CVR Partners - Earnings Call - Q3 2025

Executive Summary

• Solid quarter with pricing-led upside: Net sales $163.5M, net income $43.1M, EBITDA $70.6M, and diluted EPS $4.08; UAN and ammonia realized prices rose 52% and 33% YoY, respectively, amid tight inventories and reduced global supply.
• Distribution raised: Board declared a Q3 2025 cash distribution of $4.02 per unit vs $3.89 in Q2, supported by $42.4M available cash for distribution and $156M cash on hand ($206M total liquidity including ABL availability).
• Operations healthy despite outages: Consolidated ammonia utilization 95% (some planned/unplanned downtime), 208k gross tons ammonia and 337k tons UAN produced; sales volumes modestly lower due to low inventories exiting Q2 after strong 1H demand.
• Forward setup constructive but turnaround-driven Q4 mix: Q4 outlook calls for 80–85% ammonia utilization (Coffeyville turnaround), direct operating expenses $58–$63M, and capex $30–$35M; management expects pricing strength to persist into 1H26.
• Key catalysts: Continued nitrogen tightness and elevated pricing, Coffeyville feedstock-flex project (natural gas + hydrogen) that could lift capacity up to ~8%, and distribution trajectory tied to cash generation and reserves strategy.

What Went Well and What Went Wrong

• What Went Well

  • Pricing power: “Average realized gate prices” up to $531/ton ammonia (+33% YoY) and $348/ton UAN (+52% YoY); net sales rose to $163.5M from $125.2M YoY.
  • Strong cash generation and distribution: CFO reported $91.7M operating cash flow in Q3 and $4.02/unit distribution; $42.4M available cash for distribution.
  • Execution and outlook: CEO emphasized operating focus and favorable setup: “operating the plants at utilization rates above 95%... excluding turnarounds,” and expects supportive pricing into 1H26.

• What Went Wrong

  • Utilization headwinds: 95% utilization impacted by “planned and unplanned downtime at both facilities”; volumes down slightly vs prior year with low inventories after strong 1H.
  • Cost inflation: DOE increased YoY on higher natural gas and electricity; preliminary Coffeyville turnaround spending also contributed.
  • Turnaround disruption: Ammonia release during early phase of Coffeyville turnaround anticipated to delay completion by “a few days,” affecting near-term utilization and costs.

Transcript

Operator (participant)

Greetings and welcome to the CVR Partners third quarter 2025 conference call. At this time, all participants are in listen-only mode. A brief question and answer session will follow the formal presentation. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Richard Roberts, Vice President of FP&A and Investor Relations. Thank you, sir. You may begin. Thank you, Eric.

Richard Roberts (VP of Financial Planning & Analysis and Investor Relations)

Good morning everyone. We 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 may reserve amounts for other future cash needs as 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 Pytosh (President, CEO and Director)

Mark, 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 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. For the third quarter of 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 the third quarter of 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 the third quarter of 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 the first half of 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 the first half of 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.

Dane Neumann (EVP, CFO and Treasurer)

Thank you, Mark. For the third quarter of 2025, we reported net sales of $164 million and operating income of $51 million. Net income for the quarter was $43 million, $4.08 per common unit, and EBITDA was $71 million. Relative to the third quarter of 2024, the increase in EBITDA was primarily due to a combination of higher UAN and ammonia sales pricing. Direct operating expenses for the third quarter of 2025 were $58 million. Excluding inventory impacts, direct operating expenses increased by approximately $7 million relative to the third quarter of 2024, primarily due to higher natural gas and electricity costs and some preliminary spending associated with Coffeyville's planned turnaround. During the third quarter of 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 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 2 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 the fourth quarter of.

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 excluding 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 (President, CEO and Director)

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 10-year averages. Grain prices have remained at the lower end of the last 12-month 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 cost. 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 the spring of 2026. The wild card 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 remained 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 of producing 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 faces structural natural gas supply issues that 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 35-day turnaround at our East Dubuque facility in the third quarter 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 petcoke. 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 the expansion of our DEF production and loadout capacity.

