Q2 2026 AdvanSix Inc Earnings Call

August 7, 2026

Operator: Good day, and welcome to the AdvanSix Q2 2026 Earnings Conference Call. All participants will be in 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 a touch-tone 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 #1: Good day and welcome to the AdvanSix second quarter 2026 earnings conference call. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero.

Speaker #1: After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star, then 1 on a touchtone phone.

Speaker #1: To withdraw your question, please press star, then 2. 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 #1: Please go ahead.

Speaker #2: Thank you, Debbie. Good morning and welcome to AdvanSix's second quarter 2026 earnings conference call. With me here today are President and CEO Erin Kane, and Senior Vice President and CFO Patrick Day.

Adam Kressel: Thank you, Debbie. Good morning and welcome to AdvanSix's Q2 2026 earnings conference call. With me here today are President and CEO, Erin Kane, and Senior Vice President and CFO, Patrick Day. 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. 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: Thank you, Debbie. Good morning and welcome to AdvanSix's Q2 2026 Earnings Conference Call. With me here today are President and CEO, Erin Kane, and Senior Vice President and CFO, Patrick Day. 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. 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 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.

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

Adam Kressel: This morning, we will review our financial results for Q2 2026 and share our outlook for our key product lines and end markets. Finally, we will leave time for your questions at the end. With that, I will 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, our resilient second quarter results reflected a significant sequential improvement in earnings and cash flow amid what remains a highly dynamic macro environment, particularly in plant nutrients.

Erin Kane: Thanks, Adam, and good morning, everyone. We appreciate you joining us here today for our quarterly call. As you saw in our press release, our resilient Q2 results reflected a significant sequential improvement in earnings and cash flow amid what remains a highly dynamic macro environment, particularly in Plant Nutrients. Patrick will dive into the financials in a moment, I would like to start the discussion today framing our key strategic priorities. To drive through cycle value creation and support total shareholder return with higher highs and higher lows, we remain focused on commercial execution, operational excellence, and disciplined capital deployment. These are the controllable levers that are critical to anchor our performance. On commercial execution, we continue to focus on winning with customers to profitably fill our plants and shifting product mix towards higher value applications.

Speaker #3: Patrick will dive into the financials in a moment, but I would like to start the discussion today framing our key strategic priorities. To drive through-cycle value creation and support total shareholder return, with higher highs and higher lows, we remain focused on commercial execution, operational excellence, and disciplined capital deployment.

Speaker #3: These are the controllable levers that are critical to anchor our performance. On commercial execution, we continue to focus on winning with customers to profitably fill our plants and on shifting product mix towards higher value applications.

Speaker #3: Our commercial teams continue to leverage both formula and market-based pricing mechanisms to recover inflationary raw material costs. In the quarter, strong pricing across plant nutrients, chemical intermediates, and nylon solutions offset higher sulfur, benzene, and propylene costs.

Erin Kane: Our commercial teams continue to leverage both formula and market-based pricing mechanisms to recover inflationary raw material costs. In the quarter, strong pricing across Plant Nutrients, Chemical Intermediates, and Nylon Solutions offset higher sulfur, benzene, and propylene costs. Importantly, our year-over-year net price over raws impact was neutral in the quarter, which is a notable improvement from the Q1 headwind. On operational excellence, we are well-positioned through our integrated asset base, global low-cost position, and continued focus on productivity. Our base capital investments support safe, stable, and sustainable operations. As we discussed on prior calls, our ammonia turnaround was moved to Q2 and scoped to align with our supplier's natural gas pipeline inspection. We are pleased to share that we executed to our expectations. Lastly, we are focused on generating meaningful operating cash flow to support disciplined capital deployment.

Speaker #3: Importantly, our year-over-year net price over raw's impact was neutral in the quarter, which is a notable improvement from the first quarter headwind. On operational excellence, we are well-positioned through our integrated asset base: global low-cost position and continued focus on productivity.

Speaker #3: Our base capital investments support safe, stable, and sustainable operations. As we discussed on prior calls, our ammonia turnaround was moved to the second quarter and scoped to align with our suppliers' natural gas pipeline inspection.

Speaker #3: We are pleased to share that we executed to our expectations. Lastly, we are focused on generating meaningful operating cash flow to support disciplined capital deployment.

Speaker #3: From a working capital perspective, our cash conversion cycle benchmarks in the top quartile among peers. Our significant runway of opportunity on 45Q carbon capture tax credits also supports future cash generation.

Erin Kane: From a working capital perspective, our cash conversion cycle benchmarks in the top quartile among peers. Our significant runway of opportunity on 45Q carbon capture tax credits also supports future cash generation. As we allocate capital, our discretionary organic investments target greater than 20% returns. Our Sustained Growth Program is generating returns in excess of 30%, and we remain on track to deliver product mix optimization with 75% ammonium sulfate granular conversion. This is an important milestone as we continue to align our production output with growing demand for sulfur nutrition. We will continue to ensure a well-managed balance sheet that will afford the investments for performance and growth. We continue to expect improved earnings and cash flow in H2 of the year compared to H1 as we build momentum into 2027.

Speaker #3: As we allocate capital, our discretionary organic investments target greater than 20% returns. Our sustained growth program is generating returns in excess of 30%, and we remain on track to deliver product mix optimization with 75% ammonia sulfate granular conversion.

Speaker #3: This is an important milestone as we continue to align our production output with growing demand for sulfur nutrition. We will continue to ensure a well-managed balance sheet that will afford the investments for performance and growth.

Speaker #3: We continue to expect improved earnings and cash flow in the second half of the year compared to the first half, as we build momentum into 2027.

Speaker #3: While the near-term market environment has been mixed, our durable competitive advantage, portfolio resiliency across a diverse set of end markets, and our long-term positioning for growth underpin what we believe is a compelling investment thesis for AdvanSix.

Erin Kane: While the near-term market environment has been mixed, our durable competitive advantage, portfolio resiliency across a diverse set of end markets, and our long-term positioning for growth underpin what we believe is a compelling investment thesis for AdvanSix. Let's turn to slide four. Based on our expectations coming out of the Q1 earnings call, a number of items played out as anticipated. Notably, this sequential improvement in net pricing over rising raw material costs was a primary driver of our earnings improvement. Both Nylon Solutions and Chemical Intermediates performed at or better than our expectations, with strong commercial performance and mix optimization supporting margins. Plant Nutrients volume, however, was lower than anticipated. The spring planting season saw significant increase in grower input costs while crop and grain prices remained steady at lower levels. This unfavorably impacted farmer profitability and resulted in a reduction of fertilizer consumption overall.

Speaker #3: Let's turn to slide out of the first quarter earnings call, a number of items played out as anticipated. Notably, the sequential improvement in net pricing over rising raw material costs was a primary driver of our earnings improvement.

Speaker #3: Both nylon solutions and chemical intermediates performed at or better than our expectations with strong commercial performance and mix optimization supporting margins. Plant nutrients volume, however, was lower than anticipated.

Speaker #3: The spring planting season saw a significant increase in grower input costs, while crop and grain prices remained steady at lower levels. This unfavorably impacted farmer profitability and resulted in a reduction of overall fertilizer consumption.

