Earnings call transcript: LSB Industries misses Q2 2025 expectations, stock drops

LSB Industries (LXU) reported its second-quarter 2025 earnings, revealing a significant miss on both earnings per share (EPS) and revenue compared to analyst forecasts. The company’s actual EPS came in at $0.04, falling short of the forecasted $0.15, marking a surprise of -73.33%. Revenue also missed expectations, totaling $151.3 million against a forecast of $156.76 million, resulting in a -3.48% surprise. Following these results, LSB Industries’ stock price dropped by 11.83% to close at $8.71. The $552 million market cap company maintains strong liquidity with a current ratio of 2.51, according to InvestingPro data.

Key Takeaways

• LSB Industries reported a significant miss on both EPS and revenue for Q2 2025.
• The company’s stock fell 11.83% following the earnings announcement.
• LSB Industries continues to focus on operational improvements and cost reductions.
• The company is progressing with its low-carbon CO2 injection project.

Company Performance

LSB Industries experienced a challenging second quarter, with financial performance not meeting analysts’ expectations. The company reported a decrease in adjusted EBITDA to $38 million from $42 million in the same quarter last year. Despite these challenges, sales volumes increased by 6% year-over-year, indicating some underlying demand strength.

Financial Highlights

• Revenue: $151.3 million, down from the forecasted $156.76 million.
• Earnings per share: $0.04, significantly below the forecast of $0.15.
• Adjusted EBITDA: $38 million, down from $42 million in Q2 2024.

Earnings vs. Forecast

LSB Industries fell short of both EPS and revenue forecasts for Q2 2025. The EPS surprise was -73.33%, while the revenue surprise was -3.48%. This performance contrasts with previous quarters where the company had either met or exceeded expectations.

Market Reaction

Following the earnings release, LSB Industries’ stock price declined by 11.83%, closing at $8.71. This movement places the stock closer to its 52-week low of $4.88, reflecting investor disappointment in the earnings results. According to InvestingPro analysis, the stock appears undervalued at current levels, with management actively buying back shares. Discover more insights and 8 additional ProTips with an InvestingPro subscription, including detailed Fair Value analysis and comprehensive Pro Research Reports available for over 1,400 US stocks.

Outlook & Guidance

Looking ahead, LSB Industries expects an increase in UAN and AN sales volumes and anticipates a healthy year-over-year increase in Q3 adjusted EBITDA. The company is also advancing its low-carbon CO2 injection project, expected to commence by the end of next year. Despite current weak gross profit margins of 7.56%, InvestingPro data indicates net income is expected to grow this year, with analysts projecting profitability for 2025.

Executive Commentary

CEO Mark Behrman stated, "We continue to generate increasing ammonia, UAN and AN volumes," highlighting the company’s focus on expanding production. CFO Cheryl Maguire added, "We expect third quarter gas prices to be less of a headwind," suggesting potential cost improvements in the near term.

Risks and Challenges

• Continued volatility in natural gas prices could impact production costs.
• Global ammonia supply constraints may affect pricing and availability.
• Execution risks associated with the company’s cost reduction initiatives.
• Potential impacts from proposed tariffs on Chinese imports.

Q&A

During the earnings call, analysts questioned the company about UAN production challenges and potential impacts of tariffs on nitrogen prices. The management also discussed ongoing initiatives to improve plant reliability and efficiency.

Full transcript - Lsb Industries Inc (LXU) Q2 2025:

Conference Operator: Greetings, and welcome to the LSB Industries Second Quarter twenty twenty five Earnings Conference Call. At this time, all participants are in a listen only mode. A brief question and answer session will follow the formal presentation. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Kristy Carver, Senior Vice President and Treasurer.

Thank you. You may begin.

Kristy Carver, Senior Vice President and Treasurer, LSB Industries: Good morning, everyone. Joining me today are Mark Behrman, our Chairman and Chief Executive Officer Cheryl Maguire, our Chief Financial Officer and Damian Renwick, our Chief Commercial Officer. Please note that today’s call includes forward looking statements. These statements are based on the company’s current intent, expectations and projections. They are not guarantees of future performance, and a variety of factors could cause the actual results to differ materially.

For more information about the risks and uncertainties that could cause actual results to differ materially from those projected or implied by forward looking statements, please see the risk factors set forth in the company’s most recent annual report Form 10 ks. On the call today, we will reference non GAAP results. Please see the press release posted yesterday in the Investors section of our website, lsbindustries.com, for further information regarding forward looking statements and reconciliations of non GAAP results to GAAP results. At this time, I’d like to turn the call over to Mark.

