Calumet Q2 2025 Earnings Report

Calumet EPS Results

• Actual EPS: -$1.70
• Consensus EPS: -$0.44
• Beat/Miss: Missed by -$1.26
• One Year Ago EPS: -$0.48

Calumet Revenue Results

• Actual Revenue: $1.03 billion
• Expected Revenue: $982.88 million
• Beat/Miss: Beat by +$43.72 million
• YoY Revenue Growth: -9.40%

Calumet Announcement Details

• Quarter: Q2 2025
• Date: 8/8/2025
• Time: Before Market Opens
• Conference Call Date: Friday, August 8, 2025
• Conference Call Time: 9:00AM ET

Calumet (NASDAQ:CLMT) engages in the manufacturing, formulating, and marketing of a diversified slate of specialty branded products and renewable fuels to customers across a broad range of consumer-facing and industrial markets. It operates through the following segments: Specialty Products & Solutions, Performance Brands, Montana/Renewables, and Corporate. The Specialty Products & Solutions segment consists of customer-focused solutions and formulations businesses, covering multiple specialty product lines, anchored by a unique integrated complex in Northwest Louisiana. The Performance Brands segment includes a fast-growing portfolio of high-quality, high performing brands. The Montana/Renewables segment is composed of a Great Falls specialty asphalt facility and Montana Renewables facility. The Corporate segment focuses on the general and administrative expenses not allocated to the Montana/Renewables, Specialty Products and Solutions, or Performance Brands segments. The company was founded in 1919 and is headquartered in Indianapolis, IN.

Calumet Q2 2025 Earnings Call Transcript

Key Takeaways

• Positive Sentiment: Calumet reported $76.5 million of adjusted EBITDA with tax attributes in Q2, driven by resilient specialty margins (> $66/barrel) and sustaining specialty sales volumes above 20,000 bpd despite a full-month Shreveport turnaround.
• Positive Sentiment: Company-wide cost and reliability initiatives cut operating costs by $42 million in H1 2025 vs H1 2024, even with a $7 million rise in energy costs, while production ticked up year-over-year.
• Positive Sentiment: The 45Z production tax credit was extended through 2029 and made transferable, and Calumet has banked over $50 million of PTCs with term sheets signed for roughly half to monetize credits.
• Positive Sentiment: The MaxSaf 150 SAF project remains on track for 120–150 million gallons of sustainable aviation fuel by 2026 at a $20–30 million capex, with active marketing and expected $1–2/gal SAF premiums.
• Negative Sentiment: Renewable diesel index margins hit their lowest level on record amid ongoing regulatory uncertainty around the final RVO, unresolved small refinery exemptions, and a year-to-date RIN carryover overhang.

Presentation

[Operator]

Good day, and welcome to Calumet Incorporated Second Quarter twenty twenty five Conference Call. All participants will be in a listen only mode. Please note this event is being recorded. I would now like to turn the conference over to John Kompa, Investor Relations for Calumet. Please go ahead.

[John Kompa, Director - IR at Calumet Specialty Products Partners]

Thank you, Steve. Good morning, everyone. Thanks for joining our call today. With me on today's call are Todd Borgman, CEO David Lunen, EVP and Chief Financial Officer and Scott Obermeyer, EVP of Specialties. Please note, Bruce Fleming, EVP, Montana Renewables and Corporate Development has an unavoidable company obligation today.

[John Kompa, Director - IR at Calumet Specialty Products Partners]

Todd Borgman will address questions regarding Montana Renewables and its absence. You may now download the slides that accompany the remarks made on today's conference call, which can be accessed in the IR section of our website at calumet.com. Also, a webcast replay of this call will be available on our site within a few hours. Turning to the presentation on Slide two, you can find our cautionary statements. I'd like to remind everyone that during this call, we may provide various forward looking statements.

[John Kompa, Director - IR at Calumet Specialty Products Partners]

Please refer to our press release that was issued this morning as well as our latest filings with the SEC for a list of factors that may affect our actual results and cause them to differ from our expectations. As we turn to Slide three, I'll now pass the call to Todd.

[Todd Borgmann, Chief Executive Officer at Calumet Specialty Products Partners]

Thanks, John. Good morning, and welcome to our second quarter twenty twenty five earnings call. This quarter was one of sound execution paralleled with foundational and supportive steps taken on the regulatory front, both of which we'll walk through on today's call. Calumet earned $76,500,000 of adjusted EBITDA with tax attributes during the second quarter. This result was a function of continued execution of our near term initiatives on reliability, cost discipline and commercial excellence across the company.

[Todd Borgmann, Chief Executive Officer at Calumet Specialty Products Partners]

Dollars 8,300,000.0 of our quarterly result was earned in Montana Renewables, which we'll touch on more momentarily, leaving the lion's share of the quarterly result being earned in our specialties business despite a full month turnaround at our largest facility in Shreveport. Specialty margins continue to prove resilient overall and our product and market diversification has been critical to this. Pockets of weakness in the more commoditized paraffinic lube space have been more than offset with continued strength across our specialized lines of naphthenics, solvents, waxes and food grade and pharmaceutical products. Further, specialty sales volume within our SPS segment marked the third straight quarter over 20,000 barrels a day. And despite a late start to the outdoor lawn and garden season, our Performance Brands segment posted its second highest quarterly sales volume in its modern form, second only to this quarter last year.

