CVR Partners, LP Q2 FY2025 earnings call

• Financial highlights: Second quarter net sales were $169 million, net income was $39 million, EBITDA was $67 million, and the Board declared a second quarter distribution of $3.89 per common unit. - Operational performance: Ammonia plant utilization was 91% despite some planned and unplanned downtime during the quarter. - Planting and yield data: USDA estimated 95.2 million acres of corn and 83.4 million acres of soybeans were planted in spring 2025, with corn yield estimates at 181 bushels per acre and soybean at 52.5 bushels per acre. - Geopolitical impacts: Conflicts in Iran, Israel, and Ukraine affected fertilizer production and supply, with nearly 20% of global urea export capacity offline during the quarter. - Projects: Coffeyville facility has projects like control system upgrades at East Dubuque, installation of a nitrous oxide abatement unit, and efforts to get Coffeyville certified as a low-carbon nitrogen fertilizer production facility. - Management change: Mark Pytosh will take on the role of CEO of CVR Energy starting January 1, 2026, in addition to his role as CEO of CVR Partners.

For the second quarter of 2025, CVR Partners reported net sales of $169 million. Net income stood at $39 million, and EBITDA was $67 million. In terms of product sales, approximately 345,000 tons of UAN were sold at an average price of $317 per ton, and around 57,000 tons of ammonia were sold at an average price of $593 per tonne. The consolidated ammonia plant utilization was 91%. Combined ammonia production for the quarter was 197,000 gross tons, with 54,000 net tons available for sale, and UAN production amounted to 321,000 tons.

• Third quarter 2025: Ammonia utilization rate is expected to be between 93% and 98% with planned downtime at East Dubuque for control system upgrades. Direct operating expenses, excluding inventory impacts, are expected to be between $60 million and $65 million. Total capital spending for the third quarter is anticipated to be between $20 million and $25 million. - 2025 full year: Total capital spending is estimated to be approximately $55 million to $65 million, with $40 million to $45 million expected to be maintenance capital.

• Geopolitical conflicts: Events like Israel attacking Iran causing natural gas disruptions and Ukraine damaging Russian fertilizer plants impacted supply. - Europe natural gas concerns: Europe has refilled natural gas inventories at a slower rate than expected, and there are concerns about replenishing inventories to targeted levels before winter 2025. - Tariff risks: Potential tariffs on Russian fertilizer exports could have significant impacts on pricing.

Q: Can you comment on the timing of your UAN summer fill program? What are your thoughts on pricing without needing to offer discounts?

A: We have not yet completed the summer UAN fill; the season was extended into July due to high demand. Prices won't have a big discount this year because of the tight supply-demand balance.

Q: Direct operating costs increased in the second quarter. Is there background on higher maintenance and repair costs and the new control systems installed at East Dubuque?

A: There were repairs during outages in the quarter, and we drew on inventory, which lifted direct operating expenses. There is also expense associated with the work on the Clark controls at East Dubuque.

Q: What is the outlook for third quarter direct operating cost guidance and the breakdown between maintenance and growth CapEx?

A: Direct operating expenses for the third quarter are expected to be $60 million to $65 million. We are seeing elevated natural gas and electricity costs, and there is expense related to the Clark controls work. Growth CapEx comes from reserved capital.

Q: What is the status of unplanned downtime and what can you say about the capacity from brownfield reliability projects?

A: Unplanned downtime issues have been addressed. Brownfield projects at Coffeyville are expected to add about 100 tonnes a day of ammonia production, and at East Dubuque, potential projects may add 5%+ to capacity. These are growth CapEx projects.

Q: How does the management change impact CVR Partners and what is your view on industry consolidation?

A: I will continue to manage CVR Partners. I see potential for industry consolidation in the fertilizer space, influenced by geopolitical events and logistics changes. The U.S. could become a more valuable producer of fertilizer due to cheap feedstock, good logistics, and lower carbon intensity