Calumet (CLMT) Q2 FY26 earnings call: guidance and Q&A

How long will high base oil cracks last, given global disruptions and capacity issues? Is it similar to fuel refinery dynamics, and how much is pass-through of feed costs?

Scott Obermeier stated that the market is firing on all cylinders and the situation is not short-term due to structural impacts like 10% global capacity offline, diversion to distillates, and Russian refinery strikes. He expects the tight market to continue through 2026.

“I think right now across the whole portfolio, and I'll get into base oils here in a second. But I think across our whole portfolio, I'd say we're certainly firing on all cylinders, as touched on in the script, production has been great, execution has been great, et cetera. And we think about the fuel crack market being historic specialties, again, across our whole portfolio are doing really well. So we feel good about that. We think in this current environment, it's not just a short-term situation. There's been a lot of structural impacts, if you will, that will take months and months to sort of stabilize.”

asked by Conor Fitzpatrick · answered by Scott Obermeier

If deleveraging targets are met organically sooner, does it change the approach to MRL monetization?

Todd Borgmann confirmed that the long-term path for MRL is still separation/monetization, but accelerated deleveraging means it's no longer a prerequisite for specialties growth. The decision will now be purely through the lens of shareholder value optimization.

“I think the answer is no, not long term. We still expect that separating monetizing Montana Renewables is the right long-term path for this business. I'd say what has changed, and you pointed this out in your question, is we no longer have to do it as a prerequisite to grow our specialties business, which I think is critical.”

asked by Conor Fitzpatrick · answered by Louis Borgmann

Can the full contribution from MRL be expected in Q3 FY26 and the second half of the year, given past start-and-stop performance?

Todd Borgmann expressed high confidence, stating that July showed positive earnings ramp-up. He noted that Q2's $17 million adjusted EBITDA was despite over $40 million of foregone margin, and Q3 is expected to be "meaningfully higher" with a full quarter of production.

“I think the answer is absolutely yes. In July, we saw Earnings continue to ramp positively. Obviously, we were down April, first half of May for the MaxSAF turnaround, which you don't shed the fixed costs in that environment. So earlier, we talked about probably a normalized run rate Q2, you would have thought about in the $60 million range, $17 million we did plus a little over $40 million on kind of foregone margin while we were down.”

asked by Amit Dayal · answered by Louis Borgmann

Can the company share details on the cost of the MRL reactor project and the yield loss at the conventional Montana plant (CMR)?

Todd Borgmann deferred specific cost details, stating they would be released soon. He indicated that a "good chunk" of CMR's historical EBITDA would be traded for a "much larger number" at MRL, emphasizing that CMR would continue to operate and provide shared benefits. Bruce Fleming added that CMR would maintain asphalt and gasoline racks, crude run, and employment, with rearrangement in black oils.

“Jason, it's Todd. Let's defer of talk on the extra details for just a little bit here. And like I said earlier, we expect to be out with more on that soon. But I will say it's safe to say a good chunk of the EBITDA CMRs made historically will be traded for a much larger number at MRL and the massive cost savings of the project.”

asked by Jason Gabelman · answered by Louis Borgmann

Why isn't MRL running at maximum SAF until the second reactor comes online, given previous expectations of low renewable naphtha yield? Has the yield differed, or is it related to SAF contract timing?

Todd Borgmann clarified that current economics don't incentivize losing renewable diesel (RD) to naphtha by cranking up severity without the polishing reactor. He stated that RD margins are strong, and CMR margins were lower previously, making the conversion less urgent. The current 60 million gallon SAF run rate is optimal until the polishing reactor improves yields to "best-in-class." SAF contracts have flexibility.

“I don't want to say that the yields on renewable naphtha are higher than originally expected at all. I'd say as you crank up without the polishing service, as you crank up severity on the cracking, more and more RV goes to naphtha. And if we rewind the clock a few months, when RD is less valuable, losing some of that in the cracking process isn't too painful, right? And when CMR margins were lower, converting that second reactor sooner wasn't much of a lost opportunity either.”

asked by Jason Gabelman · answered by Louis Borgmann

When should the $50 million Specialties growth CapEx start impacting results? Is it this year or over time?

Todd Borgmann stated that the majority of the $50 million CapEx will be part of the 2027 and 2028 capital budget, with most of the spend occurring in 2027 (approx. 2/3) and the remainder in 2028. Results impact is expected mainly in 2028, with some trickling in late 2027.

“I'd say the majority of that comes through next year, right? So where we're at right now is we have a pipeline of projects that we're reviewing. These are smaller projects in nature. So think of it as a portfolio, optimization type things, debottlenecking, small expansions that have been stacking up.”

asked by Gregg Brody · answered by Louis Borgmann