stable, the company captures full intermediate value (unlike non-integrated producers relying on expensive, scarce third-party intermediates), and it also benefits from high margins on co-produced fuels and asphalt - Montana Renewables & Sustainable Aviation Fuel (SAF) Expansion • Completed the first stage of the MaxSaf 150 expansion on time and on budget; new MaxAF catalyst met or exceeded all performance expectations • Adopted a novel, capital-efficient expansion plan that repurposes an existing crude refinery reactor at the Great Falls site instead of transporting a new reactor from the Gulf Coast. This cuts project costs by hundreds of millions of dollars, accelerates timelines by years, reduces construction risk, and delivers a higher internal rate of return • The repurposed second reactor will operate as a patent-pending polishing unit (rather than severe cracking), producing minimal low-value byproducts and enabling economically optimal high SAF output, compared to standard industry processes that prioritize renewable diesel (RD) over SAF even when SAF carries a price premium • The project will reach 60 million gallons per year (MGY) SAF run rate in the near term, ramp to 80-100 MGY by end-2026, exceed 120 MGY by spring 2027, and ultimately reach 200 MGY SAF at 17,000 barrels per day total throughput by 2028 at a fraction of original projected capital • The RVO policy is working as expected: rational, measured restarts of biodiesel capacity are supporting strong margins, and biomass-based diesel production is up 70% year-over-year in 2026 - Growth Strategy Update • With deleveraging progressing faster than planned and a strong cash flow backdrop, management is now progressing a pipeline of low-risk, high-return specialty growth projects accumulated over the past several years. A majority of these projects are expected to clear final review and be deployed in 2027 and 2028.

Guidance

- Deleveraging: Restricted group leverage is expected to fall below 3x next quarter, with continued accelerated debt paydown through the second half of 2026 - Specialty Products: Management expects strong results similar to Q2 2026 to continue through the remainder of 2026, supported by persistent structural market tightness, with no planned turnarounds in Q3 2026 - Performance Brands: The segment is expected to recover in coming quarters as price increases flow through to margins and the LIFO inventory headwind reverses - Montana Renewables: Q3 2026 adjusted EBITDA will be meaningfully higher than Q2 2026, as the segment will have a full quarter of uninterrupted production at strong current index margins - CMR Refining: CMR is expected to deliver outsized earnings between Q3 2026 and the planned November downtime for reactor reconfiguration, with current pricing caught up after early-quarter margin pressure - Specialty Growth Capex: Most of the $50 million planned growth capex will be spent in 2027, with the remainder in 2028; earnings contributions from these projects will primarily flow through in 2028, with minimal contributions before late 2027 - Full SAF expansion details, including total project costs, will be released before the next earnings call, following completion of DOE document updates

Segment performance

1. Specialty Products and Solutions (STS): Adjusted EBITDA of 16.17 billion yen, more than double the prior year period. This segment led overall company performance, contributing ~88% of total adjusted EBITDA in Q2 2026. It marked the seventh consecutive quarter of specialty sales volume above 20,000 barrels per day, with a record production quarter and 5% year-to-date volume growth over 2025's high milestone. 2. Performance Brands: Adjusted EBITDA of 63 million yen, a 62 million yen decrease year-over-year. The decline is attributed to timing: 18% volume growth was offset by input cost spikes that hit margins due to a 60-90 day lag in passing price increases to retail customers, plus a $7 million LIFO accounting headwind from rapid cost inflation. 3. Montana Renewables (renewable segment): Adjusted EBITDA with tax attributes was 170 million yen, even with $40 million in foregone margin from downtime for the first stage of the MaxSaf 150 expansion, a full April outage and half of May outage. Current index margins are strong at ~$2.60 per gallon and rising. 4. CMR (Montana refining side): Adjusted EBITDA was 122 million yen, a 109 million yen sequential increase. Early quarter asphalt margins were squeezed by rapid crude price escalation, but pricing has since caught up ahead of peak Q3 asphalt season.

Risks & headwinds

- Global energy market volatility and geopolitical disruptions (Iran war, Russia-Ukraine war, drone strikes on Russian refineries) create supply chain uncertainty and crude price volatility, though Calumet's domestic crude supply and integrated model position it to benefit from current market conditions - Base oil and specialty product market tightness depends on prolonged offline capacity, which could change if disrupted capacity comes back online faster than expected - Feedstock intermediate scarcity and high prices create headwinds for non-integrated competitors, but could impact Calumet if domestic crude supply availability shifts - SAF expansion project execution carries typical construction and operational risk, though the repurposed asset approach de-risks delivery compared to the original megaproject plan

Analyst Q&A

• Q: How durable are current high base oil cracks, and how much of current margin gains are just pass-through of higher feed costs? /

  A: Management states the high base price environment is not short-term, driven by structural capacity disruptions that will take many months to resolve. Over 10% of global base oil capacity is offline: 1/3 of Middle Eastern Group 3 capacity is down, which has lifted demand for Calumet's Group 1 and Group 2 output, global commodity refineries are diverting base oil capacity to higher-margin distillate, and recent drone strikes have taken additional Russian capacity offline. Results similar to Q2 are expected to continue through 2026.

• Q: If deleveraging finishes earlier than planned, will this change the approach to potential MRL monetization? /

  A: The long-term plan to separate or monetize MRL to maximize shareholder value remains unchanged. The key difference is that monetization is no longer required as a prerequisite to fund specialty business growth, thanks to stronger organic cash flow. Management will now pursue any transaction purely from the lens of optimizing shareholder value, rather than a requirement to free up capital.

• Q: What is the current demand outlook for SAF, both domestically and internationally? /

  A: Management notes that the North American voluntary SAF market and European mandatory market are expected to remain separate, with sustained strong demand. The company has not yet hit the limit of voluntary demand for SAF, and it has pre-positioned production capacity to meet growing demand by expanding MRL and reconfiguring existing fossil assets. The company maintains flexibility to adapt to ongoing market volatility.

• Q: Why are you delaying full APMAC SAF production until the repurposed reactor is online, and have yields differed from original expectations? /

  A: Yields are not off expectations: without the polishing reactor, increasing cracking severity to produce more SAF converts more RD to low-value naphtha. With current high RD margins, losing RD to naphtha is uneconomical, and delaying the reactor reconfiguration allows Calumet to capture an extra $50 million in EBITDA from CMR before the switch. After reconfiguration, SAF yields will be best-in-class, and existing SAF contracts have built-in flexibility to accommodate the phased ramp-up.