Q1 2025 LSB Industries Inc Earnings Call
Greetings and welcome to the LSP Industries first quarter 2025 earnings conference call at this time, all participants trying to listen only mode.
Operator: Greetings, and welcome to the LSB Industries First Quarter 2025 Earnings Conference Call. At this time, all participants are in a listen-only mode. If anyone should require operator assistance, please press star zero on your telephone keypad.
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Operator: A question and answer session will follow the formal presentation. You may be placed into question queue at any time by pressing star 1 on your telephone keypad and we ask that you please ask one question, one follow-up, then return to the queue. As a reminder, this conference is being recorded.
A question and answer session will follow the formal presentation.
You may be placed in the question queue at any time by pressing star one on your telephone keypad and we ask you. Please ask one question one follow up then return to the queue. As a reminder, this conference is being recorded.
Fred Buonocore: It's now my pleasure to introduce your host, Fred Buonocore, Vice President, Investor Relations. Fred, please go ahead. Good morning, everyone.
Speaker Change: It's now my pleasure to introduce your host Fred Burkhart, Vice President of Investor Relations. Please go ahead.
Fred Burkhart: Good morning, everyone. Joining me today are Mark Behrman, our chairman and Chief Executive Officer, Cheryl Maguire, our Chief Financial Officer, and Damien Renwick, our Chief commercial officer.
Fred Buonocore: Joining me today are Mark Behrman, our Chairman and Chief Executive Officer, Cheryl Maguire, our Chief Financial Officer, and Damien Renwick, our Chief Commercial Officer. Please note that today's call includes forward-looking statement. These statements are based on the company's current intent, expectations, and projections. They are not guarantees of future performance, and a variety of factors could cause the actual results to differ materially. For more information about these risks and uncertainties that could cause actual results to differ materially from those projected or implied by forward-looking statements, please see the risk factors set forth in the company's most recent annual report on Form 10-K.
Fred Burkhart: Please note that today's call includes forward looking statements. These statements are based on the company's current intent expectations and projections. They are not guarantees of future performance and a variety of factors could cause the actual results to differ materially.
Fred Burkhart: For more information about these risks and uncertainties that could cause actual results to differ materially from those projected or implied by forward looking statements. Please see the risk factors set forth in the company's most recent annual report on Form 10-K.
Fred Buonocore: On the call, we will reference non-GAAP results.
Fred Burkhart: On the call we will reference non-GAAP results. Please see the press release posted yesterday in the investors section of our website LSP industries Dot com for further information regarding forward looking statements and reconciliations of non-GAAP results to GAAP results at this time I think to go.
Fred Buonocore: Please see the press release posted yesterday in the Investors section of our website, lsbindustries.com, for further information regarding forward-looking statements and reconciliations of non-GAAP results to GAAP results.
Mark Behrman: At this time, I'd like to go ahead and turn the call over to Mark. Thank you, Fred, and good morning, everyone. The global economy has a lot of moving parts. not the least of which is the impact that U.S. tariffs could have on our... While we don't anticipate a big impact to our business, it has created a lot of uncertainty for both planned spending and potential capital projects. We'll provide more color on this later in our...
Speaker Change: Go ahead and turn the call over to Mark.
Mark Behrman: Thank you Fred and good morning, everyone.
Speaker Change: The global economy. It has a lot of moving parts right now not the least of which is the impact that U S tariffs could have on our business.
Speaker Change: While we don't anticipate a big impact to our business. It has created a lot of uncertainty for both planned spending and potential capital projects will provide more color on this later in my comments.
Mark Behrman: Turning our attention to the first quarter, on page four of our presentation, we highlight some achievements during the quarter. Overall sales volumes improved 4% quarter over quarter, driven by solid improvement in sales volumes for ammonium nitrate and UAM. These gains are the result of higher ammonia production and better performance by our upgrading We're pleased at the work to improve the reliability and efficiency of our facilities is yielding results, and we expect to see continued improvement as 2025 progresses. Not only did we increase our production and sales volumes during the first quarter, but we did so with zero recordable injuries across the organization.
Speaker Change: Turning our attention to the first quarter.
Speaker Change: Page four of our presentation, we highlight some achievements during the quarter.
Speaker Change: Overall sales volumes improved 4% quarter over quarter, driven by solid improvement in sales volumes for ammonium nitrate in U a N. These.
Speaker Change: These gains are the result of higher ammonia production and better performance by your upgrading plants.
Speaker Change: We're pleased that the work to improve the reliability and efficiency of our facilities is yielding results and we expect to see continued improvement is 2025 progresses.
Speaker Change: Not only do we increase our production and sales volumes during the first quarter, but we did so with zero recordable injuries across the organization.
Mark Behrman: Congratulations to the entire team for embracing our Protect What Matters core value in demonstrating that our Goal Zero is achievable.
Speaker Change: Congratulations to the entire team for embracing our protect what matters core value and demonstrating that our goal zero is achievable.
Speaker Change: Okay.
Mark Behrman: Lastly, we continue to make progress with our decarbonization project at our Eldorado facility, which I'll discuss later in the call.
Speaker Change: Lastly, we continue to make progress with our decarbonization projects at our El Dorado facility, which I'll discuss later in the call.
Damien Renwick: Now, I'll turn the call over to Damien, who will review current market dynamics and pricing trends. Damien? Thanks, Mark, and good morning, everyone.
Speaker Change: Now I'll turn the call over to Damien, who will review current market dynamics and pricing trends Damian.
Damien Renwick: Thanks, Mark and good morning, everyone.
Damien Renwick: I'll begin my remarks today by addressing the tariff situation. You'll find a summary of key points on this matter on page 5. Much remains to be seen as to how the US tariffs on imports will affect our business. So far, we've seen a significant uplift in domestic pricing for prompt delivery of urea due to tariffs and other factors. We expect this to persist through the current spring planting season. We believe our market exposure to retaliatory tariffs from other countries is limited. We export less than 10% of our sales. with all our exports to Mexico and Canada.
Damien Renwick: I'll begin my remarks today by addressing the tariff situation.
Damien Renwick: You'll find a summary of key points on this matter on page five.
Damien Renwick: Much remains to be saying is to have the U S tariffs on imports will affect our business.
Damien Renwick: So far we've seen a significant uplift in domestic pricing for prompt delivery of urea due to tariffs and other factors.
Damien Renwick: We expect this to persist through the spring planting season.
Damien Renwick: We believe our market exposure the retaliatory tariffs from other countries is limited.
Damien Renwick: We export less than 10% of our sales.
Damien Renwick: With all of our exports to Mexico and Canada.
We also I believe the impacts to AG markets, we serve we will not be significant.
Damien Renwick: We also believe the impact to ag markets we serve will not be significant. Only 2% of U.S. corn exports were to China in 2024.
Damien Renwick: Only 2% of U S corn exports to China in 2024.