[Todd Borgmann, Chief Executive Officer at Calumet Specialty Products Partners]

These results are a combination of continued deployment of our integrated specialty strategy in the industrial lubricants and separately rapid growth of our TruePeel brand. One area we haven't talked about much when it comes to commercial excellence is the impact of our program outside our core specialties offering. Specifically, I'll note the results from the change in our approach to our Southern Asphalt margin. This is a fairly commoditized space, but with three crude fed refineries in Northwest Louisiana, we have a number of streams to choose from and have proven the ability to more intentionally blend products and offer a broader offering in a market that changes rapidly between seasons. Asphalt's yielding improved margins to the tune of $5,000,000 plus per year, which as a singular item isn't of game changing scale, but represents a great example of the type of continuous optimizations that add up as we deploy the strengths of our product diversity, innovative mindset and commercial excellence engine across our business.

[Todd Borgmann, Chief Executive Officer at Calumet Specialty Products Partners]

Next, the cost and reliability initiatives rolled out to begin this year continue to track ahead of plan. Company wide, our operating costs have been reduced $42,000,000 through the first half of the year versus the first half of last year despite a $7,000,000 increase in the cost of natural gas and electricity, our largest variable expenses. Further through the halfway point, company wide production has slightly increased year over year despite the full month turnaround at our largest plant. I want to thank our teams underground who are leading these efforts and continue to deliver on the challenge to fortify our operation. Flexibility and customer centricity don't have to come at the expense of efficiency and reliability.

[Todd Borgmann, Chief Executive Officer at Calumet Specialty Products Partners]

We can be both. And the 1,000 plus men and women in our operations team are proving that daily. We believe more is possible when it comes to operational excellence, but the team is strong out of the gate and we look forward to building on the successes thus far. Let's turn to Slide four and talk more about the recent developments at Montana Renewables as the second quarter was a busy one on the regulatory front. While the renewable diesel industry saw its lowest quarterly index margin today, Montana Renewables was able to generate a positive $8,300,000 of adjusted EBITDA with tax attributes.

[Todd Borgmann, Chief Executive Officer at Calumet Specialty Products Partners]

Our ability to remain positive in this brutal market is a function of our advantaged fleet flexibility, leading staff position, ultra competitive costs and the highest throughput volumes we've achieved yet. More simply, Montana Renewables has firmly established itself as one of the most competitively advantaged producers in the space. David will take you through these quarterly results shortly. But before that, I'd like to take a moment to hit on the continued strategic progress we're making around our streamlined MaxSaf 150 project and the regulatory outlook, which came more clearly as a focus in the second quarter. With the advantaged operational and commercial position of Montana Renewables proven out, the remaining critical steps prior to potential monetization are margin recovery, which requires regulatory clarity and taking the next step in our SAF leadership journey.

[Todd Borgmann, Chief Executive Officer at Calumet Specialty Products Partners]

Starting with our MAX SAF 150 project, we remain on track to start up in the 2026, we expect to generate 120,000,000 to 150,000,000 annual gallons of SAF for a capital cost of $20,000,000 to $30,000,000 With the purchase order for the catalyst placed and engineering underway, we're excited for this next milestone, and we've begun the SAF marketing cycle. Earlier in the quarter, there was plenty of speculation around SAP demand as the One Big Buford bill legislation was negotiated and we saw a temporary pause as market participants awaited new legislation. With that behind us, conversations are now feeling more normal. As we've discussed in the past, the SAF market is close to balance now and the world is gearing up for the next step in mandated demand that we'll see in international markets in January, and voluntary demand continues to feel robust. We don't want to do a public play by play of each potential contract we're negotiating, but what I can report is that we have active conversations regarding more potential volume than our increased supply can meet.

[Todd Borgmann, Chief Executive Officer at Calumet Specialty Products Partners]

We continue to see SAF premiums in the previously reported $1 to $2 per gallon over renewable diesel range and our customer slate is very likely to include a diversified portfolio, including large middle market aviation fuelers as we've had historically, direct airline sales both large and regional and even some separated direct sales in Scope three and Scope one credits. As we've done with renewable diesel, our SAP portfolio targets a diversified set of geographies both in The U. S. And Canada, where we can capture maximum value from our location. On the renewable diesel front, we continue to be bullish around the return of industry margins, which are temporarily paused as the industry awaits the finalization of the RVO, clarity on small refinery exemptions and choose through the excess RINs that were created by imports last year, while the blenders tax credit was still in place.

[Todd Borgmann, Chief Executive Officer at Calumet Specialty Products Partners]

At current margin levels, some of the top players in industry have reported rate reductions, which tells you empirically what you need to know about the current margin environment being unsustainable. At Montana Renewables, we continue to run at full rates as the incremental gallon remains positive, but there's not much room to spare at current margin levels and we'll continue to make monthly run decisions based on near term economic signals we receive from the market. As we know, renewable diesel margins are largely a function of regulatory outlook and while not perfect, the fundamental drivers became more clear during the quarter. I'm not sure whether or not it's gotten easier to predict if we'll see major margin reversal this year or when new RVO steps up in January and the carry forward rents from 2024 are eliminated, but the regulatory actions taken thus far are supportive on balance. Let me highlight a few of these.

[Todd Borgmann, Chief Executive Officer at Calumet Specialty Products Partners]

The first example was the One Big Beautiful Bill Act. The most important element of the bill to our industry was the extension of the PTC, highlighting that biofuels continue to receive bipartisan support. Of the roughly 20 tax credits established in the 2022 IRA legislation, nearly half were cut or reduced in a new bill. However, the 45Z credit impacting us not only remained intact, but was extended through 2029, demonstrating the importance of growth in this space to the ag community, the energy transition and with nearly 7,000,000,000 gallons of domestic feedstock produced annually, a meaningful and growing component of American Energy dominance. This extension through 2029 will mark twenty five years of a blenders tax credit or production tax credit for biomass based diesel.

