Q1 2026 AdvanSix Inc Earnings Call

May 8, 2026

Operator: Good day, and welcome to the AdvanSix Q1 2026 Earnings Conference Call. All participants will be in a listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star, then one on your touchtone phone. To withdraw your question, please press star then two. Please note this event is being recorded. I would now like to turn the conference over to Adam Kressel, Vice President, Investor Relations, and Treasurer. Please go ahead.

Speaker #2: After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star, then one on your touchtone phone.

Speaker #2: To withdraw your question, please press star, then two. Please note this event is being recorded. I would now like to turn the conference over to Adam Kressel Vice President Investor Relations and Treasurer.

Speaker #2: Please go ahead. Thank you, Danielle. Good morning and welcome to AdvanSix's first quarter 2026 earnings conference call. With me here today are President and CEO Erin Kane, Senior Vice President and CFO Patrick Day, and Vice President of Corporate Finance and Strategic FP&A Chris Gramm.

Adam Kressel: Thank you, Danielle. Good morning and welcome to AdvanSix's Q1 2026 Earnings Conference Call. With me here today are President and CEO, Erin Kane, Senior Vice President and CFO, Patrick Day, and Vice President of Corporate Finance and Strategic FP&A, Christopher Gramm. This call and webcast, including any non-GAAP reconciliations, are available on our website at investors.advansix.com. Note that elements of this presentation contain forward-looking statements that are based on our best view of the world and of our business as we see it today. Those elements can change and the actual results could differ materially from those projected, and we ask that you consider them in that light. We refer you to the forward-looking statements included in our press release and earnings presentation.

Speaker #2: This call and webcast, including any non-GAAP reconciliations, are available on our website at investors.advansix.com. Note that elements of this presentation contain forward-looking statements that are based on our best view of the world and of our business as we see it today.

Speaker #2: Those elements can change and the actual results could differ materially from those projected. And we ask that you consider them in that light. We refer you to the forward-looking statements included in our press release and earnings presentation.

Speaker #2: In addition, we identify the principal risks and uncertainties that affect our performance in our SEC filings, including our annual report on Form 10-K, as further updated in subsequent filings with the SEC.

Adam Kressel: In addition, we identify the principal risks and uncertainties that affect our performance in our SEC filings, including our annual report on Form 10-K, as further updated in subsequent filings with the SEC.

Speaker #2: This morning, we will review our financial results for the first quarter 2026 and share our outlook for our key product lines and end markets.

Christopher Gramm: This morning, we will review our financial results for Q1 of 2026 and share our outlook for our key product lines and end markets. Finally, we'll leave time for your questions at the end. With that, I'll turn the call over to AdvanSix's President and CEO, Erin Kane.

Adam Kressel: This morning, we will review our financial results for Q1 of 2026 and share our outlook for our key product lines and end markets. Finally, we'll leave time for your questions at the end. With that, I'll turn the call over to AdvanSix's President and CEO, Erin Kane.

Speaker #2: Finally, we'll leave time for your questions at the end. So, with that, I'll turn the call over to AdvanSix's President and CEO, Erin Kane.

Speaker #3: Thanks, Adam, and good morning, everyone. We appreciate you joining us here today for our quarterly call. As you saw in our press release, the AdvanSix team navigated a number of headwinds to deliver a solid first quarter performance.

Erin Kane: Thanks, Adam. Good morning, everyone. We appreciate you joining us here today for our quarterly call. As you saw in our press release, the AdvanSix team navigated a number of headwinds to deliver a solid Q1 performance, including the earlier winter storm-related impacts and new geopolitical challenges amid continued subdued industrial end market demand. In Q1, we generated 7% sales growth year-over-year, supported by improvements in Chemical Intermediates volume and Plant Nutrients market pricing, partially offsetting the margin impacts driven by increased sulfur and natural gas costs. We are executing with a focus to recover inflationary raw material input costs by leveraging both our pass-through formula and freely negotiated pricing mechanisms. I'd like to thank all of our teammates who contributed to successfully maintaining safe operations during the winter storm earlier this year.

Speaker #3: Including the earlier winter storm-related impacts, a new geopolitical challenges, amid continued subdued industrial and market demand. In the quarter, we generated 7% sales growth year over year, supported by improvements in chemical intermediates volume, and plant nutrients market pricing, partially offsetting the margin impacts driven by increased sulfur and natural gas costs.

Speaker #3: We are executing with a focus to recover inflationary raw material input costs by leveraging both our pass-through formula and freely negotiated pricing mechanisms. I'd like to thank all of our teammates who contributed to successfully maintaining safe operations during the winter storm earlier this year.

Speaker #3: While the earnings impact related to this event came in just above the high end of our anticipated range, we were able to save $3 million of planned turnaround expense for the year.

Erin Kane: While the earnings impact related to this event came in just above the high end of our anticipated range, we were able to save $3 million of planned turnaround expense for the year. Looking ahead, we anticipate significant sequential earnings and cash flow improvement into Q2. We are in a solid position as the domestic planting season progresses and continue to operate amid a tightening acetone global supply and demand environment and a modestly recovering nylon industry. We're maintaining a disciplined focus on cost productivity, capital spending, turnaround execution, and full year free cash flow generation. We continue to expect full year CapEx in the range of $75 to 95 million with targeted allocation of nearly 20% of that towards high return growth investments.

