管理層發言
Good day, and welcome to the AdvanSix Second Quarter 2026 Earnings Conference Call. All participants will be in listen-only mode. After today's presentation, there will be an opportunity to ask questions. 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.
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 N. Kane and Senior Vice President and CFO Patrick C. 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. 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. Finally, we will leave time for your questions at the end. So with that, I will turn the call over to AdvanSix's President and CEO, Erin Kane.
Thanks, Adam, and good morning, everyone. We appreciate you joining us 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. Patrick will dive into the financials in a moment, but I would like to start the discussion today by 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. 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 overall impact was neutral in the quarter, which is a notable improvement from the first quarter headwinds. 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 the second quarter and scoped to align with our suppliers' 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. 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 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 the second half of the year compared to the first half as we build momentum into 2027. 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 4. Based on our expectations coming 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. Both Nylon Solutions and Chemical Intermediates performed at or better than our expectations with strong commercial performance and mix optimization supporting margins. Plant nutrient volume, however, was lower than anticipated. 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 fertilizer consumption overall. 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 will turn it to Patrick to discuss the financials.
Thanks, Erin. I am 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 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%, 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 $1.50 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. 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. 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. 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. We saw a reduction overall in export volume sequentially in the second quarter. 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 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. 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. As you can see on the right side of this slide, raw material costs were a headwind of $72 million in the second quarter 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 1Q, we saw that flip to a $39 million tailwind in 2Q. 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. 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. 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 have shown our first half 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 the first half as expected. The primary driver of the improvement was disciplined inventory management. As we have 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 capital tailwinds including our fourth quarter pre-buy program in Plant Nutrients, timing of annual payments paid in the first half, and 45Q cash tax credits. Let me turn the call back to Erin.
Thanks, Patrick. With the moving parts in our end markets, let's first take a deeper dive into what we are seeing in the plant nutrients market and specifically sulfur input costs, which 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. Ammonium sulfate demand softened significantly in 2Q 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. 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 the third quarter, following $655 per long ton in the second. Third-party industry experts are forecasting a $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. In this environment, we have 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 USDA grant in support of our SUSTAIN program, we are now planning to apply for their new FEEDS 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 we move forward it would unlock more value off our integrated ammonia platform. Let's turn to slide 10 to highlight what we are seeing across the rest of the portfolio. 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 remained soft overall, driving lower global operating rates, coupled with reduced acetone imports into the U.S., all of which are supporting tighter phenol-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 second half sequential EBITDA and cash flow improvement. 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. We continue to target approximately $10 million savings exiting 2026 from our multiyear non-manpower fixed cost reduction program. In Nylon Solutions, we expect steady volume performance and continued focus on price-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 have historically realized a $10 million 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. Due to the softer late season demand, 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 second half 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. 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 chain and energy markets as well as a diverse set of end market applications. We believe the actions we are 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.
Thanks, Erin. Debbie, can you please open the line for questions?
分析師問答
We will now begin the question and answer session. If your question has been addressed and you would like to withdraw your question, please press star then 2. The first question comes from Pete Oesterlin with Truist Securities. Please go ahead.
Hey, good morning. Thanks for taking the questions. So 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 are running and how much line of sight you have into when conditions would be supportive of raising operating rates?
Yeah. Thanks for the question, Pete, and good morning. Certainly in the quarter, we would have had Hopewell running around the mid-70s percent, consistent with other turnaround quarters. So a large majority would have been constrained through our ammonia production, which has implications on the full value chain. As we proceed forward, we are focused on running the assets to the demand. Chesterfield operations are improving year over year, and operational performance is important there. We are continuing to evaluate the economics given the environment on both how we think about monetizing ammonia and sulfuric acid versus producing ammonium sulfate. We have to take the full enterprise chain all the way through to the mix to make those best decisions. So it is an ongoing opportunity set for us to optimize.
Okay. Understood. And then, a lot of moving with pricing versus raw materials. But just following full offset of pricing versus raws in second quarter, do you have an estimate or a range you could share of what you would expect the net impact would look like in the third quarter just based on what you can see right now?