[Todd Borgmann, Chief Executive Officer at Calumet Specialty Products Partners]

Next in the bill, the 45Z credit is transferable. This is important to Montana Renewables as we're not yet able to use the full credit to offset taxable income in these early days and the credit is a critical part of our margin stack. In fact, we have over 50,000,000 worth of PTCs built up on our balance sheet through the first half of the year as the market was waiting for the bill to be finalized to act. Upon completion, the market has picked back up. In fact, we just signed a term sheet on about half of our credits, and we look forward to completing the monetization of these and the rest of the credit portfolio in short order.

[Todd Borgmann, Chief Executive Officer at Calumet Specialty Products Partners]

Also important was the continued language that imported overseas product and feed won't qualify for the producers' tax credit. This supports domestic ag and highlights the administration's focus on American energy dominance and independence. We estimate roughly a billion gallons of imports drove surplus in D4 RINs last year, and that surplus has been carried forward this year. But going forward, foreign production will not be incentivized to be dumped here again. One regrettable component of the bill was the SAF PTC, whose formula is now equal to the renewable diesel PTC formula.

[Todd Borgmann, Chief Executive Officer at Calumet Specialty Products Partners]

Whereas previously, SAF generated a larger PTC than renewable diesel, It's now descent. For Montana Renewables, this means the value of the PTC associated with our SAP production will be reduced by approximately zero four zero to $0.50 per gallon at our current carbon intensity. While we do expect that this will influence the SAP premium, we continue to see strong premiums to renewable diesel in the marketplace, which remain within our historically discussed $1 to $2 per gallon range. Interestingly, the changes to tax credits for SAF may also have the unintended consequence of reducing future supply in a market which looks solidly to deficit as global mandates ramp up. Next, let's switch from the One Big Beautiful Bill Act to the Renewable Volume Obligation, where we received the first insights into the 2026 RVO from the Trump era.

[Todd Borgmann, Chief Executive Officer at Calumet Specialty Products Partners]

I'll start by saying the new administration at the EPA inherited a real mess between the six year backlog of unresolved SREs combined with the 2023 to 2025 RVO that's decimating the biodiesel industry. After some initial confusion around the demand generated by the RVO proposal, most now expect the proposed RVO would equate to roughly 4,500,000,000 gallons of biomass based diesel. This is a nice 30% increase from the approximately 3,500,000,000 gallon D4 RVO that exists today and industry margin should react positively as industry capacity utilization increases. We see the impact of these levels to the chart on the right, where we combine the D4 RVO just discussed with roughly 1,000,000,000 gallons of additional D4 demand that's required to meet the D6 RIN shortage to arrive at a total expected biomass based diesel demand both at today's and the proposed levels. What this chart does not include is the one year carry forward rents from the 2024 surplus, which practically offsets significant 2025 demand.

[Todd Borgmann, Chief Executive Officer at Calumet Specialty Products Partners]

The massive shutdowns we've seen in biodiesel and even some renewable diesel are a direct result of the twenty twenty three to twenty twenty five RVO being set too low. That all being said, we believe the new RVO should be much higher. North America is capable of producing roughly 7,000,000,000 gallons of biomass based diesel feedstocks. And including biodiesel production, there's at least 7,000,000,000 gallons of industry capacity to process this domestic feed into product. This idea that 1,000,000,000 gallons of foreign feed will be required to generate the mandated RIN count is not supported by the data.

[Todd Borgmann, Chief Executive Officer at Calumet Specialty Products Partners]

In fact, we're exporting nearly 1,000,000,000 gallons of soybean oil alone. In addition to that, and specifically to China exports, we're exporting over 22,000,000 tons of soybeans to get crushed into well over 1,000,000,000 gallons of potential feed offshore. We have enough feed right here at home to dramatically increase the supply to our growing industry today, and in addition, spur future crush investment here in The U. S. That will serve a future step up.

[Todd Borgmann, Chief Executive Officer at Calumet Specialty Products Partners]

The mandate can be increased to match capacity as we've done historically every year until the 2023 SET rule under the Biden administration. The open comment period on the Trump EPA SET two rule closes today, and we hope the Z4 RVO level will be revisited to incentivize the continued growth of American Energy, American Jobs and the American farmer. With that, I'll turn the call over to David saying a few of the quarterly results. David?

[David Lunin, EVP & CFO at Calumet Specialty Products Partners]

Thanks, Todd. It's great to see the progress in Montana on all fronts as monetization of that asset continues to be the final step in our deleveraging strategy. Before I go through each of the segments, I'd like to highlight some recent activity as our deleveraging and maturity management strategy continues to unfold. Last week, we announced a refresh of our Shreveport terminal assets financing, which was a nice optimizer within our broader plan. We had previously sold these assets to Stonebriar for $70,000,000 back in 2021.

