LSB Industries (LXU) Q4 2025 Earnings Transcript

DATE

Thursday, Feb. 26, 2026 at 10:00 a.m. ET

CALL PARTICIPANTS

• President & Chief Executive Officer — Mark T. Behrman
• Senior Vice President, Commercial — Damien J. Renwick
• Executive Vice President & Chief Financial Officer — Cheryl A. Maguire

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TAKEAWAYS

• Total Reportable Incident Rate -- 0.40 incidents per 200,000 work hours as of year-end, achieving a record low and marking a significant improvement from 2024.
• Net Sales, Adjusted EBITDA, EPS -- All grew year over year in both the fourth quarter and full year, directly attributed to improved operational execution and pricing momentum.
• Record Downstream Production -- Achieved all-time highs in nitric acid and ammonium nitrate solution output during the year, reflecting reliability and throughput improvements.
• Adjusted EBITDA (Full Year) -- $162,000,000, up 25% from $130,000,000 the prior year.
• Adjusted EBITDA (Q4) -- $54,000,000, a 42% increase from $38,000,000 in the prior Q4, driven by higher pricing, volume, and product mix despite elevated natural gas and contractor costs.
• Operating Cash Flow -- $96,000,000 for the year; free cash flow was $44,000,000 after $53,000,000 in sustaining capital spending, with timing-related working capital outflows clarifying the apparent gap to EBITDA.
• Year-End Cash & Leverage -- Ended with $150,000,000 cash and net leverage of 1.8x.
• Debt and Share Repurchase -- $40,000,000 in senior secured notes and approximately 300,000 shares repurchased during the year as part of balance sheet de-risking and capital return.
• Q4 UAN Pricing -- Averaged $320 per tonne (NOLA basis), up 39%; tightest UAN carryout inventory in several years and constrained domestic supply expected to persist through midyear.
• Operational Outlook -- Two major plant turnarounds scheduled in 2026 (El Dorado in Q2, Pryor in Q3); combined impact estimated at approximately 60,050 tons of lost ammonia and UAN production for the year.
• 2026 CapEx Guidance -- Approximately $75,000,000 planned, with $55,000,000 for HSE and reliability, and $20,000,000 for AN-focused logistics and storage enhancements.
• Q1 2026 Natural Gas Cost -- Expected average cost of $5.50 per MMBtu due to Winter Storm Fern, with cost declines anticipated for Q2.
• First Quarter Earnings View -- "we expect a meaningful uplift in our first quarter earnings compared to 2025 and expect the earnings power of the first quarter to mirror that of 2025, adjusted for the temporary run-up of gas costs."
• 2026 Effective Tax Rate -- Forecast at 25%; not expected to be a material cash taxpayer due to NOL usage.
• EBITDA Value Creation Initiatives -- $20,000,000 annualized EBITDA uplift already realized since 2023; $50,000,000 targeted from current projects, with $15,000,000 of incremental EBITDA anticipated by early 2027 from the El Dorado carbon capture project.
• El Dorado CCS Project Milestones -- EPA Class VI permit technical review expected April, permit to construct in August, permit to inject CO2 by year-end; sequestration expected to commence by year-end or early next year.
• Ammonia Production Target -- Targeting 875,000 to 880,000 tons of gross ammonia production annually, before turnarounds.
• Production Mix Optimization -- Management has flexibility to shift production between UAN and AN in response to market conditions to maximize margin and spot opportunities.
• Market Dynamics -- Ongoing supply shortages, infrastructure demand, and global production constraints continue to support favorable pricing and tight supply across all key product lines.

SUMMARY

Management outlined a clear strategic focus on driving higher plant reliability and operational efficiency through targeted turnarounds and capital investment. The company's El Dorado carbon capture project advanced on schedule, aligning with milestones set by the EPA and positioning for incremental EBITDA gains from environmental initiatives. Shifts in product mix, tactical sales strategies, and continued progress in balance sheet strength were repeatedly noted as core methods to navigate persistent market tightness and demand volatility. Management emphasized progress toward a higher margin portfolio, a disciplined reinvestment approach, and readiness to selectively pursue growth opportunities.