Mark Behrman, Chairman and Chief Executive Officer, LSB Industries: Thank you, Christy, and good morning, everyone. Page four of our presentation summarizes highlights from the second quarter. Sales volumes increased 6% year over year, driven by solid improvement in sales volumes of AN and UAN. These gains are the result of higher ammonia production and better performance by our upgrading plants. We’re pleased that our efforts to improve the reliability and efficiency of our facilities are yielding results, and we expect to make further progress in the 2025.

We achieved our increase in production and sales volumes during the second quarter while having zero recordable injuries across the organization. I want to congratulate our entire team for embracing our protect what matters core value and demonstrating that goal zero is achievable. Lastly, we continue to focus on our allocation of capital. And during the quarter, we not only invested in supporting the growth and improvement in our business, but we bought back $32,000,000 of debt. Cheryl will provide a few more details on our leverage.

Now I’ll turn the call over to Damian to review current market dynamics and pricing trends. Damian?

Damian Renwick, Chief Commercial Officer, LSB Industries: Thanks, Mark, and good morning, everyone. Turning to Page five, demand for our industrial products remains robust. We continue to ramp up our ammonium nitrate solution volumes as we expand our industrial business. Copper and gold mining activity remains strong with pricing for both near all time highs. We continue making progress optimizing our sales mix, targeting a third of our sales under cost plus contracts, further neutralizing the volatility of natural gas and fertilizer price swings.

To achieve this mix shift, in early July, we began transitioning our sales of HDAN, a spot price fertilizer product, to A and S used in industrial and mining applications. We expect to wrap up our production of HDAN later in the third quarter. We believe this shift will improve stability and predictability in our financial performance. Nitric acid demand remains strong, supported by the resilience of The U. S.

Economy. In addition, we believe that the proposed countervailing duties on Chinese imports of MDI, a polyurethane feedstock, could drive a favorable structural change in the domestic MDI market, leading to higher nitric acid demand. On page six, we continue to see strong prices for our fertilizer products. The spring twenty twenty five planting season resulted in strong demand and pricing for nitrogen fertilizers. This was due in part to the expected increase in planted corn acres, driven by continued low corn stocks to use ratios.

The USDA estimates U. S. Producers planted 95,200,000 acres of corn this year compared to 90,600,000 planted acres last year. UAN prices are up significantly from a year ago. The current NOLA UAN price of $350 per tonne is more than 70% higher than this time last year.

The tamper ammonia price for August is $487 per ton, slightly above year ago levels. This increase reflects reduced supply from The Middle East, North Africa and Russia and higher European production costs. Tight global supply is expected to continue in the short term. Now I’ll turn the call over to Cheryl to discuss our second quarter financial results and our outlook. Cheryl?

Cheryl Maguire, Chief Financial Officer, LSB Industries: Thanks, Damian, and good morning. On page seven, you’ll see a summary of our second quarter twenty twenty five financial results. You can see the early benefits of our investments in plant reliability and efficiency through increased net sales and stronger volumes. Page eight bridges our second quarter twenty twenty four adjusted EBITDA of $42,000,000 to our second quarter twenty twenty five adjusted EBITDA of 38,000,000 Higher pricing for UAN, higher sales volumes, and a reduction in our fixed plant costs were offset by materially higher natural gas costs. Page nine provides a summary of our key balance sheet and cash flow metrics.

Our cash balance remains strong. During the quarter, we repurchased approximately $32,000,000 of our senior secured notes. Additionally, we have an equipment loan coming due in August, and will reduce debt by an additional $5,000,000 in the third quarter. Our second quarter twenty twenty five CapEx reflects investments in A and S loading and storage capabilities at our El Dorado facility. This will enable us to meet the strong demand for the product that Damian mentioned earlier.

We will continue to make investments in the reliability of our facilities while also investing in storage and logistics capabilities to support our growing industrial business. Turning to the third quarter outlook. The Tampa ammonia price settled at $487 for August, an increase of $70 a ton over July’s price, and NOLA UAN is currently trading around $350 per ton. Our natural gas costs have averaged approximately $3.25 per MMBtu quarter to date, higher than our average gas cost of $240 in the third quarter of last year. However, we expect third quarter gas prices to be less of a headwind to our year over year comparison relative to what we experienced in the 2025 based on pricing we are seeing thus far in the third quarter.