[David Lunin, EVP & CFO at Calumet Specialty Products Partners]

And given the improvements in Shreveport production, the truck and related assets value increased to $120,000,000 Instead of repurchasing the asset in the year and a half, we were able to add $80,000,000 of new cash to the existing $40,000,000 of principal and call another $80,000,000 of our 2026 notes, reducing the outstanding balance to a manageable $124,000,000 Add this to the accretive Royal Purple industrial asset monetization and deleveraging that occurred earlier this year, and we now will have called $230,000,000 of the 2026 notes in the last few months. With our revolver capacity and approximately 50,000,000 to $60,000,000 of cash flow expected in the restricted group through the rest of the year, we shift our near term strategic focus to broader deleveraging and managing the 2027 notes. With improving cash flows from the business and the renewable regulatory outlook solidifying, we remain confident in our plan to reach our ultimate goal of $800,000,000 of restricted group debt. Further, the broader strategic activity that we've mentioned previously continues to progress well, and we'll discuss that more at an appropriate time. Turning to Slide six.

[David Lunin, EVP & CFO at Calumet Specialty Products Partners]

Our Specialty Products and Solutions segment generated $66,800,000 of adjusted EBITDA during the quarter. We continue to see strong performance, particularly among our specialty product lines, reflecting our commercial excellence program. In fact, this was the third consecutive quarter that our specialty products posted sales volume exceeding 20,000 barrels per day, reflecting our customer and application diversity and improved reliability. Further, we saw margins in our specialty products increase to more than $66 per barrel. These accomplishments made despite a full month turnaround at Shreveport in June.

[David Lunin, EVP & CFO at Calumet Specialty Products Partners]

The team also successfully managed through a major disruption in service from a key rail provider that had issues across their network. The rail service provider is a major transporter for our network, and Calumet incurred meaningful costs as the team went above and beyond to arrange alternative logistics to keep our customers supplied. Thankfully, the railway is reporting that the worst of that is now behind us, and we're seeing service normalize. Regardless, Calumet will always do everything we can to deliver service to our valued customers. Looking ahead, we continue to expect to operate at mid cycle margins even amidst an industry backdrop that is below mid cycle, highlighting our commercial advantage.

[David Lunin, EVP & CFO at Calumet Specialty Products Partners]

Our operational improvement trend also continued in the second quarter as we reduced our fixed costs by approximately $10,000,000 in the 2025 compared to the prior year. Interestingly, strong operations not only increased volume and reduces costs, but increases margin as well as it allows our commercial team to place more volume to secure contracted homes at higher margins rather than keeping volume available for the spot market. With the downtime associated with the turnaround, our quarterly results included only $11,000,000 of total restricted group adjusted EBITDA plus tax attributes in June. The plan is now back online and successfully generating full revenue. Looking ahead, we expect and already have begun to see the unwind of approximately 30,000,000 in the 2025 from working capital build associated with the turnaround as we have no more turnarounds planned for the rest of the year and are running at full rates.

[David Lunin, EVP & CFO at Calumet Specialty Products Partners]

Finally, as tariffs have been topical again, I wanted to remind our shareholders that we do not believe they are impactful to our specialties business considering our U. S.-based manufacturing and feedstock supply footprint, customer base, product diversity and the fact that nearly all of our sales in feedstock are domestic or protected by USMCA. Moving to Slide seven and our Performance Brands segment. We are now firmly in the third year of our revised strategy that leverages commercial excellence and integration optionality across our specialties business. We posted strong quarterly results of $13,500,000 reflecting continued volume growth and ongoing commercial improvements in the business.

[David Lunin, EVP & CFO at Calumet Specialty Products Partners]

As a reminder, we completed the sale of the industrial portion of the Royal Purple business, and this is the first quarterly period to not include Royal Purple Industrial results following the divestiture. Our second quarter results reflected strong volumes and margins across the business, particularly for our TruFuel brand. Moving to Slide eight. Our MontanaRenewables segment adjusted with tax attributes generated $16,300,000 in the second quarter compared to $8,700,000 in the prior year period. Montana Renewables specifically generated adjusted EBITDA with tax attributes of $8,300,000 making the 87% attributable portion to Calumet worth 7,200,000.0 Montana Renewables' continued ability to generate positive EBITDA with tax attributes even in the lowest industry margin we've ever seen is representative of our competitive position and reflects our unique assets, logistical advantage and strong customer relationships.

[David Lunin, EVP & CFO at Calumet Specialty Products Partners]

In addition, as we previously disclosed, we continue to expect to monetize the value of the production tax credits. And as Todd mentioned earlier, our monetization efforts are in advanced stages of discussion. Despite the worst margin environment, the primary driver of the year over year improvement in this segment continues to be with the tremendous cost savings we've made in the business and improvements in operations. You can see in the lower right hand side of the Renewables slide, we have reduced op costs and SG and A down well north of $1 to current levers $1 gallon to current levels. Focusing just on operating costs, we recorded $0.43 a gallon.

[David Lunin, EVP & CFO at Calumet Specialty Products Partners]

This represents our seventh consecutive quarter of operational cost improvement trend, excluding the turnaround in the 2024. When factoring in our lean SG and A position, we posted operating plus SG and A costs of approximately $0.51 per gallon, also a record low for the business and proves our low cost position in the industry. Our plans also remain on track for our mass sap expansion as we expect to bring on 120,000,000 to 150,000,000 gallons of annual sap production in the 2026 for an investment of 20,000,000 to 30,000,000. So there's no change what prequel was previously announced, and we're excited to continue this exciting step. On the Montana asphalt side, the business saw a $6,500,000 year over year improvement.

[David Lunin, EVP & CFO at Calumet Specialty Products Partners]

The same discipline and rigor that we've deployed with MRLs, is also being applied, in the asphalt side on cost that is generating these improved results. Thank you for your time today with a strong quarter, meaningful progress on the regulatory front, thoughtful maturity management and a clear expectation of meaningful free cash flow generation in the business, we look forward to the major value creating opportunities that rest ahead for our shareholders. With that, I'll turn the call back to the operator for questions.