Speaker #3: Despite these challenges, we ended the full fertilizer year at near record volume performance for domestic granular ammonium sulfate. Lastly, our utilization rates were lower on operational performance, including the impact of our ammonia plant turnaround.

Erin Kane: Despite these challenges, we ended the full fertilizer year at near record volume performance for domestic granular ammonium sulfate. Lastly, our utilization rates were lower on operational performance, including the impact of our ammonia plant turnaround. With that, I'll turn to Patrick to discuss the financials.

Speaker #3: With that, I'll turn to Patrick to discuss the financials.

Speaker #4: Thanks, Erin. I'm now on slide 5 to discuss our results for the quarter. Sales of $421 million increased approximately 3% versus the prior year, comprised of 18% favorable pricing.

Adam Kressel: Thanks, Erin. I'm now on slide five to discuss our results for the quarter. Sales of $421 million increased approximately 3% versus the prior year, comprised of 18% favorable pricing, partially offset by a 15% decline in volume.

Patrick Day: Thanks, Erin. I'm now on slide five to discuss our results for the quarter. Sales of $421 million increased approximately 3% versus the prior year, comprised of 18% favorable pricing, partially offset by a 15% decline in volume.

Speaker #4: Partially offset by a 15% decline in volume. Raw material pass-through pricing was up 13%, following a net cost increase in benzene and propylene. Market-based pricing improved 5%.

Patrick Day: Raw material pass-through pricing was up 13%, following a net cost increase in benzene and propylene. Market-based pricing improved 5%, primarily driven by an increase in Plant Nutrients, reflecting higher nitrogen pricing amid increased sulfur input costs. Lower sales volume was primarily driven by more challenging agricultural fundamentals, including farmer economics, which resulted in a reduction of in-season fertilizer purchases. Adjusted EBITDA was $32 million, down $24 million from last year. I will highlight the key year-over-year variances in a moment. Adjusted earnings per share of $0.19 declined $1.05 versus the prior year. The higher effective tax rate compared to last year was driven primarily by 45Q carbon capture tax credits claimed in the prior year period and changes in taxable income. We expect the full year 2026 effective tax rate to be in the range of 10% to 15% prior to any additional 45Q claims.

Speaker #4: Primarily driven by an increase in plant nutrients, reflecting higher nitrogen pricing amid increased sulfur input costs. Lower sales volume was primarily driven by more challenging agricultural fundamentals including farmer economics.

Speaker #4: Which resulted in a reduction of in-season fertilizer purchases. Adjusted EBITDA was 32 million dollars, down 24 million dollars from last year. I will highlight the key year-over-year variances in a moment.

Speaker #4: Adjusted earnings per share of $0.19 declined $1.05 versus the prior year. The higher effective tax rate compared to last year was driven primarily by 45Q carbon capture tax credits claimed in the prior-year period and changes in taxable income.

Speaker #4: We expect the full year 2026 effective tax rate to be in the range of 10 to 15 percent prior to any additional 45Q claims.

Speaker #4: On a sequential basis compared to the first quarter, earnings and cash flow improved significantly, with tailwinds across the portfolio from net favorable pricing over raw material input costs.

Patrick Day: On a sequential basis compared to Q1, earnings and cash flow improved significantly, with tailwinds across the portfolio from net favorable pricing over raw material input costs. Overall, a testament to the commercial performance in H1 of this year. Let's turn to slide 6. In the quarter, we drove pricing improvement across the portfolio on both a year-over-year and sequential basis. This was supported by higher raw material pass-through pricing, as well as an increase in market-based pricing. The primary driver of lower volume, both year-over-year and sequentially, was Plant Nutrients due to the in-season dynamics we observed. To a lesser extent, we saw modestly lower volumes quarter-over-quarter in Nylon Solutions and Chemical Intermediates. Across Nylon Solutions, resin volumes increased year-over-year on improved operational performance while caprolactam volumes moderated in a soft demand environment for carpet applications.

Patrick Day: On a sequential basis compared to Q1, earnings and cash flow improved significantly, with tailwinds across the portfolio from net favorable pricing over raw material input costs. Overall, a testament to the commercial performance in H1 of this year. Let's turn to slide six. In the quarter, we drove pricing improvement across the portfolio on both a year-over-year and sequential basis. This was supported by higher raw material pass-through pricing, as well as an increase in market-based pricing. The primary driver of lower volume, both year-over-year and sequentially, was Plant Nutrients due to the in-season dynamics we observed. To a lesser extent, we saw modestly lower volumes quarter-over-quarter in Nylon Solutions and Chemical Intermediates. Across Nylon Solutions, resin volumes increased year-over-year on improved operational performance while caprolactam volumes moderated in a soft demand environment for carpet applications.

Speaker #4: So overall, a testament to the commercial performance in the first half of this year. Now, let's turn to slide 6. In the quarter, we drove pricing improvement across the portfolio on both a year-over-year and sequential basis.

Speaker #4: This was supported by higher raw material pass-through pricing, as well as an increase in market-based pricing. The primary driver of lower volume, both year-over-year and sequentially, was plant nutrients.

Speaker #4: Due to the in-season dynamics, we observed to a lesser extent we saw modestly lower volumes quarter over quarter in nylon solutions and chemical intermediates.

Speaker #4: Across nylon solutions, resin volumes increased year over year on improved operational performance, while Caprolactam volumes moderated in a soft demand environment for carpet applications. We saw a reduction overall in export volume sequentially in the second quarter.

Patrick Day: We saw a reduction overall in export volume sequentially in Q2. A more constrained production environment, including the planned turnaround activities, shifted our focus to serving our North American customers. Consistent with our ongoing operating approach, we evaluate the optimal product and geographic mix to ensure the best economic outcome for the integrated enterprise. Let's turn to slide 7. Here, we highlight the key drivers of our Q2 adjusted EBITDA performance year-over-year. We completely offset the significant raw material cost increase in the quarter through commercial execution and pricing actions. We thought it was important to highlight in this environment the magnitude of the input cost inflation that we were able to offset through pricing in the quarter.

Patrick Day: We saw a reduction overall in export volume sequentially in Q2. A more constrained production environment, including the planned turnaround activities, shifted our focus to serving our North American customers. Consistent with our ongoing operating approach, we evaluate the optimal product and geographic mix to ensure the best economic outcome for the integrated enterprise. Let's turn to slide seven. Here, we highlight the key drivers of our Q2 adjusted EBITDA performance year-over-year. We completely offset the significant raw material cost increase in the quarter through commercial execution and pricing actions. We thought it was important to highlight in this environment the magnitude of the input cost inflation that we were able to offset through pricing in the quarter.

Speaker #4: A more constrained production environment including the planned turnaround activities shifted our focus to serving our North American customers. Consistent with our ongoing operating approach, we evaluate the optimal product in geographic mix to ensure the best economic outcome for the integrated enterprise.

Speaker #4: Let's turn to slide 7. Here, we highlight the key drivers of our second quarter adjusted EBITDA performance year-over-year. We completely offset the significant raw material cost increase in the quarter through commercial execution and pricing actions.

Speaker #4: We thought it was important to highlight, in this environment, the magnitude of the input cost inflation that we were able to offset through pricing in the quarter.