From a volume perspective, we continue to expect meaningful increases in both UAN and AN sales volumes compared to prior year. This will result in lower sales volumes of ammonia as we forgo ammonia sales in favor of upgrading into higher margin products. Collectively, we expect these favorable dynamics to result in a healthy year over year increase in adjusted EBITDA as compared to the third quarter of last year. And now I’ll turn it back over to Mark.

Mark Behrman, Chairman and Chief Executive Officer, LSB Industries: Thank you, Cheryl. Page 10 is an overview of the low carbon project at El Dorado. Our partner, Lapis Carbon Solutions, completed the drilling of a stratigraphic injection well in June. Lapis continues to gather data from this well to support the EPA in its continuing technical review of our Class VI permit application, with technical review expected to be complete in the first quarter of next year. We are expecting to use the same well for our CO2 injections when in operation.

We continue to expect to begin CO2 injections by the end of next year. We were pleased with the progress that we made in the 2025 towards meeting our goals for the full year. We continue to generate increasing ammonia, UAN and AN volumes, and we achieved higher sales volumes of our higher margin products. We’re successfully shifting our sales mix to an increasing percentage of contractual industrial sales, which enables us to pass through our natural gas costs and provides us with a more stable base of earnings with multiyear visibility. As I mentioned at the start, our safety performance was excellent with zero recordable incidents so far this year, and we expect that to continue.

Lastly, we reduced our debt further and maintained a healthy liquidity position while continuing to invest in plant reliability and strategic projects. I am enthusiastic about our prospects for the remainder of the year and look forward to our continued progress of improving our business and generating improved financial results. Before we open it up for questions, I’d like to mention that we will be participating in the following events in the coming months. The Jefferies Industrial Conference in New York on September 3, and the UBS Global Materials Conference also in New York on September 4. We look forward to seeing some of you at those events.

That concludes our prepared remarks, and we will now be happy to take your questions. Thank you.

Conference Operator: Thank you. We will now be conducting a question and answer star one on your telephone keypad. Information tone will indicate that your line is in the question queue. We ask that analysts limit themselves to one question and a follow-up so that others may have the opportunity to do so as well. Our first question comes from Lucas Guamont with UBS.

Please proceed with your question.

Lucas Guamont, Analyst, UBS: Good morning. Thank you. Just wanted to start on UAN. So the first half volumes were up sort of about 30,000 tonnes year on year. Coming into the year, you were looking to kind of potentially lift volumes up to 150,000 tonnes initially.

How do you see sort of the outlook there for the second half now in terms of the size of the growth that you think you can generate? And what are you kind of doing to maximize that and capitalize on the really strong relative UAN pricing that we’re seeing at the moment?

Tim, Unnamed Executive, LSB Industries: Good morning, Lucas. How are you? So, we as you probably remember, we did an expansion of our UAN production back in September up at our Pryor facility. And while we’re getting the maximum rates that we expected, we’re still working out some kinks to do it consistently. So I think we’re pleased that the plant itself operates at the higher rate and has been fairly consistent, but we’re still working on that.

So I think we have expectations that the second half of the year should have higher UAN production out of that facility and then therefore, higher sales. Remember though, we do have seasonality that we’ll have to deal with, right, the first half of the year. Usually, you’re going to see more products sold in the second half of the year.

Lucas Guamont, Analyst, UBS: Great. And then I just wanted to ask about the setup for the third quarter. I mean, typically, that has a lot more sort of industrial sort of mix, less ag mix. And it’s usually sort of the smallest quarter for the year seasonally. This year though, we’ve sort of got some diversion dynamics compared to normal.

So UAN pricing has been really strong. It’s continued to increase into July. Ammonia pricing has sort of been stable. And you should sort of it sort of also some volume uplift. So it seems to me the combination of those factors could have EBITDA potentially even like flat sequentially on the second quarter or at least seeing a much less of a decline than you would normally get.

How are you guys kind of thinking about things there?

Tim, Unnamed Executive, LSB Industries: I think you’re spot on.

Conference Operator: Our next question comes from Andrew Wong with RBC Capital Markets. Please proceed with your question.