Damien Renwick: Lastly, some of the parts, components and equipment we use to maintain our plants are imported, mainly from Europe. We are evaluating any potential tariff implications for these imports, but we have already seen some pricing pressure from suppliers. We are also looking to source domestically wherever possible.
Damien Renwick: Lastly, some of the parts components and equipment, we use to maintain their plants are imported mainly from Europe.
Damien Renwick: We are evaluating any potential tariff implications for these imports, but we have already seen some pricing pressure from suppliers.
Damien Renwick: We are also looking to source domestically wherever possible.
Damien Renwick: Moving to page six. Demand for our industrial products remains robust. We continue to ramp up our ammonium nitrate solution volumes as we expand our industrial business. copper mining activity and pricing remain strong. Global demand for copper has surged over the past year. Additionally, gold prices have continued to move higher. This price increase is driven by global economic uncertainty. As a result, U.S. gold mining activity continues to be strong. Nitric acid continues to see healthy demand and price. We remain sold out. We also continue to see opportunities for growth with existing and new customers.
Damien Renwick: Moving to page six.
Damien Renwick: Demand for our industrial products remains robust.
Damien Renwick: We continue to ramp up our money I'm not tried solution volumes as we expand our industrial business.
Damien Renwick: Copper mining activity and pricing remains strong.
Damien Renwick: Global demand for copper has surged over the past year.
Damien Renwick: Additionally, gold prices have continued to move higher.
Damien Renwick: This price increase is driven by global economic uncertainty.
Damien Renwick: As a result U S gold mining activity continues to be strong.
Damien Renwick: Nitric acid continues to see healthy demand and pricing.
Damien Renwick: We remain sold out.
Damien Renwick: We also continue to see opportunities for growth with existing and new customers.
Damien Renwick: Our primary constraint at this point is production capacity. and we are continually evaluating opportunities to increase our production capacity in both nitric acid and ammonium nitrate.
Damien Renwick: Our primary constraint at this point is production capacity.
Damien Renwick: And we are continually evaluating opportunities to increase our production capacity in both nitric acid and ammonia I'm not try it.
Damien Renwick: On page 7, we continue to see strong prices for our products. UAN prices continue to increase significantly. The current NOLA UAN price of $350 per tonne is 73% higher than the low price of Fall 2024. We are seeing strong demand, along with insufficient import volumes, which has resulted in tight U.S. inventories. Urea prices have also strengthened considerably, with Nola prices now above $500 per tonne. This increase is due to seasonal demand, lack of imports, tariff pressures, robust demand from India, and the continued ban on urea exports from China.
Damien Renwick: On page seven we continued to see strong process for our products.
Damien Renwick: You are in process continue to increase significantly.
Damien Renwick: The current NOLA U I N price of $350 per ton is 73% higher than the low price of full 2024.
Damien Renwick: We are seeing strong demand along with insufficient import volumes, which has resulted in tight U S inventories.
Damien Renwick: Urea prices have also strengthened considerably with NOLA prices now above $500 per tonne.
Damien Renwick: This increase is due to seasonal demand.
Damien Renwick: Lack of imports tariff questions robust demand from India.
Damien Renwick: And the continued band on urea exports from China.
Damien Renwick: Okay.
Damien Renwick: The tamper-ammonia price has declined since the start of the year. This decline has followed falling natural gas prices in Europe. Europe continues to be the marginal cost producer for ammonia. This dynamic is underpinning ammonia prices globally. But despite this decline, ammonia prices remain attractive due to a globally tight supply and demand balance. U.S. ammonia producers continue to enjoy a significant cost advantage to those in Europe. We expect that spread to persist through the entirety of this year.
Damien Renwick: The Tampa ammonia price has declined since the start of the year.
Damien Renwick: This decline has followed falling natural gas prices in Europe.
Damien Renwick: Europe continues to be the marginal cost producer for ammonia.
Damien Renwick: This dynamic is underpinning ammonia prices globally.
Damien Renwick: But despite this decline ammonia prices remain attractive.
Damien Renwick: Two a globally taught supply and demand balance.
Damien Renwick: U S ammonia producers continue to enjoy a significant cost advantage to those in Europe.
Damien Renwick: We expect that spread to persist through the entirety of this year.
Damien Renwick: Okay.
Damien Renwick: The spring 2025 planting season is shaping up strongly, with a significant increase in planted corn acres expected. The USDA reported in its Prospective Plantings Report that producers intend to plant 95.3 million acres of corn this year, compared to 90.6 million planted acres last year. This significant increase is driving very strong fertiliser demand and is driving pricing for our products up significantly.
Damien Renwick: The spring 2025 planting season is shaping up strongly with a significant increase in planted corn acres expected.
Damien Renwick: The USDA reported and its prospective plantings report that.
Speaker Change: That produces intend to plant 95 three.
Speaker Change: A million acres of corn this year compared to $19 6 million planned Tonight because last year.
Speaker Change: This significant increase is driving very strong fertilizer demand and is driving pricing for our products up significantly.
Speaker Change: On page eight the USDA has lowered its forecast for corn ending stocks.
Damien Renwick: On page 8, the USDA has lowered its forecast for corn ending stocks. This forecast has provided support for corn prices.
This forecast has provided support for corn process.
Damien Renwick: U.S. corn prices sit solidly above $4 per bushel, supporting favourable pharma economics.
Speaker Change: U S corn prices get solidly above $4 per bushel supporting favorable pharma or economics.
Cheryl Maguire: Now, I'll turn the call over to Cheryl to discuss our first quarter financial results and our outlook. Thanks, Damien, and good morning. On page nine, you'll see a summary of our first quarter 2025 financial results. You can see the early benefits of the investments we've made in plant reliability and efficiency in our increase in net sales, driven in part by stronger volumes. Page 10 bridges our first quarter 2024 adjusted EBITDA of $33 million to our first quarter 2025 adjusted EBITDA of $29 million. Improved sales volumes, along with higher pricing for ammonia and AN, were offset by materially higher natural gas costs.
Speaker Change: Now I'll turn the call over to Cheryl to discuss our first quarter financial results and our outlook Cheryl.
Cheryl Maguire: Thanks, Damien and good morning on page nine you'll see a summary of our first quarter 2025 financial result.
Speaker Change: You can see the early benefits.
Speaker Change: We have made in plant reliability and efficiency in our increase in net sales driven in part by stronger volumes.
Speaker Change: Page 10 branches are first quarter 'twenty 'twenty four adjusted EBITDA of 33 million again to our first quarter 2025, adjusted EBITDA 29 million.
Speaker Change: And print sales.
Speaker Change: Along with higher pricing for ammonia and a N or offset by materially higher natural gas cost.
Speaker Change: As we've discussed on previous calls we liked the contractual nature of our industrial business and the benefit that it provides to our overall performance.