Speaker #4: As you can see on the right side of this slide, raw material costs were a headwind of 72 million dollars in the second quarter on a year-over-year basis.

Patrick Day: You can see on the right side of this slide, raw material costs were a headwind of $72 million in Q2 on a year-over-year basis. This was primarily driven by rising benzene and sulfur prices. We were able to fully recoup that impact through strong commercial execution with favorable market and pass-through pricing across the portfolio. On a sequential basis, while we incurred a $10 million headwind in Q1, we saw that flip to a $39 million tailwind in Q2. This was also supported by strong pricing in each business line, more than offsetting rising benzene, sulfur, and propylene costs. Natural gas costs were seasonally lower in Q2 as compared to Q1, which is typical for our business. Back to the bridge on the left side of the chart.

Speaker #4: This was primarily driven by rising benzene and sulfur prices. We were able to fully recoup that impact through strong commercial execution with favorable market and pass-through pricing across the portfolio.

Speaker #4: On a sequential basis, while we incurred a $10 million headwind in Q1, we saw that flip to a $39 million tailwind in Q2.

Speaker #4: This was also supported by strong pricing in each business line more than offsetting rising benzene sulfur and propylene costs. Natural gas costs were seasonally lower in the second quarter as compared to the first, which is typical for our business.

Speaker #4: Now, back to the bridge on the left side of the chart. Volume represented a $17 million unfavorable impact, primarily driven by lower sales in plant nutrients in the face of more challenging agricultural fundamentals, including farmer economics.

Patrick Day: Volume represented a $17 million unfavorable impact, primarily driven by lower sales in Plant Nutrients in the face of more challenging agricultural fundamentals, including farmer economics. Operationally, we saw an approximately $4 million unfavorable impact from the timing of planned plant turnarounds. Lastly, all other items netted to a $3 million headwind with the impact of reduced production output partially offset by lower SG&A as planned. Let's turn to slide 8. On the left side of the page, we've shown our H1 free cash flow generation for 2025 and 2026. Our year-to-date performance is largely tracking to last year when taking into account approximately $26 million of insurance proceeds in the prior year period. Working capital, although improved year-over-year, has been a seasonal use of cash in H1 as expected. The primary driver of the improvement was disciplined inventory management.

Patrick Day: Volume represented a $17 million unfavorable impact, primarily driven by lower sales in Plant Nutrients in the face of more challenging agricultural fundamentals, including farmer economics. Operationally, we saw an approximately $4 million unfavorable impact from the timing of planned plant turnarounds. Lastly, all other items netted to a $3 million headwind with the impact of reduced production output partially offset by lower SG&A as planned. Let's turn to slide eight. On the left side of the page, we've shown our H1 free cash flow generation for 2025 and 2026. Our year-to-date performance is largely tracking to last year when taking into account approximately $26 million of insurance proceeds in the prior year period. Working capital, although improved year-over-year, has been a seasonal use of cash in H1 as expected. The primary driver of the improvement was disciplined inventory management.

Speaker #4: Operationally, we saw an approximately $4 million unfavorable impact from the timing of planned plant turnarounds. Lastly, all other items netted to a $3 million headwind, with the impact of reduced production output partially offset by lower SG&A, as planned.

Speaker #4: Let's turn to slide 8. On the left side of the page, we've shown our first half free cash flow generation for 2025 and 2026.

Speaker #4: Our year-to-date performance is largely tracking to last year, when taking into account approximately $26 million of insurance proceeds in the prior year period.

Speaker #4: Working capital, although improved year-over-year, has been a seasonal use of cash in the first half, as expected. The primary driver of the improvement was disciplined inventory management.

Speaker #4: As we've shared previously, there is non-linearity in our cash flow on a quarterly basis. As we look forward into the second half, we anticipate significant sequential improvement, notably as a result of our reduced CapEx run rate working our fourth quarter pre-buy program in plant nutrients timing of annual payments paid in the first half and 45Q cash tax credits.

Patrick Day: As we've shared previously, there is non-linearity in our cash flow on a quarterly basis. As we look forward into H2, we anticipate significant sequential improvement, notably as a result of our reduced CapEx run rate, working capital tailwinds, including our Q4 pre-buy program in Plant Nutrients, timing of annual payments paid in H1, and 45Q cash tax credits. Let me turn the call back to Erin.

Speaker #4: Let me turn the call back to Erin.

Speaker #1: Thanks, Patrick. With the moving parts in our end markets, let's first take a deeper dive into what we're seeing in the plant nutrients market, and specifically, sulfur input costs.

Erin Kane: Thanks, Patrick. With the moving parts in our end markets, let's first take a deeper dive into what we're seeing in the plant nutrients market, and specifically sulfur input costs, which have been key drivers of our H1 performance. We realized lower in-season plant nutrient sales as a result of reduced grower application of nutrients. Ammonium sulfate demand softened significantly in Q2 after strong early season purchases as farmers prioritized applying nitrogen in the peak of the season above all nutrients, most notably ammonia. As the season progressed, growers applied fertilizer, including ammonium sulfate, based on purchases and inventory that was in the channel. Despite weaker in-season sales, we still achieved one of our strongest fertilizer year performances in terms of total domestic granular volume. It is clear that we structurally improved our output and mix, supported by our sustained growth program.

Speaker #1: These have been key drivers of our first half performance. We realized lower in-season plant nutrient sales as a result of reduced grower application of nutrients.

Speaker #1: Ammonium sulfate demand softened significantly in Q2 after strong early season purchases, as farmers prioritized applying nitrogen in the peak of the season above all nutrients, most notably ammonia.

Speaker #1: As the season progressed, growers applied fertilizer including ammonium sulfate based on purchases and inventory that was in the channel. Despite weaker in-season sales, we still achieved one of our strongest fertilizer year performances in terms of total domestic granular volume.

Speaker #1: It is clear that we structurally improved our output and mix, supported by our sustained growth program. From an input perspective, sulfur costs have moved up to record highs over the course of the last year.

Erin Kane: From an input perspective, sulfur costs have moved up to record highs over the course of the last year. It is evident that elevated sulfur prices, amplified by the conflict in the Middle East, created demand destruction across the industry, most notably in phosphates, which represent approximately 50% of sulfur demand. The Tampa sulfur marker closed at another record of $705 per long ton in Q3, following $655 per long ton in Q2. Third-party industry experts are forecasting a roughly $200 decline in sulfur prices entering 2027, which will be a tailwind for the next planting season amid what is likely tighter domestic ammonium sulfate supply. As a sensitivity for impact to AdvanSix, every $100 per long ton change in sulfur raw material price equals an approximately $35 million cost impact on an annual basis.

Speaker #1: It is evident that elevated sulfur prices amplified by the conflict in the Middle East created demand destruction across the industry most notably in phosphates which represent approximately 50 percent of sulfur demand.

Speaker #1: The Tampa sulfur marker closed at another record of 705 dollars per long ton in the third quarter. Following 655 dollars per long ton in the second.

Speaker #1: Third-party industry experts are forecasting a roughly 200 dollar decline in sulfur prices entering 2027 which will be a tailwind for the next planting season amid what is likely tighter domestic ammonium sulfate supply.

