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LSB INDUSTRIES, INC. (LXU)·Q4 2024 Earnings Summary

Executive Summary

  • Q4 2024 net sales were $134.9M, up 1.7% year-over-year, with adjusted EBITDA rising to $37.6M from $25.1M; GAAP net loss widened to $(9.1)M driven by ~$17.1M turnaround costs and ~$3.1M asset write-downs .
  • Management highlighted stronger ammonia pricing, lower natural gas costs, and higher AN/nitric acid volumes; Pryor set monthly records in December for urea/UAN production post urea debottleneck, reinforcing the shift to higher-margin downstream products .
  • 2025 volume outlook: higher AN/nitric acid and UAN sales volumes, lower ammonia sales volumes as more ammonia is upgraded; estimated ammonia production 790–820k tons (vs 757k in 2024) and UAN sales 620–650k tons (vs 483k in 2024) .
  • Energy transition: El Dorado CCS targeted for 2H 2026 (awaiting EPA Class VI approval), with first offtake customer shipping conventional ANS now; Houston Ship Channel FEED targeted to begin in 1H 2025, with price discovery indicating offtake needs to be below ~$600/ton to transact, a potential stock catalyst tied to FEED/FID visibility .

What Went Well and What Went Wrong

What Went Well

  • Adjusted EBITDA improved year-over-year despite a plant turnaround, aided by stronger ammonia prices, lower gas costs, and higher AN/nitric acid volumes; “several positive indicators point towards a robust Spring” .
  • Operational execution: “Our Pryor facility achieved a monthly record for urea and UAN production in December,” attributable to the Q3 turnaround and urea capacity expansion .
  • Safety and reliability: Cherokee and Baytown reported zero recordable incidents for 2024; management expects turnarounds and upgrades to drive higher reliability and incremental EBITDA .

What Went Wrong

  • GAAP loss widened: Q4 net loss $(9.1)M vs $(5.3)M LY, driven by ~$17.1M turnaround costs and ~$3.1M non-cash write-downs; diluted EPS fell to $(0.13) vs $(0.07) .
  • UAN headwinds: UAN sales volumes fell 9% YoY and ASPs declined 13% amid the Cherokee turnaround; UAN product sales down 18% YoY in Q4 .
  • Operating performance under turnaround pressure: Q4 operating loss vs operating income in Q4 2023, as turnarounds and write-downs offset pricing/volume benefits; CFO noted an estimated ~$7M EBITDA impact from Cherokee turnaround, with implied adjusted EBITDA ex-turnaround of ~$45M for Q4 .

Financial Results

Quarterly Progression

MetricQ2 2024Q3 2024Q4 2024
Net Sales ($USD Millions)$140.073 $109.217 $134.906
Diluted EPS ($USD)$0.13 $(0.35) $(0.13)
Adjusted EBITDA ($USD Millions)$41.146 $17.464 $37.566

Q4 Year-over-Year

MetricQ4 2023Q4 2024
Net Sales ($USD Millions)$132.613 $134.906
Diluted EPS ($USD)$(0.07) $(0.13)
Adjusted EBITDA ($USD Millions)$25.127 $37.566

Product Sales (Q4)

Product Sales ($USD Thousands)Q4 2023Q4 2024
AN & Nitric Acid$47,959 $57,620
UAN$36,621 $30,132
Ammonia$36,731 $40,194
Other$11,302 $6,960
Total Net Sales$132,613 $134,906

KPIs (Q4)

KPIQ4 2023Q4 2024
Key Product Volumes (short tons) – AN & Nitric Acid124,697 150,054
Key Product Volumes (short tons) – UAN125,966 114,875
Key Product Volumes (short tons) – Ammonia95,447 85,678
ASP ($/short ton) – AN & Nitric Acid$322 $308
ASP ($/short ton) – UAN$253 $221
ASP ($/short ton) – Ammonia$368 $449
Benchmark – Tampa Ammonia ($/ton)$599 $564
Benchmark – NOLA UAN ($/ton)$256 $230
Avg Natural Gas Cost ($/MMBtu) – in cost of materials$3.75 $2.45
Avg Natural Gas Cost ($/MMBtu) – used in production$3.99 $2.79

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Ammonia Production (tons)2025E vs 2024A2024A: 757,000 790,000–820,000 Raised
AN & Nitric Acid Sales (tons)2025E vs 2024A2024A: 554,000 590,000–620,000 Raised
UAN Sales (tons)2025E vs 2024A2024A: 483,000 620,000–650,000 Raised
Ammonia Sales (tons)2025E vs 2024A2024A: 321,000 250,000–280,000 Lowered
CapEx ($USD Millions)FY2025FY2024 actual: ~$92M $80–$90M Lowered
Effective Tax RateFY2025N/A~25% (no material cash taxes in 2025 given NOLs) New
El Dorado CCS startOperationsEarly 2026 (prior commentary) 2H 2026 Deferred modestly
Houston Ship Channel FEEDProject phaseBegin Q1 2025 (prior plan) Goal: begin 1H 2025, finish by mid-2026 Timing clarified