[Operator]

Thank you. We will now begin the question and answer session. The first question comes from Alexia Patrick with Goldman Sachs. Please go ahead.

[Alexa Petrick, Investment Research Analyst at Goldman Sachs]

Good morning, team, and thank you for taking our question. The first one, just wanted to ask on renewable diesel. Appreciate we're in a challenging macro right now just given the uncertain regulatory environment. But would love your updated thoughts on what mid cycle earnings looks like for the business and then what do we need to see in the industry to get to more normalized earnings?

[Todd Borgmann, Chief Executive Officer at Calumet Specialty Products Partners]

Hey, Alexia, it's Todd. Good question. Like you said, it's obviously a tough environment out there right now. And we think the driver of that is really just the market waiting for news on the permanent RVO and the SRE respond plus working through that backlog of rents that was carried forward, from 2024. So I point to those as kind of the key drivers for recovery.

[Todd Borgmann, Chief Executive Officer at Calumet Specialty Products Partners]

We provide that chart every quarter that talks about the supply stack, the biomass based diesel supply stack. And basically what we see is at the proposed RVO levels you should see before demand of basically 5,500,000,000 gallons or so, which would suggest that you need, you know, good chunk of biodiesel run to run and meet that demand. That puts you in that $150 to $2 a gallon index margin range. We're ways away from that right now. But really that's the range that we've seen throughout history up until kind of the 2023 RPO change things.

[Todd Borgmann, Chief Executive Officer at Calumet Specialty Products Partners]

So at those levels, I think we put some information out in the past that says at $1.5 a gallon index margin, Montana Renewables should be making around 140,000,000 $150,000,000 a year of adjusted EBITDA with tax attributes. I kind of point to that. And then obviously, if you increase back up to the historic $2 a gallon level, you're meaningfully higher than that. That's at our current yields. The other thing I'd point out is adding the SAF flexibility that we are really provides a meaningful kick to those margin numbers.

[Todd Borgmann, Chief Executive Officer at Calumet Specialty Products Partners]

When you're talking an extra $1 to $2 gallon premium, on an incremental 90,000,000 to 100,000,000 gallons or 120,000,000 gallons of SAF, it's a pretty meaningful bump in margin, which is why we're so excited to be able to streamline this MAX SAF 150 project and move that forward. You talked about $1 a gallon plus on 100,000,000 gallons. Obviously, that's the math and we stack that on top of the core renewable diesel EBITDA that we just talked about.

[Alexa Petrick, Investment Research Analyst at Goldman Sachs]

Okay. That's great. And then my follow-up just on the balance sheet, it's nice to see the partial redemption of the 26 notes. Can you talk about the path to further debt pay down? And then particularly what considerations you guys think about for potential future divestitures?

[Todd Borgmann, Chief Executive Officer at Calumet Specialty Products Partners]

Yes, question. The, like David said, there's not too much remaining on the 2026 is after we called the $230,000,000 so far this year. So it's a really nice progress on that front. I think you look at that and you could say we have enough availability and free cash flow in the second half of the year to manage that in itself. We kind of look forward and say, what next on the 2027.

[Todd Borgmann, Chief Executive Officer at Calumet Specialty Products Partners]

We've talked about potential strategic asset sales. Don't want to get too far into that, But I can tell you that's certainly an option. We're expecting meaningful cash flow, next year and throughout the rest of this year. And then also you have the Montana renewables monetization, which we continue to expect is the ultimate step to reach our final deleveraging target of $800,000,000 So those are kind of the three, I'd say large steps. There's other things that can be done as well in kind of the just the maturity management mode.

[Todd Borgmann, Chief Executive Officer at Calumet Specialty Products Partners]

But as far as ultimate deleveraging, that's really what we're looking at.

[Alexa Petrick, Investment Research Analyst at Goldman Sachs]

Okay. Thank you. I'll turn it over.

[Todd Borgmann, Chief Executive Officer at Calumet Specialty Products Partners]

Thank you.

[Operator]

Thank you. The next question comes from Connor Fitzpatrick with Bank of America. Please go ahead.

[Conor Fitzpatrick, Vice President at Bank of America Merrill Lynch]

Hi, everybody. This was another quarter where OpEx per gallon was reduced in the renewables business. Cost reductions have had momentum for a while now, but I think it would help us to explain the types of improvements and changes you've made in your operations year to date that are driving these cost reductions? Thanks.

[Todd Borgmann, Chief Executive Officer at Calumet Specialty Products Partners]

Hey, Connor, it's Todd again. Thanks for the question. And you're right, you know, it's fundamental really to our success, particularly in this tight market, what we've been able to do on costs and really, you know, establish ourselves as one of the cost leaders in this space, which stacked on top of, you know, our geographic advantage and feedstock flexibility and ability to generate staff, we're quite excited about. Specifically, I'd say there are, you know, primary improvement that we've made on costs is real minimization of water. We've spent a lot of time and effort understanding water treatment, reducing exposure or reducing the amount of water we have to treat in general.

[Todd Borgmann, Chief Executive Officer at Calumet Specialty Products Partners]

That's been a major step down. And then with smaller amounts, can obviously treat it more efficiently as well. In fact, we put out something not too long ago that said, as part of the expansion in the future, we highlighting that on treatment on-site treatment of water is a piece of that plan, hasn't changed. That's always been the case. So water treatment is the primary improvement.