Cheryl Maguire: As we've discussed on previous calls, we like the contractual nature of our industrial business and the benefits this provides to our overall performance. On page 11, we illustrate that many of our industrial contracts are cost-plus arrangements where we pass through the cost of the natural gas used to make products like nitric acid or AN and earn a fixed margin. This type of arrangement allows us to contract out the volatility of natural gas prices, is non-seasonal, and provides stability to our business. In 2021, less than 20% of our sales volumes were cost plus contracts. As we've grown our industrial business, we've grown this cost pass-through business to approximately 30% as of the end of Q1 2025.
Speaker Change: On page 11, we illustrate that many of our industrial contracts are cost plus arrangement, where we pass through the cost of the natural gas you can make products like nitric acid Oran and earn a margin.
Speaker Change: This type of arrangement allows us to contract out the volatility of natural gas prices.
Speaker Change: Is non seasonal and provides stability to our business.
Speaker Change: In 2021 less than 20% of our sales volumes were cost plus contracts.
Speaker Change: As we've grown our industrial business.
Speaker Change: We've grown this cost pass through business to approximately 30%.
Speaker Change: As of the end of Q1 2025.
Cheryl Maguire: And we expect this to grow to 35% by the end of the year as we continue to optimize our product mix.
Speaker Change: And we expect this to grow to 35% by the end of the year as we continue to optimize our product mix.
Speaker Change: Page 12 provides a summary of our key balance sheet and cash flow metrics.
Cheryl Maguire: Page 12 provides a summary of our key balance sheet and cash flow metrics. Our cash balance remains strong and our leverage ratio remains in line with our target level for a mid-cycle pricing environment. We will continue to make investments in the reliability of our facilities while also investing in storage and logistics capability to support our growing industrial business.
Speaker Change: Our cash balance remains strong and our leverage ratio remains in line with our target level for a mid cycle pricing environment.
Speaker Change: We will continue to make investments in the reliable.
Speaker Change: Facilities, while also investing in stores and logistics capability to support.
Speaker Change: Our growing industrial business.
Speaker Change: Turning to the second quarter outlook, the Tampa ammonia price currently sits at $435 a ton.
Cheryl Maguire: Turning to the second quarter outlook, the Tampa ammonia price currently sits at $435 a ton. NOLA UAN pricing rose through April and is currently at its highest level in more than two years. While much of our U.N. volume for April was sold ahead of this increase, we expect to capitalize on the pricing strength for sales in May and June. Our natural gas costs settled just under $4.00 per MMBTU for April. However, U.S. gas costs have trended downward closer to $3.00 per MMBTU as we move toward May settlement, and we look forward to benefiting from that.
Speaker Change: No are you an pricing rather through April and is currently at its highest level in more than two years.
Speaker Change: Well much of our U N volumes for April were sold ahead of this increase we expect to capitalize on the pricing transfer sales in May and June.
Speaker Change: Our natural gas costs I don't just under $4 per and then Btu for April.
Speaker Change: However, U S gas costs have trended downward closer to $3 per M. N V to you as we move toward base that on that and we look forward to benefiting from that.
Speaker Change: From a volume perspective, we expect meaningful increases in both U a N and Ann volumes compared to prior year.
Cheryl Maguire: From a volume perspective, we expect meaningful increases in both UAN and AN volumes compared to prior year. This will come with lower sales volumes of ammonia, as we forego ammonia sales in favor of upgrading into higher margin products.
Speaker Change: This will come with lower sales volumes of ammonia as the Fargo ammonia sales in favor of upgrading into higher margin products.
Speaker Change: One change to the full year outlook that we discussed on our Q4 'twenty 'twenty four call relate to the turnaround that was scheduled for El Dorado site for the second half of this year.
Cheryl Maguire: One change to the full year outlook that we discussed on our Q4 2024 call relates to the turnaround that was scheduled for our El Dorado site for the second half of this year. We have elected to push this turnaround into the first half of 2026, as we have experienced delays in the delivery of key equipment we were planning to replace during the turnaround. As a result, we are increasing our ammonia production outlook for 2025 by approximately 30,000 tons. We are also lowering our estimated turnaround expense for the full year by approximately $15 million.
Speaker Change: We have elected to push this turnaround into the first half of 2026, and we have experienced delays in the delivery of key equipment, we were planning to replace during the turnaround.
Speaker Change: As a result, we are increasing our ammonia production outlook for 2025 by approximately 30000 tons.
Speaker Change: We are also lowering our estimated turnaround expense for the full year by approximately $15 million.
Mark Behrman: And now I'll turn it back over to Mark. Thank you, Cheryl. Page 13 summarizes a key development with our Ildarado Ammonia Project. We are excited that in January we achieved pre-certification status under the Fertilizer Institute's verified ammonia carbon intensity. This is a voluntary certification. Carbon Footprint of Ammonia Production at a Specific Facility from Well to Production. The program utilizes a standard methodology to calculate the carbon intensity of a facility's ammonia production. The program has been developed by industry experts and the results are audited by a third party. Once the auditor provides a written report confirming that the carbon intensity was calculated by the facility according to the methodology Verified ammonia carbon intensity certifies the facility.
And now I'll turn it back over to Mark.
Mark Behrman: Thank you Cheryl.
Speaker Change: Page 13 summarizes our key development with our El Dorado ammonia project.
Speaker Change: We were excited that in January we achieved pre certification status under the fertilizer institutes verified ammonia carbon intensity program.
Speaker Change: This is a voluntary certification of the carbon footprint of ammonia production at a specific facility from well to production yet.
Speaker Change: The program utilizes a standard methodology to calculate the carbon intensity of our facility's ammonia production.
Speaker Change: The program has been developed by industry experts and the results are audited by a third party.
Speaker Change: Once the order provides a written report confirming that the carbon intensity was calculated by the facility. According to the methodology.
Speaker Change: Verified ammonia carbon intensity certifies the facility.
Speaker Change: Our ammonia plant at El Dorado is one of four north American plants to have received such a status.
Mark Behrman: Our ammonia plant at El Dorado is one of four North American plants to have received such a status. We expect this certification to be integral in our ability to secure sales agreements for our low-carbon ammonia and upgraded product out.
Speaker Change: We expect this certification to be integral in our ability to secure sales agreements for our low carbon ammonia and upgraded product output.
Speaker Change: Yeah.
Mark Behrman: Page 14 is an overview of the project at Eldorado. our partner, Lapis Carbon Solutions. Completing the drilling of a stratigraphic conjecture. LAPDIS is now gathering data to support the EPA in their continuing technical review of our Class VI Permadeath. Once our project receives EPA approval, we will use the same well for CO2 injections, allowing us to be very efficient. Based on our ongoing dialogue with the EPA, we continue to expect to begin CO2 injections by the end of 2026. Given the impact of U.S.
Speaker Change: Page 14 is an overview of the project at El Dorado.
Speaker Change: Our partner Leptus carbon solutions is completing the drilling of a stratigraphic injection well.
Speaker Change: That this is now gathering data support the EPA and their continuing technical review of our class six permit application.
