AdvanSix Q4 2024 Earnings Report

AdvanSix EPS Results

• Actual EPS: $0.03
• Consensus EPS: -$0.37
• Beat/Miss: Beat by +$0.40
• One Year Ago EPS: N/A

AdvanSix Revenue Results

• Actual Revenue: $329.06 million
• Expected Revenue: $377.15 million
• Beat/Miss: Missed by -$48.09 million
• YoY Revenue Growth: N/A

AdvanSix Announcement Details

• Quarter: Q4 2024
• Date: 2/21/2025
• Time: Before Market Opens
• Conference Call Date: Friday, February 21, 2025
• Conference Call Time: 9:30AM ET

AdvanSix (NYSE:ASIX) engages in the manufacture and sale of polymer resins in the United States and internationally. It offers Nylon 6, a polymer resin, which is a synthetic material used to produce fibers, filaments, engineered plastics, and films. The company also provides caprolactam to manufacture polymer resins; ammonium sulfate fertilizers to distributors, farm cooperatives, and retailers; and acetone that are used in the production of adhesives, paints, coatings, solvents, herbicides, and engineered plastic resins, as well as other intermediate chemicals, including phenol, monoisopropylamine, dipropylamine, monoallylamine, alpha-methylstyrene, cyclohexanone, methyl ethyl ketoxime, acetaldehyde oxime, 2-pentanone oxime, cyclohexanol, sulfuric acid, ammonia, and carbon dioxide. It offers its products under the Aegis, Capran, Sulf-N, Nadone, Naxol, and EZ-Blox brands. The company sells its products directly, as well as through distributors. AdvanSix Inc. was incorporated in 2016 and is headquartered in Parsippany, New Jersey.

AdvanSix Q4 2024 Earnings Call Transcript

Presentation

[Operator]

Hello and welcome to the Advance six Fourth Quarter of twenty twenty four Earnings Conference Call. All participants will be in listen only mode. As a reminder, this conference is being recorded. I would now like to hand the call to Adam Kressel, Vice President of Investor Relations and Treasurer. Please go ahead.

[Adam Kressel, VP of Investor Relations & Treasurer at AdvanSix]

Thank you, MJ. Good morning, and welcome to AdvanSix's fourth quarter twenty twenty four earnings conference call. With me here today are President and CEO, Aaron Cain and Senior Vice President and CFO, Sid Mandashwar. This call and webcast, including any non GAAP reconciliations, are available on our website at investors.advan6.com. Note that elements of this presentation contain forward looking statements that are based on our best view of the world and of our business as we see it today.

[Adam Kressel, VP of Investor Relations & Treasurer at AdvanSix]

Those elements can change and the actual results could differ materially from those projected, and we ask that you consider them in that light. We refer you to the forward looking statements included in our press release and earnings presentation. In addition, we identify the principal risks and uncertainties that affect our performance in our SEC filings, including our annual report on Form 10 K as further updated in subsequent filings with the SEC. This morning, we will review our financial results for the fourth quarter and full year 2024 and share our outlook for our key product lines and end markets. Finally, we'll leave time for your questions at the end.

[Adam Kressel, VP of Investor Relations & Treasurer at AdvanSix]

So with that, I'll turn the call over to AdvanSix's President and CEO, Erin Kane.

[Erin Kane, President and CEO at AdvanSix]

Thanks, Adam, and good morning, everyone. We appreciate you joining us here today for our quarterly call. As you saw in our press release, AdvanSix achieved commercial success and advanced our key growth programs in 2024, while navigating operational performance that did not meet our expectations. It was a testament to the resilience of all our dedicated teammates focused on delivering financial results and shareholder value, while remaining committed to continuously improving our health, safety and environmental performance as we recovered and learned from our challenges. We continue to benefit from our diverse product portfolio with strong performance across our ammonium sulfate and acetone businesses.

