Robert McGuire

Rob McGuire inquired about LSB Industries' perspective on current farmer economics, the stress within the agricultural sector, and whether this is expected to influence demand or ordering behavior for their products this year.

Answer

Chairman and CEO Mark Behrman acknowledged farmer stress due to high corn crop inventories and reduced soybean export demand. He emphasized the need to create more demand for major commodities (corn, soy) to lift prices and alleviate farmer stress, citing potential solutions like permanently adopting E15.

Rob McGuire asked about the proportion of LSB Industries' AN sales volume under contract exiting 2025 and whether shifted AN production would be contracted. He also questioned the timing of the Cherokee turnaround, El Dorado's inventory build for downstream production, shifts in U.S. fertilizer import volumes post-tariff lift, and the impact of current farmer economics on demand.

Answer

Mark Behrman, Chairman and CEO, stated that LSB's base AN business is fully contracted, while additional AN production from optimizing product balance (reducing UAN) is sold on the spot market. Cheryl Maguire, EVP and CFO, confirmed El Dorado plans to build ammonia inventory in Q1 to support downstream operations during the Q2 turnaround, and the Cherokee turnaround is slated for Q3 2027. Mark Behrman added that it's too early to tell if fertilizer tariffs lifting shifted import volumes, noting imports never stopped and the current market tightness drives import demand. He acknowledged farmer stress but believes strong corn acreage forecasts and global dynamics will maintain solid demand, with a need for increased commodity demand to alleviate farmer pressure.

Rob McGuire from Granite Research inquired about UAN import trends, the market impact from recent Ukrainian strikes on Russian fertilizer facilities, and the current status of the Leidos lawsuit.

Answer

CCO Damian Renwick explained that UAN imports were below last year, contributing to market tightness, and that potential tariffs would likely have a more material impact than the drone strikes. CEO Mark Behrman provided an update on the Leidos lawsuit, stating that the trial is currently scheduled to begin in late October 2025.

Rob McGuire of Granite Research asked about current UAN import trends, the market impact from Ukrainian strikes on Russian fertilizer plants, and requested an update on the status of the Leidos lawsuit.

Answer

EVP and CCO Damien Renwick stated that UAN imports were below last year, contributing to market tightness. He has seen no immediate impact from the drone strikes, suggesting future tariffs would be a more significant factor that could redistribute global trade. Chairman and CEO Mark Behrman provided an update on the Leidos lawsuit, stating the trial is currently scheduled to begin in late October.

Robert McGuire from Granite Research asked for the company's view on the European import dynamic between U.S. ammonia and LNG. He also sought updates on European legislation supporting blue ammonia, such as CBAM, and inquired if there was a significant pricing disparity between inland ammonia sales and the Tampa benchmark.

Answer

Chief Commercial Officer Damien Renwick explained that European ammonia producers face a 'make vs. buy' decision based on their natural gas costs versus import prices, a dynamic he expects to continue. He noted the CBAM transition is still on track for next year, despite rumors. Chairman and CEO Mark Behrman added that EU discussions on carbon intensity scores are not yet finalized. Regarding pricing, Renwick stated that inland ammonia prices are consistent with seasonal expectations and not out of the ordinary.

Robert McGuire of Granite Research asked about potential European legislative shifts towards low-carbon ammonia, the impact of U.S. carbon policy changes on customer demand, and the drivers behind strong Q4 ammonium nitrate sales.

Answer

Chairman and CEO Mark Behrman noted that Europe appears to be revisiting its policies to be more inclusive of low-carbon (blue) ammonia due to economic realities, and that customer interest is primarily driven by financial impact rather than politics. CCO Damien Renwick and CEO Mark Behrman attributed the strong AN sales to a combination of improved plant reliability and a successful commercial strategy to upgrade molecules to higher-value products.

Robert McGuire asked about the current purchasing behavior in the nitrogen market, the drivers for Q3 capital expenditures, the reason for the extended production timeline on the Houston Ship Channel project, and the performance improvements observed at the Pryor facility post-turnaround.

Answer

Chief Commercial Officer Damien Renwick described nitrogen purchasing as cautious and 'hand-to-mouth.' CFO Cheryl Maguire attributed higher Q3 CapEx to the major Pryor turnaround. CEO Mark Behrman explained the Houston project timeline reflects conservatism. Mr. Behrman also detailed significant performance gains at Pryor, including optimal ammonia rates and a 75,000-ton increase in annual UAN capacity.

Rob McGuire with Granite Research inquired about UAN import trends, specifically from Trinidad and Russia, and the overall supply-demand balance. He also asked about the year-over-year decrease in deferred revenue and whether it indicated less pre-sold product. Additionally, McGuire questioned the expected sequential pricing for ammonia and UAN heading into Q1 2026. He sought an update on the resolution of the Coffeyville air separator issue and potential compensation for downtime. Finally, he asked for management's perspective on the impact of projected lower corn acreage on nitrogen fertilizer demand for spring 2026 and current farmer purchasing trends, given the early product movement.