Speaker #1: As a sensitivity for impact to AdvanSix, every $100 per long ton change in sulfur raw material price equals an approximately $35 million cost impact on an annual basis.

Speaker #1: In this environment, we have flexed optionality to incrementally increase ammonia sales availability based on market dynamics across the entire value chain. Our plan for the full year 2026 is expected to be up 30% on ammonia sales volume compared to 2025, which was a prior record year.

Erin Kane: In this environment, we have flex optionality to incrementally increase ammonia sales availability based on market dynamics across the entire value chain. Our plan for the full year 2026 is expected to be up 30% on ammonia sales volume compared to 2025, which was a prior record year. This reflects our ongoing debottlenecking efforts and the benefit of targeted replacement maintenance capital investments over time. With our positive experience securing our existing USDA grant in support of our SUSTAIN program, we're now planning to apply for their new FIELDS grant to expand our ammonia capacity and increase nitrogen nutrition availability for domestic farmers. In addition, our previously announced DEF project is progressing through its evaluation phases as planned, and if moved forward, would unlock more value off our integrated ammonia platform. Let's turn to slide 10 to highlight what we're seeing across the rest of the portfolio.

Speaker #1: This reflects our ongoing debottlenecking efforts and the benefit of targeted, replacement maintenance capital investments over time. With our positive experience securing our existing USGA grant in support of our sustained program, we're now planning to apply for their new fields grant to expand our ammonia capacity and increase nitrogen nutrition availability for domestic farmers.

Speaker #1: In addition, our previously announced DEF project is progressing through its evaluation phases as planned and has moved forward to unlock more value from our integrated ammonia platform.

Speaker #1: Let's turn to slide 10 to highlight what we're seeing across the rest of the portfolio. Moving beyond ag to our key nylon end markets across building, construction, and durables, plastics, and packaging, North American demand has not materially changed.

Erin Kane: Moving beyond ag to our key nylon end markets across building construction, engineering plastics, and packaging, North American demand has not materially changed. Global pricing has moved up with higher input costs, while raw material shortages, logistics constraints, and lower operating rates in China have tightened supply. Similar to nylon, end market demand across Chemical Intermediates into construction, coatings, and downstream industrials has been broadly stable. Phenol demand remains soft overall, driving lower global operating rates, coupled with reduced acetone imports into the US, all of which are supporting tighter acetone supply and demand dynamics. Let's move to slide 11. Looking ahead, we have line of sight to several drivers in place to support H2 sequential EBITDA and cash flow improvement. On earnings, we expect benefits from the absence of the Q1 winter storm impact and the completion of our larger planned turnaround in the Q2.

Speaker #1: Global pricing has moved up with higher input costs, while raw material shortages, logistics constraints, and lower operating rates in China have tightened supply. Similar to nylon, end market demand across chemical intermediates into construction, coatings, and downstream industrials has been broadly stable.

Speaker #1: Phenol demand remains soft overall, driving lower global operating rates, coupled with reduced acetone imports into the U.S., all of which are supporting tighter ammonia and acetone supply and demand dynamics.

Speaker #1: Let's move to slide 11. Looking ahead, we have line of sight to several drivers in place to support second-half sequential EBITDA and cash flow improvement.

Speaker #1: On earnings, we expect benefits from the absence of the first quarter winter storm impact and the completion of our larger planned turnaround in the second quarter.

Speaker #1: We continue to target approximately $10 million in savings beyond 2026 from our multi-year non-manpower fixed cost reduction program. In Nylon Solutions, we expect steady volume performance and continued focus on price roles expansion through disciplined commercial execution and mix optimization.

Erin Kane: We continue to target approximately $10 million savings exiting 2026 from our multi-year non-manpower fixed cost reduction program. In Nylon Solutions, we expect steady volume performance and continued focus on price over raws expansion through disciplined commercial execution and mix optimization. In Chemical Intermediates, we continue to expect cycle average performance for acetone spreads, while our other products in the portfolio are performing to expectations. In Plant Nutrients at this point in the year, we've historically realized a $10 to $15 million sequential headwind on earnings due to the reset of the North American fertilizer year, beginning with the fall fill program. This year, we expect the impact to be greater given pricing dynamics amid higher sulfur input costs that have impacted the fill program outcomes.

Speaker #1: In chemical intermediates, we continue to expect cycle-average performance for acetone spreads, while our other products in the portfolio are performing to expectations. In plant nutrients, at this point in the year, we've historically realized a $10 to $15 million sequential headwind on earnings due to the reset of the North American fertilizer year beginning with the fall fill program.

Speaker #1: This year, we expect the impact to be greater, given pricing dynamics amid higher sulfur input costs that have impacted the fill program outcomes. Due to the softer late-season demand, as discussed, there was fertilizer inventory left in the channel, which prompted competitive intensity as players—including traders of imported and other domestic volume—sought to liquidate their positions without regard to producer economics.

Erin Kane: Due to the sulfur late season demand, as discussed, there was fertilizer inventory left in the channel, which prompted competitive intensity as players, including traders of imported and other domestic volume, sought to liquidate their positions without regard to producer economics. While this has near-term impact, we remain focused on serving our customers with a strong sulfur nutrition value proposition we have long built through sound agronomic research and grower yield benefits. Moving to cash, there are several tailwinds which Patrick highlighted supporting our stronger H2 performance. Let's turn to slide 12 before moving to Q&A. We remain confident in the through-cycle value creation opportunity at AdvanSix. Our unique combination of assets and business model are core to our durable competitive advantage and long-term positioning. Key to our strategy is a focus on the levers we control: commercial execution, operational excellence, cash generation, and disciplined capital deployment.

Speaker #1: While this has near-term impact, we remain focused on serving our customers with a strong sulfur nutrition value proposition that we have long built through sound agronomic research and grower yield benefits.

Speaker #1: Moving to cash, there are several tailwinds which Patrick highlighted supporting our stronger second half performance. Let's turn to slide 12 before moving to Q&A.

Speaker #1: We remain confident in the through-cycle value creation opportunity at AdvanSix. Our unique combination is core to our durable competitive advantage and long-term positioning. Key to our strategy is a focus on the levers we control: commercial execution, operational excellence, cash generation, and disciplined capital deployment.

Speaker #1: As we move through the remainder of 2026 and navigate the current industry 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, as well as a diverse set of end market applications.

Erin Kane: As we move through the remainder of 2026 and navigate the current industry 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. We believe the actions we're taking and strategic priorities ahead support AdvanSix to deliver improved performance and sustainable long-term value. With that, Adam, let's move to Q&A.

Speaker #1: We believe the actions we're taking and the strategic priorities ahead support AdvanSix to deliver improved performance and sustainable long-term value. With that, Adam, let's move to Q&A.

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

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

Speaker #3: 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.

Operator: We will now begin the question and answer session. To ask a question, you may press star then one on your touch tone phone. If you are using a speaker phone, 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. At this time, we will pause momentarily to assemble our roster. The first question comes from Peter Osterland with Truist Securities. Please go ahead.

Operator: We will now begin the question and answer session. To ask a question, you may press star then one on your touch tone phone. If you are using a speaker phone, 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. At this time, we will pause momentarily to assemble our roster. The first question comes from Pete Osterland with Truist Securities. Please go ahead.