[Erin Kane, President and CEO at AdvanSix]

Robust market acceptance of our annual ammonium sulfate pre buy program also supported strong cash flow performance in the fourth quarter, resulting in positive free cash flow for the full year. This past year, we funded key growth in enterprise capital investments, including expansion of our granular ammonium sulfate capacity, returned cash to shareholders through repurchases and dividends and maintained prudent debt leverage levels. As we move into 2025, we are well positioned to support our strategic growth priorities and we continue to focus on making the necessary investments at the right time to support our long term performance. Lastly, I'd like to provide an update on two key developments on which we've made significant progress. First, we reached final settlement reflecting our ongoing efforts to recover losses associated with the 2019 PES cumene supplier shutdown.

[Erin Kane, President and CEO at AdvanSix]

This included $5,300,000 of insurance proceeds in the fourth quarter of twenty twenty four and a final omnibus settlement in the first quarter of twenty twenty five of approximately $26,000,000 In total, we have received approximately $39,000,000 of aggregated insurance proceeds since the 2019 event. Second, as one of the largest producers of ammonia along the East Coast, we are pleased to be one of the first industrial companies to be recognized for carbon capture through an approved life cycle assessment, enabling initial 45Q tax credits of $9,700,000 claimed in the fourth quarter. We both use CO2 as a feedstock in downstream products and sell to customers for beneficial reuse in various applications. Our initial credits were for the 2018 and 2019 tax years and we continue to pursue credits for subsequent periods. Both of these provide tailwinds from an earnings per share and cash flow perspective entering 2025.

[Erin Kane, President and CEO at AdvanSix]

Now let me turn the call over to Sid to walk through the financials.

[Siddharth Manjeshwar, Senior VP & CFO at AdvanSix]

Thanks, Aaron, and good morning, all. I am now on Slide four, where I will provide a summary and highlight key items of the fourth quarter twenty twenty four financials. Sales of $329,000,000 in the quarter decreased approximately 14% versus the prior year. Sales volume decreased approximately 16%, primarily driven by the delayed ramp to full operating rates following our planned turnaround. Market based pricing was favorable by 2%, including continued strength in ammonium sulfate and acetone.

[Siddharth Manjeshwar, Senior VP & CFO at AdvanSix]

Adjusted EBITDA of $10,000,000 declined $5,000,000 versus the prior year, primarily driven by the timing and impact of plant turnarounds, partially offset by changes in favorable sales mix, including lower plant nutrients and nylon solutions export volumes. Favorable pricing net of raw material costs and insurance claim proceeds. As a reminder, the impact to pretax income due to the plant turnaround in the quarter was approximately $47,000,000 compared to zero in the prior year period. Adjusted earnings per share of $0.09 increased by $0.19 versus the prior year. This included the impact of $9,700,000 in 45Q carbon capture tax credits that reduced our effective tax rate to 3.1% for the full year 2024 compared to 21.1% in the prior year period.

[Siddharth Manjeshwar, Senior VP & CFO at AdvanSix]

Free cash flow was $30,000,000 in the quarter, up $8,000,000 versus the prior year. Cash flow from operations of $64,000,000 dollars increased $4,000,000 versus the prior year, primarily due to the favorable impact of changes in working capital, including our strong ammonium sulfate pre buy program in the quarter. Capital expenditures of $34,000,000 in the quarter decreased $4,000,000 Now let's turn to the next slide. On Slide five, we've summarized our full year 2024 financial results. Our diverse portfolio, advantage of our integrated business model and favorable industry dynamics, particularly in Plant Nutrients and Acetone, enabled us to successfully navigate the year and deliver full year adjusted EBITDA of $142,000,000 adjusted earnings per share of $196,000,000 and positive free cash flow.

[Siddharth Manjeshwar, Senior VP & CFO at AdvanSix]

Now let's turn to Slide six. On the left side of the page, we've highlighted our cash flow profile by quarter. I too would like to thank all our dedicated and talented employees for their efforts to overcome and learn from the impacts of our operational challenges, while driving commercial success. This demonstrates a persistent focus on effectively running our business to drive profitability. Through 2024, we continued to fund key growth and enterprise investments, including our sustained program, returned cash to shareholders and maintained prudent leverage levels.