Speaker Change: Once a project received EPA approval, we will use the same well for C O two injections, allowing us to be very efficient.
Speaker Change: Based on our ongoing dialogue with the EPA, we continue to expect to begin C. O two injections by the end of 2026.
Speaker Change: Given the impact of U S tariff related price increases and other global economic uncertainties on project costs, coupled with a slower than anticipated ramp up of low carbon ammonia demand, we have decided to put a pause on our Houston ship channel projects while disappointing.
Mark Behrman: tariff-related price increases and other global economic uncertainties on projects, coupled with a slower-than-anticipated ramp-up of low-carbon ammonia.
Mark Behrman: We have decided to put a pause on our Houston Ship Channel project. while disappoint We are excited that we will have approximately 250,000 tons of low-carbon ammonia available for sale out of our Eldorado site by the end of next year.
Speaker Change: We are excited that we will have approximately 250000 tons of low carbon ammonia available for sale out of our El Dorado site by the end of next year.
Speaker Change: We're off to a good start in 2025.
Mark Behrman: We're off to a good start in 2025. While we're making meaningful production and sales volume improvements. We are continuing to grow and optimize our industrial business in order to increase the stability and predictability of our earnings.
Speaker Change: While we're making meaningful production and sales volume improvements, we are continuing to grow and optimize our industrial business in order to increase the stability and predictability of our earnings stream.
Mark Behrman: And, as I mentioned, we're on track to begin producing low-carbon ammonia at our Eldorado facility late next year. We plan to continue to invest in our core business to achieve our plant reliability. Additionally, we have a number of opportunities within our existing portfolio of assets to grow our profits while maintaining a strong balance. We will look to make investments in projects that increase our profits and cash flow while managing our leverage at a level appropriate for the uncertain economic environment. Collectively, we believe that these initiatives will translate into significant incremental EBITDA and shareholder value.
Speaker Change: And as I mentioned, we're on track to begin producing low carbon ammonia at our El Dorado facility late next year.
Speaker Change: We plan to continue to invest in our core business to achieve our plant reliability goals. Additionally.
Speaker Change: Additionally, we have a number of opportunities within our existing portfolio of assets to grow our profits, while maintaining a strong balance sheet.
Speaker Change: We will look to make investments and projects that increase our profits and cash flow, while managing our leverage at a level appropriate for the uncertain economic environment.
Speaker Change: Collectively we believe that these initiatives will translate into significant incremental EBITDA and shareholder value.
Mark Behrman: Before we open it up for questions, I'd like to mention that we will be participating in the following events in the coming months. The UBS Energy Transition and Decarbonization Conference in New York on May 14. and the Deutsche Bank Industrials Materials and Building Products Conference in New York on June 5th.
Speaker Change: Before we open it up for questions I'd like to mention that we will be participating in the following events in the coming months.
Speaker Change: UBS energy transition and Decarbonization conference in New York on May 14th.
Speaker Change: And the Deutsche Bank Industrials materials and building products Conference in New York on June 5th.
Mark Behrman: We look forward to speaking with some of you at those events.
Speaker Change: We look forward to speaking with some of you at those events.
Mark Behrman: That concludes our prepared remarks, and we will now be happy to take your questions. Thank you.
Speaker Change: That concludes our prepared remarks, and we will now be happy to take your questions.
Speaker Change: Thank you well now be conducting a question and answer session if you'd like to be placed in the question queue. Please press star one on your telephone keypad. As a reminder, please ask one question. One follow up then return to the queue. Once again Thats star one to be placed in the question queue.
Operator: We will now be conducting a question and answer session. If you would like to be placed into question queue, please press star 1 on your telephone keypad. And as a reminder, please ask one question, one follow-up, then return to the queue. Once again, that's star 1 to be placed into question queue.
Lucas Beaumont: Our first question is coming from Lucas Beaumont from UBS, your line is now live. Good morning. So I guess as we head into May, we're seeing very strong derivative pricing, sort of including UAN. That looks sort of set to peak here in the second quarter. On the other hand, ammonia has sort of been weakening, and there's expectations that the Tampa contract's probably going to shift a fair bit lower for May as well.
Speaker Change: Our first question is coming from Lucas Falloff from UBS. Your line is that a lot.
Speaker Change: Yeah.
Speaker Change: Good morning.
Speaker Change: So I guess as we head into <unk>, we're seeing very strong.
Speaker Change: Derivative crossing center, including here I am.
Speaker Change: That looks that are set to take here in the second quarter on the other hand.
Speaker Change: There is sort of a weight gain awakening and there's expectations that the 10th contracts probably going to shift to say that lower.
Speaker Change: And I as well.
Cheryl Maguire: So I guess with these diverging trends, and just considering some of the timings in the order book that you mentioned earlier, Cheryl, I was just wondering if you could give us a bit more comment on how we should think about the setup for LXU's realized pricing here in the second quarter. Hey Lucas, I'll take that one. So look, we're seeing, as you said, good price increases for our UAN product. We're well positioned to take advantage of that. We're not fully sold out, deliberately so, through the end of second quarter, so we can capitalise on that pricing and that'll reflect in our results.
Speaker Change: So I guess, what they got very junior trends and.
Speaker Change: Considering sort of the timing is in the order book that you mentioned.
Speaker Change: Earlier, Sheryl I was just wondering if you could give us a bit more that we should think about.
Speaker Change: Set up for Aleksey is realized pricing here in the second quarter.
Speaker Change: Hi, Lucas I'll take that one so look what we're seeing as you said good price increases.
Speaker Change: For our U I N products are well positioned to take advantage of that week.
Speaker Change: We're not fully sold out deliberately so.
Speaker Change: Through the end of second quarter. So we can capitalize on that pricing and that will that will reflect in our results.
Speaker Change: Yeah.
Speaker Change: Right and then I guess, just given that you've decided to sort of pause.
Lucas Beaumont: Right. And then I guess just given that you've decided to sort of pause the Houston Ship Channel project, I was just wondering if you could kind of give us your thoughts now on your updated capital allocation priorities. Is there anything else on the CapEx side that you guys are looking to do now to maybe drive an earnings improvement there? Or is it more back to repurchases and that sort of thing?
Speaker Change: The Houston ship channel projects I, just wondered if you could kind of give us your thoughts now in your updated capital allocation priorities is there anything else on the Capex side that you guys will look to do now to Timna I think driving the earnings improvement there or.
Speaker Change: Is it all back to back to repurchases.
Speaker Change: That sort of thing.
Speaker Change: Yes, good morning Lucas.
Cheryl Maguire: Good morning, Lucas. I think there's nothing, not a project on the horizon as we sit here today that we've committed capital to. We continually look at projects on our existing assets that we can do that will improve the operating results. But as we sit here today, we haven't FID'd any of those projects. From a capital allocation standpoint, as always, we're going to focus on improving the reliability and the EH&S of our existing facilities. And so we'll continue to do that, which I think, as we stated before, is somewhere in the neighborhood of $60 to $65 million of capital a year.