[Todd Borgmann, Chief Executive Officer at Calumet Specialty Products Partners]

We've also just got more efficient with the operation, you know. You learn a lot and we came up the learning scale really quickly in Montana over the past couple of years. But, we had a number of folks on-site, third party contractors, etcetera to just help us with the learning curve over the last year. And we've had a meaningful contractor reduction on-site this year. And obviously the numbers, the production numbers and the cost numbers we see that we didn't need them.

[Todd Borgmann, Chief Executive Officer at Calumet Specialty Products Partners]

So the teams are just done a really spectacular job of getting up to speed, familiarizing themselves with the assets and keeping costs down.

[Conor Fitzpatrick, Vice President at Bank of America Merrill Lynch]

Great. That's clear. And then as a follow-up, it looks like there's a few regions to play, for SaaS in The United States. The West Coast has LCFS programs and Transpacific voluntary and mandatory markets. The Gulf Coast has voluntary and mandatory markets in Europe.

[Conor Fitzpatrick, Vice President at Bank of America Merrill Lynch]

And there's several U. S. Midwest states that have purchasers or producers tax credits. And then SAF prices nationally trade out of premium from incremental voluntary demand versus RD and conventional jet. So how would you characterize the attractiveness of the different regions from where you sit?

[Conor Fitzpatrick, Vice President at Bank of America Merrill Lynch]

And do you think the proximity to the Midwest will win out versus other regions over time or at least provide a more stable end market? Thanks.

[Todd Borgmann, Chief Executive Officer at Calumet Specialty Products Partners]

Yes, great question. The Midwest is a really interesting market just because of the state tax credit, right? So, I think he used the word, you know, just stability or kind of stabilize the whole outlook. That tax credit goes a long way to do that. So, so yeah, that'll be a piece of the solution.

[Todd Borgmann, Chief Executive Officer at Calumet Specialty Products Partners]

You know, California is obviously a big piece as well. You know, Oregon, Washington, we've talked about all of these areas. Honestly, just like renewable diesel, we're pretty flexible on our output and we take it to whatever areas we're geographically advantaged in. That's what we're doing now with our partners at Shell and that's what we expect to do in the future as we add to the portfolio that we're building on the marketing side. The other thing I wouldn't forget about is Canada.

[Todd Borgmann, Chief Executive Officer at Calumet Specialty Products Partners]

We're right on the border there and there's some real ability to partner with the right people in Canada blend our product and service that market. And there's a pretty meaningful SAP premium still in Canada. So like always at Montana Renewables, the key to our advantage or one of the keys to our advantage is really that in market flexibility and sitting right there on the, on the BNSF. You know, we can go east to Minnesota and Illinois. We can go west to California, Washington, Oregon, and we can even, you know, truck north to Canada.

[Todd Borgmann, Chief Executive Officer at Calumet Specialty Products Partners]

So very flexible and I'd expect all of those to be part of the solution.

[Conor Fitzpatrick, Vice President at Bank of America Merrill Lynch]

Great. Thank you.

[Todd Borgmann, Chief Executive Officer at Calumet Specialty Products Partners]

Thank you.

[Operator]

The next question comes from Greg Brody with Bank of America. Please go ahead.

[Gregg Brody, High Yield Research Analyst at Bank of America Merrill Lynch]

Hey, good morning guys. Nice quarter. It's nice to see the operations coming together in specialty.

[Todd Borgmann, Chief Executive Officer at Calumet Specialty Products Partners]

Thanks Greg.

[Gregg Brody, High Yield Research Analyst at Bank of America Merrill Lynch]

Gave a couple of numbers there on the restricted group that I just wanted to run through to make sure it's clear.

[Gregg Brody, High Yield Research Analyst at Bank of America Merrill Lynch]

So you think you said the 2025, you expect 50,000,000 to $60,000,000 of cash flow. And then you also mentioned the unwind of some working capital of $35,000,000 Is that part of that number? Or is that in addition to that?

[David Lunin, EVP & CFO at Calumet Specialty Products Partners]

Yes. It's part of that number. So we're already seeing some of that unwind from the working capital just related to the turnaround and timing of building inventory in advance.

[Gregg Brody, High Yield Research Analyst at Bank of America Merrill Lynch]

Got it. And then you suggested that you could deal with the remaining $125,000,000 of the 26s this year. Is so the 50,000,000 to $60,000,000 is from restricted group. Should we expect cash from anything from renewable diesel business to be sent out? Or is the rest going to be solved for with possibly strategic alternative strategic actions?

[Todd Borgmann, Chief Executive Officer at Calumet Specialty Products Partners]

It's a good question. It's possible, to have cash on Montana and Noble. Honestly, way we plan for it is just the fully controllable in today's market. So so the way we plan for things is, you know, just what can we generate in a restricted group. So so, yeah, to your point, you've got the $5,060,000,000 dollars of cash flow.

[Todd Borgmann, Chief Executive Officer at Calumet Specialty Products Partners]

Think you said is that, you know, all in the business. There there'll be there'll be additional to that from the from the $35,000,000 of capital on one. So I don't want you to think that there's only, you know, $15,000,000 of of free cash flow generated in the core business in the second half plus that $35,000,000 of working capital unwind, right? So it's 50,000,000 plus the rest. So we are expecting more cash flow in the second half.

[Todd Borgmann, Chief Executive Officer at Calumet Specialty Products Partners]

We do expect some strategic activity to help with that, but I'd also just point to our general liquidity and revolver balance for a very small amount.

