LSB Industries, Inc. (LXU) Earnings

Management highlights

### Production and Performance - First quarter 2026 results in line with expectations, driven by operational discipline, improving EH&S performance, and significant growth in net sales, adjusted EBITDA, and EPS. - Investments in facilities paying off, progress evident over past two quarters. ### CCS Project - CCS project at El Dorado site on track to meet projected timeline, with completion of underground horizontal pipeline, next step is civil work for capture equipment. ### Litigation - Entered settlement agreement with Benham Constructors, receiving ~$20.9 million, plan to continue prosecution against Leidos for fraud and breach of contract, trial scheduled for October. ### Commercial Environment - Middle East conflict causing supply disruptions in ammonia and urea markets, affecting shipping and production facilities; European natural gas prices expected to be elevated, US natural gas prices resilient; industrial business sold-out, optimised production mix for ammonium nitrate; mining market showing renaissance; chemical segment positive with MDI anti-dumping duties; domestic ammonia and UAN markets discussed with supply and demand dynamics. ### Financials - Q1 adjusted EBITDA grew 44% YOY, balance sheet solid, free cash flow $37 million; Q2 expected to have strong demand, elevated pricing, turnaround at El Dorado facility underway impacting ammonia production by ~35,000 tons, expecting Q2 adjusted EBITDA to be meaningfully higher. ### Eldorado Low-Carbon Project - Progressing, working with EPA Region 6 to sequester CO2 by end of this year or early next year, team pursuing low carbon product supply opportunities and evaluating environmental attributes sale.

Guidance

### Q2 Expectations - Expect demand for products to remain strong in sold-out position, pricing to remain elevated; turnaround at El Dorado facility underway, expected to impact ammonia production by ~35,000 tons, incur ~15 - 20 million in turnaround related expenses, but expect Q2 adjusted EBITDA to be meaningfully higher than Q1 2026 and Q2 last year. ### Long-Term Goals - Path to an additional $50 million of annual EBITDA through specific initiatives, with good portion expected to be realized by end of this year, balance by end of next year; reviewing opportunities to invest capital into projects to expand fertilizer and industrial production capacity, including debottlenecking and evaluating acquisition or partnership opportunities.

Segment performance

Industrial business is sold-out; mining market shows renaissance with strong copper and gold demand, quarrying and aggregate production growth; chemical segment positive with MDI anti-dumping duties finalized; domestic ammonia market had good spring campaign, low inventories; UAN market at risk of short nitrogen; adjusted EBITDA grew 44% YOY to $52 million in Q1 2026, balance sheet solid with $180 million cash, net leverage 1.4 times, operating cash flow $52 million, free cash flow $37 million

Risks & headwinds

### Geopolitical and Market Risks - Evolving geopolitical landscape, including Middle East conflict, disrupting global availability of nitrogen fertilizers; supply disruptions from various sources like Trinidad production, Indian gas curtailments, Australian outages, Russian drone strikes, Chinese export restrictions; potential demand destruction in certain regions due to economic strain or lack of product availability; impact of natural gas supply disruptions on European prices and global markets; risks associated with turnaround activities potentially causing extended downtime if not managed properly.

Analyst Q&A

• Q: Get view on nitrogen market's evolution over next couple months, pricing, demand and demand destruction.

  A: Mark says it'll take through end of this year and into next year to return to normal, Damien adds US urea pricing at discount, ships bid heavily, concern on product availability in US over next few weeks, Tampa, Romania pricing to go up, many global issues affecting supply.

• Q: On industrial side, how industrial demand responding, initiatives to capitalize, demand destruction.

  A: Mining activity strong, US industrial demand steady, optimising production mix for ammonium nitrate, some regions see demand destruction due to economic strain or lack of product, focus on security of supply creating opportunities for expansion.

• Q: On free cash flow, detail on new projects.

  A: Talked about expanding ammonia plant production at El Dorado with USDA grant, considering other facilities' debottlenecking and new products, administration supporting domestic fertilizer production.

• Q: Follow up on administration support for fertilizers, turnaround flexibility.

  A: No other USDA funding like original, but administration focused on increasing domestic fertilizer production, elected not to push off Eldorado turnaround as it risks not having desired contractors, will come out in great shape, Pryor turnaround in July, will try to get through quickly.

• Q: On MDI tariffs and duties, impact on nitric acid demand and plans, market shaping.

  A: Positive for US domestic MDI producers, customer base running flat out, contemplating expansions, early discussions with customers.

• Q: On projects and value creation exit from turnarounds.

  A: Expect good portion of $50 million value creation by end of this year, balance by end of next year.

• Q: On AN mix, AM production room.

  A: Same mix expected to continue through at least end of year, likely at limit of AM production.

• Q: On sulfuric acid, production and benefit from price increase.

  A: Still in market, but margins stable as sulfur costs go up with prices.