CVR Partners, LP (UAN) Q3 2026 Earnings Call Transcript

Operator: Hello, everyone. Thank you for joining us. Welcome to the CVR Partners LP Third Quarter 26 Earnings Conference Call. After today's prepared remarks, we will host a question-and-answer session. If you would like to ask a question, please press star 1 to raise your hand. To withdraw your question, press star 1 again. I will now hand the conference over to Richard Roberts, interim CFO and VP of FP&A and Investor Relations. Richard, please go ahead.

Richard J. Roberts Jr.: Thank you. Good morning, everyone. We appreciate your participation in today's call. With me today are Dane Neumann, our Chief Executive Officer Mike Wright, our Chief Operating Officer and other members of management. Prior to discussing our 26 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. Disclosures related to such non GAAP measures, including reconciliations to the most directly comparable GAAP financial measures, are included in our 26 third quarter earnings release that we filed with the SEC for the period. Let me also remind you that we are a variable distribution NLP. Will review our previously established reserves, current cash usage, evaluate future anticipated cash needs, may reserve amounts for other future cash needs, as determined by our general partners 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 will turn the call over to Dane Neumann, our chief executive officer. Dane?

Dane J. Neumann: Thank you, Richard. Good morning, everyone, and thank you for joining us for today's call. The summarized financial highlights for the third quarter of 26 include net sales of $146 million net loss of $11 million EBITDA of $20 million and the Board of Directors of CVR Partners general partner declared a third quarter 2026 distribution of $1.79 per common unit which will be paid on November 23 to unitholders of record at the close of the market on November 16. For the third quarter of 26, our ammonia plant utilization was 80%, which was impacted by the planned turnaround at East Dubuque that began in late August and was completed in October. Apart from the turnaround, facilities ran well during the quarter, and we continued to see steady demand across the system after the summer price reset Since the summer, prices have steadily increased for both ammonia and UAN. We have a good order book for the remainder of 2026 and into 2027. Which I will discuss further in my closing remarks. I will now turn the call over to Richard to discuss our financial results.

Richard J. Roberts Jr.: Thank you, Dane. Turning to our results. For the third quarter of 26. we reported net sales of $146 million and an operating loss of $4 million. Net loss for the quarter was $11 million or a $1.02 per common unit, and EBITDA was $20 million Relative to the third quarter of 25, the decrease in EBITDA was primarily due to turnaround expenses incurred in the quarter along with lower UAN sales prices, a slight decline in sales volumes. Total ammonia production for the third quarter was 175 thousand gross tons, of which 46 thousand net tons were available for sale, and UAN production was 294 thousand tons. During the quarter, we sold approximately 327 thousand tons of UAN at an average price of $309 per ton. And approximately 36 thousand tons of ammonia at an average price of $637 per ton. Relative to the third quarter of 25, total sales volumes were down slightly. Primarily due to reduced production volumes as a result of the East Dubuque turnaround. Third quarter prices for UAN decreased by approximately 11% and ammonia prices increased approximately 20% relative to the prior year period. Direct operating expenses for the third quarter of 26 were $90 million, including turnaround expenses of approximately $27 million. Excluding inventory and turnaround impacts, direct operating expenses increased by approximately $1 million relative to the third quarter of 25 primarily due to higher labor costs. Partially offset by lower electricity and natural gas consumption. Capital spending for the third quarter of $35 million of which $21 million was maintenance capital. Estimate total capital spending for 2026 to be approximately $95 million to $104 million of which $55 million to $63 million is expected to be maintenance capital. We anticipate a significant portion of the profit and growth capital spending planned for 2026 will be funded through cash reserves taken over the past few years. We ended the quarter with a total liquidity of $203 million which consisted of $158 million in cash availability under the ABL facility of $45 million. Our cash balance of $158 million, approximately $43 million related to customer prepayments for the future delivery of products. In assessing our cash available for distribution, we generated EBITDA of approximately $20 million and had net cash needs of approximately $1 million for interest costs, maintenance CapEx, and other reserves which includes the release of approximately $42 million of previous reserves. As a result, there was $19 million of cash available for distribution, and the board of directors of our general partner declared a distribution of $1.79 per common unit. Looking ahead to the fourth quarter of 26, we estimate our ammonia plant utilization rate to be between 88% and 93%, will be impacted by the completion of the East Dubuque turnaround in October. Estimate direct operating expenses, excluding inventory and turnaround impacts, to be between $58 million and $63 million turnaround expenses to be between $4 million and $6 million, total capital spending to be between $26 million and $34 million. With that, I will turn the call back over to Dane.