Speaker #3: Looking ahead, we anticipate significant sequential earnings and cash flow improvement into the second quarter. We are in a solid position as a domestic planting season progresses, and continue to operate amid a tightening acetone global supply and demand environment and a modestly recovering nylon industry.

Speaker #3: We're maintaining a disciplined focus on cost productivity, capital spending, turnaround execution, and full-year free cash flow generation. We continue to expect full-year CapEx in the range of $75 to $95 million with targeted allocation of nearly 20% of that towards high-return growth investments.

Speaker #3: We also continue to expect debt leverage ratios near the low end of our target range of 1 to 2 and a half times by the end of this year.

Erin Kane: We also continue to expect debt leverage ratios near the low end of our target range of 1 to 2.5 times by the end of this year. Key to our strategy is a keen focus on controllable levers to support through cycle profitability and cash conversion while progressing targeted growth strategies and initiatives. We announced yesterday an exciting new opportunity to expand our integrated ammonia platform at our Hopewell, Virginia site to supply the growing regional diesel exhaust fluid or DEF market. I'll share more about this later in the call. Lastly, effective 27 April, we welcome Patrick Day as our new Senior Vice President and Chief Financial Officer. Pat has tremendous experience establishing corporate and financial strategies that accelerate growth and shareholder value. We look forward to his expertise as we advance in our next chapter.

Speaker #3: Key to our strategy is a keen focus on controllable levers to support through-cycle profitability and cash conversion. While progressing targeted growth strategies and initiatives.

Speaker #3: We announced yesterday an exciting new opportunity to expand our integrated ammonia platform at our Hopewell-Virginia site to supply the growing regional diesel exhaust fluid, or DEF, market.

Speaker #3: I'll share more about this later in the call. Lastly, effective April 27th, we welcome Patrick Day, as our new Senior Vice President and Chief Financial Officer.

Speaker #3: Pat has tremendous experience establishing corporate and financial strategies that accelerate growth and shareholder value. We look forward to his expertise as we advance in our next chapter.

Speaker #3: I'd like to also give thanks to Chris Gramm for his commitment and support during his time as Interim CFO over the last year. With that, I'll turn it to Chris to discuss the financials.

Erin Kane: I'd like to also give thanks to Christopher Gramm for his commitment and support during his time as interim CFO over the last year. With that, I'll turn it to Chris to discuss the financials.

Speaker #2: Thanks, Erin. I'm now on slide four to discuss our results for the quarter. Sales of $404 million in the quarter increased approximately 7% versus the prior year.

Christopher Gramm: Thanks, Erin. I am now on slide 4 to discuss our results for the quarter. Sales of $404 million in the quarter increased approximately 7% versus the prior year, comprised of 6% volume growth and 1% favorable price. Sales volume growth was primarily driven by favorable Chemical Intermediates sales. Market-based pricing improved by 3%, primarily driven by an increase in Plant Nutrients, reflecting higher nitrogen pricing amid increased sulfur input costs. Raw material passthrough pricing was down 2% following a net cost decrease in benzene and propylene, which is a major input to cumene, our largest raw material and key feedstock to our products. Adjusted EBITDA was $5 million, down $47 million from last year.

Speaker #2: Comprised of 6% volume growth and 1% favorable price. Sales volume growth was primarily driven by favorable chemical intermediate sales. Market-based pricing improved by 3%, primarily driven by an increase in plant nutrients reflecting higher nitrogen pricing amid increased sulfur input costs.

Speaker #2: Raw material pass-through pricing was down 2%, following a net cost decrease in benzene and propylene, which is a major input to QME, our largest raw material and key feedstock to our products.

Speaker #2: Adjusted EBITDA was $5 million, down $47 million from last year. This was primarily driven by the absence of insurance proceeds from the prior year of $26 million, the unfavorable impact of higher sulfur and natural gas raw material prices, higher utility expenses, and $11 million of winter storm-related impacts.

Christopher Gramm: This was primarily driven by the absence of insurance proceeds from the prior year of $26 million, the unfavorable impact of higher sulfur and natural gas raw material prices, higher utility expenses, and $11 million of winter storm-related impacts. On a sequential basis compared to Q4, higher sales volume growth supported by improved operational performance was more than offset by escalating raw material input prices. From a free cash flow perspective, Q1 represents a seasonal use of cash as expected, primarily due to the timing of cash payments for CapEx following the prior quarter outages. The absence of insurance proceeds was also a meaningful driver of the year-over-year change. We continue to anticipate sequential improvement into Q2 and expect H2 of the year to be a source of cash to achieve our full year expectations. Now let's turn to slide 5.

Speaker #2: On a sequential basis compared to the fourth quarter, higher sales volume growth supported by improved operational performance was more than offset by escalating raw material input prices.

Speaker #2: From a free cash flow perspective, the first quarter represents a seasonal use of cash as expected, primarily due to the timing of cash payments for CapEx following the prior quarter outages.

Speaker #2: The absence of insurance proceeds was also a meaningful driver of the year-over-year change. We continue to anticipate sequential improvement into the second quarter and expect the second half of the year to be a source of cash to achieve our full-year expectations.