Andrew Wong, Analyst, RBC Capital Markets: Hey, good morning. Thanks for taking my questions. So we’ve seen improvement in production and operating rates now. And I think you’re pretty far down the path for operational improvements, which is great. Maybe can you just talk about more like on the cost side of things, as those operating rates stabilize?

Where do you see costs trending over time? And I think there are some costs that were tied to the improvement programs as well, like contractors and consultants and things

Kevin Estec, Analyst, Jefferies: like that. So as those

Andrew Wong, Analyst, RBC Capital Markets: required costs kind of fall off, like what can

Kevin Estec, Analyst, Jefferies: we expect on the overall cost side? Thanks.

Tim, Unnamed Executive, LSB Industries: Good morning, Andrew. How are you? So first off, yes, we’ve made a lot of improvements on the operational side, but we still have a lot of initiatives going on that, we believe can still add significant EBITDA to our annual EBITDA to where we are today, right? I mean, the goal for our ammonia plants is 95%, consistently, right? Reliability is really key.

The goal for our upgrading plants is generally speaking, improve from where we are today. So I do think we still have some significant improvement that we can make that should translate into meaningful increase in EBITDA. On the cost side, I’m going to turn it over to Cheryl. We have a lot of initiatives going on because we are now focused on not only just pulling costs out, but really creating efficiencies throughout the business that by themselves will create cost decreases.

Cheryl Maguire, Chief Financial Officer, LSB Industries: Yes. Good morning, Andrew. We had said coming into this year that we would expect our costs to reach an inflection point in 2025 and then start trending down from there. In addition to that, we talked about 15,000,000 to $20,000,000 of cost reduction through efficiencies, as Mark just mentioned. So we should be we’re starting to work on

I think by the end of the year, we’ll probably be, I would say, 25% complete towards the 15,000,000 to $20,000,000 target that we’re looking for. So we’ll see the balance of that come out across 26,000,000 and maybe a bit into ’27

Tim, Unnamed Executive, LSB Industries: And I would say one thing to add to that, keep in mind that when you make some changes now, we’re not going to see the annualized benefit obviously until next year. So, while we pull we’re working on those initiatives today, We’ll probably be able to report at the end of the year what the annualized effect is going into 2026.

Andrew Wong, Analyst, RBC Capital Markets: Okay, got it. That makes sense. Yes, obviously, I appreciate there are still certain levers you can pull to improve operating rates here. And then just going on to the tariffs, like what’s your sense on the impact from tariffs on U. S.

Nitrogen prices so far this year versus just how tight the market was with the churn rate demand and some of the supply issues? And then just as you touched on in your prepared remarks, with the insuring on some of the industrial businesses that’s definitely impacted domestically. Can you just talk about what that might mean for pricing and margins for LSV?

Kevin Estec, Analyst, Jefferies: If you can help quantify it, that’d

Andrew Wong, Analyst, RBC Capital Markets: be great or in any way you can.

Tim, Unnamed Executive, LSB Industries: Sure. Damian, you want to answer that?

Damian, Chief Commercial Officer, LSB Industries: Yes. Good morning, Andrew. So, in terms of the tariffs, I think it’s honestly been a little hard to discern some of the impacts given some of the more pertinent market dynamics around supply and also being in peak season of demand. But I think from a urea perspective, there’s been I think some impact for the other products, probably not so much. Going forward, I think we’re closely monitoring what happens with Russia, if there’s any sort of tariff there and then any adjacent tariffs for other countries doing business with Russia, that’s likely to have a more meaningful impact on nitrogen.

So, we’re closely monitoring that. In terms of the onshoring of production here in The U. S, look, that’s going to have a long runway until we start seeing anything material. I think in the shorter term, there opportunities for The U. S.

Domestic market to take advantage of the current environment. We’re seeing that a little bit with copper at the moment, right, like the support for U. S. Copper domestically is seeing producers like Freeport and others really focus on driving their efforts there and exploring with some priority expansion activities there. So, I think that’s certainly a tailwind for us and something that we’re looking forward to seeing realize in

Tim, Unnamed Executive, LSB Industries: the future. I would add on to that, that those activities make us really look at some potential debottlenecking or expansion because they underpin some of those expansions.

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

Kevin Estec, Analyst, Jefferies: Hi. This is, Kevin Estec on for Lawrence. Thank you for taking my questions. I guess my first one has to do with fertilizer prices that, you know, they’ve been pretty elevated, like you, Aon, and and I guess there’s been some deterioration of farmer economics, and that’s, I think largely because of lower corn prices. Are you seeing any signs of demand destruction let’s say as of July from the farmer perspective of you weigh on?

