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LSB Industries (LXU) Q2 FY26 earnings call: guidance and Q&A

Earnings call· Jun 2026 (Q2 FY26)· Materials· Jul 30, 2026

Source: earnings call transcript

Executive summary

LSB Industries Q2 FY26 — Strong Operational Performance and Growth Initiatives

LSB Industries delivered a strong second quarter, marked by significant operational improvements and strategic advancements in growth initiatives. Despite planned turnaround activities impacting short-term earnings, the company achieved higher production rates and optimized its product mix. Key developments include assuming full ownership of the Eldorado carbon capture project and advancing plans for an ammonia expansion, positioning LSB for stronger financial and operational performance through the remainder of the year and into the future.

Highlights

5

  • Adjusted EBITDA increased by approximately 40% year-over-year to $53 million, despite planned turnaround activity.

  • Eldorado ammonia plant achieved some of its highest daily production rates since 2016, running at ~1375 tons/day post-turnaround, significantly above its 1150 tons/day nameplate capacity.

  • Successfully completed extensive turnaround at Eldorado ammonia plant on time, on budget, and injury-free.

  • Assumed full ownership of the Eldorado carbon capture and sequestration project, expecting $25-$30 million in annual earnings and cash flow when fully operational in Q1 2027.

  • Anticipate meeting or exceeding annual production targets for 2026 due to major turnaround activity being substantially complete and higher production rates.

Concerns

3

  • Planned turnaround activity at Eldorado and Pryor facilities impacted Q2 results by an estimated $35 million to $40 million in adjusted EBITDA.

  • Middle East conflict and Strait of Hormuz disruption continue to create significant ongoing risk, impacting product pricing and global supply.

  • European TTF natural gas prices have been above $19-$20 per mmBtu, increasing European ammonia production costs to nearly $700 per metric tonne.

Guidance & targets

CategoryTargetConfidence
Annual earnings and cash flow from Eldorado CCS project
$25 million to $30 million
high materiality
High
Additional annual EBITDA from specific initiatives
$35 million
high materiality
Medium
Eldorado ammonia expansion project cost (net)
$105 million to $120 million
high materiality
Medium
Eldorado ammonia expansion annual production capacity
100,000 tons
high materiality
Medium
Eldorado ammonia expansion incremental annual EBITDA
$20 million
high materiality
Low
Full-year production targets
Meet or exceed
medium materiality
High

Deals & partnerships

Lapis Carbon Solutions Assumed full ownership of the Eldorado carbon capture and sequestration project.

Milestone-based structure aligns capital deployment with project advancement, limiting upfront capital exposure. Provides enhanced commercial flexibility.

Capital programs

Eldorado Carbon Capture and Sequestration Project underway
Period spend: $11 million

Benefit:$25 million to $30 million annual earnings and cash flow

$11 million invested in Q2 FY26 related to acquisition and development. Expected to begin operations in Q1 2027.

Eldorado Ammonia Expansion feasibility study advancing $135 million to $150 million (gross); $105 million to $120 million (net)
Funding: Existing cash on balance sheet; USDA grant (approx. 20% of gross cost)

Benefit:100,000 tons of annual ammonia production capacity; $20 million incremental annual EBITDA

Final investment decision targeted for Q2 2027. Capital cost per ton added is significantly below current new build costs.

Risks & headwinds

Middle East conflict and Strait of Hormuz disruption Ongoing

Shipping within the Strait represents about 20% of global ammonia seaborne trade, 30% of global urea trade, and 45% of global sulfur trade. European TTF natural gas prices above $19-$20 per mmBtu, increasing European ammonia production costs to nearly $700 per metric tonne.

Mitigation:Leveraging flexibility in production assets to optimize product mix; US structural production cost advantage due to cheaper domestic natural gas.

Elevated sulfur costs Current

Caused phosphate producers to curtail production.

Mitigation:Resulting decline in ammonia demand balances some of the loss of supply from Strait of Hormuz.

Global supply uncertainty and production restarts Near to medium term

Unclear timing and pace of potential production restarts from Russian plants damaged by Ukrainian drone attacks and Middle Eastern producers impacted by Iranian conflict.

Mitigation:Market supported by relatively tight supply environment and high non-US natural gas and energy prices.

