LSB Industries (LXU) The Stifel 2024 Cross Sector Insight Conference summary

Market and operational trends

• Early warm winter led to early ammonia application and planting, but wet spring slowed progress, leaving planting slightly behind the five-year average.

• Corn prices stabilized between $4 and $5 per bushel, supporting strong fertilizer demand and profitability for farmers.

• UAN demand was robust, with industry participants ending the season with low inventory levels due to a shift to just-in-time inventory practices.

• Russian fertilizer imports to the U.S. have decreased but not disappeared, creating opportunities to sell into new markets at better pricing.

• NuStar pipeline maintenance below the El Dorado plant is advantageous, allowing for more flexible ammonia distribution this year.

Strategic investments and contracts

• Added nitric acid storage at El Dorado to maintain production during customer outages and market volatility.

• Transitioned to direct customer distribution from Pryor, Oklahoma, utilizing four terminal locations for better seasonal positioning and pricing.

• Secured a five-year contract to supply 150,000 tons of low-carbon ammonium nitrate solution to Freeport-McMoRan, supported by new loading infrastructure.

Low-carbon and blue ammonia initiatives

• Carbon capture and sequestration project at El Dorado aims to capture 450,000-500,000 tons of CO2 annually, with a partner funding and operating the facility.

• Project expected to generate $15 million in annual EBITDA from CO2 sales, while retaining environmental attributes for low-carbon ammonia sales.

• Freeport-McMoRan contract leverages low-carbon ammonium nitrate, with potential for similar deals with other mining and chemical companies.

• Customers are increasingly interested in low-carbon nitric acid, with ongoing commercial discussions.