[Siddharth Manjeshwar, Senior VP & CFO at AdvanSix]

We ended the year at just about one turn of leverage, and our healthy balance sheet continues to support optionality for value creative capital allocation initiatives moving forward. Now let's turn to Slide seven. As Aaron mentioned, I will provide a bit more detail on the 45Q tax credits. We operate an approximately 600,000 metric ton ammonia plant at our Hopewell, Virginia facility from which CO2 is generated. The captured CO2 is used as a feedstock in downstream products through chemical conversion or sold to our customers for beneficial reuse in essential applications, including food and beverage, coal chain storage and more.

[Siddharth Manjeshwar, Senior VP & CFO at AdvanSix]

Our recently approved life cycle assessment of greenhouse gas emissions allows a federal tax credit based on the amount of CO2 captured that would otherwise be emitted into the atmosphere. These credits are eligible as of Feb twenty eighteen when the tax code changed and applies over a twelve year period. The 45Q credits represent a significant value driver for our business over the medium to long term. The credits reduce our effective tax rate, are calculated for utilization and are adjusted annually for inflation. We claimed $9,700,000 in the fourth quarter of twenty twenty four for the 2018 and 2019 tax years and continue to pursue these credits for subsequent periods.

[Siddharth Manjeshwar, Senior VP & CFO at AdvanSix]

Now let me turn the call back to Erin.

[Erin Kane, President and CEO at AdvanSix]

Thanks, Sid. I'm now on Slide eight to discuss each of our key product lines, starting with our Plant Nutrients business. Our continued strong performance in 4Q and market acceptance of our pre buy program are further proof points to the resiliency of sulfur nutrition demand. Industry Corn Belt Ammonium Sulfate prices were up 15% year over year. In contrast, Corn Belt nitrogen pricing saw an 8% decline, supporting healthy realized sulfur premiums.

[Erin Kane, President and CEO at AdvanSix]

Moving into 2025, our order book is robust and we are now sold out well into the second quarter reflecting a favorable setup into the spring. The combination of strong sulfur nutrition demand and tailwinds from rising grain and nitrogen fertilizer prices is expected to support higher ammonium sulfate pricing in the first half year over year. We remain confident that the underlying industry fundamentals supported by crop prices, stock to use ratios and expected planted acres among others will continue to support nutrient demand. We are however monitoring higher anticipated raw material prices, namely natural gas and sulfur, which impact our overall price raw spread. Settled prices for both raws in the first quarter were higher than industry expectations and the forward curve and forecast would indicate a year over year headwind for 2025.

[Erin Kane, President and CEO at AdvanSix]

Long term, we remain excited about the growth prospects for this business and leveraging our expertise as a leader in this space. We continue to see strong demand for ammonium sulfate as growers understand the value and seek ways to maximize crop yields. Our multi year sustained growth program remains on track and is supporting market demand in North America with potential upside driven by increased adoption on soybeans. We anticipate production capability by the end of twenty twenty five to reach a milestone of 72% granular conversion, up from roughly 70% at the end of twenty twenty four. Let's turn to Slide nine.

[Erin Kane, President and CEO at AdvanSix]

For Nylon, persistent global oversupply conditions continue to pressure pricing and spreads. The Asia caprolactam over benzene spreads have essentially bounced around trough levels exiting 2024. We now expect a slower recovery off the trough. North American end market demand is relatively stable with improved domestic supply given the absence of supply chain disruptions in 2024. As a result from a volume perspective, it's been a relatively slow start to the year, including less disciplined competitive behavior impacting spreads in North America.

[Erin Kane, President and CEO at AdvanSix]

Trade flows out of China, primarily to Southeast Asia and Europe, have also continued to limit pricing improvement globally. From a North America demand perspective, a lower interest rate environment in time is expected to favorably impact building construction end markets. However, the pace and size of those potential reductions is likely to draw out the time for meaningful impact to translate to fiber and filament applications. Demand across Engineering Plastics and Packaging remains stable overall with trade policy and tariffs potentially having the greatest impact on pricing and demand in the auto value chain in the near term. As we navigate what has become a protracted downturn in the cycle, we remain highly focused on supporting improved through cycle profitability by driving productivity, optimizing our regional and product sales mix and continuing to promote the value proposition of our differentiated nylon offerings, while benefiting from running at higher operating rates relative to our peers.

