Note: This is an earnings call transcript. Content may contain errors.

Image source: The Motley Fool.

DATE

Thursday, Oct. 30, 2025, at 11 a.m. ET

CALL PARTICIPANTS

  • Chief Executive Officer — Mark Pytosh
  • Chief Financial Officer — Dane Neumann
  • Executive Vice President, Corporate Affairs — Richard Roberts

Need a quote from a Motley Fool analyst? Email [email protected]

RISKS

  • Chief Executive Officer Pytosh reported that an ammonia release during the initial phase of the Coffeyville facility turnaround "could delay the completion of turnaround work by a few days relative to the original schedule."
  • Chief Executive Officer Pytosh noted, "The wildcard continues to be the potential for tariffs on Russian fertilizer imports that could have significant impacts on pricing in the near term."

TAKEAWAYS

  • Net Sales -- $164 million for Q3 2025, driven by higher UAN and ammonia pricing compared to the prior year.
  • Net Income -- $43 million, or $4.02 per common unit for Q3 2025.
  • EBITDA (non-GAAP) -- $71 million for Q3 2025, up from Q3 2024 mainly due to higher product pricing.
  • Distribution Declared -- $4.02 per common unit for Q3 2025, payable Nov. 17 to holders of record on Nov. 10.
  • Ammonia Plant Utilization -- 95% for Q3 2025, reflecting planned and unplanned downtime at both facilities.
  • Ammonia Production -- 208,000 gross tons produced, with 59,000 net tons available for sale in 2025.
  • UAN Production -- 337,000 tons produced during Q3 2025.
  • Product Pricing -- UAN average sales price was $348 per ton and ammonia averaged $531 per ton for Q3 2025. UAN prices increased 52% and ammonia prices rose 33% from Q3 2024 to Q3 2025, driven by "tight inventory levels," according to Mark Pytosh, and "elevated demand."
  • Sales Volumes -- 328,000 tons of UAN and 48,000 tons of ammonia sold in Q3 2025, with volumes down slightly due to low inventories at the end of the previous quarter.
  • Direct Operating Expenses -- $58 million for 2025, up approximately $7 million from 2024, excluding inventory impacts, primarily due to higher natural gas and electricity costs and preliminary spending related to Coffeyville's planned turnaround.
  • Capital Expenditures -- $13 million spent year-to-date in 2025, including $7 million for maintenance, with full-year capital spending projected at $58 million to $65 million ($39 million to $42 million for maintenance).
  • Liquidity Position -- $206 million at the end of Q3 2025, consisting of $156 million in cash and $50 million available under the ABL facility.
  • Customer Prepayments -- $28 million of the $156 million cash balance was attributed to customer prepayments for future deliveries as of Q3 2025.
  • Cash Available for Distribution -- $42 million for Q3 2025, after accounting for $71 million in EBITDA, $34 million in cash needs, and $6 million released from prior reserves.
  • Ammonia Utilization Guidance -- Estimated 80%-85% utilization rate in 2025, reflecting the impact of the ongoing Coffeyville turnaround.
  • 2025 Operating and Turnaround Expense Outlook -- Direct operating expenses, inventory, and turnaround impact expected between $58 million and $63 million; 2025 turnaround expense projected at $15 million to $20 million.
  • Capital Spending Outlook (2025) -- Forecast of $30 million to $35 million for the balance of the year, with a significant portion funded by cash reserves taken over the past two years.
  • Planned East Dubuque Turnaround -- Thirty-five-day turnaround scheduled for third quarter 2026 at the East Dubuque facility.
  • Coffeyville Feedstock Project -- Ongoing "detailed design and construction plan," according to Mark Pytosh, to utilize natural gas and additional hydrogen, potentially increasing Coffeyville's ammonia production capacity by up to 8%.
  • Ongoing Debottlenecking Initiatives -- Water quality upgrades and DEF production expansion at both plants targeting utilization rates above 95% of nameplate, exclusive of turnarounds.
  • Domestic and International Market Dynamics -- Tight nitrogen fertilizer inventories, "supportive of higher prices," according to management, with domestic and global supply pressure from outages and geopolitical events.
  • Russian UAN Imports -- Despite geopolitical tensions, management stated, "there's been no restriction on the imports of Russian [UAN]. Russian UAN has been a big factor in the U.S."
  • Natural Gas Pricing Differential -- European natural gas was near $11 per MMBtu and U.S. prices ranged between $3 and $4 per MMBtu; European ammonia production remained "below historical levels" as of the Q3 2025 earnings call.
  • Management Strategy -- Continued focus on maintaining high plant utilization, prudent capital management, and execution of reliability and safety objectives.