Speaker #3: If at any time your question has been addressed and you would like to withdraw your question, please press star, then two. At this time, we will pause momentarily to assemble our roster.

Speaker #3: The first question comes from Pete Osterland with Truist Securities. Please go ahead.

Speaker #4: Hey, good morning. Thanks for taking the questions. So, I just wanted to start with the comment on running Hopewell at lower rates than you expected.

Peter Osterland: Hey, good morning. Thanks for taking the questions. Just wanted to start on the comment on running Hopewell at lower rates than you expected. Was this a market-based decision driven by ammonium sulfate demand, or were there any operational delays coming out of the turnaround? And then also maybe if you could size just how far below your optimal rates you're running and how much line of sight you have into when conditions would be supportive of raising operating rates.

Pete Osterland: Hey, good morning. Thanks for taking the questions. Just wanted to start on the comment on running Hopewell at lower rates than you expected. Was this a market-based decision driven by ammonium sulfate demand, or were there any operational delays coming out of the turnaround? And then also maybe if you could size just how far below your optimal rates you're running and how much line of sight you have into when conditions would be supportive of raising operating rates.

Speaker #4: Was this a market-based decision driven by ammonium sulfate demand, or were there any operational delays coming out of the turnaround? And then also, maybe if you could size just how far below your optimal rates you're running, and how much line of sight you have into when conditions would be supportive of raising operating rates.

Speaker #1: Yeah, thanks for the question, Pete, and good morning. Certainly in the quarter, we would have had Hopewell running around the mid-70s, consistent with other turnaround quarters.

Erin Kane: Yeah, thanks for the question, Pete, and good morning. Certainly in the quarter, we would've had Hopewell running around mid-70s, consistent with other turnaround quarters. A large majority there would've been really being constrained through our ammonia production, which has implications on the full value chain. As we proceed forward, obviously we're focused on, as we've shared, running the assets to the demand. As you've seen, certainly our Chesterfield operations are improving year over year, some operational performance that's important there. Then obviously we're continuing to evaluate really the economics given the environment on both how we think about monetizing ammonia and sulfuric acid in the environment for ammonium sulfate. We have to take the full enterprise chain all the way through to the mix to make those best decisions. It's kind of an ongoing opportunity set for us to optimize.

Speaker #1: So, a large majority there would have really been constrained through our ammonia production, which has implications on the full value chain. And as we proceed forward, obviously we're focused on, as we've shared, running the assets to the demand. So, as you've seen, certainly our Chesterfield operations are improving year over year.

Speaker #1: An operational performance that's important there. And then, obviously, we're continuing to evaluate the economics given the environment—both how we think about monetizing ammonia and sulfuric acid, and the environment for ammonium sulfate.

Speaker #1: But we have to take the full enterprise chain all the way through to the mix to make those best decisions. So it's kind of an ongoing opportunity set for us to optimize.

Speaker #4: Okay, understood. There are a lot of moving parts with pricing versus raw materials, but just following the full offset of pricing versus raws in the second quarter, do you have an estimate or a range you could share of what you expect the net impact would look like in the third quarter, just based on what you can see right now?

Peter Osterland: Okay, understood. A lot of moving parts with pricing versus raw materials, but just following the full offset of pricing versus raws in Q2, do you have an estimate or a range you could share of what you expect the net impact would look like in Q3, just based on what you can see right now?

Pete Osterland: Okay, understood. A lot of moving parts with pricing versus raw materials, but just following the full offset of pricing versus raws in Q2, do you have an estimate or a range you could share of what you expect the net impact would look like in Q3, just based on what you can see right now?

Speaker #1: Yeah, certainly, as we've shared, I can start and then Patrick can jump in as well. Given where sulfur has landed, I think that's going to be the largest headwind, vis-à-vis certainly where ammonium sulfate pricing has reset, right, in the fall fill program.

Erin Kane: Yeah, certainly as we've shared, I can start and Patrick can jump in as well. Given where sulfur has landed, I think that's going to be the largest headwind vis-a-vis certainly where ammonium sulfate pricing has reset right in the fall fill program. Benzene and propylene are going to move with oil, right? Certainly we have moving parts there based on really how the Middle East is impacting that on a regular basis. When you think about the pricing mechanisms, the formula and pass-through definitely play more to benzene being passed through in the formulas mechanistically. It's really going to be how the sulfur plays out relative to the price performance.

Speaker #1: Benzene and propylene are going to move with oil, right? And then, certainly, we have moving parts there based on really how the Middle East is impacting that on a regular basis.

Speaker #1: So when you think about the pricing mechanisms, the formula and pass-through definitely play more to benzene being passed through in the formulas, mechanistically. So it's really going to be how the sulfur plays out relative to the price performance.

Speaker #2: Yeah, I think we highlighted in our comments the $10 to $15 million year-over-year headwind. That's currently the range we're working with and what we expect.

Adam Kressel: Yeah, I think we highlighted in our comments the $10 to 15 million year-over-year headwind. That's currently the range we're working with and what we expect.

Speaker #4: Okay, very helpful, thanks. I just wanted to finish with a couple questions, including some on the cash tailwinds you're expecting in the second half.

Peter Osterland: Okay. Very helpful. Thanks. Just wanted to finish with a couple questions on some of the cash tailwinds you're expecting in H2. Just first on the ammonium sulfate pre-buy advances with some of the challenges around farmer economics and fertilizer demand that you called out, do you expect the pre-buy in H2 to be weaker than normal? I guess could you size what is normal and what are your expectations for how that is shaping up this year?

Pete Osterland: Okay. Very helpful. Thanks. Just wanted to finish with a couple questions on some of the cash tailwinds you're expecting in H2. Just first on the ammonium sulfate pre-buy advances with some of the challenges around farmer economics and fertilizer demand that you called out, do you expect the pre-buy in H2 to be weaker than normal? I guess could you size what is normal and what are your expectations for how that is shaping up this year?

Speaker #4: So, just first on the ammonium sulfate pre-buy advances: with some of the challenges around farmer economics and fertilizer demand that you called out, do you expect the pre-buy in the second half to be weaker than normal?

Speaker #4: And I guess, could you size what is normal and what your expectations are for how that is shaping up this year?

Speaker #1: Yeah, at this point, we would anticipate that it’s, on one hand, a little too early to tell, right? We’re just getting through the fall fill.

Erin Kane: Yeah. At this point, we would anticipate that it's a bit, on one hand, a little too early to tell, right? We're just getting through the fall fill. Obviously this is something that we generally see as steady demand every winter. At this point with nutrition, we're really kind of watching now the fundamentals and the guideposts, right? We're watching the current crop performance. We'll get more from the USDA this week. You've got certainly implications now that the corn rating has declined since mid-July, a little bit more in line with 2022 and 2023 crops than the last two years. How that plays into yield estimates, how that will play into future corn prices, obviously reset and profitability.

Speaker #1: Obviously, this is something that we generally see as steady demand every winter. At this point with nutrition, we're really kind of watching the fundamentals and the guideposts, right?