Speaker #2: Now let's turn to slide five. On this slide, we are detailing our quarterly sales contributions by product line. As well as price and volume indicators, both year over year and sequentially.

Christopher Gramm: On this slide, we are detailing our quarterly sales contributions by product line, as well as price and volume indicators, both year-over-year and sequentially. In light of the significant raw material inflation and the mix of our formula or index-based pricing mechanisms, we did not fully cover those costs in Q1. However, we anticipate recouping a large portion of that shortfall in Q2, particularly into the heart of the domestic planting season for Plant Nutrients. Starting with Nylon Solutions, resin volumes improved sequentially on improved operational performance while caprolactam volumes moderated in a soft demand environment, particularly for carpet applications. We saw a higher export mix in Q1 2026, which is expected to continue in the near term.

Speaker #2: In light of the significant raw material inflation and the mix of our formula or index-based pricing mechanisms, we did not fully cover those costs in the first quarter.

Speaker #2: However, we anticipate recouping a large portion of that shortfall in the second quarter particularly into the heart of the domestic planting season for plant nutrients.

Speaker #2: Starting with nylon solutions, resin volumes improved sequentially on improved operational performance while Caprolactam volumes moderated in a soft demand environment particularly for carpet applications.

Speaker #2: We saw a higher export mix in the first quarter of 2026, which is expected to continue in the near term. With our AdvanSix position, we are evaluating export opportunities to ensure the best economic output for the integrated enterprise.

Christopher Gramm: With our advantaged position, we are evaluating export opportunities to ensure the best economic output for the integrated enterprise. Domestic pricing steadily increased overall, supported in part by higher input costs. Plant Nutrients volumes were flat to down both year over year and sequentially in Q1, while pricing strength continued. In the early parts of the year, we witnessed more cautious buying behavior down the value chain and a more risk-averse sentiment from customers amid the higher input costs and rapidly rising nitrogen prices. Lastly, Chemical Intermediates sales improved on the back of volume improvements year over year. In acetone, as we mentioned on the Q1 2025 earnings call, downstream MMA saw extended plant outages last year. In Q1 2026, we observed more normalized operating rates down the value chain supporting demand.

Speaker #2: Domestic pricing steadily increased overall, supported in part by higher input costs. Plant nutrient volumes were flat to down, both year over year and sequentially in the first quarter, while pricing strength continued.

Speaker #2: In the early parts of the year, we witnessed more cautious buying behavior down the value chain and a more risk-adverse sentiment from customers amid the higher input costs and rapidly rising nitrogen prices.

Speaker #2: And lastly, chemical intermediate sales improved on the back of volume improvements year over year. In acetone, as we mentioned on the first quarter 2025 earnings call, downstream MMA saw extended plant outages last year.

Speaker #2: In the first quarter of 2026, we observed more normalized operating rates down the value chain, supporting demand. In addition, given pricing dynamics and trade flows across our key products in this portfolio, we delivered on opportunistic spot sales domestically and in the export markets.

Christopher Gramm: In addition, given pricing dynamics and trade flows across our key products in this portfolio, we delivered on opportunistic spot sales domestically and in the export markets.

Speaker #3: Thanks, Chris. I'm now on slide six to discuss what we're seeing across our major product lines. Our diversified end-market exposure continues to be a strategic advantage, providing resilience across cycles.

Erin Kane: Thanks, Chris. I'm now on slide 6 to discuss what we're seeing across our major product lines. Our diversified end market exposure continues to be a strategic advantage, providing resilience across cycles. Agricultural and fertilizer remains our largest end market. As we sit here today, our domestic granular sales for this fertilizer year are now expected to be near record levels, but closer to flat as compared to the last fertilizer year. While the fertilizer year started off with optimism and a strong fall fill, as we've discussed in previous calls, buying has become more cautious given continued challenged fundamentals, including farmer profitability and input affordability, cold weather to start the spring, and drought conditions.

Speaker #3: Agricultural and fertilizer remains our largest end-market. As we sit here today, our domestic granular sales for this fertilizer year are now expected to be near record levels, but closer to flat as compared to the last fertilizer year.

Speaker #3: While the fertilizer year started off with optimism and a strong fall fill as we've discussed in previous calls, buying has become more cautious given continued challenge fundamentals including farmer profitability and input affordability, cold weather to start the spring, and drought conditions.

Speaker #3: What that means is we are now selling in-season tons with the ability to work coverage of sulfur input costs. Which is important because, amid a higher global nitrogen pricing environment, on the heels of the conflict in the Middle East, ammonium sulfate pricing actions are largely offsetting sulfur input costs rather than driving margin expansion in this current context.

Erin Kane: What that means is we are now selling in-season tons with the ability to work coverage of sulfur input costs, which is important because amid a higher global nitrogen pricing environment on the heels of the conflict in the Middle East, ammonium sulfate pricing actions are largely offsetting sulfur input cost rather than driving margin expansion in this current context. We know that growers value the cost of nutrition. In fact, ammonia for direct application is currently a relatively attractive value for growers. While we are not a large merchant ammonia supplier, we have seen good demand and net backs and have been maximizing our ammonia availability this spring while slightly moderating ammonium sulfate production.