• Ongoing cost-control initiatives, including a reduction in contractor-related expenses, may contribute to improved margin structure as reliability initiatives reach completion.
• Industrial and mining demand for ammonium nitrate remains strong, particularly as copper, gold, and U.S. infrastructure projects accelerate end-market consumption.
• The company plans to build up ammonia inventories ahead of scheduled turnarounds to minimize supply risk to downstream operations.
• Discussions highlighted the slow development of premium pricing for low-carbon ammonia, with management noting, "the market is slower to develop to pay a premium for a low-carbon product, but there are niche opportunities that we are pursuing."
• Leadership targets 95% capacity utilization as the benchmark for "upper quartile" manufacturing performance, with maintenance and operational best practices identified as levers for achieving this goal.
• The shift from commodity ammonia sales toward higher-value products is expected to enhance margin and stabilize earnings.
• Large-scale capital outlays for both maintenance and strategic upgrades remain a top priority, reinforcing long-term growth and reliability targets.
• Management does not expect recent fertilizer tariff changes to meaningfully impact U.S. import volume patterns in the near term.

INDUSTRY GLOSSARY

• NOLA: New Orleans, Louisiana—the key pricing point for U.S. Gulf Coast fertilizer benchmarks.
• AN: Ammonium Nitrate, a chemical commonly used in fertilizers and explosives.
• UAN: Urea Ammonium Nitrate solution, a liquid nitrogen fertilizer product.
• CCS: Carbon Capture and Sequestration, the process of capturing CO2 emissions for underground storage.
• HSE: Health, Safety, and Environment—capital spent to maintain operational safety and regulatory compliance.
• CBAM: Carbon Border Adjustment Mechanism, an EU regulatory framework potentially impacting low-carbon exports.
• NOL: Net Operating Loss, tax loss carryforwards that reduce taxable income in future years.
• Pryor, Cherokee, El Dorado: Names of LSB Industries’ key chemical plant locations.

Full Conference Call Transcript

Mark T. Behrman: Thank you, Kristy, and good morning, everyone. Turning to the 2025 highlights, I first want to recognize our teams for their continued focus on safety and discipline, which drove further improvement in our safety performance during the year. Our twelve-month rolling Total Reportable Incident Rate of 0.40 incidents per 200,000 work hours as of 12/31/2025 was a record low, and three of our four sites operated injury-free for the full year. Quite an accomplishment. That represents a meaningful improvement over 2024, and we are proud of the progress our teams have made. We delivered significant year-over-year growth in net sales, adjusted EBITDA, and EPS in both the fourth quarter and the full year of 2025.

Our strategy to improve our operational performance combined with disciplined commercial execution yielded strong financial results. The operational progress we achieved during the year enabled us to fully capitalize on favorable pricing momentum across our key products. We delivered record nitric acid and ammonium nitrate solution production in 2025, reflecting the progress we have made in plant reliability, throughput, and operational efficiency. We believe this positions us well going forward, and we are ready to take advantage of current favorable market conditions. While we have been able to capture value with the operational and commercial improvements we have made, there remains significant value to capture, and we have ongoing initiatives intended to do just that.

Cheryl will provide more color on that later in the call. Lastly, we are making good progress on our CCS project at our El Dorado site, and we feel good about meeting our projected timeline. I will provide an update later on the call. Now I will turn the call over to Damien to provide more detail on the commercial environment.

Damien J. Renwick: Thanks, Mark, and good morning, everyone. Turning to page five, our Industrial business remains well positioned with demonstrated performance across the board. During the fourth quarter, we optimized our production balance by reducing UAN production volumes to maximize ammonium nitrate spot sales at above typical market prices. This was to support existing customers whose regular AN supply was constrained by some supplier issues. Demand for AN for explosives in mining is strong across all commodities, but particularly with copper and gold miners who are maximizing production volumes to take advantage of record prices. AN demand for explosives for quarrying and aggregate production for infrastructure also remains steady.