[Erin Kane, President and CEO at AdvanSix]

Given our cost advantage, our caprolactam utilization rate at Hopewell is targeted to be 90% plus for 2025. Let's turn to Slide 10. Moving to chemical intermediates. Industry realized acetone prices over refinery grade propylene costs generally remain healthy amid continued balanced global supply and demand as lower phenol operating rates continue. While for the year, balanced supply and demand conditions are expected to support acetone spreads above cycle averages, here we have also seen a slower start to the year with demand for acetone into the MMA markets remaining soft, along with several downstream industry turnarounds occurring this quarter.

[Erin Kane, President and CEO at AdvanSix]

We're monitoring for any change in phenol demand signals, which can impact market supply. With potential interest rate cuts likely pushed out further, phenol demand into building construction applications is also expected to be subdued. Demand across the chemical intermediates the rest of the chemical intermediates, excuse me, remains mixed overall. So many of these chemistries serve high value applications in support of longer term growth and profitability. We are pleased to receive our new European patent grant in the fourth quarter for our EZBlocks 2PO product used as an anti scanning agent for aglid paints and coatings.

[Erin Kane, President and CEO at AdvanSix]

Let's turn to Slide 11. To better help frame the various factors that impact our commercial results, given a number of moving parts year over year and sequentially, we've highlighted here several relevant KPIs and industry pricing metrics. Starting with raw materials. Forward curves and forecasts indicate significant year over year and sequential increases for both natural gas and sulfur prices in the first quarter as well as for the remainder of 2025. Natural gas and sulfur represented approximately 106% respectively of our raw material costs in 2024.

[Erin Kane, President and CEO at AdvanSix]

In Plant Nutrients, while we do expect ammonium sulfate premiums over urea to remain near the high end of historical ranges in 2025, the price raw spread is being impacted by these anticipated higher raw material prices. As a reminder, roughly half of our total company portfolio is on formula or index based pricing, where we can pass through changes in our raw materials. For ammonium sulfate, however, this business is all freely negotiated and market oriented as farmers ultimately buy nutrients on their value. Underlying nitrogen nutrient values are influenced by urea prices, which are currently based on industry marginal producer of gas costs out of Europe and not The U. S.

[Erin Kane, President and CEO at AdvanSix]

We then price our products with a premium for the value proposition of sulfur nutrition. Another important dynamic is to highlight that our ammonium sulfate order book is typically sold out one quarter. As I mentioned earlier, we are currently sold into the second quarter, so industry pricing quoted today reflects sales we're recognizing several months out. We'll also be unwinding our fourth quarter twenty twenty four pre buy cash advances throughout the first half of the year with the majority of those sales in the second quarter. For the remainder of our key product lines, we're seeing estimated spreads decline sequentially into the first quarter.

[Erin Kane, President and CEO at AdvanSix]

Acetone spreads are off the prior year highs, but are expected to remain above cycle averages, while the global nylon spreads are near trough levels entering 2025. Lastly, we anticipate our first quarter nylon export mix to return to historical averages representing a sequential headwind. Let's wrap up on Slide 12 before moving to Q and A. While like many others, 2025 is off to a slower start, we continue to anticipate meaningful year over year earnings improvement for the full year 2025. This is supported by expected operational excellence and strong commercial performance across our diverse product portfolio.

[Erin Kane, President and CEO at AdvanSix]

Our plant turnarounds are anticipated to be a tailwind year over year based on the scope and focus of this year's activities. We also expect CapEx to be in the range of $140,000,000 to $160,000,000 reflecting the planned progression of growth projects, including our sustained program and refined execution timing to address critical enterprise risk mitigation. Our organization's efforts are centered around improving through cycle profitability, which requires us to drive productivity, optimize our regional and product sales mix and continue to promote the value proposition of our differentiated product portfolio. We understand that we're operating in an uncertain environment. However, the macro backdrop for the industries we serve remains largely favorable overall.

