Lsb Industries Q1 Earnings Call Highlights

Key Points

• LSB delivered strong Q1 results with adjusted EBITDA up 44% year over year to $52 million, ending the quarter with about $180 million in cash, 1.4x net leverage and roughly $37 million of free cash flow; management expects Q2 EBITDA to be “meaningfully higher” despite an El Dorado turnaround that will cut ammonia output by ~35,000 tons and cost $15–$20 million, while Q2 pricing has averaged about $775/mt (Tampa ammonia) and $480/ton (NOLA UAN).
• Company-wide supply tightness is being driven by the Middle East conflict and Strait of Hormuz disruptions—which represent roughly 20% of seaborne ammonia and 30% of seaborne urea trade—plus other global outages, leaving LSB’s industrial business “sold out” and supporting elevated fertilizer and industrial pricing with tightness expected to persist into 2026–27.
• LSB reached a settlement with Benham for about $20.9 million but is continuing to pursue claims against Leidos seeking over $300 million with a trial set for October, while advancing a low‑carbon CO2 capture project and other initiatives management says could generate roughly $50 million of incremental annual EBITDA.

LSB Industries NYSE: LXU reported first-quarter 2026 results that management said were in line with expectations, reflecting higher production reliability, a favorable product mix, and tighter global nitrogen markets. Chairman and CEO Mark Behrman said the company’s operating discipline and recent investments are “driving improved operating and financial performance,” citing year-over-year growth in net sales, adjusted EBITDA, and earnings per share.

Operational performance and legal settlement update

Behrman highlighted ongoing efforts to improve safety, reliability, efficiency, and output across LSB’s facilities, noting that the benefits have become “increasingly evident over the past two quarters.” He also provided an update on litigation tied to engineering and procurement contracts related to construction of the ammonia plant at the company’s El Dorado, Arkansas, facility.

Earlier in the month, LSB entered into a settlement agreement with Benham Constructors, one of two defendants in the case. Behrman said Benham agreed to pay the company approximately $20.9 million. The settlement does not release claims against Leidos, Behrman said, adding that LSB plans to continue pursuing claims against Leidos, including allegations of fraud and breach of contract, and to seek “actual and punitive damages in excess of $300 million.” A trial against Leidos is scheduled to begin in October.

Market conditions: Middle East disruption and tight global nitrogen supply

Chief Commercial Officer Damien Renwick described the conflict in the Middle East as one of the most significant and prolonged supply disruptions the industry has experienced. He said the Strait of Hormuz represents about 20% of global ammonia seaborne trade and 30% of global urea seaborne trade, and that the disruption is affecting both shipping flows and fertilizer production in the region.

Renwick said these events are compounding other global supply issues, including reduced ammonia production in Trinidad, gas curtailments in India, outages in Australia, “increasingly frequent drone strikes on Russian nitrogen plants,” and export restrictions affecting urea (and potentially ammonia) from China. While some phosphate demand destruction has occurred globally, Renwick said ammonia and urea demand has remained consistent and fertilizer and industrial demand has been “reasonably strong.”

On natural gas, Renwick noted that approximately 20% of global LNG transits through the Strait of Hormuz and said disruptions could contribute to elevated European natural gas prices, while the U.S. remains advantaged by low-cost gas. He said U.S. natural gas has been “incredibly resilient and affordable,” trading well below $3 per MMBtu. Renwick added that LSB expects the market implications to be persistent, with elevated pricing “throughout 2026 and even into early 2027,” even after the Strait is fully reopened due to the time required to restore normal logistics and production.

Industrial and agricultural demand trends

Renwick said LSB’s industrial business is currently in a “sold-out position,” even with improved production volumes. During the first quarter, the company optimized its production mix to maximize ammonium nitrate spot sales at above typical market prices, which Renwick said helped support customers impacted by supply disruptions. He said the U.S. ammonium nitrate market is under pressure due to lower domestic production availability while demand remains strong, with supply interruptions expected to continue through most of 2026.

Renwick also pointed to strength in mining demand, describing a “renaissance in mining” driven by copper demand outpacing supply and record gold prices incentivizing new supply, particularly in the Western U.S. He added that quarrying and aggregate production has been growing, and that lower residential construction demand is being offset by higher private and public construction demand. He said coal demand remains resilient, supported by policy changes and demand for electricity.

In chemicals, Renwick said finalized antidumping duties on imported methylene diphenyl diisocyanate (MDI) for five years have been positive for U.S. producers. In response to a question, he said the MDI duties are a “very positive story” for domestic producers, noting LSB’s customer base is running “flat out” and that some customers are contemplating expansions, prompting early discussions on supply needs.

On agricultural markets, Renwick said the company had a “good spring ammonia campaign” and exited with minimal inventory, with inland ammonia prices tracking international levels. Favorable weather in the first quarter supported higher-than-expected shipments out of the Pryor facility and low inventory levels at quarter end, he said, and he observed that ammonia supply appeared constrained in late March. Renwick said ammonia demand is being supported by nitrogen pricing spreads, with ammonia at a significant discount to urea and UAN, incentivizing growers to minimize input costs amid “challenging grain economics.”

