Lucas Beaumont

Lucas Beaumont asked about the cost of long lead-time equipment for Bluepoint compared to budget, its percentage of total project spend, and built-in cost escalation for inflation/tariffs. He also asked how the current tight ammonia market and strong pricing, combined with falling TTF futures, might resolve in 2026.

Answer

Chris Bohn (EVP and COO) stated that Bluepoint's long lead-time equipment costs are currently in line with expectations, and modular equipment bids are fixed fee. He noted that tariff impacts are uncertain but forecasted into the $500 million contingency. Chris Bohn highlighted that the TTF-Henry Hub gas differential remains constructive despite TTF coming off. Bert Frost (EVP of Sales, Market Development, and Supply Chain) reiterated that the ammonia market is expected to maintain tightness into 2026 due to ongoing supply disruptions and low inventories.

Lucas Beaumont asked about the cost of long lead-time equipment for the Bluepoint project relative to budget, its proportion of total project spend, and provisions for cost escalation due to inflation and tariffs. He also inquired how the current tight ammonia market and strong pricing would reconcile with falling TTF futures in 2026.

Answer

Christopher Bohn (EVP and COO) confirmed that Bluepoint's long lead-time equipment costs were on budget, with modular equipment bids fixed-fee and included in the $3.7 billion total. He noted that tariff impacts were uncertain but accounted for within the $500 million contingency. Regarding market dynamics, Christopher Bohn (EVP and COO) stated that the gas differential between TTF (around $11 forward strip) and U.S. ($3.50-$4) remains constructive. Bert Frost (EVP of Sales, Market Development, and Supply Chain) reiterated that the ammonia market's tightness, driven by outages and delayed new capacity, is expected to persist into 2026, particularly through the first half.

Lucas Beaumont from UBS Group asked about the drivers of cost pressure in the first half of 2025, specifically the year-over-year increase in SG&A and controllable non-gas production costs, and the outlook for the second half.

Answer

EVP & CFO Greg Cameron attributed the SG&A increase to two discrete items: legal fees for the BluePoint JV closing and adjustments to variable compensation accruals based on strong performance. EVP & COO Christopher Bohn explained that higher controllable costs were driven by unplanned outages at two facilities and the resulting increased logistics costs to meet customer commitments amid tight inventory.

Lucas Beaumont of UBS asked about the near and long-term impact of tariffs on U.S. nitrogen markets and sought clarification on the revenue and tax credit structure for the Blue Point JV.

Answer

CEO Tony Will highlighted that Russian fertilizer enters the U.S. tariff-free, while EVP Bert Frost noted that tariffs on other countries will shift trade flows and likely move U.S. prices closer to Brazil parity. COO Christopher Bohn confirmed that for Blue Point, CF will receive a fee for managing common facilities and the 45Q tax credits will be split among partners based on equity percentage.

Lucas Beaumont inquired about the funding strategy for the Blue Point project, given its wide potential capital commitment range, and whether it would necessitate taking on additional debt.

Answer

EVP & CFO Gregory Cameron stated that funding would start with cash on hand and cash from operations, noting the annual commitment is manageable given the company's strong free cash flow. CEO W. Will emphasized that robust cash generation in 2024 and a strong 2025 pricing outlook provide significant financial flexibility for the project.

Lucas Beaumont asked for clarification on the fixed cost base impact on 2026 EBITDA if Nutrien's Trinidad operations remain shut down, and inquired if the flat year-on-year potash shipment outlook for North America into 2026 assumes no demand destruction.

Answer

Ken Seitz, President and CEO, clarified that Nutrien is not projecting a 2026 shutdown for Trinidad and is actively working towards optimal operating conditions. He noted that Trinidad contributes less than 1% of Nutrien's free cash flow, making its overall impact de minimis. For potash, he explained that the market is expected to grow at trend levels (74-77 million tons in 2026) due to strong nutrient removal, low channel inventories, and affordability, with Nutrien participating at its historical 19-20% market share.

Lucas Beaumont asked about the fixed cost base impact on EBITDA if Trinidad operations remain shut down into 2026, and whether the flat North American potash shipment outlook for next year assumes no demand destruction.