[Erin Kane, President and CEO at AdvanSix]

We expect strong sulfur premium supporting plant nutrients and a constructive global acetone supply and demand environment, which should serve as a counterbalance to an anticipated slower recovery across our Nylon Solutions business. We continue to protect our healthy balance sheet, enabling our capital allocation framework to provide optionality for further value creation. We remain confident in the future prospects for AdvanSix and are committed to delivering sustainable long term value to our shareholders. With that, Adam, let's move to Q and A.

[Adam Kressel, VP of Investor Relations & Treasurer at AdvanSix]

Great. Thanks, Aaron. And then, Jay, please open the line for questions.

[Operator]

Certainly. We will now begin the question and answer session. Today's first question comes from Charles Neibert with Piper Sandler. Please go ahead.

[Charles Neivert, Senior Research Analyst at Piper Sandler Companies]

Good morning, everybody. A couple of questions. One, on the conversion to granular side, you said you're heading for what 72%. I mean, is there a maximum? Would you go to 100% or does the market not given that you move a lot to the Latin American market at certain times of the year, does that preclude going to that higher level?

[Charles Neivert, Senior Research Analyst at Piper Sandler Companies]

And ultimately, what level do you guys want to attain in terms of granular production on AF?

[Erin Kane, President and CEO at AdvanSix]

Yes. So, Charlotte, the sustained program, as you may recall, is being driven to a 75% target conversion. And so we don't anticipate that our assets will get to 100%. The 75% is a nice stretch matching sort of the North American domestic demand for this higher premium product. And certainly on the export side, that is typically more in our standard grade that we focused on there at this time.

[Erin Kane, President and CEO at AdvanSix]

But obviously, there is a both a technical max that can be achieved and certainly making sure that we are driving to support our domestic customers.

[Charles Neivert, Senior Research Analyst at Piper Sandler Companies]

Got it. And on the question, is the phenol market still problematic and therefore creating some opportunity for your acetone side since you guys consume a vast proportion of your phenol? Are you still running at above let's say, industry rates for phenol and therefore producing the more acetone and acetone remains sort of snug for that reason? Is that still the situation out there?

[Erin Kane, President and CEO at AdvanSix]

I mean, you look at sort of broader operating rates in The U. S, phenol rates are sitting at about 65 plus minus percent, and we are targeting a rate that is higher than that, obviously, because of our strong integration into our capital Actium value chain, obviously, given that the vast majority of what we produce is forward integrated. So again, as we've talked in the past, for us, acetone serves as a bit of a natural hedge, right, in a lower phenol operating rate environment.

[Charles Neivert, Senior Research Analyst at Piper Sandler Companies]

Got it. And then just on the carbon capture side, the assumption is that to be that you've collected twenty eighteen, 20 19, you've got 2021, '20 '20 '2, '20 '20 '3 and 2024 to still deal with. But is there any idea about just what 2025 will produce excluding anything you may get from prior years? Do you guys have any estimate on that or any guidance on that number? What it might be?

[Charles Neivert, Senior Research Analyst at Piper Sandler Companies]

And I know it may or not occur in 2025, but just what are we potentially looking at there?

[Siddharth Manjeshwar, Senior VP & CFO at AdvanSix]

So good question, Charlie, and I hope you're doing well. I think, look, the way to think about it is, it's taken us five years to get to this point, right, with all the approvals, filings, etcetera, for the 2018 and 2019 year. So on a run rate basis for the next several years, you could assume a $5,000,000 that escalates given that based on our utilization and what has been published by the IRS in terms of a credit schedule with inflation baked in. So that $5,000,000 6 million dollars run rate would expand.

[Charles Neivert, Senior Research Analyst at Piper Sandler Companies]

Okay. And then if I'm looking at I'm sorry, go ahead.

[Erin Kane, President and CEO at AdvanSix]

No, I was just going to say, the one thing to consider here, Tully, is we do move sequentially because we have to file life cycle assessments for certain time periods and then go back and perfect claims. So when we think about sort of our timeframe here, we are moving sequentially just as a note for your consideration.