SUMMARY

Management noted that UAN product prices in Q3 2025 exceeded those seen in the spring, setting a favorable backdrop for the remainder of the year and into 2026. Prepared comments confirmed the Coffeyville turnaround is nearing completion, although an ammonia release is expected to delay full production resumption by several days. A multi-year capital reserves strategy continues, with the current quarter's reserve allocation supporting planned capacity-expansion and debottlenecking projects. Global market commentary emphasized ongoing geopolitical disruption and potential trade policies as key sources of price risk for the industry.

  • Chief Executive Officer Pytosh said, "pricing will be higher in the fourth quarter versus March," signaling anticipated continued favorable product price momentum.
  • Management reported customer demand remains strong, with "a really good fall ammonia run" according to Mark Pytosh expected and "additional cash orders" from customers coming in late in the quarter.
  • Chief Executive Officer Pytosh described grain market uncertainties related to trade tensions but indicated that current inventory tightness will likely mitigate potential negative impacts from acreage changes next season.
  • The Board plans to keep reserving capital as project execution ramps up, aiming to support upgrades and expansions over the next two to three years.

INDUSTRY GLOSSARY

  • ABL facility: Asset-based lending facility, a credit line secured by a company's receivables or inventories.
  • UAN: Urea ammonium nitrate, a liquid nitrogen fertilizer product.
  • DEF: Diesel exhaust fluid, a solution used to reduce nitrogen oxide emissions in diesel engines.
  • Turnaround: A scheduled shutdown period for maintenance and upgrades at a production facility.

Full Conference Call Transcript

Richard Roberts: Thank you, Eric. Good morning, everyone. Appreciate your participation in today's call. With me today are Mark Pytosh, our Chief Executive Officer, Dane Neumann, our Chief Financial Officer, and other members of management. Prior to discussing our 2025 third quarter results, let me remind you that this conference call may contain forward-looking statements as that term is defined under federal securities laws. For this purpose, any statements made during this call that are not statements of historical facts may be deemed to be forward-looking statements. You are cautioned that these statements may be affected by important factors set forth in our filings with the Securities and Exchange Commission and in our latest earnings release.

As a result, actual operations or results may differ materially from the results discussed in the forward-looking statements. We undertake no obligation to publicly update any forward-looking statements whether as a result of new information, future events, or otherwise, except to the extent required by law. This call also includes various non-GAAP financial measures. The disclosures related to such non-GAAP measures, including reconciliation to the most directly comparable GAAP financial measures, are included in our 2025 third quarter earnings release that we filed with the SEC for the period. Let me also remind you that we are a variable distribution MLP.

We will review our previously established reserves, current cash usage, evaluate future anticipated cash needs, and their reserve amounts for other future cash needs determined by our General Partner's Board. As a result, our distributions, if any, will vary from quarter to quarter due to several factors, including but not limited to, operating performance, fluctuations in the prices received for finished products, capital expenditures, and cash reserves deemed necessary or appropriate by the Board of Directors of our general partner. With that said, I'll turn the call over to Mark Pytosh, our Chief Executive Officer. Mark?

Mark Pytosh: Thank you, Richard. Good morning, everyone, and thank you for joining us for today's call. The summarized financial highlights for 2025 include net sales of $164 million, net income of $43 million, EBITDA of $71 million, and the Board of Directors declared a third quarter distribution of $4.02 per common unit, which will be paid on November 17 to unitholders of record at the close of the market on November 10. In 2025, our consolidated ammonia plant utilization was 95%, which was impacted by some planned and unplanned downtime at both facilities during the quarter. Combined ammonia production for 2025 was 208,000 gross tons, of which 59,000 net tons were available for sale, and UAN production was 337,000 tons.