Demand for coal production remains resilient, as the U.S. continues to generate more power from coal. Preliminary antidumping duties on imported methylene diphenyl diisocyanate, or MDI, combined with tariffs has increased U.S. production, leading to increasing demand for nitric acid. Turning to page six.

Mark T. Behrman: Pricing for UAN averaged $320 per tonne on a NOLA basis in Q4, up 39% over Q4 2024. UAN prices dipped slightly in November and December, but have recently improved. This reflects continued low levels of domestic inventory, constrained supply, and a strengthening in urea prices. We began the 2026 fertilizer year with the lowest carryout inventory of UAN in several years. Together with a late start to Somerville, this has created a tight domestic supply situation, and we expect this to continue through midyear. We saw strong fall ammonia sales supported by favorable weather conditions, and we continue to see strong demand domestically with ongoing favorable application weather and higher prices for upgrades supporting demand.

The Tampa ammonia benchmark price remains above year-ago levels. Ammonia prices currently reflect reduced supply from the Middle East and Trinidad, higher cost of production in Europe, and delays in new production capacity coming online. This is constraining global supply availability. In terms of the outlook for global ammonia, we see prices trending back to mid-cycle levels as new production comes online during 2026. But like the last couple of years, the market remains finely balanced and sensitive to any production interruptions. Finally, we believe broader ag market dynamics remain supportive of nitrogen fertilizer demand. The USDA recently projected 94,000,000 planted acres for corn for the 2027 season, and we anticipate nitrogen demand to track closely with recent years.

Now I will turn the call over to Cheryl to discuss our fourth quarter financial results and our outlook.

Cheryl A. Maguire: Thanks, Damien, and good morning. On page seven, you will see a summary of our fourth quarter and full year 2025 financial performance. Our results reflect the impact of the reliability improvements we have implemented across our operations. These gains, combined with the absence of planned turnarounds, positioned us to capitalize on strong market conditions. As a result, full year 2025 adjusted EBITDA was $162,000,000 compared to $130,000,000 in 2024, representing a 25% year-over-year increase. As shown on page eight, Q4 adjusted EBITDA grew 42% year-over-year from $38,000,000 in Q4 last year to $54,000,000 this year. This increase reflects higher pricing coupled with stronger volumes and product mix, which were partially offset by higher natural gas and other operating costs.

Operating costs were elevated this period due to timing of expenses, along with increased maintenance and contractor support as we advance towards our production target. We expect contractor-related costs to decline toward 2026 as this work is completed. On page nine, you can see that our balance sheet remains solid with approximately $150,000,000 in cash at year-end and net leverage of 1.8x for the period ending December 2025. Operating cash flow for the full year of 2025 was $96,000,000. After subtracting $53,000,000 of sustaining capital, the capital required to maintain our operations, free cash flow was $44,000,000.

The remaining $25,000,000 of CapEx relates to investments made to support growth in our business, which is discretionary and not included in free cash flow. While free cash flow looks lower than EBITDA might suggest, the shortfall is largely timing-related. Working capital grew by over $30,000,000 during the period, driven by the rollover of certain 2024 payables that were paid early in 2025 as well as strong end-of-the-quarter sales falling into receivables at year-end. Adjusting for the timing of these items, free cash flow generation was consistent with our expectation.

In addition to investing in our manufacturing assets in 2025, we also de-risked our balance sheet by repurchasing approximately $40,000,000 in principal amount of our senior secured notes, while also repurchasing approximately 300,000 shares of stock during the same period. Page 10 outlines the key considerations behind our full year 2026 expectations, with the table on the upper left showing our estimated ammonia production and sales volume. These estimates reflect planned turnaround activity, including the previously communicated El Dorado turnaround, which we have scheduled for the second quarter. In addition, we are accelerating a turnaround at our Pryor location, originally scheduled for 2027, so we can proactively perform work needed to improve reliability at that site.