Dane J. Neumann: Thanks, Richard. In summary, the third quarter was another strong 1 for our operations. Apart from the planned turnaround at East Dubuque. The turnaround started a few weeks later than originally planned due to some equipment delays, and was completed in October in line with the revised schedule. The next turnaround is currently planned for 2028 at Coffeyville. And we look forward to 2 years ahead with no planned turnaround activity. Fall ammonia application is getting underway in the Corn Belt region as the harvest progresses, and activity is expected to pick up in the Southern Plains over the next few weeks. Demand for ammonia has been strong, limited terminal availability in the Corn Belt has pushed fall pricing to the highest levels of the season. Offshore prices are firming ahead of the November Tampa settlement, although the gap between inland and seaborne ammonia prices remains wide. For UAN, the market firmed through the third quarter after the summer reset. Local supply remains tight. And the first spring 2027 prices were posted in early October. We have continued to build our book of business for the fourth quarter and into the first quarter of 2027 at attractive pricing. The ongoing conflicts in Russia and Ukraine and in the Middle East continue to affect global nitrogen supply. Including shipping through the Strait Of Hormuz. Global supply remains a key variable. Chinese exports have been elevated, and Middle East volumes are recovering gradually. However, continued attacks on shipping highlight the persistent geopolitical risk impacting fertilizer availability and pricing. Our focus remains on safely and reliably running our plants at high utilization rates to meet our customers' needs. Natural gas prices in Europe have risen further since our last call, to over $30 per MMBtu. That keeps ammonia production costs in Europe well above the current import prices has led to some production curtailments. Meanwhile, US natural gas prices remain near $3 per MMBtu. Continue to believe the structural gap favors US producers with access to low cost, secure feedstock. Nitrogen fertilizer prices have recovered from their summer lows, while corn prices have eased from their recent highs. Although affordability is currently somewhat less favorable than it was in late summer, we believe the combination of tight local supply, and constructive global balance and a solid forward book positions us well heading into the spring. With the East Dubuque turnaround, we completed the brownfield capacity expansion and we intend to test the ability to sustainably operate at the increased capacity level during the fourth quarter. We also completed the work on the water quality upgrade project. At the Coffeyville facility, we have a similar water system upgrade plan along with the expansion of our DEF production and load out capacity. The goal of these projects is to improve reliability and production rates supporting our target of operating the plants at utilization rates, above 95% of nameplate capacity. Excluding the impact of turnarounds. We are in the final phases of completing detailed engineering and cost estimates for the feedstock optionality project at Coffeyville. And with approval by the board of directors of our general partner, expect to proceed with construction in 2027. When completed, this initiative would make the Coffeyville facility the only nitrogen fertilizer facility in the United States with dual feedstock flexibility providing us the ability to choose the optimal mix of natural gas and third party pet coke depending on prevailing prices. The funds needed for these projects and other initiatives coming from the reserves taken over the last few 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 and we anticipate holding higher levels of cash related to these investment in the near term as we ramp up execution and spending. We believe unitholders will see the benefits of these investments in the coming years as these projects are completed and brought online. In closing, I would like to thank our employees for all their hard work during this East Dubuque turnaround. And continuing to deliver on our marketing and logistics plans resulting in a distribution of $1.79 per common unit for the third quarter. With that, we are ready to answer any questions. Operator?

Operator: We will now begin the question and answer session. If you would like to ask a question, please press star 1 to raise your hand. To withdraw your question, press star 1 again. We ask that you pick up your handset when asking a question to allow for optimum sound quality. If you are muted locally, please remember to unmute your device. Please stand by while we poll for questions. We have no questions at this time. I will now call back to Dane J. Neumann for closing remarks.

Dane J. Neumann: Alright. I would like to thank you all for your interest in CVR Partners and our employees for their hard work commitment towards safe, reliable, and environmentally responsible operations. We look forward to reviewing our fourth quarter 26 results during our next earnings call. Have a safe day.

Operator: This concludes today's call. Thank you for attending. You may now disconnect.