During the quarter, we sold approximately 328,000 tons of UAN at an average price of $348 per ton and approximately 48,000 tons of ammonia at an average price of $531 per ton. Relative to 2024, sales volumes were down slightly primarily as a result of low inventory levels at the end of the second quarter following the strong demand in 2025. UAN and ammonia prices increased 52% and 33%, respectively, from the prior year period driven by tight inventory levels across the system as a result of elevated demand and reduced supply associated with domestic and international production outages. Overall, we had a strong third quarter with UAN pricing above levels we saw in the spring.

And we believe the setup is favorable for the remainder of the year and into 2026. Domestic and global inventories of nitrogen fertilizer remain tight, and that has been supportive of higher prices, which I will discuss further in my closing remarks. I will now turn the call over to Dane to discuss our financial results. Thank you, Mark.

Dane Neumann: For 2025, we reported net sales of $164 million, operating income of $51 million. Net income for the quarter was $43 million, or $4.02 per common unit, and EBITDA was $71 million. Relative to 2024, the increase in EBITDA was primarily due to a combination of higher UAN and ammonia sales pricing. Direct operating expenses for 2025 were $58 million. Excluding inventory impacts, direct operating expenses increased by approximately $7 million relative to 2024, primarily due to higher natural gas and electricity costs and some preliminary spending associated with Coffeyville's planned turnaround. During 2025, we spent $13 million on capital projects, of which $7 million was maintenance capital.

We estimate total capital spending for 2025 to be approximately $58 to $65 million, of which $39 million to $42 million is expected to be maintenance capital. We anticipate a significant portion of the profit and growth capital spending plan for 2025 will be funded through cash reserves taken over the past two years. We ended the quarter with total liquidity of $206 million, which consisted of $156 million in cash and availability under the ABL facility of $50 million. Within our cash balance of $156 million, we had approximately $28 million related to customer prepayments for the future delivery of product.

Assessing our cash available for distribution, we generated EBITDA of approximately $71 million and net cash needs of $34 million for interest costs, maintenance CapEx, and other reserves, and had $6 million released from previous reserves. As a result, there was $42 million of cash available for distribution, and the Board of Directors of our general partner declared a distribution of $4.02 per common unit. Looking ahead to 2025, we estimate our ammonia utilization rate to be between 80% and 85%, which will be impacted by the planned turnaround currently underway at the Coffeyville facility.

We expect direct operating expenses, inventory, and turnaround impacts to be between $58 million and $63 million, and total capital spending to be between $30 million and $35 million. Turnaround expense is expected to be between $15 million and $20 million. With that, I will turn the call back over to Mark.

Mark Pytosh: Thanks, Dane. Harvest is currently on schedule and nearing completion. The USDA is estimating yields of approximately 187 bushels per acre on 98.7 million acres of corn and inventory carryout levels of approximately 13%. Soybean yields are estimated to be 54 bushels per acre on 81 million acres planted with inventory carryout levels of 7%. Although the soybean numbers will likely be impacted by ongoing trade friction with China, both of these carryout estimates are at or below the ten-year averages.

Grain prices have remained at the lower end of the last twelve months' range, driven primarily by expectations of large crop production in Brazil and North America this year and potential trade disputes where the purchase of grains may be used as a negotiating tool when reaching trade agreements. December corn prices are approximately $4.30 a bushel, and November soybeans are approximately $10.90 per bushel. The Trump administration and congressional leaders have indicated they intend to provide a subsidy program for farmers to help offset lower grain prices and higher input costs. Geopolitical conflicts are continuing to impact the nitrogen fertilizer industry. In the third quarter, Ukraine continued to target nitrogen fertilizer plants and export infrastructure in Russia.

After the large planting seasons in the U.S. and Brazil and the loss of production due to geopolitical factors, fertilizer inventory levels across the industry have been tight and are taking time to replenish. We expect these conditions to persist into 2026. The wildcard continues to be the potential for tariffs on Russian fertilizer imports that could have significant impacts on pricing in the near term. Natural gas prices in Europe have been steady since our last earnings call and remain around $11 per MMBtu currently, while U.S. prices continue to range between $3 and $4 per MMBtu.

