CVR PARTNERS, LP Q3 FY2026 earnings call

• Operational Performance & Turnarounds: Ammonia plant utilization was 80% due to a planned turnaround at the East Dubuque facility that began late August and completed in October. Facilities ran well otherwise, with steady demand observed after summer price resets.
• Pricing Trends: Ammonia prices increased approximately 20% year-over-year, while UAN prices decreased by approximately 11%. Fall ammonia pricing reached seasonal highs due to limited terminal availability in the Corn Belt. UAN market firmed through Q3, with tight local supply.
• Capacity Expansion & Upgrades: Completed brownfield capacity expansion at East Dubuque, intending to test sustained higher capacity in Q4. Completed water quality upgrades at Coffeyville. Next turnaround is planned for 2028 at Coffeyville, allowing two years of uninterrupted operation.
• Strategic Projects: Finalizing engineering for the feedstock optionality project at Coffeyville, which aims to provide dual feedstock flexibility (natural gas and pet coke). This would make it the only US nitrogen facility with such flexibility. DEF production and load-out capacity expansion is also underway at Coffeyville.
• Global Market Context: Geopolitical conflicts in Russia/Ukraine and the Middle East continue to impact global nitrogen supply and shipping. European ammonia production costs remain high (> $30/MMBtu natural gas), favoring US producers with lower natural gas costs (~$3/MMBtu).
• Cash Reserves & Investments: Board elected to reserve capital in Q3 to fund future projects. Anticipates holding higher cash levels near-term as execution ramps up. Unitholders are expected to benefit from these investments upon completion.

The company operates a single integrated nitrogen fertilizer segment comprising ammonia and UAN (Urea Ammonium Nitrate) production. For the third quarter of 2026, net sales were $146 million, representing the total revenue for the firm. The segment reported an operating loss of $4 million and a net loss of $11 million ($1.02 per common unit). EBITDA was $20 million. Specific product metrics include: Ammonia production of 175,000 gross tons with 46,000 net tons available for sale, sold at an average price of $637 per ton; UAN production of 294,000 tons, with approximately 327,000 tons sold at an average price of $309 per ton. Direct operating expenses totaled $90 million, including $27 million in turnaround expenses.

• Q4 2026 Utilization: Estimated ammonia plant utilization rate between 88% and 93%, impacted by the completion of the East Dubuque turnaround.
• Q4 2026 Operating Expenses: Direct operating expenses (excluding inventory and turnaround impacts) estimated between $58 million and $63 million. Turnaround expenses estimated between $4 million and $6 million.
• Q4 2026 Capital Spending: Total capital spending estimated between $26 million and $34 million.
• Full Year 2026 Capital Spending: Estimate total capital spending for 2026 to be approximately $95 million to $104 million, with $55 million to $63 million designated as maintenance capital.
• Outlook: Management cites a strong order book for remainder of 2026 and into Q1 2027, positioning the company well heading into spring despite current affordability challenges.

• Geopolitical Risks: Ongoing conflicts in Russia/Ukraine and the Middle East affect global nitrogen supply chains, particularly shipping through the Strait of Hormuz. Persistent attacks on shipping highlight risks to fertilizer availability and pricing.
• Market Volatility: Fluctuations in finished product prices, corn prices, and natural gas prices directly impact margins and demand. While US natural gas remains low, European costs have risen significantly.
• Operational Execution: Dependence on successful completion of turnarounds and new projects (e.g., feedstock optionality) without significant delays or cost overruns.
• Regulatory/Environmental: Focus on environmentally responsible operations implies ongoing compliance and potential liability risks associated with water quality and emissions.

Q: Given the strong forward book and tight local supply, how sustainable are current ammonia and UAN pricing levels, and what are the primary headwinds to maintaining this momentum into spring?

A: Management noted that while affordability is less favorable than in late summer due to eased corn prices, the combination of tight local supply and constructive global balance supports current pricing. However, persistent geopolitical risks, specifically attacks on shipping in the Middle East and elevated Chinese exports, remain key variables that could disrupt supply and pressure prices. The wide gap between inland and seaborne ammonia prices also presents a risk if global supply conditions normalize.

Q: Can you elaborate on the timeline and financial impact of the feedstock optionality project at Coffeyville, and how it fits into the broader capital allocation strategy?

A: The detailed engineering and cost estimates for the Coffeyville feedstock optionality project are in final phases, with construction expected to begin in 2027 following board approval. This project will allow the facility to switch between natural gas and third-party pet coke based on prevailing prices, enhancing margin resilience. Funding for this and other initiatives comes from reserves taken over recent years, reflecting the board's decision to prioritize long-term operational flexibility and reliability over immediate distribution growth.

Q: How does the company view the structural competitive advantage provided by low-cost US natural gas compared to European producers, especially given recent energy price movements?

A: Management emphasized that US natural gas prices remain near $3/MMBtu, while European prices have risen above $30/MMBtu, keeping European production costs well above import prices and leading to curtailments. This structural gap strongly favors US producers like CVR Partners, providing a durable competitive advantage in both domestic and export markets. The company believes this cost differential will continue to support profitability even if global ammonia prices fluctuate.

Q: What specific steps is management taking to ensure the East Dubuque turnaround did not negatively impact long-term asset reliability, and what are the plans for sustaining the new capacity?

A: The turnaround was completed in October in line with a revised schedule, though equipment delays caused minor slippage. Management intends to test the ability to sustainably operate at the increased capacity level during Q4 to validate the brownfield expansion. Additionally, parallel water quality upgrades at Coffeyville and planned expansions of DEF production capacity are aimed at improving overall reliability and supporting target utilization rates above 95% of nameplate capacity excluding turnarounds.