[Charles Neivert, Senior Research Analyst at Piper Sandler Companies]

Okay. And then on that front, I mean, if you look at all the carbon capture you're doing now, is that basically all you can do I mean physically can do or is there potentially more coming? Meaning, you have to have the offtake agreement, all the offtakes and all the rest of that stuff. But are you capturing all that you can or is there more that conceivably could be captured if you can find the home for it?

[Erin Kane, President and CEO at AdvanSix]

Yes. So effectively when you look at what we consume internally and sort of incorporate through chemical conversion into our downstream products and then with our three partners for the offtake for beneficial reuse, we effectively have been emitting or venting very little process CO2 for quite some time.

[Charles Neivert, Senior Research Analyst at Piper Sandler Companies]

Okay. So basically you've got pretty much all you get out of it. The number will be whatever. Yes. Yes.

[Erin Kane, President and CEO at AdvanSix]

The opportunity is just to finally get the credit for it.

[Charles Neivert, Senior Research Analyst at Piper Sandler Companies]

Yes. Yes. Okay. Thanks very much, Amit. Thank you.

[Erin Kane, President and CEO at AdvanSix]

Thank you.

[Operator]

The next question comes from David Silver with CL King. Please go ahead.

[David Silver, Managing Director & Senior Research Analyst at C.L. King & Associates]

Okay. Hi. Thank you. I guess I have several questions. First, let me just look here.

[David Silver, Managing Director & Senior Research Analyst at C.L. King & Associates]

First, if you don't mind, you did sketch out a range for capital spending in 2025 of $140,000,000 to $160,000,000 And I was hoping you could just take a minute and maybe call out the different buckets there in particular. I mean, as I recall, I think $75,000,000 or $80,000,000 might be sustaining. So I'm kind of more interested on the discretionary side or the non sustaining side. Certainly, some of that goes into the ammonium sulfate expansion. But can you just maybe take a minute and where else are you directing discretionary CapEx in 2025?

[David Silver, Managing Director & Senior Research Analyst at C.L. King & Associates]

Thank you.

[Siddharth Manjeshwar, Senior VP & CFO at AdvanSix]

Yes. Thanks, David. Good question. Yes, maybe I'll walk you through the framework and the various buckets like you suggested. So look, this year, it's $140,000,000 to $160,000,000 It's up from the $134,000,000 in 2024.

[Siddharth Manjeshwar, Senior VP & CFO at AdvanSix]

But it primarily reflects the planned progression of our growth projects, including our sustained program and a refinement, I'd say, on the execution timing of the various critical enterprise risk mitigation. Also, there was a $10,000,000 carryover from 2024 to 2025 based on execution. So that's one piece of it. On the base maintenance capital, which improves and supports our safe and stable operations, Year over year, we expect that to be down and within our framework. That's offset by some of the enterprise programs, including spend for our Hopewell water permit.

[Siddharth Manjeshwar, Senior VP & CFO at AdvanSix]

And then as you know, the Frankfurt Dock And Boiler upgrade is supposed to wrap up this year, so that's another piece of it. But primarily, the major driver moving the needle here is the growth capital investment related to sustained. It was roughly $8,000,000 last year and is projected to be in the $20,000,000 to $25,000,000 in 2025. So if you think about this year versus next year as well, '26 spend is likely to be flat to down with that framework that we adopt in terms of how we bucket and budget for.

[David Silver, Managing Director & Senior Research Analyst at C.L. King & Associates]

Okay, great. Thank you very much. Next question would be about natural gas costs and in particular regional spreads. So Aaron, I think in your prepared remarks on maybe the KPI page, you did touch on this briefly. But I do kind of track that regional spread from when it got extremely wide a few years ago.

[David Silver, Managing Director & Senior Research Analyst at C.L. King & Associates]

And it's certainly not back to where it was in, I don't know, 2021 or 2022, but it has been ticking up pretty noticeably through the last few months of the year. So firstly, I mean, I guess I was just wondering if you consider that kind of maybe a secondary or a background support to your fertilizer business? And then more directly, but do you think that that has redirected global trade in ammonium sulfate or other products that impact on your competitiveness or competitive advantage in the domestic market?