[Gregg Brody, High Yield Research Analyst at Bank of America Merrill Lynch]

Okay. And then just shifting to, the PTC monetization. I think you you said you had a term sheet for about half of it. Sort of two questions there. I think you'd mentioned a discount, that's the way to think about it, if I'm remembering like five percent to 7% versus what the book value is.

[Gregg Brody, High Yield Research Analyst at Bank of America Merrill Lynch]

And then just remind us if that's if I'm remembering that right and if that's sort of the way to think about it? And then the second part of that is when do you think you'll address this the other half of the PTCs? Just in general, based on the the market is coming together, should we expect that to be a quarterly it's been done quarterly ratably with what your the actual income is?

[Todd Borgmann, Chief Executive Officer at Calumet Specialty Products Partners]

Yes, we think I don't want to get too deep into the price obviously. We're still working through all of these. But what I've said is we historically projected that established tax credit sell for 95%, 98% of their value. And that's what we expect in these producers' tax credits to be over time. New credits, new market, there can be a small startup discount on the first few, but not much.

[Todd Borgmann, Chief Executive Officer at Calumet Specialty Products Partners]

So everything we've learned says we should be thinking at 95% range as the normal mental model. And yes, as far as timing, we've seen the market pick up quite a bit since the big beautiful bill was signed and provide a little bit more clarity around these PTCs. So we do expect to sell them all in the near future. And after we clear that backlog, yes, we expect it to be a quarterly transaction.

[Gregg Brody, High Yield Research Analyst at Bank of America Merrill Lynch]

Got it. And one piece of information, I was wondering if you have your liquidity as of today, just or basically what's on the revolver?

[David Lunin, EVP & CFO at Calumet Specialty Products Partners]

It's just about $200,000,000

[Gregg Brody, High Yield Research Analyst at Bank of America Merrill Lynch]

Great. All right. Thanks for the time guys. I appreciate it.

[Todd Borgmann, Chief Executive Officer at Calumet Specialty Products Partners]

Thank you, Greg.

[Operator]

The next question comes from Amit Dayal with H. C. Wainwright. Please go ahead.

[Amit Dayal, MD - Equity Research at H.C. Wainwright & Co.]

Thank you. Good morning, everyone. Pretty solid execution despite some and on that front, Todd, are there any particular catalysts we should be looking for you know, with respect to any remaining sort of macro overhangs, know, for you to start hitting a stride, especially with respect to, you know, Montana renewables? I mean, it looks like on the cost side, you've already done, you know, pretty well in terms of bringing costs down. If some margin improvements aren't showing up, mean, it looks like there's a lot of operating leverage you could start generating.

[Amit Dayal, MD - Equity Research at H.C. Wainwright & Co.]

So any color on, you know, maybe, you know, this topic would be helpful. Thank you.

[Todd Borgmann, Chief Executive Officer at Calumet Specialty Products Partners]

Yes. And I think that's the, that's the million dollar question. You've nailed it is when do we see the reversal in margins? You know, very comfortable and confident that with the regulatory actions we've seen here in the second quarter that, you know, it's a matter of, you know, when, not if on these, right? We talked earlier in Q and A about, at a 5,500,000,000 gallon RVO, without an overhang, you're at substantially better volumes than our prices, margins than we are today, just you know, stay compliant.

[Todd Borgmann, Chief Executive Officer at Calumet Specialty Products Partners]

So, so we're very bullish to long term outlook. I think the big question is just the overhang around when is that RVO going to be finalized. You know, a lot of rumors still flowing around the SREs and how that interacts with the RVO, if at all. And then the market just has to work through this backlog. Know, there's a year's worth of overproduction from 2024 RINs that have been carried into 2025.

[Todd Borgmann, Chief Executive Officer at Calumet Specialty Products Partners]

So the market is not acting like it would in a normal environment. When it has those RINs that it has to eat through in the current year, I'll say just expire. That essentially becomes part of the balance and the market doesn't have to respond to just normal fundamentals, like it would. But that all ends at the end of this year, we step into 2026. Those old rents, can't be carried forward again.

[Todd Borgmann, Chief Executive Officer at Calumet Specialty Products Partners]

And we see a step up in RVO. So I think the big question in our mind is, do we see margin recovery before that as people get more comfortable with how strong the outlook looks for 2026 and starts to ramp up production, or prices start to respond expecting that there's going to be such an increase in 2026. So that's what our eyes are on. I think that's what most folks in the industry are tracking as well. And long term, we think the changes that occurred in Q2 are quite bullish for the space. So looking forward to getting there.

[Amit Dayal, MD - Equity Research at H.C. Wainwright & Co.]

Okay. Thank you.

[Amit Dayal, MD - Equity Research at H.C. Wainwright & Co.]

And just on the Montana renewables monetization, it's I mean, it looks like it's still on the table, but from a timeline perspective, should should we expect any movement on that front in 2026? Or is this a little bit more sort of a future type event for the company now?

[Todd Borgmann, Chief Executive Officer at Calumet Specialty Products Partners]

Yeah, I don't think 2026 should be thought of as off the table at all. You know, when we rewind the clock a little bit and we say, what do we have to do at Montana Renewables? You know, we need to get the DOE loan that's done. We needed to prove out our operation commercial, position, that's done. We needed to, you know, demonstrate our cost advantage, that's done.

