CVR Partners (UAN) Q2 2026 earnings call transcript

Thank you. Good morning, everyone. We appreciate your participation in today's call. With me today, our Dean Newman, our chief executive officer, Mike Wright, our chief operating officer, and other members of management. Prior to discussing our 2026 second quarter results, let me remind you that this conference call may contain forward-looking statements. At that time, it's defined under federal security laws.

For this purpose, any statements made during this call or not statements of historical facts may be deemed to be forward-looking statements. Your caution that these statements may be affected by important factors set forth in our filings with the Securities and Exchange Commission and in our latest earnings release. As a result, actual operations or results may differ materially from the results discussed in the forward-looking statements.

We undertake no obligation to publicly update any forward-looking statements, whether as a result of new information, future events, or otherwise, except to the extent required by law.

This call also includes various non-gapped financial measures. The disclosures related to such non-gapped measures, including reconciliation to the most directly comparable gap financial measures, are included in a 2026 second quarter earnings release that we filed with the SEC for the period. Let me also remind you that we are a variable distribution NLP. We will review our previously established reserves, current cash usage, evaluate future anticipated cash needs, and measure their amounts for other future cash needs as determined by our General Partners Board.

As a result, our distributions, if any, will vary from quarter to quarter due to several factors, including but not limited to operating performance, fluctuations in the prices received for finished products, capital expenditures, and cash reserves being necessary or appropriate by the Board of Directors of our General Partner.

With that said, turn the call over to Dane Newman, our Chief Executive Officer. Dane?

Thank you, Richard. Good morning, everyone, and thank you for joining us for today's call. The summarized financial highlights for the second quarter of 2026 include net sales of 202 million, net income of 78 million, even of 107 million, and the Board of Directors declared a second quarter distribution of $6.08 per common unit, which will be paid on August 17th to unit holders of record at the close of the market on August 10th. For the second quarter of 2026, our ammonia plant utilization was 99%, but both plants running well and experiencing minimal downtime during the quarter.

The ongoing conflicts in the Middle East significantly tightened available global supplies of nitrogen fertilizers in the second quarter, which drove prices higher for the spring. We saw steady demand for product across our system, although toward the end of the planting season, we began seeing some customers shifting away from UAN due to the elevated prices relative to other nitrogen fertilizers.

We completed summer fill programs for ammonia and UAN in late June and early July, respectively, and we have a good order book for the second half of 2026, which I will discuss further in my closing remarks. I will now turn the call over to Richard to discuss our financial results.

Thank you, Dane. Turning to our results, for the second quarter of 2026, we reported net sales of 202 million and operating income of 85 million. That income for the quarter was 78 million, or $7.33 per common unit, and EBITDA was 107 million. Relative to the second quarter of 2025, the increase in EBITDA was primarily due to higher UAN and ammonia sales pricing.

Total knowing production for the second quarter of 2026 was 214,000 gross tons, with 64,000 net tons were available for sale, and UAN production with 342,000 tons. During the quarter, we sold approximately 333,000 tons of UAN at an average price of $392 per ton, and approximately 54,000 tons of ammonia at an average price of $791 per ton. Relative to the second quarter of 2025, total sales volumes were down slightly, primarily due to an earlier spring planting season, shifting some volumes into the first quarter, along with some weakening demand later on the quarter due to the elevated price environment for UAN.

Second quarter prices for UAN increased approximately 24%, and ammonia prices increased approximately 33%, relative to the prior year period.

Direct operating expenses for the second quarter of 2026 were 59 million. Excluding inventory impacts, direct operating expenses increased by approximately $4 million relative to the second quarter of 2025, primarily due to higher repair and maintenance, catalyst, and electricity costs.

Capital spending for the second quarter was 17 million, at which 12 million of maintenance capital. We estimate total capital spending for 2026 to be approximately 85 to 95 million, of which 49 to 57 million is expected to be maintenance capital. We anticipate a significant portion of the profit and growth capital spending planned for 2026 will be funded through cash reserves taken over the past few years.

We ended the quarter with total liquidity of 187 million, which consisted of 137 million in cash and availability under the ADL facility of 50 million. Within our cash balance of 137 million, we had less than 1 million related to customer prepayments for the future delivery of product.