We are targeting the third quarter for this turnaround. This proactive step reinforces our focus on improved plant reliability and positions the business for sustainable production performance. The impact of turnarounds is expected to result in lost ammonia and UAN production tons in 2026 of approximately 60,050 tons, respectively. Despite these planned outages, we continue to expect strong underlying volume momentum, reflecting the operational improvements we have made across our facilities. The slide also covers our estimates of variable and fixed plant expenses as well as SG&A and other expenses for 2026. Our expectations for costs reflect investments we are making to achieve our production volume goals. We expect to see costs trend down towards 2026.

We expect our effective tax rate for the year to be approximately 25%. However, we do not expect to be a material cash taxpayer in 2026 as we continue to utilize our NOLs. In the table at the bottom right of the slide, you will see that we expect to invest approximately $75,000,000 of CapEx in our facilities during 2026. That includes $55,000,000 for annual HSE and reliability CapEx and $20,000,000 earmarked for investments, including enhanced logistics and storage capabilities for our growing AN business. Turning to the first quarter, a few notable items. We expect strong selling prices for our products, roughly in line with 2025.

Winter Storm Fern drove short-term gas volatility in late January and into February settlements and resulted in elevated gas prices for February. However, gas prices have moderated back to around $3 per MMBtu, and therefore, we expect much lower realized pricing in the second quarter. As a result of the inflated February natural gas prices, our average gas cost for the first quarter is expected to be approximately $5.50 per MMBtu. From a Q1 sales volume standpoint, we may opportunistically shift some production towards ammonium nitrate solution where market conditions warrant. As a result, UAN sales volumes could be lower with a corresponding increase in AN volume. This reflects our ability to optimize product mix based on market conditions.

Ahead of the scheduled turnaround at our El Dorado facility planned for the second quarter, we plan to build ammonia inventory to support continued operation of our downstream plants during the majority of the turnaround. As a result, first quarter ammonia sales volumes will be impacted by approximately 15,000 tons. Overall, we expect a meaningful uplift in our first quarter earnings compared to 2025 and expect the earnings power of the first quarter to mirror that of 2025, adjusted for the temporary run-up of gas costs I previously mentioned. We have discussed our focus on upgrading an increasing amount of ammonia to capture additional margins on previous calls.

Page 11 illustrates the favorable sales volume trends we are driving in our major product group, adjusted for the impact of turnarounds. The first chart shows the increase in AN and nitric acid sales volumes recognized in 2025 as a result of our reliability improvements to our downstream operations and the full-year volume impact we expect in 2026. Similarly, the middle chart shows UAN sales volumes, which are on a steady trajectory upward after normalizing for turnaround activity in certain years. The chart on the far right shows a downward trend in ammonia sales as we continue to upgrade ammonia into higher value products. In this case, a down-and-to-the-right trend is a good thing, as it results in improved margins.

Page 12 highlights the value creation we have delivered over the 24 months. Since 2023, we have captured approximately $20,000,000 of annual EBITDA uplift driven primarily by higher downstream production as outlined on the previous slide. Additionally, we expect to achieve approximately $15,000,000 of annual EBITDA improvement beginning in early 2027 related to our carbon capture and sequestration project at El Dorado. Mark will provide an update on that later in the call. As we continue our focus on best in class, we see an additional $35,000,000 of incremental annual EBITDA uplift ahead of us, primarily from higher production rates, numerous efficiency gains, and continued cost optimization.

In total, when complete, these efforts should yield a total of $70,000,000 of annual EBITDA, with $20,000,000 already captured and a further $50,000,000 that is planned and underway. We have demonstrated our ability to deliver on these initiatives, and we see a clear path to capturing the remaining value through continued execution of numerous initiatives. And now I will turn it back over to Mark. Thank you, Cheryl.

