What Calumet (CLMT) Said on Its Q3 Earnings Call

Key Points

• Calumet reported $347 million in third-quarter adjusted EBITDA with tax attributes, including $248.1 million from Specialty Products and Solutions and a record $80.4 million from Montana Renewables.
• The company retired roughly $265 million of debt over four months, saving about $26 million in annual cash interest; management said deleveraging remains its top priority.
• Specialty margins rose amid supply disruptions, while Calumet advanced Montana Renewables’ expansion, targeting an 80-million-gallon annual SAF run rate by year-end and 200 million gallons in 2028.

Calumet NASDAQ: CLMT reported $347 million in third-quarter adjusted EBITDA with tax attributes, as tight specialty products supplies and a strong quarter at Montana Renewables helped the company accelerate debt repayment.

CEO Todd Borgmann said the company retired roughly $265 million of debt over the past four months, saving approximately $26 million in annual cash interest. Consolidated net leverage stood at about 3 times at quarter-end, down from more than 9 times at the beginning of the prior year.

The Specialty Products and Solutions segment generated $248.1 million in adjusted EBITDA, more than triple the $80.2 million reported a year earlier. Montana Renewables delivered $80.4 million in adjusted EBITDA with tax attributes at 100% ownership, a record for the business, Borgmann said.

Specialty margins rise amid supply disruptions

Specialty material margin exceeded $108 per barrel, compared with $62 a barrel a year earlier, CFO David Lunin said. Fuels and asphalt margin was nearly $38 per barrel. Specialty sales volumes topped 20,000 barrels per day for the eighth consecutive quarter.

Borgmann said more than 10% of global paraffinic base oil capacity was damaged or offline, citing disruptions in the Middle East and Europe. Although Calumet does not directly produce much of the affected Group III base oil capacity, he said the products are part of an interconnected market.

President Scott Obermeier said customer demand remained strong early in the fourth quarter despite the period’s usual seasonality. Borgmann said management expects margins to remain similar for the foreseeable future, though he cautioned that the third-quarter specialty result should not be treated as a permanent norm.

Calumet completed a major turnaround at its Shreveport facility on time and on budget in early November, Borgmann said. He expects the facility to run at rates in the 50,000-barrel-per-day range following the work, compared with the mid-40,000s before the turnaround.

Montana Renewables expansion advances

Montana Renewables’ third-quarter result followed the initial phase of the MaxSAF expansion and reflected a strong index margin environment, Lunin said. He reported $110.6 million in adjusted EBITDA with tax attributes for the broader Montana Renewables segment, which includes the CMR refining operation. CMR contributed $40.8 million in adjusted EBITDA during peak asphalt season and elevated fuels margins.

The company has begun tying CMR equipment into Montana Renewables, including a hydrotreater, hydrogen plant and naphtha splitter. Borgmann said the work is expected to be completed in November and will support higher throughput and sustainable aviation fuel, or SAF, production.

Management outlined a path to an 80 million-gallon annual SAF run rate by year-end, more than 120 million by spring, 120 million to 150 million by the end of 2027, and ultimately 200 million in 2028. The broader project also aims to increase throughput to 17,000 barrels per day and capture renewable propane and butane for sale.

Under a connected agreement involving the Department of Energy and investment partner Warburg Pincus, Montana Renewables will pay CMR an expected $30 million annual lease payment for equipment used in the expansion. Warburg’s preferred return will rise to 11.5%, while its existing 13.2% common equity position in Montana Renewables will be replaced by a warrant to purchase 8% at a $750 million equity value strike price, Lunin said.

Lunin said interest on the intercompany financing arrangements and the Warburg investment will continue to accrue in kind until project completion. Borgmann said monetizing Montana Renewables remains a long-term option, but a sale is no longer needed solely to accelerate debt reduction. An initial public offering remains an option, though he said he would not expect one in the next few months.

Debt reduction remains the priority

Calumet has $175 million of 2028 notes outstanding following its latest debt call, and its 2029 notes become callable at par in January 2027. Lunin said the company plans to use cash generated by its businesses to continue reducing high-cost capital.

Performance Brands reported $9.1 million in adjusted EBITDA, down from $13.2 million a year earlier, even as volume rose to 6.8 million gallons from 6.3 million. Lunin said input costs increased faster than retail pricing, which typically lags by 60 to 90 days. The segment also benefited from a $7 million insurance claim related to Winter Storm Uri.

Borgmann said completing deleveraging remains the company’s first priority, while management evaluates potential organic investments and acquisitions.

About Calumet (NASDAQ:CLMT)

Calumet, formerly known as Calumet Specialty Products Partners, L.P., is a manufacturer of specialty hydrocarbon products and renewable fuels. The company refines crude oil and other feedstocks into products used in industrial, transportation, commercial and consumer applications.

Its specialty product portfolio includes base oils, lubricants, waxes, solvents, asphalt and other highly engineered hydrocarbon products. Calumet also produces fuels and renewable fuels, including renewable diesel and sustainable aviation fuel-related products through its renewable fuels operations.

Founded in 1916, the company serves customers across the United States and supplies products to a range of industries, including automotive, energy, manufacturing, infrastructure and aviation.

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