Answer

Ken Seitz, President and CEO, stated that Nutrien is not prognosticating a Trinidad shutdown into 2026, as discussions are ongoing for optimal operating conditions. He noted Trinidad contributes less than 1% of free cash flow, making its overall contribution de minimis. For potash, he explained the 74-77 million ton global demand forecast for 2026 reflects a return to trend-level growth, driven by nutrient removal, low inventories, and affordability, with Nutrien expecting to maintain its 19-20% market share.

Lucas Beaumont from UBS Group revisited the 2026 potash outlook, asking where new supply would come from to meet expected demand growth and when Nutrien would need to make staffing decisions to potentially increase its production.

Answer

President & CEO Ken Seitz reiterated that the market is expected to remain in balance, with project delays offsetting some new supply. He noted that Nutrien and a few other producers have marginal expansion capability. He restated that Nutrien's plan is to maintain market share by growing with the market and bringing on personnel as needed, leveraging the flexibility of its network rather than needing to 'push a button' far in advance.

Lucas Beaumont asked for a quantification of the tariff exposure within the retail crop chemical business, assuming tariffs remain, and inquired if Nutrien imports finished formulations and how significant this is.

Answer

President and CEO Kenneth Seitz noted that while the company is covered for the current year, it is watching the U.S.-China trade dispute closely, as many products have exemptions but others do not. Executive Jeff Tarsi elaborated that 98% of proprietary crop protection products are post-patent and are multi-sourced, including from China and India, as both finished goods and active ingredients. He stated that price increases are expected but the impact is not material for 2025, with plans to pass through costs to customers.

Lucas Beaumont asked for Nutrien's view on the range of outcomes for the nitrogen cost curve if the situation in Europe normalizes, given that pre-war costs were significantly lower.

Answer

Chief Economist Jason Newton responded, noting that while European gas prices are volatile, the cost curve is expected to remain above pre-war levels due to Europe's reliance on imported LNG. He pointed out that European gas storage levels are low after a normal winter and will need to be rebuilt, supporting prices. Furthermore, over 20% of European ammonia capacity remains shut down, with some closures likely permanent. With limited new global supply additions, Newton expects the supply-demand balance to tighten over the medium term.

Lucas Beaumont, on for Joshua Spector, questioned the path to the 2026 retail EBITDA target, noting the required ~12% annual growth rate is above historical levels, and asked for the specific drivers of this growth.

Answer

Jeff Tarsi, EVP & President of Retail, outlined three key growth buckets to reach the $1.9-$2.1 billion target: 1) Continued >10% annual growth in proprietary products, 2) Steady growth in core North American and Australian operations via optimization and tuck-ins, and 3) The stabilization and recovery of the Brazil business.

Lucas Beaumont asked for Axalta's expectations for the industrial and commercial vehicle end markets in 2026, beyond the refinish segment.

Answer

Chris Villavarayan, CEO and President, expects commercial vehicle markets to remain muted, with Class 8 production around 225k-250k units in 2026, down significantly from prior expectations. He noted the team's pivot to commercial transportation solutions (CTS) like marine, military, and RVs. For industrial, he anticipates flat to slightly up volumes, contingent on interest rate cuts and improved residential construction, but is not counting on it. Light vehicle builds are expected to be slightly lower in 2026.

Lucas Beaumont of UBS Group AG inquired about the specifics of the revised potash production guidance, seeking to understand the net impact of weather-related shifts versus the Amax well disappointment on the 2026 forecast. He also questioned the medium-term production outlook and the effect on unit costs.

Answer

CFO Matt Preston clarified that the net production decrease for 2026 is 30,000 tons after accounting for shifts from 2025, and projected a potential 8-10% increase in cost per ton. CEO Kevin Crutchfield added that the Amax cavern remains a long-term priority and that stronger market pricing should help offset the near-term production and cost impacts.

Lucas Beaumont inquired about the specifics of the revised production guidance, seeking to understand the interplay between the weather-related shift of 15,000 tons into 2026 and the overall 45,000-ton reduction for that year. He also asked about the medium-term production outlook following the unsuccessful Amax well and the expected impact on cost per ton.