Mark T. Behrman: Page 13 is a timeline for our low-carbon project at our El Dorado facility for the year. We and our partners met with senior officials from the EPA's Region 6 office in mid-December to discuss the status and timing of our Class VI permit application. Based on that conversation and the EPA's stated support for our project, we remain on track to begin sequestering CO2 by the end of this year or, at the latest, early next year. The milestones we expect are first for the technical review of the permit to be completed in April, followed by the permit to construct in August, and lastly, the permit to inject CO2 by year-end.

We are excited to get strong support for our project from the EPA and look forward to partnering with them to complete the milestones this year and getting into operation. Our commercial team continues to pursue low-carbon product supply opportunities where we can generate premiums for those products as well as the potential to sell environmental attributes that we generate. 2025 was a year of meaningful progress across several fronts. Improved production, strong commercial execution, and solid financial performance drove strong results.

While our continued shift towards industrial business has reduced the earnings volatility of our business, we also took important steps to strengthen our balance sheet, including reducing our debt, all while continuing to invest in our assets and the growth of our business and returning capital to shareholders through share repurchases. We ended the year with a healthy cash position and significant financial flexibility, allowing us optionality when thinking about how we allocate capital and how we will grow our business.

While we have captured meaningful margin uplift over the last several years, we are keenly focused on executing on specific initiatives that will generate an additional $50,000,000 of annual EBITDA when complete, giving us clear line of sight to continued value creation. I am excited about the future of our business and the opportunity for value creation. I am encouraged by a healthy market backdrop, and I am confident that we have the right team to continue executing, creating long-lasting shareholder value.

Before we open it up for questions, I would like to mention that Cheryl will be participating in the Gabelli Specialty Chemicals Conference on March 19 in New York City, and I will be participating in a virtual conference with Granite Research on March. We look forward to speaking with some of you at these events. That concludes our prepared remarks, and we will now be happy to take your questions. Thanks.

Operator: We will now be conducting a question and answer session. A confirmation tone will indicate that your line is in the question queue. You may press star 2 if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star key. One moment please while we poll for questions. Our first question comes from Lucas Charles Beaumont with UBS. Please proceed with your question.

Lucas Charles Beaumont: Thank you. Good morning. So just wanted to talk about the gross ammonia production. So, I mean, that is sort of it has been somewhat volatile just sort of with the turnaround timing that when we look at it on a multiyear view, it is up kind of maybe 5% on a two-year stack. So I was just trying to get your thoughts on how we should think about your ability to kind of continue to lift productivity from here going forward, and just sort of how that flows through into the remaining kind of $35,000,000 in production improvement initiatives that you called out?

Mark T. Behrman: Good morning, Lucas. So I think we have a chart in our earnings presentation that is showing sales volumes, but we do not really put in a production volume chart. But having said that, I think if you look year-over-year, you normalize for any turnarounds, and you look at the outlook for this year that Cheryl has presented, you can see that we are continuing to go up. So what we are really focused on is getting to about 875,000 to 880,000 tons of gross ammonia production without any turnaround. So, you know, we are confident that we are on the path to get there. We are seeing that year-over-year.

And as far as how should we think about that and how much of the $35,000,000 really is that, I would probably say maybe about 30% to 40% of that $35,000,000 is by having higher ammonia production rates and getting to the targets that I have outlined. Right. Thanks.

Lucas Charles Beaumont: And I guess then, just looking at your non-gas cost assumptions that you sort of put out today for 2026, I mean, in aggregate, it looks like you are sort of targeting to hold those basically flat year-on-year, maybe even slightly down, which is, you know, a much more attractive outcome for you guys than the inflationary pressure that we have seen over the last couple of years. So I guess, is that sort of inflation abating? Is it work you are doing to kind of keep your costs down? And are you going to see any swing factors there that could push you sort of higher or lower on those non-gas costs?

Mark T. Behrman: Yes. So I think what you are seeing is just a lot more efficiency with the business. And also as we become more reliable, there is less maintenance costs, and so we are driving our maintenance costs down. That should continue. And there is a continued expense reduction in the $35,000,000 that we expect to capture.