Speaker Change: Yeah, I think theres nothing not a project on the horizon as we sit here today that we've committed capital to we continually look at.
Speaker Change: Projects on our existing assets that we can do that will improve the operating results, but as we sit here today, we haven't if I did any of those projects from a capital allocation standpoint.
Speaker Change: As always we're going to focus on improving the reliability and the H N S.
Speaker Change: Our existing facilities and so we'll continue to do that which I think as we stated before is somewhere in the neighborhood of $60 million to $65 million of.
Capital a year and then after that I think we will take a step back and look at them.
Lucas Beaumont: And then after that, I think we will take a step back and look at investments in other projects, stock buyback, and, of course, debt reduction. All right, thank you. Thank you.
Speaker Change: Investments and other projects stock buyback and of course debt reduction.
Speaker Change: Alright, thank you.
Speaker Change: Thank you next question is coming from Kevin Estok from Jefferies. Your line is now live.
Kevin Estock: Next question is coming from Kevin Estock from Jeffries. Your line is now live. Hey, good morning. This is Kevin Estacon for Laurence Alexander. Thank you for taking my questions. So, my first one is just, there's been obviously quite a bit of talk around deregulation by the administration. And I guess I was wondering whether or not you guys have sketched out or maybe thought about how, you know, how big of a tailwind or how it could help you guys. I guess, let's say like related to permitting, etc. I guess many companies that we're covering are actually saying that the impact is going to be quite minimal.
Kevin Estok: Hey, Good morning. This is Kevin Estok on for Laurence Alexander Thank you for taking my questions.
Speaker Change: So my first one is just I know there's obviously.
Kevin Estok: Obviously quite a bit of talk around deregulation by the administration.
Kevin Estok: And I guess I was wondering whether or not you're going to have sketched out maybe thought about how you know how big of a tailwind or how it could help you guys I guess.
Relating to permitting et cetera, I guess, many companies that were covering are actually saying that the impact is going to be quite minimal.
Kevin Estock: And I guess I was wondering if you guys were thinking about it in the same.
Kevin Estok: I was wondering if you guys are thinking about it in the same way.
Kevin Estok: Yes, good morning.
Mark Behrman: Yeah, good morning. I would say it is going to be quite minimal, with the exception of the EPA, where we're having numerous conversations. We did see... You know, I'd say a slow process before, you know, the change in the administration and the change in the head of the EPA in the regional offices, and we certainly saw a pause for a couple of months. Well, they put new people in place to lead all those efforts. But since the time that Lee Zeldin took over the EPA and our new head of the Region 6 office in Dallas of the EPA took over, we've seen a lot more activity and a lot more conversations, which is encouraging for us on our low-carbon ammonia project at El Dorado.
Speaker Change: I would say it is going to be quite minimal with the exception of the EPA, where we're having numerous conversations we did see.
Speaker Change: You know I'd say, a slow process before the.
Speaker Change: The change in the administration and the change in the head of the EPA and the regional offices and we certainly saw a pause for a couple of months.
Speaker Change: While they put new people in place to lead all those efforts but.
Speaker Change: Since that.
Speaker Change: Since the time that lease Eldon took over the P E and our new head of the region six office in Dallas of the EPA took over and we've seen a lot more activity and a lot more conversations which is encouraging for us on our low carbon ammonia project at El Dorado other than that though I don't think we are.
Kevin Estock: Other than that, though, I don't think we're going to see much change. Got it. Okay. Thank you.
Speaker Change: Gonna see much change.
Speaker Change: Got it okay. Thank you and just I guess as a second question.
Kevin Estock: And just, I guess, as a second question, you guys mentioned on the release that there's potential pent-up demand, I guess, related to UAN at the retailer and producer level. And I guess I was wondering if you could give a little bit more color there, the certain specific dynamics there, and I guess it's related to, I guess, you know, higher corn acreage this planting season. If there's any color that would help be helpful. Thank you.
Speaker Change: You guys mentioned in the release it.
Speaker Change: Pent up demand I guess related.
Speaker Change: Related to UN at every time producer level and I guess I was wondering if you could give a little bit more color there.
Speaker Change: They can specific dynamics, there and I guess related to I guess, you know higher corn acreage planting season, just any color there would be helpful. Thank you.
Damien Renwick: Yeah, hi Kevin. Absolutely, it's down to the higher corn acres forecast. So, you know, we talked about it in the prepared remarks around the USDA in their prospective plantings report forecasting over 95 million acres and that's a significant increase compared to last year. But the other compounding factor that we're seeing in both Eurea and UAN is the fact that there haven't been enough imports into the country to satisfy that demand. And so that's putting strain on logistics, on river movements, and demand on rail as well. And, you know, we're all just working as hard as we can to satisfy that demand.
Speaker Change: Yeah, Hi, Kevin absolutely, it's down to the higher corn acres forecast.
Speaker Change: We talked about it in the.
Speaker Change: In the prepared remarks around the USDA and the prospective plantings report forecasting the 95 million acres and that's a significant increase compared to last year.
Speaker Change: But the other compounding factor that we're seeing in both your rare in UAE and is is the fact that they havent been enough imports into the country to satisfy that demand and so that's putting a strain on the logistics on rhythm movements.
Speaker Change: The demand on rail as well then.
Speaker Change: We're all just working as hard as we can to satisfy that demand and that's also having an impact on pricing as well.
Damien Renwick: And that's also having an impact on pricing as well.
Speaker Change: Thank you very much.
Kevin Estock: Thank you very much.
Speaker Change: Thank you. That's a reminder, thats star one to be placed in the question queue. Our next question is coming from Andrew Wong from RBC capital markets. Your line is ally.
Kevin Estock: Thank you.
Operator: As a reminder, that's star one to be placed into the question queue.
Andrew Wong: Our next question is coming from Andrew Wong from RBC Capital Markets. Your line is now live. Hey, good morning.
Andrew Wong: Hey, good morning.
Andrew Wong: So, as you're considering some of these potential upgrade capacity projects, can you just, I know nothing's been committed, but can you just talk about what those projects might look like from a backspaces, like how large that they might be? And what kind of margin benefits you anticipate generally from a project that might increase your nitric acid or AN capacity?
Andrew Wong: As you're considering some of these potential upgrade capacity projects can you just I know nothing has been committed but can you just talk about what those projects might look like from a.
Andrew Wong: Hi tech spaces, like how large that they might be.
Andrew Wong: What kind of margin benefits you anticipate generally from a project that might increase your nitric acid.
Andrew Wong: Capacity.
Andrew Wong: Good morning, Andrew look I think that what we're doing.
Mark Behrman: Morning, Andrew. Look, I think that while we're doing some work to explore some of the expansion capabilities or potentials that we have, I think it's probably too early for us to talk about, you know, the actual cost. We want to finish engineering studies before we sort of give you a gut number. I think that would be the most prudent and, you know, with that, once we get a final or at least a more finalized capital number, then we can sit down and figure out, you know, what kind of EBITDA generation and returns there are and does the project even make sense.
