CVR Partners 2026 Q2 Earnings Call

Good morning, everyone. We appreciate your participation in today's call. With me today are Dane Neumann, 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 as that term is defined under federal securities laws. For this purpose, any statements made during this call that are not statements of historical facts may be deemed to be forward-looking statements. You are cautioned 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-GAAP financial measures. The disclosures related to such non-GAAP measures, including reconciliation to the most directly comparable GAAP financial measures, are included in our 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 MLP. We will review our previously established reserves, current cash usage, evaluate future anticipated cash needs, and may reserve amounts for other future cash needs as determined by our general partner's 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 deemed necessary or appropriate by the board of directors of our general partner. With that said, I'll turn the call over to Dane Neumann, 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, EBITDA 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 unitholders of record at the close of the market on August 10th. For the second quarter of 2026, our ammonia plant utilization was 99%, with 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. Net 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 ammonia production for the second quarter of 2026 was 214,000 gross tons, of which 64,000 net tons were available for sale, and UAN production was 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 in 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, of which $12 million was maintenance capital. We estimate total capital spending for 2026 to be approximately $85 million-$95 million, of which $49 million-$57 million is expected to be maintenance capital.

We anticipate a significant portion of the profit and growth capital spending plan 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 ABL 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. In assessing our cash available for distribution, we generated EBITDA of 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 ammonia utilization rate to be between 75%-80%, which will be impacted by the upcoming planned turnaround at the East Dubuque facility.

We estimate direct operating expenses, excluding inventory and turnaround impacts, to be between $57 million and $62 million, turnaround expenses to be between $30 million and $35 million, and total capital spending to be between $40 million and $49 million. With that, I'll turn the call back over to Dane.

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 is 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 results 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-pay for ammonia occurred in late June, and UAN 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 half 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.