[Erin Kane, President and CEO at AdvanSix]

Yes. So certainly from a Nutrien or let's call it Plant Nutrien's perspective, energy costs are important certainly as we think about how that impacts the marginal producer around the world for nitrogen. And certainly, the EU is currently the marginal producer. And as part of certainly what is supporting the higher global urea prices, certainly in combination though with some supply disruptions, higher India demand, other things around the world, but isn't necessarily impacting global AS trade, if you will. It certainly is enabling a higher nitrogen based pricing and again, in which we are then working to drive our premium for softer nutrition on top of that.

[Erin Kane, President and CEO at AdvanSix]

So there is a play there, right, as a follow through on the nitrogen side. Relative to energy costs in Europe, to your point, it definitely does impact producers and other value chains in which we operate when we think about the chemical intermediates peers that are producing phenyl acetone in the region as well as certainly cabbalactam and nylon. And so we continue to see that that impacts their utilization rates. And as we've seen in nylon, that continues to attract imports from Asia and China because of where they sit on the cost curve. So I think the dynamic has remained the same.

[Erin Kane, President and CEO at AdvanSix]

It may just be sort of an amplification just given the current energy prices.

[David Silver, Managing Director & Senior Research Analyst at C.L. King & Associates]

Okay. And again on ammonium sulfate, but you called out the improved sulfur values implied or direct on ammonium sulfate. And I'm just wondering, I mean, there are very few fertilizer products that include sulfur directly. But in the domestic market, what is the most competitive way of providing that incremental sulfur, let's say, to a fertilizer blend? Is that just elemental sulfur or is there another way that the channel gets the sulfur they need other than through yours or someone else's ammonium sulfate product?

[Erin Kane, President and CEO at AdvanSix]

Yes. There certainly are alternatives. Elemental sulfur is the one as you point out. But when you just look at the sulfate form of sulfur that we provide, certainly, it's the best option sort of pound for pound to deliver the nutrition that the plants require. Elemental fall for comparison has just different types of issues in becoming plant available from a timing standpoint because it has oxidized in the soil, which is slow, right?

[Erin Kane, President and CEO at AdvanSix]

So again, we go back to sort of the years of field research, the education that we spend with retailers and growers into the value chain, that AS certainly is, again, pound for pound, the best nutrient for software nutrition available.

[David Silver, Managing Director & Senior Research Analyst at C.L. King & Associates]

Okay. No, thank you. Yes, and I knew there would be different agronomic benefits based on the form of the sulfur. Question on nylon, but you did call out increased competitive pressures and I was hoping you might be able to just add a little bit more color there. So is this the case where, I don't know, the sloppy marketing is maybe showing up in the form of extra spot product availability?

[David Silver, Managing Director & Senior Research Analyst at C.L. King & Associates]

Or is this the type of thing where maybe there's competition in unexpected kind of end markets where you're having to defend some maybe long held contract business. But and I guess I'm asking that as kind of a metric for whether this is something that might last a quarter or two or whether it's maybe more structural. But if you could maybe just touch on where the increased competitive pressures in the domestic market are most visible? Thank you.

[Erin Kane, President and CEO at AdvanSix]

Yes. Sure. When you think just sort of kind of the standard sort of supply demand fundamentals, demand has been relatively stable, right? I think it's mixed across the end markets relative to where it sits from, let's say, history or pre COVID levels. Fiber and filament is down, and Drilling Plastics has sort of recovered.

[Erin Kane, President and CEO at AdvanSix]

But it's been year on year and we kind of see it as stable given kind of where the value chains exist today. The big difference between 2024 and 2025 is, we were transparent in our operational disruptions. Another North American competitor had several force majeures as well last year. And so the supply side was a bit tighter domestically. Certainly, we saw imports continuing to compete here, but what's restored now is the domestic supply, right?

[Erin Kane, President and CEO at AdvanSix]

So I think it's a natural consideration of where folks are establishing and looking to either gain or defend share, as you say, in the year given sort of that fundamental change. Relative to timing, Dave, I think what we wanted to clarify in remarks is that it clearly this chain is dealing with persistent oversupply. And we need to continue to watch, I think, third party views are that it's reached a point like in many other value chains, right, where ultimately some restructuring, some exits have to take place here. And we I would note there were recent announcements, Ube is a large multinational operating space is going to cease production of caprolactam and nylon in Japan by March of twenty twenty seven. They're going to remain running their plant in Spain.