[Todd Borgmann, Chief Executive Officer at Calumet Specialty Products Partners]

You know, right now we're ramping up kind of the faster, cheaper, first step into MaxSaf. We think that's a really nice value upside for potential buyers. And then the last thing you need that's a little bit outside of our control is really just demonstrated margins, which we kind of just talked about. So we think that you get a little bit of margin improvement here late this year, early into next year, have a quarter or two of really strong earnings and it's an active conversation. Don't want to predict exactly when that happens and the like.

[Todd Borgmann, Chief Executive Officer at Calumet Specialty Products Partners]

But I wouldn't say 2026 is off the table by any stretch.

[Amit Dayal, MD - Equity Research at H.C. Wainwright & Co.]

Understood. Thank you for that. That's all I have, guys. I'll take my other questions offline. Thank you.

[Todd Borgmann, Chief Executive Officer at Calumet Specialty Products Partners]

Thank you.

[Operator]

The next question comes from Jason Gabelman with TD Cowen. Please go ahead.

[Jason Gabelman, MD - Energy Equity Research at TD Cowen]

Yes. Hey, good morning. Thanks for taking my questions. I wanted to get your views on the RVO proposal and specifically the part that talks about half RIN generation for imported feed or products. And I'm wondering if you have a sense of what that does to the market.

[Jason Gabelman, MD - Energy Equity Research at TD Cowen]

Does that essentially just double the value for RINs? Or is there some offset on feedstock costs? And do you think that is likely to be included in the final RVO?

[Todd Borgmann, Chief Executive Officer at Calumet Specialty Products Partners]

Hey, Jason, it's Todd. Great question. Know, wish Bruce is here to help with it a little bit, but he'll be back this afternoon and hopefully by the time we get to connect a little later, to chime in more. But, you know, the whole Haparin concept is an interesting one. I'd say the most important thing is we don't see that imported feed is needed to basically meet the RVO as it is.

[Todd Borgmann, Chief Executive Officer at Calumet Specialty Products Partners]

Know, 4,500,000,000 gallons of domestic feed is what it calls for in the proposal. And, you know, we're generating almost 7,000,000,000 gallons of domestic feed in North America now. So, you know, big macro, I would start there and say, I don't know how much imported feed is even in the mix. Now, if you go down a little bit, there are certain plants that just logistically would have a really hard time potentially bringing in, or we need to just work on their rail, etcetera, to do more around domestic. And I think that's something that can be done in time, but, you know, they may be in a mix for a little bit.

[Todd Borgmann, Chief Executive Officer at Calumet Specialty Products Partners]

But big picture, we don't think that imported feed is needed to, you know, meet the proposed RVO. If it is, if it is temporarily, then I think exactly what you said is right. You would look at our supply stack and you would say those folks that are running on imported feed, the RINs basically would have to cover that price. The RIN price in order for them to run and meet B4 requirement would have to adjust so that at a half RIN value, they'd be incentivized to do that. Either the price of the imported feed would have to go down.

[Todd Borgmann, Chief Executive Officer at Calumet Specialty Products Partners]

That's not going to happen because it's a global market that has a floor price to it or the price of RINs would have to react. So we see that as a potential and, you know, I guess it's an upside possibility, but more practically just don't see that important feed will be needed to meet the proposed RVO. And we're hoping that, as the group there, the EPA studies deeper into it and closes the comment period today that they'll come to the same conclusion and increase it.

[Jason Gabelman, MD - Energy Equity Research at TD Cowen]

Got it. Yes, that's great color. Thanks. And my follow-up is just a clarification on the PTC monetizations. And I know you talked about signing some term sheets.

[Jason Gabelman, MD - Energy Equity Research at TD Cowen]

Is there anything on regulatory front that needs to be finalized in order to convert those term sheets into final deals or is it just normal, more normal course working through the paperwork?

[Todd Borgmann, Chief Executive Officer at Calumet Specialty Products Partners]

No, I think just normal course working through the paperwork. You know, we're in that process now. We haven't come across anything where anybody said that, hey, we need to we need to slow down. So so I think it's just, you know, the normal process. It did get delayed a little bit while rumors were swirling around the PTC and the big beautiful bill kind of negotiation.

[Todd Borgmann, Chief Executive Officer at Calumet Specialty Products Partners]

But now that's behind us, it looks like game on and return to normal. So we're not seeing anything that would stand away. We're seeing a lot of activity there and expect to have these things sold by the next time we're talking.

[Jason Gabelman, MD - Energy Equity Research at TD Cowen]

All right, great. Thanks for the answers.

[Todd Borgmann, Chief Executive Officer at Calumet Specialty Products Partners]

Thank you.

[Operator]

Thank you. This concludes our question and answer session. I would like to turn the conference back over to John Kompa for closing remarks.

[John Kompa, Director - IR at Calumet Specialty Products Partners]

Thank you, Steve. On behalf of Todd and the entire management team, I'd like to thank our shareholders for joining our call today and your continued support. Have a great rest of the day. Thank you.

[Operator]

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

Participants

Executives

• John Kompa, Director - IR
• Todd Borgmann, Chief Executive Officer
• David Lunin, EVP & CFO

Analysts

• Alexa Petrick, Investment Research Analyst at Goldman Sachs
• Conor Fitzpatrick, Vice President at Bank of America Merrill Lynch
• Gregg Brody, High Yield Research Analyst at Bank of America Merrill Lynch
• Amit Dayal, MD - Equity Research at H.C. Wainwright & Co.
• Jason Gabelman, MD - Energy Equity Research at TD Cowen