Speaker #3: We know that growers value the cost of nutrition. In fact, ammonia for direct application is currently a relatively attractive value for growers. While we are not a large merchant ammonia supplier, we have seen good demand and net backs and have been maximizing our ammonia availability this spring, while slightly moderating ammonium sulfate production.

Speaker #3: So while we capture the benefit from the advantage between U.S. natural gas and global nitrogen prices, we also contend with the impact of sulfur input costs versus the sulfur value proposition we deliver to farmers.

Erin Kane: While we capture the benefit from the advantage between US natural gas and global nitrogen prices, we also contend with the impact of sulfur input costs versus the sulfur value proposition we deliver to farmers. On tightened global supply, sulfur quarterly prices settled at a record $655 per long ton in Q2 2026, with the current spot prices trading even higher than those levels. That represents over 30% sequential increase and a roughly 140% surge year over year, so a meaningful increase that the industry is experiencing. Moving to our key nylon end markets across building and construction as well as engineering plastics, North American demand has not materially changed. Global pricing has moved up with capacity rationalization and raw material shortages in Europe, lower operating rates in China, logistics constraints, and higher input costs.

Speaker #3: On tightened global supply, sulfur quarterly prices settled at a record $655 per long ton in the second quarter of 2026. With current spot prices trading even higher than those levels, that represents over 30% sequential increase in a roughly $140% surge year over year so a meaningful increase at the industry is experiencing.

Speaker #3: Moving to our key nylon end-markets across building and construction, as well as engineering plastics, North American demand has not materially changed. Global pricing has moved up with capacity rationalization and raw material shortages in Europe lower operating rates in China, logistics constraints, and higher input costs.

Speaker #3: Our industry pricing mechanisms work to pass through changes in core raw materials notably benzene but also natural gas and sulfur. Given global trade flow dynamics, reduced imports have created opportunities to gain share.

Erin Kane: Our industry pricing mechanisms work to pass through changes in core raw materials, notably benzene, but also natural gas and sulfur. Given global trade flow dynamics, reduced imports have created opportunities to gain share. In this environment, it is critical for our business to remain agile through pricing and mix. We continue to execute our plan, including taking advantage of export opportunities as they arise, increasing prices to offset cost increases, and reducing inventory levels for the nylon resin to align with our current market conditions. In chemical intermediates, phenol demand remains soft overall, driving lower global operating rates, coupled with reduced acetone imports into the US, all of which are supporting tightening acetone supply and then demand dynamics. Acetone price increases have been implemented in the industry to keep pace with rising propylene costs.

Speaker #3: In this environment, it's critical for our business to remain agile through pricing and mix. We continue to execute our plan including taking advantage of export opportunities as they arise, increasing prices to offset cost increases, and reducing inventory levels for the nylon resin to align with our current marketing conditions.

Speaker #3: In chemical intermediates, phenol demand remains soft overall driving lower global operating rates coupled with reduced acetone imports into the U.S. all of which are supporting tightening acetone supply and demand dynamics.

Speaker #3: Acetone price increases have been implemented in the industry to keep pace with rising propylene costs. Spreads have held near cycle averages and we continue that continue to anticipate that for the full year of 2026.

Erin Kane: Spreads have held near cycle averages, and we continue to anticipate that for the full year of 2026. Let's move to slide 7. We were excited to announce yesterday that we have entered into a process design and licensing agreement to assess expansion of our integrated ammonia platform to enable the domestic manufacturing of DEF, a critical emissions control product used across on and off highway diesel applications. As background, DEF is an EPA-mandated additive for reducing NOx emissions from diesel engines. With strong and growing demand driven primarily by Class 8 vehicle usage in the Mid-Atlantic and Northeast. Demand for DEF continues to grow to meet environmental standards and as regulatory requirements expand across transportation, construction, agriculture, and industrial equipment fleets. The AdvanSix Hopewell facility provides a strong foundation for expanding domestic manufacturing at the site and already produces all required DEF inputs.

Speaker #3: Let's move to slide seven. We were excited to announce yesterday that we have entered into a process design and licensing agreement to assess expansion of our integrated ammonia platform to enable the domestic manufacturing of DEF.

Speaker #3: A critical emissions control product used across on and off-highway diesel applications. As background, DEF is an EPA-mandated additive for reducing NOx emissions from diesel engines.

Speaker #3: With strong and growing demand, driven primarily by Class 8 vehicle usage in the Mid-Atlantic and Northeast. Demand for DEF continues to grow to meet environmental standards and as regulatory requirements expand across transportation, construction, agriculture, and industrial equipment fleets.

Speaker #3: The advance is hopeful facility provides a strong foundation for expanding domestic manufacturing at the site and already produces all required DEF inputs. This potential expansion would complement existing manufacturing capabilities at the site with full continued commitment to the production of ammonium sulfate fertilizer to serve the U.S.

Erin Kane: This potential expansion would complement existing manufacturing capabilities at the site with full continued commitment to the production of ammonium sulfate fertilizer to serve the US farming industry. Our geographic position uniquely enables reliable supply to meet growing demand in a market currently served by imports and production from other domestic regions. Our investments over time with our ammonia unit operations have paid off in terms of our reliability and output. This project has the potential to unlock further value from our existing assets through increased optionality to serve a broadened customer base. We will advance through detailed engineering and development phases with final investment decision targeted for H1 2027. Additional updates will be provided as engineering, commercial, and financial milestones are achieved and regulatory approvals are secured.