Earnings Call Themes & Trends

TopicPrevious Mentions (Q2 2024, Q3 2024)Current Period (Q4 2024)Trend
Low-carbon ammonia strategy (El Dorado CCS, Houston Ship Channel)Q2: Freeport 5-year ANS offtake; CCS decision spring with early 2026 start; pre-FEED for Houston underway . Q3: pre-FEED complete; FEED expected Q1 2025; FID targeted 1H 2026 .Price discovery suggests transactions below $600/ton; FEED targeted in 1H 2025; CCS still gated by EPA Class VI .Progressing with disciplined hurdle rates.
Supply chain/geopolitical inputs (Suez, gas in Europe)Q2: Suez disruptions; delayed capacity; Europe gas supports prices . Q3: tight supply; rising TTF; supportive ammonia pricing .Continued Suez disruptions; European gas higher; tight inventories into spring .Persistent constraints underpin pricing.
Product performance (UAN, ammonia, AN/nitric)Q2: UAN stable; ammonia healthy; nitric acid steady . Q3: UAN firming; ammonia strength continues .UAN strengthens on robust urea demand and limited imports; ammonia pricing healthy .Improving pricing/mix.
Regulatory/legal (EPA Class VI)Q2: EPA final decision indicated next spring . Q3: CCS on track pending permit .Plan to drill deep injection well as stratigraphic well to speed timeline; target 2H 2026 operations .Active engagement, strategic execution.
Industrial mix focus (cost-plus contracts, ratable offtake)Q2: Increase stability via industrial contracts . Q3: grow industrial sales share .Emphasis maintained; ramping ANS to meet new commitments .Mix shift toward stability.

Management Commentary

  • “Our adjusted EBITDA for the fourth quarter of 2024 improved…due, in part, to improved production and sales volumes of nitric acid and AN…Stronger ammonia prices and lower natural gas costs also contributed” — Mark Behrman, CEO .
  • “Our Pryor facility achieved a monthly record for urea and UAN production in December…a direct result of the turnaround and urea capacity expansion project we completed during the third quarter” — Mark Behrman .
  • “We continue to make progress with our two energy transition projects…targeting startup of low carbon ammonium nitrate solution production at our El Dorado facility in the second half of 2026” — Mark Behrman .
  • “Based on these discussions, we believe that higher volume multiyear demand for low-carbon ammonia exists, providing that the price per ton is less than $600” — Mark Behrman (prepared remarks) .
  • “We expect…$80–$90M of CapEx in our facilities during 2025…$60–$65M for EH&S and reliability and $20–$25M for growth” — Cheryl Maguire, CFO .

Q&A Highlights

  • Low-carbon ammonia pricing threshold: Management believes long-term offtake volumes require FOB prices below ~$600/ton; above that, economics are currently not transactable given capital cost curves .
  • Tariff sensitivity: Potential Canadian tariffs could lift U.S. ammonia and UAN prices near-term, though management expects trade flows to equilibrate over time .
  • Operational rates: Targeting ~95% ex-planned activities by end-2026; 2025 lower (~87%) due to El Dorado turnaround .
  • Expense framework: Gas consumption assumptions updated to include process/fuel gas; 2025 tax rate ~25% with minimal cash taxes due to NOLs .
  • CCS economics: Lapis pays $30–$35 per ton of CO2; at ~400k tons, ~$14M incremental annual revenue potential post start-up .

Estimates Context

  • Consensus comparison: Wall Street consensus (S&P Global) was unavailable in this session, so beat/miss versus estimates cannot be confirmed. Actuals are reported above; investors should monitor third-party consensus updates for post-print revisions [Values retrieved from S&P Global unavailable at time of analysis].
  • Implications: Management’s 2025 volume outlook (notably UAN and AN/nitric acid increases), stable industrial cost-plus mix, and guided CapEx/tax framework suggest estimates may need to incorporate higher downstream volumes and mix benefits, offset by the planned El Dorado turnaround and potentially higher 2025 natural gas costs vs 2024 .

Key Takeaways for Investors

  • Mix shift to downstream products is accelerating (Pryor urea debottleneck), supporting margin resilience despite periodic ammonia sales declines; this should lift EBITDA through 2025 absent unplanned outages .
  • Industrial contracts and cost-plus pricing enhance earnings visibility and stability, a strategic counterweight to ag price volatility .
  • 2025 guidance calls for higher AN/nitric acid and UAN volumes; recovery from 2024 turnaround-heavy year positions LXU for improved production and EBITDA trajectory .
  • Energy transition optionality remains meaningful: CCS could add ~$14M annually post start-up; Houston FEED/FID is contingent on <$600/ton offtake economics—an important medium-term catalyst .
  • Capital allocation remains disciplined: 2025 CapEx trimmed to $80–$90M vs ~$92M in 2024, with growth spend targeted at logistics/storage to monetize AN growth .
  • Risk watch: Tariff/regulatory shifts (EU CBAM timing, North American trade) and Suez/geopolitical disruptions can sway pricing and trade flows; LXU’s U.S. gas advantage vs Europe remains a tailwind .
  • Near-term trading lens: With UAN/ammonia pricing supportive into spring and volumes ramping post turnarounds, FEED/offtake headlines and EPA permit signals are likely stock catalysts over the next 1–2 quarters .