Lucas Charles Beaumont: Right. And then maybe just one last one on this. So on the AN market, I just wanted to get your thoughts on how, I guess, the market is responding to the supply disruption from CF at Yazoo City. You know, what is kind of supply availability like? And is that sort of flowing through to pricing and your P&L? Or how would you expect that—given, I mean, the market is more contracted, so I should have more of sort of a lag there, and it is not as quick a transmission. But would be interested in your views. Thanks.

Mark T. Behrman: Damien, you want to handle it?

Damien J. Renwick: Yeah. Good morning, Lucas. I think it is really fair to say that the market is pretty tight at the moment. I mean, that is a significant production capacity that is out. And, you know, I think the players in the market are flexing production where they can, including ourselves. So where it makes sense for us, we are optimizing our plans and reducing UAN production to make more AN available. And, you know, we are certainly doing that where it is financially viable as well. So, you know, pricing for those sales is definitely above typical contract rates. So, you know, how long will that go on for?

Look, market intel sort of suggests that will go through to the end of the year, and we will continue to try and optimize our production and capture some of those sales. But, also, you know, against that, you have got the backdrop of the market being pretty buoyant for AN. So, you know, as I said in the remarks, you have got gold and copper miners really trying to maximize their production as much as they can, and that is drawing on explosives demand. And we are seeing that in our day-to-day business. So the market is really well set up this year, and we are really well positioned to take advantage of it.

Lucas Charles Beaumont: Right. Thanks very much.

Operator: Our next question comes from Laurence Alexander with Jefferies. Please proceed with your question.

Kevin Especk: Hey. Good morning. This is Kevin Especk on for Lauren. So I have a few end market questions. I am just curious to get your thoughts on basically how much of a potential tailwind in demand you could expect to receive from rising U.S. coal production, I guess, or more simply whether you expect U.S. coal production to basically drive a growing share of demand for the company?

Damien J. Renwick: Yeah. Hi, Kevin. Look, I think coal is probably more holding steady than increasing. There are months where you are seeing some increases in production, but that is really just a power generation mix decision that is happening, with potentially high natural gas prices. So I think what we are seeing this year and what we saw through the end of last year is that there is a lot of support at the moment to keep coal-fired power stations running. And that is providing a pretty solid demand backdrop for coal producers and therefore for AN. So I think it is pretty constructive the way it is set up at the moment.

Kevin Especk: Okay. Understood. And just on fertilizers, obviously, supply continues to be broadly constrained, but I am just curious to get more detail on what you are hearing on the ground, like how you expect the demand to basically evolve in 2027, and maybe if you are hearing demand being crimped by elevated pricing.

Mark T. Behrman: Yeah. Great question.

Damien J. Renwick: Certainly correct in the market is tight, and we are seeing that for our ammonia and UAN products. And pricing is reflecting that, and we would expect that to continue through the season. You know, upgrades, urea prices are getting high. Will that cause some demand destruction? Possibly around the edges, but, you know, I think with the corn acres being forecast for this year, I think demand is going to be pretty solid, and I would expect the supply and demand balance to be really tight through the end of the year. And also the global dynamics also support that. In ammonia at the moment, it is a very tight market.

Urea, we have had sort of unseasonal, unexpected Indian tender. Brazil demand is strong. You have got supply constraints in the Middle East and Trinidad. So I think the market from a nitrogen perspective is really constructive and tight, and we expect that to continue through the fertilizer season.

Kevin Especk: Okay. Thank you very much.

Operator: As a reminder, if you would like to ask a question, please press 1 on your telephone keypad. Our next question comes from Andrew D. Wong with RBC Capital Markets. Please proceed with your question.

Andrew D. Wong: Hey. Good morning. So maybe just broader. In 2025, we saw some good progress on your main strategic priorities, better production, reliability, more upgrade capacity. There was a transition to industrial sales. So a lot was done in 2025. Can you just talk about what your main strategic priorities are for 2026?