Andrew Wong: <unk> some work to explore some of the expansion capabilities or potentials that we have I think it's probably too early for us to talk about.
Andrew Wong: The actual cost we want to finish engineering studies before we sort of give you a good <unk>.
Andrew Wong: Number one I think that would be the most prudent and.
Andrew Wong: Once we get our final or at least a more finalized capital number then we can sit down and figure out you know.
Andrew Wong: What kind of EBITDA generation and returns there are and just the project even makes sense. So we have the capability.
Mark Behrman: So, we have the capability and I think we've mentioned this in the past. to expand our urea production up at Pryor, which would be great because we'll upgrade more free ammonia, which we're always interested in doing, capture more margin. We have the ability to expand our ammonia plant down at El Dorado to give us more ammonia, which hopefully then allows us to look at possibly expanding nitric acid or AN solution because we think there's demand, particularly in AN solution.
Andrew Wong: And I think we've mentioned this in the past.
Andrew Wong: To expand our urea production up at Pryor, which would be great. Because we will upgrade more free ammonia, which we're always interested in doing capture more margin.
We have the ability to expand our ammonia plant down at El Dorado to give us more ammonia, which hopefully then you know allows us to to look at possibly expanding nitric acid Orient solution.
Andrew Wong: Because we think there's demand.
Andrew Wong: Particularly in a <unk> solution, but I think it's a bit too early for us to be talking about the capital cost to do that.
Andrew Wong: I think it's a bit too early for us to be talking about the capital cost to do this. Okay, that's fair.
Andrew Wong: Okay.
Andrew Wong: That's fair.
Mark Behrman: And then on the Houston Ship Channel project, the decision to delay there, makes sense, everything you've laid out. Is there the potential for revisiting that project in the future? And what might need to change for that?
Andrew Wong: And then on the Houston Houston ship channel projects.
Andrew Wong: Susan to delay there makes sense everything you've laid out.
Andrew Wong: Is there the potential for revisiting that project in the future and what might need to change for that.
Andrew Wong: Okay.
Mark Behrman: Yeah, look, I think overall, we still believe that over time. There'll be new demand generation for low-carbon ammonia. So I think for us, it's really about uncertainty and capital costs right now, as things are moving around. And one day we have tariffs, and the next day we don't. And this whole situation, I think everyone's going through that, and you'll see lots of projects being put on hold. In addition to that, I think there still is. an unwillingness from some, from many actually, buyers. actually transacted a cost that I think supports the returns on a facility.
Speaker Change: Yeah look I think overall.
Andrew Wong: We still believe that over time.
Andrew Wong: There'll be new demand generation for low carbon pneumonia.
Andrew Wong: I think for US, it's really about uncertainty in capital costs right now as things are moving around and you know one day, we have tariffs in the next day, we don't and you.
Andrew Wong: There's this whole situation I think it's you know I think everyone's going through that and you'll see lots of projects being put on hold in addition to that I think there.
Andrew Wong: Still is.
Andrew Wong: And unwillingness from some for many actually buyers.
Andrew Wong: To actually transact at a cost that I think supports the returns on our facility and I believe that changes overtime.
Mark Behrman: I believe that changes over time. Today, I think we're not comfortable with that.
Andrew Wong: But today I think you know, we're not comfortable with that so I guess the answer would be we'd like to participate either in the current project that we're in and revisit that if the economics could make sense and we could certainly put a deal together that would make sense where to actually participate in another project that's maybe being.
Mark Behrman: So I guess the answer would be we'd like to participate either in the current project that we're in and revisit that, if the economics could make sense, and we could certainly put a deal together that would make sense, or to actually participate in another project that's maybe being developed and we can make an investment and maybe even operate or have some offtake or something like that. So I think we're open to that, but I just got to be very prudent about what project we get involved in and what's the right timing. So today, I think it doesn't make sense for us.
Andrew Wong: And we can.
Andrew Wong: You know, making investment and maybe even operate or have some offtake or something like that so I think we're open to that but I think we've just got to be very prudent about.
Andrew Wong: What project, we get involved in and what's the right timing. So today I think it doesn't make sense for us.
Andrew Wong: Great. Thanks, Mark. Sure.
Andrew Wong: Great. Thanks, Mike.
Andrew Wong: Sure.
Speaker Change: Thank you next question today is coming from Brian Maguire from Granite Research. Your line is now live.
Operator: Thank you.
Rob McGuire: Next question today is coming from Rob McGuire from Granite Research. Your line is now live. Good morning, just a couple of big picture topics. So Bloomberg reported a couple weeks ago that China halted US Tradewar Transcription by CastingWords and it's boosting supply and lowering gas prices over in Europe.
Brian Maguire: Hey, good morning, just a couple of big picture topics. So Bloomberg reported a couple of weeks ago that China halted U S. LNG purchases due to the trade war.
Speaker Change: And it's boosting supply and lowering gas prices.
Brian Maguire: Over in Europe.
Damien Renwick: Do you have a view, and if so, could you just kind of share it with regards to, is it better for Europe to import ammonia or LNG from the U.S.? Hey Rob, that's a tricky question, I guess. You know, from a, from an ammonia perspective. European ammonia producers will really just be evaluating, okay, what's the forward outlook on their natural gas purchases and pricing, and then they'll weigh that up against their own landed price for an import, right? So it's really a make versus buy decision, and we've been in that realm now for a number of years, particularly as Russian natural gas has disappeared from Europe.
Speaker Change: You have a view and if so could you just kind of share with regards to is it better for Europe to import ammonia or LNG from the U S.
Brian Maguire: Maybe.
Brian Maguire: The reasons why behind that.
Brian Maguire: Hi, Rob.
Brian Maguire: That's a that's a tricky question I guess.
Brian Maguire: You know from a from an ammonia perspective.
Brian Maguire: European ammonia producers will really just be evaluating okay. What's the forward outlook on the natural gas purchases in pricing and in a way that up against the <unk>.
Brian Maguire: Yeah, Ryan landed cost for an important right. So it's it's really a make versus buy decision and we've been in that realm now for a number of years.
Brian Maguire: Particularly as Russian natural gases has disappeared from from Europe.
Damien Renwick: And I don't see that sort of changing at all any time in the future unless there's some resolution between Russia and Ukraine and then back to Russian natural gas supply into Europe.
Brian Maguire: And I don't see that sort of changing at all anytime in the future unless there is some resolution between Russia, and Ukraine, and then back to <unk>.
Brian Maguire: Russian natural gas supply into Europe.
Damien Renwick: In terms of LNG, I think it's much the same really. You know, you've got the Europeans trying to import sufficient natural gas to keep the and make sure they've got enough gas in the system for power, for residential and industrial use. And I'm sure they'll look to transact upon that at the best possible price. Thanks, Damien.
Brian Maguire: In terms of LNG I think it's it's much the same really.