For UAN, Renwick said grower economics remain difficult and supply chain inventory levels appear low. He added that the North American market is at risk of being short nitrogen due to uncertainty around forward urea imports, with urea pricing strengthening since late February due to the Iranian conflict and Strait of Hormuz issues. He said LSB is estimating very low UAN carryout inventories on June 30 at around 2025 levels, with the potential for even tighter conditions if urea shortages, unplanned downtime, or reduced imports occur. Renwick also noted the USDA’s projection of 95 million planted corn acres for the 2026 crop season, which the company expects will support robust nitrogen demand.

Financial results and Q2 outlook

Chief Financial Officer Cheryl Maguire said first-quarter adjusted EBITDA rose 44% year over year, increasing to $52 million from $29 million in the prior-year quarter. She attributed the increase to higher pricing and stronger volumes and product mix, partially offset by higher natural gas and other operating costs.

Maguire said LSB ended the quarter with approximately $180 million in cash and net leverage of 1.4 times. Operating cash flow was $52 million, and after $15 million of sustaining capital expenditures, free cash flow was approximately $37 million.

Looking to the second quarter, Maguire said the company expects to remain sold out with elevated pricing. She cited average pricing so far in Q2 of approximately $775 per metric ton for Tampa ammonia and $480 per ton for NOLA UAN, while natural gas costs have averaged below $3 per MMBtu. She also said a planned turnaround at the El Dorado facility is underway and is expected to reduce ammonia production by approximately 35,000 tons and result in $15 million to $20 million of turnaround-related expenses. Maguire said the company built ammonia inventory ahead of the outage and expects to operate downstream production during most of the ammonia outage.

Despite the turnaround, Maguire said LSB expects second-quarter adjusted EBITDA to be “meaningfully higher” than both the first quarter of 2026 and the second quarter of last year, driven by strong market fundamentals and continued improvement in downstream production.

Carbon capture progress and capacity expansion considerations

Behrman said the company’s El Dorado low-carbon project is progressing, with LSB working with senior officials from the EPA’s Region 6 and targeting CO2 sequestration by the end of this year or early next year. He said that, in addition to a previously drilled injection well, the company completed drilling of an underground horizontal pipeline to transport CO2 from the capture area to the injection well. Next steps include completing civil work in the capture area and preparing for delivery of capture equipment this summer, with assembly and connection expected to finish in late fall.

Behrman said the company is pursuing low-carbon product supply opportunities that could generate premiums and is evaluating potential sales of environmental attributes generated by the project.

He also reiterated LSB’s longer-term improvement plan, referencing prior commentary about a path to an additional $50 million of annual EBITDA through initiatives including production targets, process efficiencies, and the El Dorado carbon capture project. Behrman said a “good portion” is expected to be realized by the end of this year, with the balance by the end of next year, on a run-rate basis.

On capital deployment, Behrman said LSB is reviewing opportunities to invest in projects that could expand fertilizer and industrial production capacity, including debottlenecking and potential acquisitions or partnerships to increase production and scale. In response to questions, he pointed to the ability to expand ammonia plant production at El Dorado, noting the company has a USDA grant and is completing the final stage of engineering before a final investment decision. He said the company is also evaluating debottlenecking and potential capacity increases at its Pryor facility, including possible nitric acid expansion.

Behrman said he has recently met with the administration in Washington, D.C. as part of an industry trade group and stated that the administration is focused on increasing domestic fertilizer production, viewing it as a food security issue, and that capital support could be available “for the right projects.”

On operations, Behrman said LSB chose not to delay the El Dorado turnaround—previously pushed from last year—citing contractor scheduling and execution considerations. He said a Pryor turnaround is scheduled for July, and the company aims to complete it quickly, adding that skipping the work could risk extended downtime. Behrman also said he does not expect pricing to “fall off a cliff” later in the fall, given the expected duration of global supply disruptions.

About Lsb Industries NYSE: LXU

LSB Industries, Inc NYSE: LXU is an Oklahoma City–based manufacturer of chemical products serving the agricultural, industrial and defense markets. The company operates primarily through two segments: Fertilizer Solutions and Commodities Solutions. Through its Fertilizer Solutions segment, LSB produces primary nitrogen products—including anhydrous ammonia and technical-grade ammonium nitrate—that are sold to fertilizer distributors and agricultural retailers across North America. Its Commodities Solutions segment manufactures and sells nitric acid, sodium nitrate and other nitrate-based compounds for industrial applications such as mining, water treatment and specialty chemical production, as well as defense-related formulations used in munitions and pyrotechnics.

Incorporated in 1969, LSB Industries has grown from a single production site to multiple manufacturing facilities strategically located in the central United States.

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