Answer

Mark Pytosh (CEO, CVR Partners) and Dane Neumann (CFO, CVR Partners) provided comprehensive answers. Mark Pytosh noted that UAN imports from Trinidad are down due to a Nutrien plant outage, contributing to a tight market, while Russian imports remain consistent. The decrease in deferred revenue was attributed to a timing shift, with strong pre-sales occurring in January and February. He confirmed an expected sequential uptick in ammonia and UAN pricing for Q1 2026. Regarding the Coffeyville air separator, Mark Pytosh expressed confidence that the issues causing delayed startup are resolved but indicated ongoing discussions with the service provider to amend their business plan due to dissatisfaction with performance, noting that contract penalties covered only a fraction of lost production. On the market outlook, Mark Pytosh explained that 95 million acres of corn still represents strong demand, and global supply constraints, including natural gas availability issues and geopolitical tensions, are a larger factor. He highlighted early ammonia movement in the Midwest as a positive indicator for the spring season, attributing it to favorable weather conditions pulling up the application timeline by several weeks.

Rob McGuire with Granite Research inquired about the current state of UAN imports, specifically noting a potential dearth from Trinidad and the ongoing situation with Russian supplies. He also asked about the year-over-year decrease in deferred revenue, the expected sequential pricing trends for ammonia and UAN into Q1 2026, and the resolution of the air separator issue at the Coffeyville facility, including potential compensation. Finally, he sought Mark Pytosh's outlook on the spring planting season, considering lower corn acreage but persistent supply constraints, and whether early product movement indicates a shift in farmer planning or just favorable weather.

Answer

Mark Pytosh, Chief Executive Officer of CVR Partners, explained that UAN imports are not outside the norm, but the Nutrien plant in Trinidad being down is tightening the market, while Russian product imports have been consistently falling. He clarified that the decrease in deferred revenue was a timing issue, with pre-sales picking up significantly in January and February for a strong spring book. Pytosh confirmed an expected, though not dramatic, sequential uptick in ammonia and UAN pricing for Q1 2026. Regarding the Coffeyville air separator, he expressed confidence in the resolution of technical issues but dissatisfaction with performance, indicating ongoing discussions with the service provider for a revised business plan and noting that contract penalties only cover a fraction of lost production. For the spring outlook, Pytosh highlighted that 95 million corn acres is still a strong demand driver due to soil nitrogen depletion, and global supply constraints (natural gas, geopolitical tensions, Iran) are a bigger factor. He noted early ammonia movement in the Midwest as a positive sign, attributing it to favorable February weather pulling up application timelines, leading to high optimism for the spring season.

Rob McGuire of Granite Research asked about the timing and pricing of the UAN summer fill program, the outlook for fall ammonia prices, and the reasons for increased Q2 direct operating costs. He also inquired about recent unplanned downtime, CEO Mark Pytosh's new dual role, views on industry consolidation, and the capacity impact of brownfield reliability projects.

Answer

President & CEO Mark Pytosh explained that the UAN summer fill was delayed by strong demand but would feature a smaller-than-typical seasonal discount. He noted fall ammonia prices should be similar to spring levels. Both Pytosh and CFO Dane Neumann attributed higher operating costs to repairs, inventory effects, and elevated utility prices. Pytosh confirmed downtime issues were resolved, discussed his commitment to his dual CEO role, and saw potential for industry consolidation. He also detailed that brownfield projects, funded by growth CapEx, could add ~100 tons/day of ammonia capacity at Coffeyville and over 5% at East Dubuque.

Rob McGuire of Granite Research inquired about the timing and pricing of CVR Partners' UAN summer fill program, the outlook for fall ammonia pricing, and the drivers behind increased Q2 direct operating costs. He also asked about the resolution of recent unplanned downtime, CEO Mark Pytosh's new dual role, views on industry consolidation, and specifics on capacity additions from brownfield reliability projects.

Answer

President & CEO Mark Pytosh explained that the UAN summer fill was delayed by strong demand but is expected soon with a smaller-than-usual seasonal discount. He noted fall ammonia pricing should be similar to the spring. Pytosh and CFO Dane Neumann attributed higher Q2 operating costs to repairs, inventory draws, and elevated electricity and gas prices, which are expected to continue into Q3. Pytosh confirmed downtime issues were resolved and discussed his commitment to his dual CEO role. He also shared a positive outlook on industry consolidation and detailed how brownfield projects, funded by growth capex reserves, will add significant, cost-effective production capacity at both plants.

Rob McGuire of Granite Research inquired about several operational and strategic topics, including the timing and pricing for the UAN summer fill program, the outlook for fall ammonia prices, and the reasons for the increase in Q2 direct operating costs. He also asked for clarification on recent unplanned downtime, the capacity impact of brownfield projects, and CEO Mark Pytosh's new dual role following the CVR Energy announcement.