Mark T. Behrman: Sure. Good morning, Andrew. So we have a real focus to continue that momentum on the manufacturing side. While we have made a lot of improvements, our real goal is to be an upper quartile manufacturer. So what does that mean? I mean, we want to run our ammonia plants at 95% capacity utilization. And so that is the real goal. In order to do that, we have to mature a lot of our maintenance practices and operating practices, but we have also got to continue to invest some selected capital within our capital plan. But a lot of the time, you really need extended downtime, and that really comes to turnaround.

So we expect some real improvements in our operating rates down at our El Dorado facility after this extended turnaround that we have in April. And then, again, as Cheryl mentioned, we pulled forward our Pryor turnaround to proactively make significant improvements there as well. So we should see some real reliability improvement coming out of that turnaround. And then at the Cherokee facility, of course, we have a turnaround next year where we will do some work there. So that is always going to be a priority as we try and continuously improve.

And then, really, once we eventually get to the level of reliability that we are really looking for and that we think we can attain, then you are sort of continuing to look at efficiencies. In addition to the manufacturing side, we have still got some optimization that we would like to do throughout our commercial operations. I mean, we have got some opportunities that we need to look at with some customers. So that is going to be a big focus this year as to do we take advantage of those opportunities and where can we selectively invest capital in the future to really take advantage of some of that demand that we cannot meet today.

The last thing I would say is, Cheryl has talked about profit optimization, one thing that we have done is we have probably spent a little bit more, and so I think the question earlier by Lucas about expenses and seeing it sort of flatten out this year or slightly down, I think we have got to take more cost out of the business, and I think we have some plans to do that. And we have spent to improve the reliability, but once you get that reliability, now you can pare back some of the expense, and that is what we will do. So those probably would be the three main operating priorities.

And then from a strategic standpoint, I think I am really proud of my team that they have really done a great job in turning around this business. And I think we are at a point now where it is time to grow. And whether that is organically through some debottlenecking opportunities or some just other growth initiatives, or that is through some combination of assets or company, I think we are really focused on that.

Andrew D. Wong: K. That is great. Thanks for that comprehensive answer. And then just on the blue ammonia front, as the Lapis project is kind of coming into focus and hopefully starts production by the end of this year, I am assuming you are having some discussions on ammonia with potential customers. What are you seeing from a willingness-to-pay standpoint for that ammonia? And are you seeing customers willing to pay a premium for low-carbon product?

Mark T. Behrman: Well, I am going to start with an answer, and then I am sure Damien is going to chime in on this. I think the market is really slow to pay a premium. So I think you have to work really hard to find the right customers that it becomes important to. If you are able to export, like some of our competitors, you might be able to, or you can send low-carbon ammonia to Europe, and then depending on what happens with CBAM, you might see a premium paid for that, and there is still an if on what is going to happen with CBAM as we sit here today.

So domestically, the fact that we have a pretty large industrial business, I think, gives us an advantage when we are talking to customers that are using our products or upgraded products as a feedstock for some of the product, and so they need to work through what is the ultimate cost increase for the value that they will receive by having a lower-carbon product. It is a long-winded way of saying I think that the market is slower to develop to pay a premium for a low-carbon product, but there are niche opportunities that we are pursuing. And I think we do believe that over time people and the market will develop and people will pay a premium.

But I do not think it is going to happen as fast as everyone thought, if the question was asked a couple of years ago.

Damien J. Renwick: Yeah. I would concur with that. I mean, certainly, domestically, it has been slower going, particularly as you have seen some uncertainty around decarbonization and the energy transition here in the U.S. But the story still is positive, I think, globally. And as Mark said, you have got opportunities if you can export to secure premiums, be it into Europe under the CBAM regulation or even into other emerging markets. But it is—the market, I think, is still immature and has been slower to develop than we would all want and expect. So that is where we stand today.

Andrew D. Wong: Given there are more opportunities in the export market, is it possible for you to do some sort of swapping maybe to access the export market?

Damien J. Renwick: Yeah. Look, we continue to evaluate all opportunities for us to be able to export our product, including swaps or some sort of physical transactions. So, yeah, it is all on the table.