The goal of these projects is to support our target of operating the plants at utilization rates above 95% of named plate 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, and 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 include safely and reliably operating our plants, with a keen focus on the health and safety of our employees, contractors, and communities, prudently managing cost, 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're ready to answer any questions. Eric.

Operator (participant)

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 on your telephone keypad. Our first question comes from the line of Rob McGuire with Granite Research. Please go ahead.

Rob McGuire (Equity Research Analyst)

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. I think I missed when 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 (President, CEO and Director)

Not ready to talk about, you know, finalizing the final cost and returns yet. We're 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, excuse me, penciling out the way we thought it would. It'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 petcoke as a feedstock for a portion with natural gas. The hydrogen component would be an increase in our production capacity. It's a combination project that includes the ability to replace feedstock plus bring additional hydrogen, which means additional ammonia capacity.

That's what I've been referring to in my comments about up to 8% increase in our production capacity. We have been reserving for that project, and we will have the capital available set aside for that. I'm expecting by the next call, you know, to be able to talk with more specifics on, you know, that project and moving ahead there. So far, all the engineering work that's coming back and the construction plans look, you know, on track with what we thought, what the original plan was.

Rob McGuire (Equity Research Analyst)

Thank you. I appreciate that. Shifting gears, any concerns about drought conditions impacting ammonia runs in this ammonia application season?

Mark Pytosh (President, CEO and Director)

Not in the markets where we're placed. We've had some moisture here the last week, particularly the big ammonia run for us is up in the Northern Plains around East Dubuque. There's been moisture. I actually think conditions are as close to perfect as we could predict because we've had, you know, we've. The harvest is basically complete there. We've emptied the fields, the soil temperatures are down, and moisture's come in in the last week. That combination is about perfect conditions. I'm expecting a big fall ammonia run. The customers are telling us that we have a good book of business already, but people are coming in now with additional cash orders. I expect really a good fall ammonia run. I'm very optimistic.

Rob McGuire (Equity Research Analyst)

Wonderful. 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? 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 (President, CEO and Director)

There's a couple different layers to that. The answer to that, number one, we've been expecting, you know, that we were thinking that the acreage, corn acreage, this is corn acreage, would drop next year. I'm not as sure now based on, you know, 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. Maybe there's going to be more corn acres just on a defensive approach to protect against trade, trade war behavior. I actually think that the corn acreage might surprise on the upside versus, you know, a drop a lot of people were talking about, drop to the low 90s, which is still great.

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 soybean exports. 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. I think, you know, lower acreage, given where we are from an inventory perspective, probably won't impact as much in 2020 as it normally would because, quite frankly, there's a rush to try to replenish what we have. You probably saw the announcement that Nutrien has shut down one of the Trinidad plants, which is an importer to the U.S., and that's going to affect the replenishment time frame. I'm not terribly concerned about the acreage.

We watch it closely, but right now I think the market is in a position to absorb that.

That's really interesting. 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, we have.

Not seen any impact on Russian imports. In fact, Russia is the in. Particularly like in UAN, Russia is the marginal producer in the marketplace, and they've been exporting the U.S. in size. There's been no effect. The fear factor in the market is if there's somehow a tariff or sanctioning of fertilizer coming to the market, that could be a big event from affecting supply. That's a fear factor, but we haven't seen any signs. During the course of this year, even with all the geopolitical events, there's been no restriction on the imports of Russian. I'll focus more on UAN, but there's urea too. Russian UAN's been a big factor in the U.S.

That's really helpful. 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.

We never give out pricing for those products, but it's going to be a solid quarter. We've seen a strong market since the UAN fuel season and the ammonia prepay. Pricing will be higher in the fourth quarter versus 3Q, which it normally would be. We'll see that show up in the results. 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 going to see there. I expect these sorts of market conditions to carry through 1H26.

That was really helpful. Thank you so much.

Thanks, Rob.

Operator (participant)

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 (President, CEO and Director)

Thank you everybody for participating in the call today. We look forward to reviewing our fourth quarter results with you in February. Have a nice day.

Operator (participant)

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.