Answer

President & CEO Mark Pytosh explained that the UAN summer fill was delayed by strong demand and that the typical seasonal price discount will be much narrower this year. He and EVP & CFO Dane Neumann attributed higher Q2 operating costs to repairs, inventory draws, and elevated electricity and gas prices, which are expected to persist into Q3. Pytosh confirmed that unplanned downtime issues were resolved and detailed how brownfield projects, funded by growth capex, will add significant capacity. He also affirmed his continued commitment to CVR Partners while taking on the CEO role at parent CVR Energy.

Robert McGuire asked for details on several topics, including the reason for lower Q2 2025 utilization guidance, the status and potential production increase from growth projects, and a cost estimate for the Coffeyville natural gas feedstock project. He also inquired about a specific cash reserve for future needs, the outlook for UAN pricing and summer fill discounting, the pricing divergence between ammonia and urea, and the potential market impact of China reducing its U.S. corn purchases.

Answer

CEO Mark Pytosh explained that the Q2 utilization step-down is due to planned downtime at the East Dubuque facility to install a new control system, a key reliability project. He stated that growth projects are aimed at reducing downtime and expanding nameplate capacity over the next 2-3 years but did not provide specific production percentages. For the Coffeyville project, he estimated a cost in the 'low double-digit millions' and confirmed its technical feasibility. Pytosh also affirmed that Q2 UAN pricing would be stronger, reflecting recent market increases, and that low system-wide inventories bode well for the summer fill season. He clarified that the widely cited Tampa ammonia price is not representative of their Midwest market, where prices are more aligned with urea and UAN. Regarding trade, he noted that Mexico is a more significant corn buyer than China and that global grain markets would likely readjust to shifting trade flows. CFO Dane Neumann added that the cash reserve in question was set aside to ensure funds are available for heavier CapEx later in the year.

Robert McGuire of Granite Research, LLC asked for an analysis of market trends, including the impact of urea prices on UAN demand, distributor inventory levels, and any application shift between UAN and ammonia. He also inquired about the forward-sold position for UAN and the outlook for 2025 capital expenditures.

Answer

CEO Mark Pytosh explained that tight global urea supply is increasing prices for both UAN and ammonia, making UAN appear attractively priced. He noted strong customer buying ahead of an anticipated increase in corn acreage, indicating a stronger market than the prior year. While not giving specific figures, he confirmed a 'solid book of business' for the spring. CFO Dane Neumann added that he does not expect a substantial change in capital reserves for 2025, as funds for growth projects have largely been set aside in prior periods.

Rob McGuire of Granite Research asked if transformative acquisitions are a new, aggressive priority for the new board members and also questioned the CAC and revenue per submission for the quarter.

Answer

CEO Vijay Kotte confirmed that M&A is a more focused priority, supported by a new Transformation Committee and a pre-approved $250 million basket for transactions. He clarified that Q2 performance metrics like CAC are not representative of the company's capabilities due to a strategic pullback from the Medicare Advantage market in May, which skewed the results.

Robert McGuire of Lake Street Capital Markets asked about potential opportunities to improve GoHealth's capital structure and whether the recent DOJ intervention in a lawsuit might delay those plans. He also inquired about the company's reaction to recent news from UnitedHealth Group and its expectations for the upcoming Annual Enrollment Period (AEP) compared to last year.

Answer

CEO Vijay Kotte stated that the DOJ lawsuit does not change the company's plans to assess all alternatives to enhance its capital structure, emphasizing they will only proceed if the terms improve their position. Regarding the AEP, Kotte noted that industry-wide margin challenges and health plan pullbacks suggest a more disruptive enrollment season is likely, with benefit resets creating increased shopping demand from consumers. He acknowledged it was too early to fully digest the UnitedHealth news but that it aligns with broader industry trends.

Robert McGuire asked for projections on Customer Acquisition Cost (CAC) for year-end 2025 and the long term, as well as expectations for 2025 free cash flow and investment levels.

Answer

CEO Vijay Kotte declined to provide specific long-term guidance on CAC or free cash flow. He emphasized the company's focus on achieving a year-one cash-on-cash return, which necessitates driving down costs. For capital deployment, Kotte described a 'read and react' strategy, where cash will be invested in high-return opportunities like technology or marketing, or used to pay down debt if such opportunities are not present, with the overall goal of being accretive without increasing total debt.

Robert M. McGuire inquired about GoHealth's efforts to reduce customer acquisition costs (CAC), the expected CAC trend in Q4 and beyond, and whether the e-TeleQuote acquisition model is repeatable. He also asked about the anticipated mix of agency versus non-agency business.

Answer

CEO Vijay Kotte detailed that CAC reduction is driven by better marketing targeting, increased agent efficiency via AI and automation, and real-time supply-demand matching. He confirmed that GoHealth's platform creates unique synergy opportunities and the company is actively seeking similar acquisitions. Regarding the business mix, he explained that while initial contracts are based on predicted market stability, the final agency vs. non-agency mix is ultimately determined by consumer choice and finding the best plan for their needs.