As we near winter, Europe has refilled its natural gas inventories at a lower level than normal, and there's a risk of prices moving higher if the winter is cooler than expected. The cost to produce ammonia in Europe has remained durably at the high end of the global cost curve, and production remains below historical levels, which has created opportunities for U.S. Gulf Coast producers to export ammonia to Europe for upgrade. We continue to believe Europe's faced structural natural gas supply issues will likely remain in effect through 2026. We are nearing the completion of the planned turnaround at our Coffeyville facility.

In the early phases of the turnaround, we experienced an ammonia release, which we currently anticipate could delay the completion of turnaround work by a few days relative to the original schedule. We expect the facility to resume full production in the next few weeks. As a reminder, we are currently planning for a thirty-five-day turnaround at our East Dubuque facility in the third quarter of 2026. At our Coffeyville facility, we continue to work on a detailed design and construction plan to allow the plant to utilize natural gas and additional hydrogen from the adjacent Coffeyville refinery as alternative feedstocks to third-party pet coke. This project could also expand Coffeyville's ammonia production capacity by up to 8%.

We also continue to execute certain debottlenecking projects at both plants that are expected to improve reliability and production rates. These include water quality upgrade projects at both plants and expansion of our DEF production and load-out capacity. The goal of these projects is to support our target of operating the plants at utilization rates above 95% of nameplate capacity, excluding the impact of turnarounds. The funds needed for these projects are coming from the reserves taken over the last two years, and the Board elected to continue reserving capital in the third quarter. While the board looks at reserves every quarter, I would expect them to continue to elect to reserve some capital.

We anticipate holding higher levels of cash related to these projects in the near term as we ramp up execution and spending, which we expect will take place over the next two to three years. The third quarter continued to demonstrate the benefits of focusing on safety, reliability, and performance. In the quarter, we executed on all the critical elements of our business plan, which includes safely and reliably operating our plants, with a keen focus on the health and safety of our employees, contractors, and communities. Prudently managing costs, being judicious with capital, maximizing our marketing and logistics capabilities, and targeting opportunities to reduce our carbon footprint.

In closing, I would like to thank our employees for their safe execution during a few brief outages in the quarter, achieving 95% ammonia utilization and the solid delivery on our marketing and logistics plans, resulting in a distribution of $4.02 per common unit for the third quarter. With that, we are ready to answer any questions. Eric?

Operator: Thank you. We will now be conducting a question and answer session. If you would like to ask a question, please press star followed by the number one. Our first question comes from the line of Rob McGuire with Granite Research. Please go ahead.

Rob McGuire: Good morning, Mark, Dane, and Richard. Thank you for taking my questions. Could you, Mark, go back to the Coffeyville natural gas feedstock project? I apologize, but can you just, I think I missed, when do you anticipate that to start? Are you at a point where you can talk to us about total cost for the project and what you expect in terms of returns?

Mark Pytosh: Not ready to talk about, you know, finalizing the final cost and returns yet. We are in detailed engineering, so we need to kind of confirm some things about that, you know, in terms of configuration or reconfiguration and the infrastructure needs, you know, but everything looks like it's kind of penciling out the way we thought it would. And that's a combination project, to be clear. Part of it is taking additional hydrogen from the refinery. The refinery has a reformer unit, so we are talking about taking additional hydrogen from the refinery plus potentially replacing pet coke as a feedstock for a portion with natural gas. But the hydrogen component would be an increase in our production capacity.

So it's a combination project that includes the ability to replace feedstock plus bring additional hydrogen, which means additional ammonia. That's what I've been referring to in my comments about, you know, up to 8% increase in our production capacity. So we have been reserving for that project, and so, you know, we will have the capital available set aside for that. And, you know, I'm expecting, you know, by the next call, you know, to be able to talk with more specifics on, you know, that project and moving ahead there.

But so far, all the engineering work that's coming back in the construction plans look, you know, on track with what we thought, you know, what the original plan was.

Rob McGuire: Well, thank you. I appreciate that. And shifting gears, any concerns about drought conditions impacting ammonia runs?