Speaker #1: So we're watching the current crop demand—or sorry, crop performance. If you think about it, we'll get more from the USDA this week. You've got certainly implications now that the corn rating has declined since mid-July.

Speaker #1: A little bit more in line with 2022 and 2023 crops than the last two years. So how that plays into yield estimates, how that will play into future corn prices, obviously, reset and profitability.

Speaker #1: And so, as we sit here today, there's no reason to think that there wouldn't be a positive view relative to that pre-buy program setting up for next spring.

Erin Kane: As we sit here today, there's no reason to think that there wouldn't be a positive view relative to that pre-buy program setting up for next spring. You could see still a constructive setup, right? When you look forward relative to where we sit today and head forward into the spring. We would also see that ammonium sulfate will probably be a bit tighter as well as we move forward. As we sit here today, the input costs are not supporting, we believe, and what the feedback is from the industry that the marginal producer in the US is not running. Again, these are the things that we're going to continue to look at as we progress through Q3, Q4, and work to set up a constructive view as we get to spring.

Speaker #1: You could still see a constructive setup, right, when you kind of look forward relative to where we sit today and head into the spring.

Speaker #1: We would think that, and also see that, ammonium sulfate will probably be a bit tighter as well as we move forward. As we sit here today, the input costs are not supporting, we believe, and the feedback from the industry is that the marginal producer in the U.S. is not running.

Speaker #1: And so, again, these are the things that we're going to continue to look at as we progress through Q3 and Q4, and work to set up a constructive view as we get to spring.

Speaker #4: Okay, great. And then just lastly, on the reductions in CapEx for the second half, when you talk about risk-based prioritization, are these mainly deferrals of spending that, at some point in the future, you have to catch up on?

Peter Osterland: Okay, great. Just lastly, on the reductions in CapEx for the H2. When you talk about risk-based prioritization, are these mainly deferrals of spending that at some point in the future you have to catch up on? What kind of activities are we talking about? Just maybe some more color around that would be helpful.

Pete Osterland: Okay, great. Just lastly, on the reductions in CapEx for the H2. When you talk about risk-based prioritization, are these mainly deferrals of spending that at some point in the future you have to catch up on? What kind of activities are we talking about? Just maybe some more color around that would be helpful.

Speaker #4: And what kind of activities are we talking about? Just maybe some more color around that would be helpful.

Speaker #1: Sure. When you think about historical approaches, in many cases, to repair maintenance as well as capital intensity from that same view, a lot of techniques are time-based, right?

Erin Kane: Sure. When you think about historical approaches, in many cases to repair maintenance as well as just capital intensity on that same view, a lot of the techniques are time-based, right? A piece of equipment goes in with an expected life. The reality is in today's views, you can use better data, have quantitative risk assessments. When we talk about risk-based, it's using better indications on when we should be tackling the repair and maintenance type capital in the assets going forward based on how we need them to run to meet demand. I wouldn't think about it as a deferral where there will be a catch-up, but rather an overall reslating or reprioritization, right? Using data, heuristics, and new ways to prioritize where we spend, when we spend it across the enterprise. The back half just reflects.

Speaker #1: A piece of equipment goes in with an expected life. The reality is, in today's view, you can use better data and have quantitative risk assessments.

Speaker #1: And so, when we talk about risk-based, it's using better indications on when we should be tackling the repair and maintenance-type capital in the assets going forward, based on how we need them to run to meet demand.

Speaker #1: So I wouldn’t think about it as a deferral where there will be a catch-up, but rather an overall reslating or reprioritization, right? Using data, heuristics, and new ways to prioritize where we spend, and when we spend it across the enterprise.

Speaker #1: And so, the back half just reflects— I mean, obviously, you've got a time lag here, right, for our actions to take place relative to the cash flow.

Erin Kane: Obviously, you've got a time lag here for our actions to take place relative to the cash flow. Certainly the H1 heavier as we exited 2025, and then putting this into place as we roll forward.

Speaker #1: So certainly the first half heavier, right, as we exited 2025 and then putting this into place as we roll forward.

Speaker #4: Excellent. Thanks a lot.

Peter Osterland: Excellent. Thanks a lot.

Pete Osterland: Excellent. Thanks a lot.

Speaker #1: Thanks, Peter.

Erin Kane: Thanks, Peter.

Erin Kane: Thanks, Pete.

Speaker #3: The next question is from David Silver with Freedom Capital Markets. Please go ahead.

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

Speaker #5: Yeah, hi. Thank you. Good morning. I guess I just wanted to pick up, maybe, on one of your recent comments about the lower operating rates for your overall production network.

David Silver: Yeah. Hi. Thank you. Good morning. I guess I just wanted to pick up maybe on one of your recent comments about the lower operating rates for your overall production network and the opportunity, I guess, to gain some flexibility in what you're selling and whatnot. You mentioned that the ammonia and the sulfuric acid units, in particular maybe there's an opportunity there to sell more of those products just as they are, as opposed to running them through your vertically integrated network there. Especially with the slower fertilizer season here, how are you thinking about maybe coaxing a little more flexibility and a little more of those basic products? I'm sorry, I'm not speaking very clearly. Just selling ammonia and sulfuric acid more into what seem to be pretty healthy markets right now.

Speaker #5: And the opportunity, I guess, to gain some flexibility in what you're selling and whatnot. So you mentioned that the ammonia and the sulfuric acid units in particular—maybe there's an opportunity there to sell more of those products just as they are, as opposed to running them through your vertically integrated network there.

Speaker #5: But especially with the slower fertilizer season here, I mean, how are you thinking about maybe coaxing a little more flexibility and a little more out of those basic products?

Speaker #5: I'm sorry. I'm not speaking very clearly, but just selling ammonia and sulfuric acid more into what seem to be pretty healthy markets right now.

Speaker #1: Thanks for the question. Good morning, David. Yeah, so that is definitely what we're trying to increase, and it has certainly been core to a lot of our strategies across expanding beyond the operational excellence of running our assets well.

Erin Kane: Thanks for the question. Good morning, David. Yeah. That is definitely what we're trying to increase, and certainly been core to a lot of our strategies across even expanding beyond the operational excellence of running our assets well, but creating more degrees of freedom and maybe more levers to flex in the optionality to do so. Certainly in the spring, the industry sold more ammonia than normal as it was the cheapest source of nitrogen. We sold certainly more in H1. Again, these are products that are, I would say, logistics sensitive, right? They're freight logical reaches, if you will, and certainly where we sit in the Mid-Atlantic, we have to optimize what we can sell there. To put it in perspective, we sold roughly 49,000 short tons in H1 up from 33 in H1 of 2025.

Speaker #1: But creating more degrees of freedom and giving you more levers to flex in the optionality to do so. So, certainly in the spring, the industry sold more ammonia than normal, as it was the cheapest source of nitrogen.

Speaker #1: We certainly sold more in the first half. Again, these are products that are logistics sensitive, right? So there are freight logical reaches, if you will, and certainly where we sit in the Mid-Atlantic, we have to optimize what we can sell there.

Speaker #1: But to put it in perspective, we sold roughly 49,000 short tons in the first half, up from 33,000 in the first half of 2025.

Speaker #1: And just to put that in perspective, while we shared at the end of last year, we had a record sales for ammonia. We anticipate that as we project through this year, we'll be up 30% year on year for the full year.

