CVR Partners, LP Q4 FY2025 earnings call

Introduced new Chief Operating Officer Mike Wright. Discussed fourth quarter and full year 2025 results. Mentioned ammonia utilization rates, net sales, net income, EBITDA. Talked about 2026 capital spending estimates, liquidity at end of quarter, market conditions for nitrogen fertilizers, ongoing projects at plants like debottlenecking, water and electricity reliability, DEF production expansion, and feedstock diversification project at Coffeyville. Emphasized focus on safety, cost management, capital judiciousness, marketing/logistics, and carbon footprint reduction.

For the fourth quarter of 2025, net sales were $131 million, net loss was $10 million, and EBITDA was $20 million. For the full year 2025, net sales were $606 million, operating income was $129 million, net income was $99 million or $9.33 per common unit, and EBITDA was $211 million. Ammonia utilization rate was 88% for the full year 2025, while for the fourth quarter of 2025 it was 64% impacted by planned turnaround and delayed start-up at Coffeyville facility.

Estimates 2026 maintenance capital spending to be $35 million to $45 million and growth capital spending to be $25 million to $30 million. Anticipates first quarter of 2026 ammonia utilization rate to be between 95% and 100%. Expect a significant portion of 2026 growth capital spending to be funded from reserved cash.

Geopolitical tensions remain a key risk to nitrogen fertilizer supplies as significant production capacity resides in countries across the Middle East, North Africa and Russia. Europe faces structural natural gas supply issues likely to remain in effect through 2026, affecting ammonia production costs. Issues with third-party air separation plant at Coffeyville causing downtime and production shortfalls.

Q: What are you seeing in terms of UAN imports out there? Are you seeing a dearth of imports from Trinidad? And in particular, what are you seeing from Russia and any other color you can give to us?

A: I wouldn't say that we are seeing anything outside the norm. We're still importing some tonnage. The one big item in Trinidad is obviously the Nutrien plant is down, an upgrade is down. So there's less tonnage coming in from Trinidad. So I think that's keeping the market tight for UAN in particular, in the states. And I just -- I've seen some of the commentary from Nutrien and it doesn't feel like that plant is likely to return to service soon. So there's a combination of ammonia and UAN tightness that was a product that was being imported here. The Russian product has been -- that's been pretty consistently flowing. And I wouldn't say there's any new up or down. The market is watching closely. There have been some drone strikes on either Russian fertilizer plants or export terminals. And so that -- the market is watching that to see. And -- but I would say, generally, it feels like the supply-demand balance in UAN is pretty, I would say, on the tight end of the curve.

Q: The current deferred revenue was $23 million at year-end, and that was down from $51 million year-over-year. Does that mean there was less product presold this year rather than relative to last year?

A: Yes. And I would just say it was a timing issue because it was not -- we typically would see more activity in December for tax planning purposes by the customer base, but we didn't see as much this year, but that's all been picked up in January and first part of February here. So we're, I'd say, normal, if anything, maybe a little bigger book or for the spring than we typically see. So it was just -- it didn't fall in December like normal, but the customers were in buying product, and we've got a big book on for the spring.

Q: And then is it safe to assume that ammonia and UAN pricing will increase sequentially, heading into the first quarter of 2026?

A: Yes. If you look at our book of business today, it's at higher prices than the fourth quarter. And so yes, there will be an uptick. It won't be dramatic, but there'll be an uptick from the fourth quarter to the first quarter.

Q: Do you feel confident about the air separator issue at Coffeyville being resolved at this point? Might you receive compensation from the operator for downtime and related shortfall on that?

A: So let me start -- I'm confident that the issues that caused the delayed startup have been dealt with. We are not happy with the performance. And we are in discussions with that service provider about the go-forward strategy for the operations and maintenance of that facility. So we're working on, I'd call it not an amended contract, but an amended business plan which would involve us being more active with the ongoing activities there. And so we're not going to just sit by and just accept those events. We're going to engage and work on a different approach than what happened in November. The contract does have penalties and there were some penalties paid for that, but it's a fraction of our lost production level at the facility. So -- it is a thorn in the side, and it's meant to incentivize the provider to provide us really good service and onstream, but it can't make up for the shortfall of lost production. So -- but again, we're revisiting our -- how we do business together. And in the coming quarters, we'll talk more about what the go-forward strategy is there, but it won't be status quo.

Q: I always appreciate your commentary on the market acreage is supposed to be down for corn this year, as you mentioned in your opening remarks. And I'm just kind of curious I would think that would hurt demand just a little bit, then again, there are more supply constraints. So can you kind of just give us how you feel the spring is going to work out? And why are you feeling so optimistic about it?

A: Sure. Well, if you asked me 3 years ago and said it was going to be 95 million acres of corn, we'd be thrilled. 95 million acres is really at the top end of -- except for last year. And so that's a large amount of acreage and it's going to -- because of the 99 million acres and how much we planned, we've -- corn consumes nitrogen from the soil, so you have to replenish it. So the soil has been depleted of nitrogen and you got to come back in and fertilize it. And so to your point, it's going to be a really good demand season. Last year was peak. And we don't -- I would say, even when 99 million acres are planted, sometimes the application rates can be lower. So it's not apples-to-apples. So you can't just take 99 million and 95 million and compare them because if on the acreage that you plant, if you plant more productive acreage and you want higher yields, you're going to put more fertilizer on. So it's hard to -- the nuance there is the apples-to-apples. But the supply side of the equation continues to be and we can talk about every region of the world. There are reasons why the supply is constrained. There's been natural gas availability issues in certain countries. There's still ongoing conflicts in certain areas. We're watching what's going to happen with Iran. Iran is a big producer of nitrogen, big exporter. If there's some activity in the Strait of Hormuz or some activity with that constrains Iran's ability to produce, that can have a -- we're right on top of the spring coming up here in 6 weeks. So that's going to -- we got to keep our eye on that. But the supply side has really been even a bigger issue. Demand side has been super solid, but the supply side is not able to keep up with the demand side. I would just tell you, suggest, we're seeing -- I know it was cold a few weeks ago, but -- if you look in the Midwest, we're already seeing ammonia movement across a pretty broad swath of up into even Iowa and Illinois to a degree but all the way down into the Southern Plains. And so that's a good omen for the spring when we have the ammonia running this early. We're only -- we're third week of February. So really feel -- I think, generally, the optimism is high for the spring, and we've got a good jump on it. When you get a good start to it, it really could lead to a much better spring. So we feel really good about where we are. We have a good book of business for the company. We've got a good order book, and we just need to run like we normally have, except for the last quarter. So they will run at a high utilization and move the product for our customers.

Q: Just one other follow-on is just with product moving at this point, is there a change in trend in terms of the farmer living food-to-mouth? Or are they starting to plan early at this point in time or it's just that the application is starting earlier given the weather opportunities.

A: I think it's your last comment there, the conditions have come into place here in February rather than March. So I would say it's probably pulled up by maybe a couple of weeks or 3 weeks. I mean, it doesn't seem like a lot, but in farming -- in farmland, that's a lot. And so if you can get a jump on -- if you're a farmer and you can get a jump on your ammonia application, that really helps you get prepared for the spring. And so that always makes everybody feel better when the ammonia runs starts earlier because then you can have a longer process of getting it applied and planting behind it. So just a lot of optimism around conditions. We started the year with super cold everywhere, all the way to the Canadian border, but we've turned the corner here from a weather perspective. And so we are able to -- been able to move -- we've been moving product from our plants out to the field.