And assessing our cash available for distribution, we generated EBITDA approximately 107 million, and had net cash needs of 43 million for interest costs, maintenance, capex, and other reserves. As a result, there was 64 million of cash available for distribution, and the board of directors of our general partner declared a distribution of $6.08 per common unit.

Looking ahead to the third quarter of 2026, we estimate our own utilization rate to be between 75 and 80%, which will be impacted by the upcoming planned turnaround at the ECD facility. We estimate direct operating expenses, excluding inventory and turnaround impacts to be between 57 and 62 million, turnaround expenses to be between 30 and 35 million, and total capital spending to be between 40 and 49 million.

With that, I'll turn the call back over to Dean.

Thanks, Richard. In summary, we had another strong quarter of operations with ammonia utilization of 99%, and nitrogen fertilizer prices for the spring were elevated due to the ongoing conflicts in the Middle East, and the effective closure of the Strait of Hormuz. The spring planting season went well, and demand for nitrogen was strong overall. The USDA estimates that 95.3 million acres of corn and 85.4 million acres of soybeans were planted in the spring of 2026, a 4% decrease for corn, and a 5% increase for soybeans.

Although corn plantings were down from the record levels of 2025, 95 million acres as well above the average level of corn plantings over the last five years. Yield estimates are approximately 183 bushels per acre for corn, resulting in an expected inventory carryout level below 2025.

Soybean yields are estimated at 53 bushels per acre, which also resulted in an expected inventory carryout below 2025. Grain prices have increased some recently, with expectations for lower carryout inventories driven by a combination of hot and dry conditions across the Western Corn Belt, increased export demand, and a smaller than expected corn crop in Argentina. December corn prices are approximately $4.80 per bushel, and November soybeans are approximately $12.20 per bushel.

Summer fill and fall pre-fay for ammonia occurred in late June, and UN fill was completed in early July. Overall, we saw strong demand for both products, and were able to secure a solid book of business for the second act of 2026 at attractive pricing.

Geopolitical issues have impacted nitrogen fertilizer markets for the past several years, beginning with Russia's invasion of Ukraine in 2022, and continuing through the current ongoing conflicts in the Middle East. While it remains unclear how long these issues in the Middle East and Russia will persist, we will continue to focus on safely and reliably running our plants at high utilization levels to meet the needs of our customers.

Prices for nitrogen fertilizers have declined since the spring, which is the typical seasonal pattern as prices reset in the summer after spring planting is completed.

With the recent declines in fertilizer prices and increases in grain prices, we believe farmers are in a better position than they were a few months ago, which is positive for our industry overall. Natural gas prices in Europe have remained elevated amid the ongoing Middle East conflicts, currently trading around $19 per MMBTU, while US prices have once again fallen below $3 per MMBTU.

Damage sustained at LNG production facilities could take several years to repair, which would likely keep upward pressure on international gas prices relative to the US prices. We continue to believe Europe-based structural natural gas supply issues that will likely remain in effect through the next few years, which should continue to provide an advantage to US producers with access to lower-cost natural gas feedstocks.

The conflicts over the past few years in Ukraine and the Middle East are a reminder of the value of US production with adequate and secure feedstock availability. We are currently executing on a number of projects at both facilities that we have discussed over the past few years. At our coffee bill facility, we expect to finalize a detailed design and construction plan this year and tend to allow the plant to utilize natural gas as an alternative feedstock to third-party pet coke.

We are no longer planning to invest the capital to source hydrogen from the adjacent coffee bill refinery, and we believe we can achieve the feedstock diversification of this project at a significantly reduced total capital spend. We also recently secured the certification of classifying coffee bills ammonia production at low carbon, and we are currently exploring opportunities to market low carbon ammonia in the US.

During these viewed turnaround that is currently expected to begin at the end of August, we plan to complete the brownfield capacity expansion that is intended to increase ammonia production capacity by up to 5%. We also plan to continue work on the water quality upgrade project. In addition, we have a water system upgrade plan for the coffee bill facility, along with the expansion of our DEF production and loadout capacity.

The goal of these projects is to improve reliability and production rates, supporting our target of operating the plants at utilization rates above 95% of name plate capacity, excluding the impact of turnarounds. The funds needed for these projects and other initiatives are coming from the reserves taken over the last few years, and the board elected to continue reserving capital in the second quarter.