Erin Kane: Just to put that in perspective, while we shared at the end of last year, we had a record sales for our ammonia. We anticipate that as we project through this year, we'll be up 30% year on year for the full year. Now, obviously, sulfuric acid as well is a freight logical product. We continue to look at that. When you think about the trade-offs, I would share with you, it's not just as simple as do we sell ammonia and sulfuric acid or do we make ammonium sulfate because we're not making just synthetic ammonium sulfate. We have an integrated chain. We really do need to look at the full set of options, including do we make caprolactam for export? Do we make resin for export? How are the performance implications on Frankford? We look at the integrated change to make those economic decisions.

Speaker #1: Now, obviously sulfuric acid as well as a freight logical product, we continue to look at that. When you think about the trade-offs, right, I would share with you, it's not just as simple as do we sell ammonia and sulfuric acid or do we make ammonium sulfate because we're not making just synthetic ammonium sulfate.

Speaker #1: We have an integrated chain so we really do need to look at the full set of options including do we make caprolactam for export?

Speaker #1: Do we make resin for export? How are the performance implications on Frankfurt? So we look at the integrated chain to make those economic decisions and so certainly relative to our targeted operational approach for the back half of the year.

Erin Kane: Certainly relative to our targeted operational approach for H2 of the year, we're dialing into where that optimization makes sense. We certainly have a little bit of a knob, if you will, on how we can think about the AS to Capro lever. We built that through the COVID years and thinking about our own technology, and we certainly are looking to minimize that as well as an extra lever. It's a pretty integrated set of considerations, but that's how we're running it today.

Speaker #1: We're dialing into where that optimization makes sense. So we certainly are we have a little bit of a knob, if you will, on how we can think about the ASA capro lever, right?

Speaker #1: We built that through the COVID years and thinking about our own technology and we certainly are looking to minimize that as well as an extra lever.

Speaker #1: So it's a pretty integrated set of considerations, but that's how we're running it today.

Speaker #5: Okay. And I stipulate it's a very complicated decision map, I guess, and not as easy as flipping a switch. But if anybody was aware of kind of how to tweak the system, I think it would be yourself and your team there.

David Silver: I stipulate it's a very complicated decision map, I guess, and not as easy as flipping a switch. If anybody was aware of how to tweak the system, I think it would be yourself and your team there. If I could just I apologize, I did have to step away at one point. Could I just get an update on the expectations for the Section 45Q credits? In other words, both when you might be booking an additional round of credits for 2026, and then when cash might be received from the credits that you claimed in 2025. Thank you.

Speaker #5: If I could just and I apologize, I did have to step away at one point, but could I just get an update on the expectations for the section 45Q credits?

Speaker #5: In other words, both when you might be booking an additional round of credits for 2026, and then when cash might be received from the credits that you claimed in 2025.

Speaker #5: Thank you.

Speaker #2: Sure, David. Let me take that one. So just as some background, our 2018 LCA is already approved by the IRS. This allowed us to claim the credits for 2018, 2019, and 2020, which we've done over the recent years.

Patrick Day: Sure, David, let me take that one. Just as some background, our 2018 LCA is already approved by the IRS. This allowed us to claim the credits for 2018, 2019, and 2020, which we've done over the recent years. We have $18 million currently accrued on the balance sheet related to that LCA. Our 2021 LCA is still under review by the DOE and the IRS. We worked closely with them on an updated submission here in the Q2 to assure that they had all the required data that they needed. All four of these years are currently included in a broader audit by the IRS. As soon as that is resolved, we expect to receive the $18 million payment, and we're still targeting that for the H2 of this year.

Speaker #2: We have 18 million dollars currently accrued on the balance sheet related to that LCA. Our 2021 LCA is still under review by the DOE and the IRS.

Speaker #2: We worked closely with them. On an updated submission here in the second quarter to assure that they had all the required data that they needed.

Speaker #2: All four of these years are currently included in a broader audit by the IRS. As soon as that is resolved, we expect to receive the 18 million dollar payment and we're still targeting that for the second half of this year.

Speaker #2: And then once that 2021 LCA is approved, we will use the approved 2021 LCA to begin the credit refund process for those applicable years and as a reminder, that can be used for up to three years.

Patrick Day: Once that 2021 LCA is approved, we will use the approved 2021 LCA to begin the credit refund process for those applicable years. As a reminder, that can be used for up to three years. At this point, look, all open items on our side related to the LCAs and the audits are closed. We are here to be responsive to the IRS and/or DOE in the event any questions come up as they may arise as they're completing their process.

Speaker #2: And at this point, look, all open items on our side related to the LCAs and audits are closed. We are here to be responsive to the IRS and our DOE in the event any questions come up, as they may arise, as they're completing their process.

Speaker #5: Okay. That's great detail. Thank you, Patrick. Can I also just double-check, but is the total amount of credits that you're ultimately targeting, is it still in that 100 to 125 million range or has there been any variation based on the review by the federal authorities thus far?

David Silver: Okay. That's great detail. Thank you, Patrick. Can I also just double-check, is the total amount of credits that you're ultimately targeting, is it still in that $100 to 125 million range, or has there been any variation based on the review by the federal authorities thus far?

Speaker #2: No, no changes to that range at this point.

Patrick Day: No. No changes to that range at this point.

Speaker #5: Okay, great. I would like to maybe switch over to the DEF opportunity that was mentioned last highlighted a little bit last quarter. At the early stages of the process, I understand, but could you just provide maybe an update on the progress to date and any changes or any notable developments that you would highlight at this relatively early stage?

David Silver: Okay, great. Would like to maybe switch over to the DEF opportunity that was mentioned, highlighted a little bit last quarter. At the early stages of the process, I understand, but could you just provide maybe an update on the progress to date and any changes or any notable developments that you would highlight at this relatively early stage?

Speaker #1: Thanks, David. Certainly, the project remains on track and as planned. So, as you say, we announced it last quarter—we entered into the licensing agreement to assess the expansion of the platform on our integrated ammonia platform.

Erin Kane: Thanks, David. Certainly, the project remains on track, as planned. As you say, we announced it last quarter. We entered into the licensing agreement to assess the expansion of the platform on our integrated ammonia platform, and certainly supply DEF into the growing market in the Mid-Atlantic and East Coast. We continue to progress through our front-end engineering design work, and that's proceeding with our partners and still on track for that final investment decision targeted for H1 2027. As a reminder, this is a multi-year capital investment, with we believe, strong attractive financial returns and align with our long-term value creation objectives. Upon a successful view here, the timing for our full operations would be in 2029. Again, progressing as we anticipated. Obviously, we'll continue to keep you apprised.

Speaker #1: And certainly supply DEF into the growing market in the Mid-Atlantic and East Coast. So we continue to progress through our front-end engineering design work, and that's proceeding with our partners and still on track for that final investment decision targeted for the first half of 2027.

Speaker #1: As a reminder, this is a multi-year capital investment with we believe strong attractive financial returns and align with our long-term value creation objectives. And upon a successful view here, the timing for our full operations would be in 2029.