[Erin Kane, President and CEO at AdvanSix]

Solana in The Czech Republic is exiting Capralactam by mid-twenty twenty five. So there are some starts. These two announcements are not fully restructuring, but I think this is where we are. We've been watching it. And so again, hence sort of our commentary that this is going to be a slower recovery than perhaps we had previously anticipated.

[David Silver, Managing Director & Senior Research Analyst at C.L. King & Associates]

Okay, very good. And then maybe just the last one for me. But you've called out the positive outlook for your fertilizer products sold into the ag markets. You also make some chemicals that end up in crop chemicals and pesticides and whatnot. Would you say the outlook for that portion of your business is also as robust or positive or not tracking, but how might your broader ag portfolio be doing above and beyond the ammonium sulfate?

[Erin Kane, President and CEO at AdvanSix]

So we do certainly see kind of a continued challenge in the ag chemical space. I think that there's challenges that might see similar sentiment from others, although it's kind of mixed depending on perhaps what chemical you are operating in and where you sit. So we continue to contend with low price competition in Chinese imports in certain markets, particularly in our means business. So this is an area where certainly we see our downstream customers who are taking our products and transforming into glyphosate type products are also experiencing some challenges. So this is a space we continue to perhaps see lag relative to the positive transversing in the dry fertilizer space.

[David Silver, Managing Director & Senior Research Analyst at C.L. King & Associates]

Okay, terrific. That's it for me. Thank you very much.

[Erin Kane, President and CEO at AdvanSix]

Thanks, David.

[Operator]

The next question is a follow-up question from Charles Neivert with Piper Sandler. Please go ahead.

[Charles Neivert, Senior Research Analyst at Piper Sandler Companies]

Yes. Just on a quick thing, you were talking about nylon production in China maintaining a fairly high level despite issues in their economy. Has that created anything or any sort of additional competition for you guys or seeing any extra product from the AS side since they are running a lot of capital as well to run the nylon. Has that created any issues in any particular markets or you're just not seeing anything at this point?

[Erin Kane, President and CEO at AdvanSix]

Yes. Certainly, all of that extra Kapralaxanth production does come with ammonium sulfate output as you point out, albeit it comes out at a different ratio. But China has been primarily focused on the Brazil market. And so we have continued to see increasing exports there and their focus there. And as a reminder, we do have the antidumping in The U.

[Erin Kane, President and CEO at AdvanSix]

S. Here. So obviously, when you look at sort of the two largest markets that exist today, they are focused there and that enables us to continue to grow here in North America.

[Charles Neivert, Senior Research Analyst at Piper Sandler Companies]

Okay. All right. That's it for me. Thank you.

[Erin Kane, President and CEO at AdvanSix]

Great. Thanks, Charlie.

[Operator]

Thank you. This concludes our question and answer session. I will now turn the call back over to Erin Cain for closing remarks.

[Erin Kane, President and CEO at AdvanSix]

Thank you all again for your time and interest this morning. Looking forward, we are confident in our demonstrated ability to perform through a multitude of environments. We are well positioned to deliver improved earnings performance year over year, supported by our resilient business model, our position as a diversified chemistry company and our strategic growth focus. We are confident in our strategies to support higher through cycle profitability and total shareholder returns. With that, we look forward to speaking with you again next quarter.

[Erin Kane, President and CEO at AdvanSix]

Stay safe and be well.

[Operator]

The conference is now concluded. Thank you for attending today's presentation. You may now disconnect your lines.

Participants

Executives

• Adam Kressel, VP of Investor Relations & Treasurer
• Erin Kane, President and CEO
• Siddharth Manjeshwar, Senior VP & CFO

Analysts

• Charles Neivert, Senior Research Analyst at Piper Sandler Companies
• David Silver, Managing Director & Senior Research Analyst at C.L. King & Associates