Mark Pytosh: In this ammonia season? Not in the markets where we're placed. We've had some moisture here in the last week, particularly on the big ammonia run for us up in the Northern Plains around East Dubuque, and there's been moisture. So I actually think conditions are as close to perfect as, you know, we could predict. Because we've had a, you know, the harvest is basically complete there, so we've emptied the fields. The soil temperatures are down, and moisture has come in the last week. And that combination is about perfect conditions. And I'm expecting a big fall ammonia run.

You know, the customers are telling us that we have a good book of business already, but are coming in now with additional cash orders. And so I expect a really good fall ammonia run. So I'm very optimistic.

Rob McGuire: Wonderful. And, I mean, kind of just moving forward to that question, it's just how significant of an impact do you think it'll be for the acreage to be down this coming season? At least on anticipated acreage? And, you know, is it simply that inventories are down, supply is tight, so you're not concerned at all about selling your volume at elevated prices? Or will there be an impact maybe even on imports?

Mark Pytosh: There's a couple different layers to the answer to that. Number one, you know, we've been expecting, you know, we were thinking that the corn acreage, just as corn acreage, would drop next year. I'm not as sure now, based on, you know, well, I'm still reading what happened this morning over in Korea with Trump and Xi, but the feeling in the marketplace is that the corn acreage won't drop as much because there's concern about what is the, you know, what are the end markets for soybeans? And so maybe there's gonna be more corn acres just on a defensive approach to protect against trade war behavior.

And so I actually think that the corn acreage might surprise on the upside versus a drop. A lot of people were talking about a drop to the low 90s, which is still great, you know, that's a great corn run. But it may not drop as far because I think farmers are of the belief that maybe the end markets will be restricted for soybeans exports. So, we may end up in a better answer there. I would tell you that, you know, if you look at the inventory balances, you know, we're already, you know, we're tight.

And I think, you know, lower acreage given where we are from an inventory perspective probably won't impact as much in 2026 as it normally would because, quite frankly, you know, there's a rush to try to replenish what we have. And you probably saw the announcement that Nutrien has shut down one of the Trinidad plants, which is an importer to the U.S. And so that's going to affect the replenishment time frame. So I'm not terribly concerned about the acreage. Yeah, we watch it closely, but right now, I think the market is in a position to absorb that.

Rob McGuire: That's really interesting. And then with regards to Trinidad and just looping Russia in on imports, are you seeing an impact in the marketplace on those imports at this point in time?

Mark Pytosh: We have not seen any impact on Russian imports. In fact, you know, Russia is the, you know, particularly like in UAN, Russia is the marginal producer in the marketplace, and they've been exporting to the U.S. in size, you know, so there's been no effect. The fear factor in the market is if there's somehow a tariff or, you know, sanctioning of fertilizer coming to the market. That could be a big event from, you know, affecting supply. So that's a fear factor. But we haven't seen any signs.

But during the course of this year, even with all the geopolitical events, there's been no restriction on the imports of Russian, and I'll focus more on UAN, but there's urea too. But, you know, Russian UAN has been a big factor in the U.S.

Rob McGuire: Well, that's really helpful. And, Mark, last question. I certainly won't hold you to this, but I'd love to hear what your outlook is for the price of ammonia, UAN, and urea heading into the fourth quarter?

Mark Pytosh: You know, we never give out pricing for those products, but it's gonna be a solid quarter. And so we've seen a strong market since, you know, the UAN fuel season and ammonia prepay. So, pricing will be higher in the fourth quarter versus March, which is, you know, normally would be. So we'll see that show up in the results. And I'm optimistic. I'm not ready to prognosticate on pricing for spring, but I'm optimistic about the supply-demand balance and what we're gonna see there. So I expect these sorts of market conditions to carry through 2026.

Rob McGuire: Well, all that was really helpful. Thank you so much.

Operator: Thanks, Rob. Thank you. We have reached the end of the question and answer session. I'd now like to turn the floor back over to management for closing comments.

Mark Pytosh: Well, thanks, everybody, for participating in the call today, and we look forward to reviewing our fourth quarter results with you in February.

Dane Neumann: Have a nice day.

Operator: Ladies and gentlemen, this concludes today's call. You may disconnect your lines at this time. Thank you for your participation and have a wonderful day.