Answer

CFO Matthew Preston clarified that the 15,000-ton shift from 2025 partially offsets the total reduction, resulting in a net 30,000-ton decrease for 2026 versus prior forecasts. He explained that while the Amax issue presents a medium-term challenge, the company is evaluating options for a new injection well. Preston projected a potential 8-10% increase in cost per ton in 2026 due to lower production absorption. CEO Kevin Crutchfield added that stronger market pricing could help mitigate this cost impact.

Lucas Beaumont inquired about the specifics of the revised production guidance, seeking to understand the net impact of the weather-related production shift versus the Amax well setback on the 2026 forecast. He also asked about the medium-term production outlook and the potential impact on unit costs.

Answer

CFO Matt Preston clarified that the net production decrease for 2026, after accounting for a 15,000-ton shift from 2025, is 30,000 tons. He explained that while the weather impact is temporary, the Amax issue presents a medium-term challenge until a new injection strategy is implemented. Preston estimated a potential 8-10% increase in cost per ton in 2026 due to lower fixed cost absorption. CEO Kevin Crutchfield added that stronger market pricing could help mitigate this financial impact.

Lucas Beaumont inquired about the discrepancy between Intrepid's Q2 potash price guidance and the larger increase in benchmark prices. He also asked for context on the implied year-over-year production decline for potash and Trio in the latter half of 2025, the cost outlook for Trio beyond the current year, and CEO Kevin Crutchfield's strategic focus after six months with the company.

Answer

Zachry Adams, VP of Sales and Marketing, explained that Q2 pricing reflects the realization of Q1's increases and that prior quarter pricing was elevated by older contracts. John Galassini, VP of Operations, attributed production forecasts to the ramp-up of recent capital projects. CFO Matt Preston stated that Trio's current low costs fully reflect recent efficiencies and expects a 5-10% cost increase in H2 2025. CEO Kevin Crutchfield highlighted his focus on maintaining consistency, predictability, and positive trends in core assets.

Lucas Beaumont of BofA Securities inquired about the drivers behind recent potash price increases, the potential impact of Canadian tariffs, and the outlook for production costs in 2025 following a strong 2024.

Answer

VP of Sales and Marketing, Zachry Adams, explained that global potash price strength is due to supportive market dynamics, with benefits for Intrepid expected to be realized more in Q2 due to Q1 volumes being pre-contracted. On tariffs, he noted it was too early to determine the impact. CFO Matt Preston added that while production will be flat in 2025, another significant improvement in unit costs is anticipated in the second half of the year as the Wendover facility's upgrades come online.

Lucas Beaumont of UBS inquired about the potential for potash demand destruction due to lower farmer income, the outlook for further improvements in potash cost of goods sold, and the sustainable sales run rate for the Oilfield Solutions segment following a strong quarter.

Answer

Zachry Adams, VP of Sales and Marketing, addressed demand, stating that current potash prices offer good value to growers, who are maintaining normal application rates to maximize yield. CFO Matt Preston handled the cost and oilfield questions, explaining that potash costs are on a positive trajectory to improve 20% from 2023 levels as production increases, though some quarterly variability will remain. For Oilfield Solutions, Preston clarified that the strong Q3 was due to a specific large project and that margins are expected to revert to the more moderate rates seen in the first half of 2024.

Lucas Beaumont of UBS Group AG inquired about the UAN volume outlook for the second half of 2025 and the potential for third-quarter EBITDA to be stronger than seasonally typical, given robust UAN pricing.

Answer

Chairman and CEO Mark Behrman acknowledged they are still working to achieve consistent production from the expanded UAN facility at Pryor but expect higher production and sales in the second half. He also confirmed Beaumont's assessment that the combination of strong UAN pricing and volume uplift could lead to a much smaller sequential EBITDA decline in Q3 than is normally seen.

Lucas Beaumont of UBS Group AG inquired about the second-half outlook for UAN volume growth, given initial targets, and how LSB is capitalizing on strong pricing. He also asked if Q3 EBITDA might see a smaller-than-usual seasonal decline due to favorable market conditions.