Speaker #3: farming industry. Our geographic position uniquely enables reliable supply to meet growing demand in a market currently served by imports and production from other domestic regions.

Speaker #3: Our investments over time with our ammonia unit operation have paid off in terms of our reliability and output. This project has the potential to unlock further value from our existing assets through increased optionality to serve a broadened customer base.

Speaker #3: We will advance through detailed engineering and development phases, with a final investment decision targeted for the first half of 2027. Additional updates will be provided as engineering, commercial, and financial milestones are achieved and regulatory approvals are secured.

Speaker #3: We anticipate a multi-year capital investment supporting attractive financial returns following expected operational startup in 2029, which align with our long-term value creation objectives and commitment to disciplined capital allocation.

Erin Kane: We anticipate a multi-year capital investment supporting attractive financial returns following expected operational startup in 2029, which align with our long-term value creation objectives and commitment to disciplined capital allocation. Let's turn to slide 8 before moving to Q&A. AdvanSix offers a compelling investment thesis with value drivers supporting through cycle profitability and sustainable performance. Our strategic initiatives, unique combination of assets and business model are core to our durable competitive advantage and long-term positioning. Our global low-cost position in vertically integrated caprolactam production serves us well. Ammonia and sulfuric acid platform integration, coupled with a leading technology position, underpins how we win in plant nutrients. We are progressing our sustained ammonium sulfate growth program and have now announced another high return investment opportunity to serve the growing DEF market.

Speaker #3: Let's turn to slide eight before moving to Q&A. AdvanSix offers a compelling investment thesis with value drivers supporting through-cycle profitability and sustainable performance. Our strategic initiatives, unique combination of assets and business model, are core to our durable competitive advantage and long-term positioning.

Speaker #3: Our global low-cost position and vertically integrated capital acting production serves us well. In addition, ammonia and sulfuric acid platform integration coupled with the leading technology position underpins how we went and plant nutrients.

Speaker #3: We are progressing our sustained ammonium sulfate growth program and have now announced another high-return investment opportunity to serve the growing DEF market. These capabilities, combined with increasing asset operational agility and a diversified product and end-market mix, position us to navigate cycles and capitalize on emerging opportunities.

Erin Kane: These capabilities, combined with increasing asset operational agility and diversified product and end market mix, position us to navigate cycles and capitalize on emerging opportunities. We remain focused on delivering on controllable levers, including our non-manpower fixed cost savings program, risk-based prioritization of our capital investments, continued working capital discipline, and 45Q carbon capture tax credits to support improved cash flow generation. With that, Adam, let's move to Q&A.

Speaker #3: We remain focused on delivering on controllable levers including our non-manpower fixed cost savings program, risk-based prioritization of our capital investments, continued working capital discipline, and 45Q carbon capture tax credits to support improved cash flow generation.

Speaker #3: With that, Adam, let's move to Q&A.

Speaker #2: Thanks, Erin. Danielle, can you please open the line for questions?

Adam Kressel: Thanks, Erin. Danielle, can you please open the line for questions?

Speaker #4: Thank you. We will now begin the question-and-answer session. To ask a question, you may press star then one on your touch-tone phone.

Operator 2: Thank you. We will now begin the question and answer session. To ask a question, you may press star then one on your touchtone phone. If you are using a speakerphone, please pick up your handset before pressing the keys. If at any time your question has been addressed and you would like to withdraw your question, please press star then two. The first question comes from Peter Osterland from Truist Securities. Please go ahead.

Operator: Thank you. We will now begin the question and answer session. To ask a question, you may press star then one on your touchtone phone. If you are using a speakerphone, please pick up your handset before pressing the keys. If at any time your question has been addressed and you would like to withdraw your question, please press star then two. The first question comes from Peter Osterland from Truist Securities. Please go ahead.

Speaker #4: If you are using a speakerphone, please pick up your handset before pressing the keys. If at any time your question has been addressed and you would like to withdraw your question, please press star then two.

Speaker #4: The first question comes from Peter from Pete Osterland from True Securities. Please go ahead.

Speaker #5: Hey, good morning. Thanks for taking the questions. Just wanted to start on the DEF ammonia project. I guess do you have a rough estimate you can share for the capital intensity you expect for this project between now and 2029 and maybe how does the return hurdle you're targeting at this point compare to other programs you've had like Sustain and the IRRs you've referenced there?

Peter Osterland: Hey, good morning. Thanks for taking the questions. Just wanted to start on the DEF ammonia project. I guess, do you have a rough estimate you can share for the capital intensity you expect for this project between now and 2029? You know, maybe how does the return hurdle you're targeting at this point compare to other programs you've had, like Sustain and the IRRs you've referenced there?

Speaker #4: Yeah, no, thanks, Pete. Good morning, and appreciate the question. At this time, I would share that we would expect the CapEx for this program, certainly, to be larger than our Sustain program.

Erin Kane: Thanks, Pete. Good morning, and appreciate the question. At this time, you know, I would share that we would expect the CapEx for this program, you know, certainly to be larger than our SUSTAIN program. Hopefully, you can appreciate that while, you know, we're investigating and doing our feed process, you know, we are having a number of negotiations with folks and, you know, at this time would keep, you know, the actual CapEx range, you know, a bit confidential and more to come there. You can think about it certainly as a larger program than SUSTAIN. That said, our internal, you know, targets as we've shared for high return growth and cost savings projects, you know, are 20-plus% IRR, you know, hurdle rates. This project fits, you know, well into that range.