Andrew D. Wong: Great. Appreciate it.

Operator: Our next question comes from Rob McGuire with Granite Research. Please proceed with your question.

Rob McGuire: Good morning. Few questions. One is on AN. Can you give us an idea how much your sales volume was under contract exiting in 2025? And if you do shift production towards AN this year, will you try to lock that up under contract?

Damien J. Renwick: Yeah. Good morning, Rob. Look. Our AN—our stable, steady AN business, the base business—is all under contract, and we work to make sure that is the case. And only a small amount really is spot. But what we are doing at the moment is really tweaking the product balance to maximize and produce more AN, and we are doing that by reducing our UAN product and putting it into the AN market. So—and that is all under spot, and there is a multitude of conversations going on with customers around whether they turn into longer-term arrangements or not. I mean, it is a very fluid market.

Rob McGuire: Thank you, Damien. And then shifting to the turnarounds, can you tell us when you expect Cherokee to take place in 2027? And then on El Dorado, will you be able to build inventory and downstream production during the April turnaround this year?

Cheryl A. Maguire: Yeah. Good morning, Rob. So on the El Dorado turnaround, the plan is to build ammonia in the first quarter so that we are ramped up on ammonia in inventory heading into that turnaround, which, yes, should allow us for the most part to run all downstream plants through that turnaround. With respect to Cherokee, the Cherokee turnaround right now, I believe, is slated for 2027.

Rob McGuire: Thank you. And then on import volumes, have U.S. import volumes or buying patterns shifted since fertilizer tariffs were lifted in the fourth quarter?

Damien J. Renwick: I think it is too early to tell, Rob. I mean, the market is short here, you are going to see some import tons come into the market to try and correct for that. But I think that is more just a response to the U.S. market per se rather than tariffs.

Mark T. Behrman: I would say that imports have never stopped coming in here. Right? So there is the demand, and people of different production points have found a home into the U.S. I think with the tariffs being lifted, I do not know that you are necessarily going to see more imports coming in. I think you could see different imports from different locations coming in.

Rob McGuire: And then I am not sure who can answer this question, but on farmer economics, there has been a lot of media focus on just the stress in the ag sector. And I am just wondering how you view the current farmer economics, and do you anticipate that softer farm incomes impacting demand or ordering behavior this year?

Mark T. Behrman: Yeah. So, good question. And there is no doubt that when you look at farm economics and you look at lots of folks that are smarter than us that really understand the economics, the farmer is under some level of stress today. And, therefore, you saw the U.S. government do a $12,000,000,000 payment package. I think when you take a step back—and, you know, we spend a lot of time really thinking about this and talking about it—and the industry really focuses on, you know, what can we do to help this situation? But the reality is it is really a supply and demand for commodities.

And so right now, we had a record corn crop that was planted, and inventories are pretty high. And why did that happen? That happened because demand for soybeans—particularly soybeans that are exported—has gone down pretty dramatically. And so when you think about the demand for both of those crops, the two largest crops for nitrogen use and two largest crops that are planted here in the U.S., there needs to be more demand created, one, for soy. And so, you know, the U.S. government needs to help probably with that to create more demand. But also, you know, demand is going to drive corn prices as well.

And so there is a lot of talk about permanently going to E15. And if that were to happen, that obviously would increase ethanol demand for corn pretty dramatically. And so I think, ultimately, we need to figure out a way to create more demand for our two largest commodities, and therefore, that will lift some of the pricing for those products and then put less stress on the farmer.

Rob McGuire: Thanks, Mark. I have no further questions.

Operator: We have reached the end of our question and answer session. I would now like to turn the floor back over to Mark T. Behrman for closing comments.

Mark T. Behrman: Thank you. I want to thank everyone for participating on the call. I am really proud of the quarter and the year that we just posted, and we are really excited about 2026 and think we will make a lot of great progress. So again, if there are any follow-up questions, feel free to call Cheryl or myself. Thanks so much.

Operator: This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation.

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