LSB Industries, Inc. Q3 FY2025 earnings call

Safety: A tragic fatality occurred at the Pryor facility in early October, emphasizing the importance of continuing to focus on safety. ### Financials: The company is back to generating free cash flow after CapEx spending in 2024 and first half of 2025, with Q3 2025 adjusted EBITDA at $40M compared to $17M in Q3 2024. ### Market Dynamics: Industrial markets are strong, with demand for AN for explosives robust in mining and quarrying. MDI production is up due to tariffs on imported MDI, boosting nitric acid sales. ### Low Carbon Project: The El Dorado facility's low carbon project is expected to have its technical review of the permit completed in Q1 2026, with operations starting by end 2026, generating ~$15M annual EBITDA. ### Sales Mix Shift: The company has successfully shifted its sales mix towards contractual industrial sales, providing greater earnings stability and visibility.

In the third quarter, UAN averaged $336 per ton on a NOLA basis, up 65% over Q3 2024. Tampa ammonia increased to $650 per metric ton for November, up from $392 per ton in June. In terms of revenue contribution, the company has shifted its sales mix towards more contractual industrial sales, with industrial now making up approximately 40% to 45% of the revenue mix.

Fourth Quarter: Expected to be higher than prior year fourth quarter due to higher selling prices and production, offset by some variable and other costs. ### Ammonia and UAN: Tampa ammonia settled at $650 per metric ton in November, NOLA UAN averaged above $300 per ton in Q3. ### Cash Flow: Expect to continue building on free cash flow generation, with $36M generated in Q3 and year-to-date free cash flow at ~$20M.

Ammonia Market: Tight supply and demand globally, with issues in Trinidad and Middle East affecting supply. ### Permitting: Risks associated with the permit for the El Dorado CCS project. ### Seasonality: Seasonality impacts on AN industrial sales, particularly in colder months affecting mining blasting activity.

Q: Lucas Beaumont from UBS asked about the ammonia market and its impact on fourth quarter pricing.

A: Mark Behrman and Damien Renwick discussed the tight global supply and demand, issues in Trinidad and Middle East, and how pricing would flow through to fourth quarter results.

Q: Andrew Wong from RBC asked about industrial demand impact on contracts and LSB's growth path.

A: Damien Renwick and Mark Behrman talked about negotiating positions depending on contract expirations and LSB evaluating upgrade capacity projects.

Q: Laurence Alexander from Jefferies asked about industrial seasonality and El Dorado CCS project offtake.

A: Damien Renwick discussed industrial seasonality and Mark Behrman talked about the El Dorado CCS project's permit and monetization avenues.

Q: Robert McGuire from Granite Research asked about UAN volumes, revenue mix, MDI dynamics, and value creation.

A: Cheryl Maguire addressed UAN volume miss and revenue mix, Damien Renwick talked about MDI dynamics, and Mark Behrman discussed value creation initiatives progress.