Speaker #4: Hopefully, you can appreciate that while we're investigating and doing our feed process, we are having a number of negotiations with folks, and at this time would keep the actual CapEx range a bit confidential—more to come there.

Speaker #4: But you can think about it. It certainly is a larger program than Sustain. That said, our internal targets as we've shared for high-return growth and cost savings projects are a 20-plus percent IRR hurdle rates.

Speaker #4: And this project fits well into that range and certainly we're here today and certainly announcing it yesterday given the fact that this continues to demonstrate real great potential for the company.

Erin Kane: Certainly, you know, we're here today and certainly announcing it yesterday, you know, given the fact that this continues to, you know, demonstrate real great potential for the company.

Speaker #5: Very helpful, thanks. And then, kind of switching gears—I guess just when you think about the level of sulfur pricing that you're getting to for the second quarter, is it your expectation at this point that prices should be at or above that level for the remainder of the year?

Peter Osterland: Very helpful. Thanks. Then, you know, kind of switching gears, I guess just when you think about the level of sulfur pricing that you're guiding to for Q2, I mean, is it your expectation at this point that prices should be at or above that level for the remainder of the year? I mean, you know, even if the Iran conflict ended very soon, I guess how long would you expect at this point until you start seeing some easing for the dynamics that are driving higher prices in that market?

Speaker #5: I mean, even if the Iran conflict ended very soon, I guess how long would you expect at this point until you start seeing some easing for the dynamics that are driving higher prices in that market?

Speaker #4: Yeah. I mean, certainly you're probably aware that the spot prices continue to trade higher than the Q2 settlement. Certainly, as we think about the Q3 settlement, that will come in a couple of months, right?

Erin Kane: Yeah, I mean, certainly, you're probably aware is that the spot prices continue to, you know, trade higher than the Q2 settlement. Certainly, as we think about the Q3 settlement, that will come in a couple of months, right? It's settled by two large phosphate, producers here in the US and our three largest suppliers. But I think consistent with what you're probably hearing with others in this space, even if things were to, we have a resolution in the Middle East, there is quite a bit of time certainly for things to settle back out. I would share that security of supply is not a consideration for us.

Speaker #4: It's settled by two large phosphate producers here in the U.S., and there are three largest suppliers. But I think, consistent with what you're probably hearing with others in this space, even if things were to—we is quite a bit of time, certainly, for things to settle back out.

Speaker #4: I would share that security supply is not a consideration for us. Being that we're buying here in North America, certainly there is a lot of sulfur, 50% or so world supply comes from the Middle East.

Erin Kane: You know, being that we're buying here in North America, you know, certainly there is a lot of sulfur. 50% or so world's, you know, supply comes from the Middle East. You know, we're in a great spot being a North American producer and purchaser, you know, here. You know, certainly we would anticipate now that it's hard to predict, but pricing probably does stay a bit, you know, higher for longer. We'll have to see what, you know, really it does for demand, you know, into its largest applications, right? Just over 50% of the world's sulfur goes into phosphate fertilizer. Watching that will be key compared to, you know, what we see.

Speaker #4: But we're in a great spot being a North American producer and purchaser here. But certainly, we would anticipate now that it's hard to predict but pricing probably does stay a bit higher for longer.

Speaker #4: And then we'll have to see what it really does for demand in its largest applications. Just over 50% of the world's sulfur goes into phosphate fertilizers.

Speaker #4: So, watching that will be key compared to what we see. But we feel good about, certainly, our sequential opportunity to recover, and that's been our focus really as we are progressing now in Q2 as we move forward.

Erin Kane: We feel good about, you know, certainly our sequential opportunity to, you know, recover, and that's been our focus, you know, really as we are progressing, you know, now in Q2 as we move forward.

Speaker #5: All right. Very helpful. Thank you, Erin.

Peter Osterland: All right. Very helpful. Thank you, Erin.

Erin Kane: Yeah.

Speaker #4: And the next question comes from David Silver from Freedom Capital Markets. Please go ahead.

Operator 2: The next question comes from David Silver from Freedom Capital Markets. Please go ahead.

Operator: The next question comes from David Silver from Freedom Capital Markets. Please go ahead.

Speaker #6: Yeah. Hi. Thank you. Let me just get my questions in order here. I did want to go back to maybe the sulfur question and a couple of your comments regarding ammonium sulfate.

David Silver: Yeah, hi. Thank you. Let me just get my questions in order here. You know, I did want to go back to maybe the sulfur question, a couple of your comments regarding ammonium sulfate. You know, I think you mentioned that ammonium sulfate prices are increasing, but, you know, more or less in line with the rise in sulfur costs. You know, I'm just wondering, you know, you talked about kinda balanced markets, whereas, I mean, for most nitrogen fertilizer products, it's, you know, somewhat different supply-demand aspect. It's very tight. You know, you do have a very strong vertically integrated production structure.

