LSB Industries (LXU) Q2 2024 earnings summary

Executive summary

• Entered a five-year agreement with Freeport Minerals to supply up to 150,000 short tons/year of low-carbon ammonium nitrate solution starting January 2025, supporting decarbonization and low-carbon strategy.

• Q2 2024 net sales were $140.1 million, down 16% year-over-year, with net income of $9.6 million and adjusted EBITDA of $41 million; diluted EPS was $0.13.

• Lower sales and profit were driven by reduced selling prices and volumes, especially for acids and ammonia, partially offset by lower natural gas costs and higher UAN sales.

• Advanced low-carbon ammonia and clean energy projects, including El Dorado and Houston Ship Channel, with key milestones expected through 2026.

• Returned capital to shareholders and de-risked balance sheet through $64 million in Q2 note repurchases, $97 million year-to-date, and 1.5 million shares repurchased year-to-date.

Financial highlights

• Q2 2024 net sales: $140.1 million (down 16% YoY); net income: $9.6 million (down 62% YoY); adjusted EBITDA: $41 million (down from $47 million YoY); gross profit: $27.4 million (down 24% YoY).

• Adjusted EBITDA margin improved to 29% from 28% YoY; gross margin was 19.6% versus 21.7% YoY.

• Diluted EPS was $0.13, compared to $0.33 in Q2 2023.

• Cash and short-term investments were $216 million as of June 30, 2024; total debt was $486 million.

• Repurchased $64 million of notes and 0.8 million shares in Q2; $97 million of debt and 1.5 million shares repurchased year-to-date.

Outlook and guidance

• Expect higher prices for ammonia and UAN in Q3 2024 versus prior year, supported by tight inventories and global supply constraints.

• Lower natural gas costs anticipated to continue benefiting profitability.

• Q3 results will reflect seasonal demand slowdown and a 30-day turnaround at Pryor, reducing production by 20,000 tons of ammonia and 35,000 tons of UAN.

• $15 million in turnaround expenses expected in Q3; adjusted EBITDA projected to be materially above Q3 2023 due to higher prices and lower costs.

• Capital expenditures for 2024 expected to be $60–80 million, focused on reliability and maintenance.