Damian, Chief Commercial Officer, LSB Industries: Yeah. Hi, Kevin. Really, as we got through spring season, we really didn’t see much demand destruction at all. But moving through to fill, I think given where prices are, there’s certainly some hesitancy from a retailer’s perspective to buy. But I think that’s really been consistent with what we’ve seen for the last three or four years.

So, it’s probably more the new normal that we’re seeing and we’re in a comfortable position coming out of spring with our inventory and we’re comfortable with where our forward sales are sitting. But we’re monitoring it. Corn prices would like to see a little higher and that would help support farmer economics, but you might see a bit of impact on the edges in that marginal corn plantings for next year. So, yeah, and I think the USDA is already sort

Tim, Unnamed Executive, LSB Industries: of indicating some of that in its outlook. I think one thing that could possibly help corn prices, so we just negotiated a deal with the EU for them to purchase a lot of energy as part of that. I think the hope is that we’ll see some ethanol being exported over to Europe, which will increase demand for ethanol and in turn demand for corn. So again, I think, that plus there’s the continued conversation going from E10 to E15 and gasoline could support some more demand from the ethanol industry and then supporting demand for corn.

Kevin Estec, Analyst, Jefferies: Okay, great. Thank you. And my second question, so I asked about this on last quarter’s call on the administration’s deregulation push. I guess I was wondering whether or not your views have changed on, let’s say, over the last three months and basically how big of a tailwind it could or could not be. Like, have you noticed any substantial changes yet, like in terms of permitting, for example?

Tim, Unnamed Executive, LSB Industries: Well, we’ve seen much more dialogue, with the federal agencies, particularly the EPA, and then, state agencies that, you know, maybe were a little hesitant given, the actions of the EPA and the government over the federal government oversight. I think both state agencies and federal agencies have been more user friendly. And so that’s actually helped us in some of our conversations just on environmental conversations at the sites and with projects, things like that.

Kevin Estec, Analyst, Jefferies: Got it. Okay.

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

Kristy Carver, Senior Vice President and Treasurer, LSB Industries0: Good morning.

Mark Behrman, Chairman and Chief Executive Officer, LSB Industries: Good morning, Rob.

Kristy Carver, Senior Vice President and Treasurer, LSB Industries0: Good morning, Mark. UAN, can you kind of tell us what you’re seeing in terms of UAN import trends? And, you know, do you have any comments on the the June, July Ukrainian strikes, you know, on the Russian fertilizer plants? Has there been any discussion about how that’s impacting Russian export volumes?

Damian, Chief Commercial Officer, LSB Industries: Tim, do you want to take that? Yes. Good morning, Rob. So, in terms of the import trend this year, fertilizer year imports for UAN were below last year and I think that contributed to some of the tightness that we saw overall in the market. In terms of the drone strikes, etcetera, we haven’t seen any immediate impact just yet and maybe that’s because of where we’re at seasonally transitioning into the next year and the fill period.

Of course, there’s still been no fill programs announced in the market. So, that is an indication of how well balanced or comfortable the producers are at this stage. But it’s clearly something that we’re monitoring. But I think that the bigger factor will be those tariffs that I talked about earlier. That’s something that will have a more material impact going forward.

And I also think don’t you think that

Tim, Unnamed Executive, LSB Industries: the European tariffs on Russia as they gain some momentum and of course the tariff rates and amounts go up will have a huge impact?

Damian, Chief Commercial Officer, LSB Industries: Yes, it will certainly see a redistribution of global trade routes for UAN. So, I think it’ll just see a shuffling. You might see some pricing impact as flight rates are impacted on the global trade. But yes, we’ve yet to see any immediate impact from that.

Kristy Carver, Senior Vice President and Treasurer, LSB Industries0: Well, thank you for that. And then totally different topic, Leidos. Any changes with Leidos at this point in time that you could share with us, the lawsuit?

Tim, Unnamed Executive, LSB Industries: No, we are at least currently scheduled to go to trial, start the trial in late October, subject to our judiciary system making any changes.

Conference Operator: Star one on your telephone keypad.

Tim, Unnamed Executive, LSB Industries: Great. Well, hearing no other questions, I want to thank everyone for participating on our Q2 earnings call and your interest in LSB Industries. Thanks.

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

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