Answer

Chairman and CEO Mark Behrman confirmed that while the Pryor facility's UAN expansion is achieving its targeted rates, they are still working on improving consistency and expect higher production and sales in the second half. Behrman agreed with the assessment for Q3, stating Beaumont was "spot on" that the combination of strong pricing and volumes could lead to a much flatter sequential EBITDA result than is typical.

Lucas Beaumont of UBS asked for clarity on LSB Industries' realized pricing outlook for Q2, given the diverging trends of strong UAN prices and weakening ammonia prices. He also inquired about the company's updated capital allocation priorities after pausing the Houston Ship Channel project and followed up on the margin impact of shifting to more cost-plus contracts and the potential cost increases from tariffs on equipment.

Answer

Chairman and CEO Mark Behrman stated the company is well-positioned to capitalize on strong Q2 UAN pricing as they are not fully sold out. He explained that capital allocation will prioritize facility reliability ($60-65M annually), followed by evaluations of other projects, stock buybacks, and debt reduction. Behrman also noted that while cost-plus contracts (targeting 40-60% of volume) trade peak margin upside for downside protection, overall margins should be similar over time. CFO Cheryl Maguire quantified potential annual tariff impacts as approximately $1 million on expenses and $2 million on capital.

Lucas Beaumont from UBS Group AG asked about the economic assessment of the Houston Ship Channel project amid European market uncertainty, the strategy to increase ammonia production volumes, and the reason for a higher gas consumption assumption.

Answer

Chairman and CEO Mark Behrman stated the Houston project will not proceed without long-term offtake agreements at a viable price point (under $600/ton), and they are exploring ways to lower capital costs. He also outlined a goal to reach ~95% operating rates by the end of 2026. CFO Cheryl Maguire clarified the updated gas consumption figure now includes both process and fuel gas.

Lucas Beaumont sought clarification on the phosphate production outlook, asking if the company was now pointing to the low end of its annual range given the production required in the second half.

Answer

President and CEO Bruce Bodine reaffirmed the full-year guidance of 7.2 to 7.6 million tonnes. He expressed confidence in achieving full capacity output in the second half, noted there is upside to a 2 million tonne quarterly rate, and explicitly stated they are not guiding toward the low end of the range.

Speaking on behalf of Lucas Beaumont, an analyst asked for commentary on the potential impact of Canadian potash tariffs on pricing, demand, and trade flows, and inquired when the recent price increases would be realized in earnings.

Answer

Bruce Bodine, President and CEO, stated that any tariffs would likely be borne by downstream customers but does not expect significant demand destruction due to strong potash affordability. Jenny Wang, EVP of Commercial, clarified that the recent price momentum will be partially reflected in Q1 earnings, with a more significant impact expected in Q2.

Lucas Beaumont, on for Joshua Spector, questioned the confidence in the volume outlook for the second half of the year, which implies an acceleration from a soft first half. He also asked for thoughts on the medium-term growth algorithm for the DIY market post-pandemic.

Answer

Frank Sullivan, Chair and CEO, explained that continued modest growth in CPG and PCG, a bottoming out in SPG, and easier comps in the Consumer segment support the second-half outlook, with Consumer's performance being the key variable. For the DIY market, he stated that nothing has structurally changed but the market is in a unique circumstance due to a 30-year low in housing turnover. He believes that as interest rates improve and turnover picks up, the positive dynamics for DIY products will return.

Lucas Beaumont of UBS, on behalf of Joshua Spector, questioned the drivers behind Fire Safety's strong Q2 sales despite lower acres burned, asked how to model Q3 given a strong start in July, probed the sustainability of high incremental EBITDA margins, and inquired about historical instances of aerial capacity constraints.

Answer

CEO Haitham Khouri attributed the strong Q2 volume to three factors: a more proactive aerial attack posture from customers, Perimeter's own significant investments in air base capacity, and a fire distribution weighted toward the end of the quarter when more assets were available. He noted that high incremental margins were driven by profitable new business in suppressants, productivity gains reducing costs, and value-based pricing. While acknowledging a strong start to Q3, he cautioned against extrapolation, stating that in a like-for-like volume scenario, earnings power is higher but the quarter is far from over.