Inflationary pressures Ongoing

SG&A costs trending higher, with about half expected to continue due to non-cash items like long-term incentive and stock-based compensation.

Mitigation:Expectation that per-ton controllable costs will trend lower due to higher production volumes, offsetting some inflationary pressures.

What to watch in Q3 FY26

Eldorado CCS project operations start

Q1 2027
Current Under development, Q2 FY26 investment of $11M
Target Beginning operations

Why it matters

This project is expected to generate $25-$30 million in annual earnings and cash flow, significantly impacting future profitability.

We continue to work closely with senior officials from the EPA's Region 6 Office with the expectations of beginning operations in Q1 2027.

Find out whether LXU delivers this. Inve re-checks your case every morning.

Q&A highlights

Will LSB add logistics and distribution to sell the extra 100,000 tons of ammonia from the El Dorado expansion to maximize price?

The quoted project cost includes some infrastructure build-out. Management plans to determine the best marketing strategy over the next three years to maximize margin, noting they currently sell 200,000 tons of merchant ammonia.

“Yes, actually, inside the cost that I quoted is some infrastructure build out to support that expansion. ... I think what we'd like to do is figure out how do we get the best margin that we can on those 100,000 tons.”

asked by Andrew Wong · answered by Unknown Speaker

2 min read 6 chapters

Detailed narrative

Operational Improvements and Turnarounds

LSB Industries successfully completed extensive and complex turnarounds at its Eldorado ammonia plant and site infrastructure, as well as pulling forward scheduled work at the Pryor facility. The Eldorado turnaround was completed on time, on budget, and injury-free, leading to significantly improved daily production rates of approximately 1375 tons/day, well above its 1150 tons/day nameplate capacity. These investments are expected to drive stronger, more reliable performance and higher annual production.

Strategic Carbon Capture and Sequestration Project

The company announced assuming full ownership of its Eldorado carbon capture and sequestration (CCS) project from Lapis Carbon Solutions. This milestone-based agreement limits upfront capital exposure while providing enhanced commercial flexibility. LSB expects the project to begin operations in Q1 2027, generating $25 million to $30 million in annual earnings and cash flow, and is actively pursuing low-carbon product supply opportunities and evaluating environmental attribute sales.

Commercial Environment and Market Dynamics

The Middle East conflict and its impact on shipping through the Strait of Hormuz continue to create significant ongoing risk and volatility in global ammonia, urea, and sulfur markets. Despite a recent reduction in the Tampa Ammonia Price Index, global natural gas prices, particularly in Europe (above $19-$20 per mmBtu), are driving up production costs for non-US producers, creating a significant structural cost advantage for US ammonia producers. Demand for ammonium nitrate in industrial markets and urea ammonium nitrate (UAN) remains strong.

Fertilizer Market Outlook and Demand Drivers

The fertilizer market backdrop remains constructive due to ongoing supply uncertainty, trade disruptions, and macro volatility. Global corn demand continues to outpace supply, with USDA projecting over 95 million planted corn acres for 2026-27 and reducing 2027 global ending stocks to a decade low. This is expected to incentivize US farmers to increase planted acres, driving strong nitrogen demand into 2027. The company anticipates favorable product pricing with potential for a Q4 rebound.

Financial Performance and Capital Allocation

For Q2 FY26, LSB reported adjusted EBITDA of $53 million, up 40% year-over-year, despite a $35 million to $40 million impact from planned turnarounds. The company generated $200 million of adjusted EBITDA on a trailing 12-month basis and ended the quarter with $220 million in cash and net leverage at 1.1 times. Operating cash flow was $59 million, with free cash flow of $32 million after sustaining capital. The company continues to evaluate expansion projects and aims for an additional $35 million in annual EBITDA by the end of 2027.

Eldorado Ammonia Expansion Project

LSB is advancing the feasibility study for a potential ammonia expansion at its Eldorado facility, targeting a final investment decision in Q2 2027 and completion alongside the 2029 turnaround. The project, with a net cost of $105 million to $120 million (after a USDA grant), is expected to add 100,000 tons of annual ammonia production capacity and generate approximately $20 million in incremental annual EBITDA. This expansion is projected to be funded with existing cash and offers a capital cost per ton significantly below new build costs.

Summary of the company's earnings call; see how call summaries are prepared. Not investment advice.