Speaker #1: So again, progressing as we anticipated. Obviously, we'll continue to keep you apprised I would share it was in the commentary but lends itself because I know you have asked the question in the past of do we need more ammonia to produce DEF, which we don't necessarily but it's been interesting.

Erin Kane: I would share, it was in the commentary, but lends itself because I know you have asked the question in the past of do we need more ammonia to produce DEF, which we don't necessarily. It's been interesting. We are one of eight successfully performing USDA grant projects through SUSTAIN, and with that credibility and certainly momentum we've built, the USDA has launched a new program called FIELDS, the Fertilizer Investment and Expansion for Long-Term Domestic Supply grant, which we are planning to apply for relative to our ammonia, really to expand our ammonia capacity and increase nitrogen availability for domestic farmers. While, again, it wasn't necessary for DEF, this new opportunity has presented itself. Again, we have strong performance under the current grant. This grant is different. It actually is a one-for-one match on dollars spent, so it's 50% covered, whereas the current grant is only 20%.

Speaker #1: We are one of eight successfully performing USDA grant projects through Sustain. And with that credibility and certainly momentum we've built, the USDA has launched a new program called Fields, the fertilizer investment and expansion for long-term domestic supply grants, which we are planning to apply for relative to our ammonia really to expand our ammonia capacity and increase nitrogen availability for domestic farmers.

Speaker #1: So while again, it wasn't necessary for DEF, this new opportunity has presented itself. Again, we have strong performance under the current grants. This grant is different.

Speaker #1: It actually is a one-for-one match on dollar spent. So it's 50% covered whereas the current grant is only 20%. And we're pretty excited about the opportunity we believe we have a more capital-efficient program than what others have discussed.

Erin Kane: We're pretty excited about the opportunity. We believe we have a more capital-efficient program than what others have discussed, more to come there. Just again, the opportunities that we have on the integrated ammonia platform continues to provide real opportunity.

Speaker #1: So more to come there, but just again, the opportunities that we have on the integrated ammonia platform continue to provide real opportunities.

Speaker #5: Wow. That's a little different. And just to clarify, and I apologize, but you're saying you potentially a project to add or de-bottleneck ammonia capacity would be done 50% subsidies totaling about 50% of the estimated cost.

David Silver: Wow. That's a little different. Just to clarify, and I apologize, but you're saying potentially a project to add or de-bottleneck ammonia capacity would be done 50% subsidies totaling about 50% of the estimated cost. Is that what FIELDS represents, or did I misunderstand?

Speaker #5: Is that what Field represents, or did I misunderstand?

Erin Kane: Yeah. That's the opportunity ahead of us. The grant program was launched, and applications are due, we're working that at hand. More to come there, but just wanted to share that.

Speaker #1: Yeah, that's the opportunity ahead of us. So, the grant program was launched and applications are due, and so we're working that at hand. So more to come there, but just wanted to share that.

Speaker #5: Yeah, very interesting. Okay. Just some comments. And again, I may have stepped away when Patrick was going over this, but just running kind of back of the envelope on cash flow generation or free cash flow prospects for the second half of the year and you did highlight I'm guessing the fourth quarter cash receipts from growers might be a little lower this year on the other hand, you've really been very, very efficient with the turnarounds and maintenance expenses.

David Silver: Yeah, very interesting. Okay. Just some comments, and again, I may have stepped away when Patrick was going over this, but just running kind of back of the envelope on cash flow generation or free cash flow prospects for the H2 of the year. You did highlight, I'm guessing, the Q4 cash receipts from growers might be a little lower this year. On the other hand, you've really been very efficient with the turnarounds and maintenance expenses. I was looking at kind of, you do have relatively low inventory levels, at least to my view. Just what are the prospects for getting close to cash break even or so in the H2 of the year?

Speaker #5: And I was looking at kind of you do have relatively low inventory levels, at least to my view. So just what are the prospects for getting close to cash break even or so in the back half of the year?

Speaker #2: Yeah, sure. I can give you a couple of comments there. First, let me start with the plant nutrients pre-buy. I would say in Q4 of last year comparing to the prior year, Q4 of last year, we were fairly selective in what we took in terms of pre-buy.

Patrick Day: Yeah, sure. I can give you a couple of comments there. First, let me start with the Plant Nutrients pre-buy. I will say in Q4 of last year, comparing to the prior year, Q4 of last year, we were fairly selective in what we took in terms of pre-buy. Excuse me. Pre-buy. Just given we knew some of the dynamics were happening around sulfur. In terms of year-over-year comparison, I'd say that that's a relatively soft comparison point. We touched on CapEx as we were talking through the CapEx details. Really the way that our sequencing lines up on a cash basis with CapEx, we are more heavily weighted to the front end of the calendar. I think the last piece too, we're looking at sequential earnings improvement too in H2, which is obviously going to contribute some more cash as well.

Speaker #2: Excuse me, pre-buy. Just given we knew some of the dynamics were happening around sulfur. So in terms of year-over-year comparison, I think that's a I'd say that that's a relatively soft comparison point.

Speaker #2: We touched on CAPEX as we were talking through the CAPEX details. Really the way that our sequencing lines up on a cash basis with CAPEX, we are more heavily weighted to the front end of the calendar.

Speaker #2: And then I think the last piece too—look, we're looking at sequential earnings improvement as well in the second half, which is obviously going to contribute some more cash as well.

Speaker #2: So, and I think just the last piece, we talk about payment timing. Just the way the calendar year unfolds for us, we have some higher payments going out the door in the first half of the year.

Patrick Day: I think just the last piece, we talk about payment timing, just the way the calendar year unfolds for us. We have some higher payments going out the door in H1 of the year. Insurance, for example, those invoices get paid on a timing basis earlier in the calendar year. We have some timing due to that as well. Those are really your big drivers that get you back to the H1 versus H2 sequential improvement in cash.

Speaker #2: Insurance, for example, those invoices get paid on a timing basis earlier in the calendar year. So we have some timing due to that as well.

Speaker #2: But those are really your big drivers that get you back to the first half versus second half sequential improvement in cash.

Speaker #5: Okay, great. Thanks for the detail there. That's all for me. Appreciate the color.

David Silver: Okay, great. Thanks for the detail there. That's all for me. Appreciate the color.

Speaker #1: Thanks, David. Have a great day.

Erin Kane: Thanks, David. Have a great day.

Speaker #3: This concludes our question-and-answer session. I would like to turn the conference back over to Erin Kane for any closing remarks.

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

Erin Kane: Thank you all again for your time and interest this morning. We hope this call and discussion have clarified the key considerations that supported our Q2 performance and outlook across our end markets. The strength of our business model and our position as an integrated chemistry company will serve us well. We continue to expect performance this year to demonstrate our resilience. With that, we look forward to speaking with you again next quarter. Stay safe and be well.

Speaker #1: Thank you all again for your time and interest this morning. We hope this call and discussion have clarified the key considerations that supported our second quarter performance and outlook across our end markets.

Speaker #1: The strength of our business model and our position as an integrated chemistry company will serve us well and we continue to expect performance this year to demonstrate our resilience.

Speaker #1: With that, we look forward to speaking with you again next quarter. Stay safe and be well.

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

Q2 2026 AdvanSix Inc Earnings Call

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