Brian Maguire: Got you.
Brian Maguire: Europeans trying to import a sufficient natural gas to keep the lights on and make sure they've got enough gas in the system.
Brian Maguire: So residential and industrial use.
Brian Maguire: And I'm sure they'll they'll look to transact upon that at the best possible price.
Speaker Change: Thanks, Damien and then any further color on potential legislation over in Europe supporting the use of the ammonia or CPM updates or anything you guys are seeing on the ground.
Damien Renwick: And then any further color on potential legislation over in Europe supporting the use of blue ammonia or CBAM updates, anything you guys are seeing? No, we've seen some positive developments with the IMO recently where they outlined their sort of carbon incentive slash tax program as it relates to marine fuels. And so we think that once everyone's, it's rather complex, so once everyone's had the time to digest what that means, I think we'll see a continued shift there, you know, targeting low carbon fuels. In terms of CBAM, look, I think we're still on track for the start-up of the transition into CBAM next year.
Speaker Change: No we've seen some positive developments with the I M O M.
Speaker Change: Recently with I outlined there.
Speaker Change: Sort of cabin incentives slash tax program as it relates to marine fuels.
Speaker Change: And so we think that that once everyone's its rather complex once everyone's had the time to.
Speaker Change: Digest, what that means I think yes it.
Speaker Change: We'll see a continued shift today.
Speaker Change: Targeting low carbon.
Speaker Change: Fuels.
Speaker Change: In terms of say Ben look I think we're still on track for the startup of the transitioning to say ban next year.
Damien Renwick: And we hear rumors about potential delays or changes, but nothing firm that we're aware of, so. And while there's conversation in Europe, certainly the EU with What would the carbon intensity scores of a low-carbon ammonia versus a zero-carbon ammonia look like? There's not been anything finalized.
Speaker Change: And this we hear rumors about potential delays with changes but nothing.
Speaker Change: That we're aware of so.
Speaker Change: And while there's conversation.
Speaker Change: In Europe.
Speaker Change: Certainly the EU with.
What what would be carbon intensity scores of the low carbon ammonia versus a zero carbon ammonia look like there's not been anything finalized yet.
Rob McGuire: That's great. I really appreciate it.
That's great I really appreciate it.
Operator: Just one other last quick one. Are you seeing a bigger disparity in what you're selling your ammonia in land relative to Tampa? I think we're seeing pricing that's consistent with what you'd expect to see in the middle of season or just after application for ammonia, Rob, so nothing really too far out of the ordinary there. Thanks guys. Thank you. As a reminder, that's star one to be placed in the question queue.
Speaker Change: Last quick one are you seeing a bigger disparity and what you are selling your ammonia inland relative to Tampa.
Speaker Change: I think were seeing pricing thats consistent with what you would expect to see in the middle of a season would just stopped application for for ammonia, Rob sorry, nothing really too far out of the ordinary day.
Speaker Change: Thanks, guys.
Speaker Change: Thank you as a reminder, that star one to be placed in the question queue.
Charles Nievert: Our next question today is coming from Charles Nievert from Piper Sandler. Your line is now live. Morning, guys. You, um, you know, you mentioned already that you're delaying some some scheduled turnarounds because of, you know, equipment and things like that. You know, delays there. Does there, is there any chance that the, some of these delays also leak out into the, the carbon project at El Dorado?
Speaker Change: Our next question today is coming from Charles <unk> from Piper Sandler Your line is now live.
Speaker Change: Good morning, guys.
Speaker Change: You mentioned already that delaying some.
Speaker Change: Some scheduled turnarounds because of equipment and things like that you know the delays there.
Speaker Change: Is there any chance that the some of these delays also leak out into.
Speaker Change: The carbon project.
Speaker Change: El Dorado.
Charles Nievert: I mean, you're, you're talking about second half of 2026 with all the, and there's a lot still going on, but is there any risk to the equipment and needs that are there that might get, that might push it out any further?
Speaker Change: Second half of 2026 with all of that and there's a lot still going on but is there any risk to the equipment and need better there that might get pushed it out any further.
Charlie: Good morning, Charlie No I don't think so.
Mark Behrman: Morning, Charlie. No, I don't think so. You know, we're talking about, I mean, some of the main things we're talking about on the compression facility of compressors, so we've, actually our partner, Lapis, has You know, already had discussions about, you know, the timing of delivery of equipment and, you know, they're on the precipice, basically, of making orders for long lead time items. So, I think based on delivery times and if they get ordered over the next couple of weeks, I think we're really comfortable that we have no problem meeting the timeline that we talked about, which is the end of next year.
Charlie: We're talking about I mean, some of the main things we're talking about on the compression facility of compressors.
Charlie: So we've.
Charlie: Actually our partner LAPIS has.
Charlie: You know already had discussions about.
Charlie: The timing of delivery of equipment and you know.
Charlie: They are on the precipice basically of making orders for long lead time items. So I think based on delivery times and if they get.
Charlie: Ordered over the next couple of weeks I think we're really comfortable that we have no problem meeting the timeline that we talked about which is the end of next year.
Speaker Change: Yeah, and also I mean, I know that they're obviously their footing the bill for all of the equipment and the build out.
Mark Behrman: Yeah, and also, I mean, I know that they're obviously foot they're footing the bill for all of the equipment and, you know, and the build out.
Mark Behrman: Is there any risk to the deal that you guys have struck between the between the two of you in terms of what the payout would look like going forward? Or is it really, it's strictly based on, you know, the payments from the government for the carbon and you're just getting that whatever piece that you're going to be getting and that will. Obviously their profit does if their costs get higher. Yeah, we have a CO2 sales agreement in place with them. That's been heavily negotiated. So we're really comfortable with us being able to receive the dollar per ton of CO2 that we've agreed to.
Speaker Change: Is there any risk to the the deal that you guys have stuck between <unk> in terms of what the payout would look like going forward or is it really excuse me based on.
Speaker Change: The payments from the government for the carbon and you're just getting that whenever piece that youre going to be getting and that won't change.
Speaker Change: Obviously, you have profit does it if their costs get higher.
Speaker Change: Yes, we have a.
Speaker Change: C O two sales agreement in place with them that's been heavily negotiated so we're really comfortable with.
Speaker Change: US being able to receive the dollar per ton of C. O two that we've agreed to.
Speaker Change: Okay. Thanks very much.
Charles Nievert: Thanks very much. Thank you.
Speaker Change: Sure.
Speaker Change: Thank you. Our next question today is a follow up from Lucas Beaumont from UBS. Your line is now live.
Lucas Beaumont: Our next question today is a follow-up from Lucas Beaumont from UBS. Their line is now live. Thank you. So just with the shift that you've outlined, going more towards cost plus kind of pricing on a contract. So, I just wanted to, I mean, you're targeting 35% by the end of this year. I guess two things, I just wanted to understand, where would you like to kind of get that to, I guess, over the medium term? And then secondly, sort of, what has your assessment been on how that's going to kind of impact your margins over the cycle?