Speaker #6: So I think you mentioned that ammonium sulfate prices are increasing but more or less in line with the rise in sulfur costs. And I'm just wondering you talked about kind of balanced markets whereas I mean, for most nitrogen fertilizer products, it's somewhat different supply-demand aspect.

Speaker #6: It's very tight. And you do have a very strong vertically integrated production structure. Just wondering what kind of in-season flexibility you think you have to maybe exploit some pretty big some pretty big I don't know price differentials amongst the different nitrogen fertilizer products.

David Silver: Just wondering what kind of in-season flexibility you think you have to maybe exploit, you know, some pretty big, you know, some pretty big, I don't know, price differentials amongst the different nitrogen fertilizer products. You know, you've looked at these markets for quite a while. You know, why not tilt or lean on, you know, direct ammonia sales and a little bit less of the ammonium sulfate here?

Speaker #6: So you've looked at these markets for quite a while. Why not tilt or lean on direct ammonia sales and a little bit less of the ammonium sulfate here?

Speaker #4: No, thanks for that question. David, certainly hopefully that was teased out a bit in our remarks. We are a big producer and a leader in ammonium sulfate and that is certainly a place here.

Erin Kane: No, thanks for that question, David. Certainly, you know, hopefully that was, you know, teased out a bit in our remarks. You know, we are, you know, a big producer and a leader in ammonium sulfate, and that is certainly, you know, a place here. As you say, you know, with ammonium sulfate we are and do, you know, get that differential certainly between, you know, where nitrogen is priced in our US natural gas position. We also can have that directly in our ammonia sales as well. I would say right now it's a moderate lever, right? You know, certainly, you know, we are and can pull back a bit right onto our ammonium sulfate production. We continue, as we shared last year, you know, produce ammonia at, you know, historically high levels.

Speaker #4: And as you say, with ammonium sulfate, we are and do get that differential certainly between where nitrogen is priced and our U.S. natural gas position.

Speaker #4: We also can have that directly in our ammonia sales as well. I would say right now it's a moderate lever, right? Certainly, we are, and can pull back a bit, right, onto our ammonium sulfate production.

Speaker #4: We continue, as we shared last year, produce ammonia at historically high levels and then certainly relative to what we are targeting to sell would be consistent with that.

Erin Kane: Certainly relative to what we are, you know, targeting to sell would be consistent with that. You know, again, farmers need NPK. They need us, right? There is a value proposition for sulfur and, you know, we continue to focus on ensuring that, you know, they have their needs met there as well. Certainly a little bit different than perhaps historical when, you know, nitrogen has moved and you have the, you know, the spread. This situation right now, you know, compared to perhaps, you know, Ukraine and Russia definitely continues to, you know, just have us, you know, contend with the sulfur.

Speaker #4: So again, farmers need NPK. They need S, right? There is a value proposition for sulfur, and we continue to focus on ensuring that they have their needs met there as well.

Speaker #4: And but certainly a little bit different than perhaps historical when nitrogen has moved and you have the spread this situation right now compared to perhaps Ukraine and Russia.

Speaker #4: Definitely continues to just have us contend with the sulfur. But certainly, farmers do seem to be sticking more with N, and we're looking to take advantage of that too.

Erin Kane: Certainly farmers do seem to be sticking more with N, and, you know, we're looking to take advantage of that to and really provide, you know, the opportunity that we have off our assets to do so.

Speaker #4: And really wrestle not wrestle, but provide the opportunity that we have off our assets to do so.

Speaker #6: Okay, just to—I'm going to follow up with a couple of targeted questions. Firstly, you did talk about the sulfur market. You did talk about your positioning, being able to get all the sulfur that you require.

David Silver: Okay. Just to I'm gonna follow up with a couple of, you know, targeted questions. Firstly, you know, you did talk about the sulfur market. You did talk about your positioning, you know, able to get all the sulfur that you require. There is I don't know, I'm guessing it's unprecedented, but there is this gap that you touched on between the spot price of sulfur and the contract price of sulfur. You know, I just wanted to clarify that AdvanSix is able to purchase at the contract price, you know, the lower contract price, you know, under your current supply agreements and rather than, you know, some mix of contract and spot pricing.

Speaker #6: But there is—I don't know, I'm guessing it's unprecedented—but there is this gap that you touched on between the spot price of sulfur and the contract price of sulfur.

Speaker #6: And I just wanted to clarify that AdvanSix is able to purchase at the contract price, the lower contract price, under your current supply agreements.

Speaker #6: And rather than some mix of contract and spot pricing. Just if you could just kind of touch on your supply arrangements for sulfur and in particular how tight is the relationship between the U.S.

David Silver: Just if you could just kinda touch on, you know, your supply arrangements for sulfur, and in particular, you know, how tight is the relationship between the, you know, the US contract price versus having to, you know, go out into the spot market.

Speaker #6: Contract price versus having to go out into the spot market.

Speaker #4: I can confirm that we purchase entirely on the contract marker.

Erin Kane: I can confirm that we purchase entirely on the contract market.

Speaker #6: Okay, great. Thank you for that. I did want to follow up maybe on the DEF project—very interesting project—and leveraging some of that, some of your capabilities.