While the board looks at reserves every quarter, I would expect them to continue to elect to reserve some capital, and we anticipate holding higher levels of cash related to these investments in the near term as we ramp up execution and spending. We believe unit holders will see the benefits of these investments in the coming years as these projects are completed and brought online.

After eight years of the company, I've seen the benefits of focusing on safety, reliability, cost management, and prudent capital allocation. We have a strong team in place, and I look forward to continue executing on the strategy we have laid out over the past few years.

In closing, I would like to thank our employees for their excellent execution, safely achieving 99% of money utilization, and the solid delivery on our marketing and logistics plans, resulting in a distribution of $6.08 per common unit for the second quarter.

With that, we are ready to answer any questions. Operator?

Hey, Martin, how are you doing?

Great. Hey, what the recent management changes is CVR partners still interested in making potential acquisitions, and if so, can you comment on strategic criteria for an acquisition? Yeah, so Rob, I would say our thought process is really anything's on the table, acquisition, merger, participating in a bill, even a sale if there were an attractive offer. I think it's going to be a relatively challenging environment.

From an acquisition perspective, we would really want to see a creative cash flow very, very quickly. And just with the assets that are out there, I don't see a lot of them being available for sale.

From a build perspective, I could see us participating in that value chain as an operator, a marketer, but I don't see us being a big financial backer to project like that. And then from a sale perspective, I think the political environment is still challenging, and that may be a headwind. So we'll continue to look for attractive opportunities and see what we find. Other than that, business is doing good, and we're happy to hold as we are as well.

Yeah, we'll give any specific details on the position of the book, but, you know, as we said in the prepared remarks, we did see demand slow down a little bit in June when the UAM nitrogen value started trading at a really wide premium. However, that when we got to the fill, buyers came right back to the market. We did see the normal reset that we didn't see last year.

UAM tracked the NOLA benchmark and ammonia did fare better. Prices have continued to tick up since then. And I think that the one significant difference was, you know, we're roughly in line with sales, but we did have more fall pre-pay on ammonia come in earlier than we did last year.

Yeah, Rob, I don't have any color on the farmer level and specific. What we did feel was that inventories did get a little bit higher downstream of us earlier in the year. That said, with the strength of the fill, clearly there was a need for product. And we've seen a recent uptick in buying, which does imply product is now moving downstream to retailers and farmers. So it seems like, you know, potentially availability concerns are back and driving behavior versus price risk at the moment.

Yeah, Rob, this is my thanks of the question. Kind of the project really right now as it stands with the delivery equipment, construction, and permitting the project will complete likely in the second half of 27.

The good news is there is no expected downtime associated with that project. So we don't expect anything to impact production rates next year. And then in regards to a cost estimate where, you know, as noted earlier, we are finalizing design at this point. We believe we'll complete the project for less than half of the original estimate as we optimize the scope around our feed novels and remove the need for the nearby adjacent hydrogen plant.

And with that, I think we just the best way to say is we will stay within the reserves that have already been taken for that project.

Yeah, that's an interesting question Rob. Yeah, obviously everyone knows that these facilities are just massively expensive to build. You know, you could call that your known at the outset and it likely will only rise as you continue. So a lot of execution risk in terms of a build and then on the flip side, your long term pricing visibility is probably a little murkier.

So, to me, that's just a lot of risk to bear on the shoulders of producers. So, yeah, I think, you know, we've seen things come out about, you know, government backing for ammonia expansion or if there were opportunities for long term customer commitments or equity participation that helps, excuse me, de risk for the producer. I think that could go a long way instead of having one party kind of absorb all the risk of execution and pricing.

It doesn't, you know, like I said, I think there's some path to some of those things taking place, but also, you know, challenging for those agreements to come together and do take a long time to develop. So agree. It's a challenge and don't know what fixes it, but I think some of those options might be might be beneficial and helpful.

You got it. Thanks, Rob.

Again, I'd just like to thank everyone for your interest and CVR partners. And again, our employees for the hard work and commitment towards safe, reliable and environmentally responsible operations. And we look forward to reviewing our third quarter, 2026 results during our next earnings call. Have a safe day.