Speaker Change: Yeah.
Speaker Change: Okay. Thank you so just with the shift that you've outlined going more towards a cost plus kind of crossing on our contracts.
Speaker Change: So I just wanted to I mean, you're you're targeting 35% by the end of this year.
Speaker Change: Yes, two things I, just wanted to understand what where would you like to kind of catch up to I guess over the medium term and then secondly sort of what is your assessment on how that's going to kind of impact your margins out of the cycle. So I mean I'm sure it's going to reduce the volatility in your earnings through the year.
Lucas Beaumont: So, I mean, I'm sure it's going to reduce the volatility in your earnings year to year, but I guess you're having to give anything up over the cycle, do you think, from a marginal perspective to get that, or would it be similar? Yeah, you know, um... I think our commercial team does a really good job of... trying to optimize our production. So you will see swings year to year. And contracts, even on the industrial side where we have contracts, I mean, they roll off. And we've got to make a decision on whether we want to re-up a contract for a longer term or.
Speaker Change: I guess, when you're having to give anything out of the cycle do you think from a margin perspective to get that or what would it be similar.
Speaker Change: Got it.
Speaker Change: <unk>.
Speaker Change: I think our commercial team does a really good job of.
Speaker Change: Trying to optimize our production.
Speaker Change: So you will see swings year to year and contracts even on the industrial side, where we have contracts I mean, they roll off and then we've got to make a decision on whether we want to re up a contract for a longer term or.
Lucas Beaumont: We think the spot market and the ag markets, based on our views, are a better play, at least for the next 12 months, 18 months, whatever it might be.
Speaker Change: We think the spot market in the AG markets based on our views are better play at.
Speaker Change: At least for the next 12 months 18 months whatever it might be.
Lucas Beaumont: You know, if I had to think about what would be an optimal mix, certainly 50-50 is something that, you know, so that 35% moving up to 50% is probably something that would make sense for us. I think in any given year or over a given couple of years, you could see that move up to 60% and you could see it move down to 40%, so probably somewhere between 40% and 60%. You know, industrial, with the balance obviously being ag.
Speaker Change: If I had to think about what would be an optimal mix certainly 50 50 as something that so that's 35% moving up to 50% is probably something that would make sense for us I think in any given year or over a given a couple of years you could see that move up to 60% or you could see it move down to 40%, so probably somewhere between <unk>.
Speaker Change: And 60%.
Speaker Change: Industrial with the balance obviously being from a margin perspective.
Lucas Beaumont: From a margin perspective... You know, absolutely, you're right. It's going to give us much more stability and, you know, comfortability on what our earnings profile looks like. From a margin perspective, it really just depends. I mean, if you look over a 10-year period on some of the products. You know, same conversations at some point, you know, that customers who are used to maybe pricing off of a Tampa index or something like that, and we'd like them to now price off of a gas, you know, gas plus contract. The commercial team, again, does a really good job and, you know, let's go back over the last 10 years and look at how pricing has, the actual pricing was over the last 10 years versus if you went, you know, gas backed or cost plus and what that might look like.
Speaker Change: You know the absolutely you're right, it's going to give us much more stability and and comfortably on what our earnings profile looks like.
Speaker Change: And from a margin perspective, it really just depends I mean, it's you know if you look over a 10 year period on some of the products.
Speaker Change: No same conversations that at some point you know that customers, who were used to maybe pricing off of a Tampa index or something like that and we'd like them to know probably sulfur for gas gas plus contract and the commercial team again does a really good job in.
Speaker Change: Now, let's go back over the last 10 years and look at how pricing has done.
Speaker Change: The actual pricing was over the last 10 years versus if you went you know gas backed or cost plus and what that might look like so.
Lucas Beaumont: So I think, well, margins overall over a period of time should actually be relatively similar. We will lose where there's a huge spike in fertilizer pricing since, like we saw in 2022, but we are trading that off for a lot of downside protection in our earnings. Great, thanks.
Speaker Change: I think well.
Speaker Change: Margins overall over a period of time.
Speaker Change: Should actually be relatively similar we will lose where theres a huge spike in fertilizer pricing since we like we saw in 2022.
Speaker Change: But we.
Speaker Change: Our trading that off for a lot of downside protection in our earnings.
Speaker Change: Alright, Thanks, and then I just wanted to follow up with one more on me.
Lucas Beaumont: And then I just wanted to follow up with one more on the cost increases on the equipment side and for maintenance that you sort of called out.
Speaker Change: Cost increases on the equipment side and for maintenance instead of coal to gas. So I guess, just maybe I don't know if youre able to size that for us relative to your cost base in 2024.
Lucas Beaumont: I guess just maybe, I don't know if you're able to size that for us relative to your cost base in 2024. I mean, if the tariffs that were in, I'm assuming there's a tariff driven, if they were in place today, I guess how much of a cost impact would you would you expect kind of on that base? Yeah, hey Lucas, we took a look at that. On the expense side, when, you know, water treatment, chemicals, things like that, probably looking at maybe a million dollars over the year on the expense side. On the capital side, we've got the majority of our equipment kind of ordered, and so thinking, you know, maybe could see two million there.
Speaker Change: I mean, if if the tariffs are already I'm sure. It is a character and if that were in place today.
Speaker Change: I guess, how much of a cost impact would you would you expect kind of on that guys.
Speaker Change: Yeah, Hey, Lukas, we we took a look at that I'm on the expense side, when you know water treatment chemicals things like that.
Speaker Change: Probably looking at maybe a million dollars over the year I'm on the expense side on the capital side. We've got the majority of our equipment kind of ordered and so thinking you know maybe could see 2 million. There you know that's the best guess today.
Lucas Beaumont: You know, that's best guess today. It's a moving target.
Speaker Change: Moving target.
Speaker Change: Alright, thank you.
Lucas Beaumont: All right, thank you. Thank you.
Speaker Change: Thank you we've reached end of our question and answer session I would like to turn the floor back over to Mark for any further or closing comments.
Operator: We've reached the end of our question and answer session.
Mark Behrman: I'd like to turn the floor back over to Mark for any further closing comments. Great. Appreciate everyone joining the call today and appreciate everyone's support. So if there are any other questions, feel free to give us a shout and we'll have a conversation and hopefully answer your questions. Thanks and have a great day.
Speaker Change: Great.
Speaker Change: The state everyone, joining the call today and for.
Speaker Change: Appreciate everyone's support so are there any other questions feel free to give us a shout and we'll have a conversation and hopefully answer your questions. Thanks and have a great day.
Speaker Change: Thank you that does conclude today's teleconference and webcast you may disconnect. Your line at this time and have a wonderful day.
Operator: Thank you, that does conclude today's teleconference and webcast. You may disconnect your line at this time and have a wonderful day.
Operator: We thank you for your participation today.
Speaker Change: Thank you for your participation today.