David Silver: Okay, great. Thank you for that. I did wanna follow up maybe on the DEF project. You know, very interesting, you know, project and leveraging, you know, some of that, some of your capabilities. You know, I read the release the other day, then I read your comments in the prepared remarks. You know, certainly you're gonna be adding some urea melt capacity there. Will you also be debottlenecking ammonia? You know, in other words, are you gonna have a higher ammonia capacity, you know, once the project is all finished than you currently have? You know, how should I just kinda think about that in terms of allocating ammonia amongst, you know, the nylon, the fertilizer, and now the DEF?

Speaker #6: I read the release the other day, and then I read your comments in the prepared remarks. But certainly, you're going to be adding some urea-milk capacity there.

Speaker #6: Will you also be debottlenecking ammonia? In other words, are you going to have a higher ammonia capacity once the project is all finished than you currently have?

Speaker #6: Or how should I just kind of think about that in terms of allocating ammonia amongst the nylon, the fertilizer, and now the DEF?

Speaker #4: Yeah. So certainly, this next phase does not this project doesn't require excuse me, an ammonia expansion. Certainly, given our geographical location, our integrated platform, we always look at marginal ammonia debottlenecks, but for the DEF, we do not need to expand ammonia for the purposes of the project.

Erin Kane: Yeah. Certainly this next phase does not, you know, this project doesn't require, excuse me, an ammonia expansion. You know, certainly given our geographical location, our integrated platform, you know, we always look at marginal ammonia bottlenecks. For the DEF, we do not need to expand ammonia for the purposes of the project.

Speaker #6: Okay. Very good. And then last one from me, but I would like to just get an update on the section 45Q credits. So you did talk about it, but I'm guessing that the 2025 filings for roughly 20 million dollars that that has not been received yet.

David Silver: Okay, very good. Last one from me, but I would like to just get an update on the Section 45Q credits. You did talk about it, but I'm guessing that the file the 2025 filings for roughly $20 million that has not been received yet. Just kind of an update on that what do, you know, do you anticipate filing for an additional, you know, tranche of the credits to which you're entitled in the current fiscal year and, you know, should we think about that maybe in the $20 million range as well?

Speaker #6: Just kind of an update on that. And then, do you anticipate filing for an additional tranche of the credits to which you're entitled in the current fiscal year?

Speaker #6: And should we think about that maybe in the 20 million dollar range as well?

Speaker #5: Yeah, David. Thanks for that question. As you can imagine, there's been a lot of continuing activity around 45Q. We are having the audit for the 2018 through 2020 years of credits.

Christopher Gramm: Yeah, David, thanks for that question. As you can imagine, there's been a lot of continuing activity around 45Q. We have the audit process underway with the IRS for the 2018 through the 2020 years of credits. We anticipate field work being wrapped up in Q2. And we're making good progress on the audit itself. In terms of the timing of the cash, and while $20 million was the sort of full value, we've already received $2 of that in prior years, so we're anticipating another $18. We would expect the proceeds for that in H2, subject to the IRS approval process. We're expecting that in H2.

Speaker #5: We anticipate fieldwork being wrapped up in the second quarter. And we're making good progress on the audit itself. In terms of the timing of the cash, and while 20 million was the sort of full value, we've already received two of that in prior years.

Speaker #5: So we're anticipating another 18. We would expect the proceeds for that in the second half subject to the IRS approval process. But we're expecting that in the second half.

Christopher Gramm: In terms of the life cycle assessment for the 21 year and following, we've submitted those to the DOE, and we're working now with the DOE and the IRS to get those certified. Just as a reminder, we've been at this for over 5 years, and this process just takes some time as we work through with the government to get their approval and the due diligence that they do. Hopefully, those will be coming shortly. That's the process and where we are.

Speaker #5: In terms of the life cycle assessment for the 21-year and following, we've submitted those to the DOE and we're working now with the DOE and the IRS to get those certified.

Speaker #5: So, just as a reminder, we've been at this for over five years. And so, this process just takes some time as we work through with the government to get their approval and the due diligence that they do.

Speaker #5: So, hopefully, those will be coming shortly. But that's the process, and where we are. So, okay. Great. Thank you for the update. Thanks.

David Silver: Okay, great. Thank you for the update.

Christopher Gramm: Okay, thanks.

Speaker #4: Thanks, David.

Erin Kane: Thanks, David.

Speaker #1: This concludes our question-and-answer session. I would like to turn the conference back over to Erin Kane for closing remarks.

Operator 2: This concludes our question and answer session. I would like to turn the conference back over to Erin Kane for closing remarks.

Operator: This concludes our question and answer session. I would like to turn the conference back over to Erin Kane for closing remarks.

Speaker #7: Thank you all again for your time and interest this morning. As we move through the remainder of 2026 and navigate a dynamic environment, we are well positioned to support our strategic priorities as a U.S.-based integrated manufacturer aligned to domestic supply chains and energy markets.

Erin Kane: Thank you all again for your time and interest this morning. As we move through the remainder of 2026 and navigate a dynamic environment, we are well-positioned to support our strategic priorities as a US-based integrated manufacturer aligned to domestic supply chains and energy markets, as well as a diverse set of end market applications. With that, we look forward to speaking with you again next quarter. Stay safe and be well.

Speaker #7: As well as a diverse set of end-market applications. With that, we look forward to speaking with you again next quarter. Stay safe and be well.

Operator 2: The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.

Operator: The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.