Oklahoma City-based LSB Industries,Inc. reported improved net sales in the second quarter of the year, showing $151.3 million in net sales compared to $140.1 million in the second quarter of 2024. But higher natural gas prices also affected its earnings.
LSB’s adjusted EBITDA of $38.3 million was down from the $41.9 million recorded in the second quarter of last year. Its net income of $3 million was down from the $9.6 million recorded a year earlier. Diluted earnings per share for the most recent quarter were $0.04 compared to 13 cents in the second quarter of last year.
“We generated a 6% year-over-year increase in sales volumes during the second quarter,” stated Mark Behrman, LSB Industries’ Chairman & Chief Executive Officer.
He said the firm was able to increase its ammonia production volume from a year earlier and as a result the company achieved “healthy year-over-year growth in both production and sales volumes of higher margin upgraded products.”
“Similar to the first quarter, however, we experienced materially higher natural gas prices relative to the prior year period when natural gas prices were at multi-year low levels. These higher gas input costs offset the higher selling prices and the operating improvements we made. We expect gas costs to be less of a year-over-year headwind in the third quarter.”
“Demand dynamics across our end markets are favorable as tight inventories and global supply disruptions have contributed to robust pricing, particularly for UAN, which is well above year-ago levels. On the industrial side of our business, our sales volumes have benefited from strong end market demand for nitric acid, as well as for ammonium nitrate, which is benefiting from a surge in U.S. copper mining activity.”
Behrman reported the company’s low carbon project at its El Dorado, Arkansas operation is on track to be operational by the end of 2026. The company is waiting on the EPA approval of its Class VI permit application. LSB’s partner in the project, Lapis Low Carbon Solutions completed the drilling of a stratigraphic injection well at the El Dorado site.
“We further de-risked our balance sheet and reduced our future interest expense by repurchasing debt during the second quarter. We also continued to make investments in the reliability of our plants as well as in projects that we expect to enhance our financial performance and visibility in the coming quarters. We believe our multi-pronged approach to capital allocation helps us maintain our financial flexibility while positioning us to maximize our profitability and cash flow, ultimately leading to increased shareholder value.”
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Adjusted EBITDA and EBITDA are non-GAAP financial measures. Please see the discussion below under the heading “Non-GAAP Reconciliations” and the reconciliations at the end of this release for additional information concerning these and other non-GAAP financial measures. |
Market Outlook
- Our industrial business remains consistent, reflecting:
- Robust demand for nitric acid domestically with limited export exposure
- Demand for ammonium nitrate (AN) for use in commercial mining explosives is robust across all commodities, particularly copper and gold
- Demand for AN is also benefiting from quarrying/aggregate production for infrastructure upgrade and expansion
- Our ammonia market is healthy and pricing remains at attractive levels driven by:
- Well balanced distribution channel inventories
- Supply disruptions from the Middle East
- Higher cost of production in Europe
- Continued delays in startup of new production capacity in the U.S.
- UAN pricing has strengthened due to:
- Steady exports, lower imports and strong demand, resulting in tight U.S. supply fundamentals
- Updraft from strong urea market resulting from robust global demand
- Corn market dynamics supportive of strong fertilizer demand:
- USDA’s recent outlook for U.S. corn calls for greater exports and lower ending stocks
- Expectations for U.S. corn acres planted in Spring 2025 to be above historical average levels
Low Carbon Ammonia Project Summary
- El Dorado Carbon Capture and Sequestration (CCS) Project with Lapis Carbon Solutions
- Expect to capture and sequester between 400,000 and 500,000 metric tons of CO2 per year, which would reduce our Scope 1 emissions by 25%, yielding between 305,000 and 380,000 metric tons per year of low carbon ammonia
- Awaiting EPA approval of Class VI permit application to commence construction
- Completed stratigraphic well in June to provide data to support EPA in review of Class VI application
- Expect to begin operations by the end of 2026