Certainly, I can start and then Patrick can jump in as well. Given where sulfur has landed, I think that is going to be the largest headwind vis-à-vis where ammonium sulfate pricing has reset in the fall fill program. Benzene and propylene move with oil, and those are influenced by developments in the Middle East 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. So it is really going to be how the sulfur situation plays out relative to price performance.
Yeah. I think we highlighted in our comments that $10 million to $15 million sequential headwind is currently the range we are working with and what we expect.
Okay. Very helpful. Thanks. So just wanted to finish with a couple of questions on some of the cash tailwinds you are expecting in the second half. So first on the ammonium sulfate pre-buy: 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? And I guess could you size what is normal and what are your expectations for how that is shaping up this year?
At this point, it is a bit early to tell, as we are just getting through the fall fill. This is something that we generally see as steady demand every winter. With nutrition, we are watching fundamentals and guideposts, including crop performance; we will get more data from the USDA this week. There are implications now that the corn rating has declined since mid-July, a little more in line with 2022 and 2023 crops than the last two years. How that plays into yield estimates and future corn prices will impact farmer profitability. If we sit here today, there is no reason to think that there would not be a constructive view relative to the pre-buy program setting up for next spring. We would think ammonium sulfate will probably be a bit tighter as well as we move forward. As we sit here today, input costs are not supporting marginal producers in the U.S. running, based on industry feedback. Those are things we will continue to monitor as we progress through Q4 and work to set up a constructive view into spring.
Okay. Great. And then just lastly, on the 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? And what kind of activities are we talking about — just some more color around that would be helpful.
When you think about historical approaches to repair and maintenance and capital intensity, a lot of the techniques are time-based — a piece of equipment has an expected life. In today's view, you can use better data and quantitative risk assessments. When we talk about risk-based, it is using better indications on when we should be tackling repair and maintenance capital based on how we need the assets to run to meet demand. I would not think about it as a deferral where there will be a catch-up, but rather a reprioritization using data heuristics and new ways to prioritize when and where we spend across the enterprise. The back half reflects a sequencing effect on cash relative to these changes: we were heavier in the first half as we exited 2025 and are putting this approach into place as we roll forward.
Excellent. Thanks a lot.
Thanks, Pete.
The next question is from David Silver with Freedom Capital Markets. Please go ahead.
Yes. Hi. Thank you. Good morning. I wanted to pick up on one of your recent comments about the lower operating rates for your overall production network and the opportunity to gain some flexibility in what you are selling. You mentioned ammonia and sulfuric acid units as opportunities to sell more of those products as-is instead of running them through your vertically integrated network. With the slower fertilizer season here, are you thinking about selling more ammonia and sulfuric acid into what seem to be healthy markets right now?
Thanks for the question, David, and good morning. Yes, that is definitely something we are trying to increase and it has been core to our strategy: expanding degrees of freedom and optionality across the integrated platform. In the spring, the industry sold more ammonia than normal as it was the cheapest source of nitrogen; we sold more in the first half. These products are logistics-sensitive — freight matters given where we sit in the Mid-Atlantic — so we optimize what we can sell there. To put this in perspective, we sold roughly 49 thousand short tons of ammonia in the first half, up from 33 thousand in the first half of 2025. While we had a record sales year for ammonia at the end of last year, we anticipate being up 30% year-on-year for the full year. Sulfuric acid is also freight-sensitive and we continue to look at that. The trade-offs are not simply sell-or-make decisions because we are integrated: we need to consider whether to make caprolactam, resin for export, or ammonium sulfate, and the performance implications across the chain. Relative to our targeted operational approach for the back half of the year, we are dialing in where optimization makes sense and we have some levers on ammonium sulfate and the caprolactam side that we will use as appropriate.
Okay. I stipulate it is a complicated decision map and not as easy as flipping a switch, but if anybody was aware of how to tweak the system, it would be you and your team. If I could just get an update on expectations for the Section 45Q credits: when might you be booking an additional round of credits for 2021 or 2026, and when might cash be received from the credits that you claimed in 2025?
Sure, David. Let me take that one. As background, our 2018 LCA is already approved by the IRS. This allowed us to claim the credits for 2019, 2018, and 2020. 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 second quarter to ensure they had all the required data. All 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 are still targeting that for the second half of this year. Once the 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 process can be used for up to three years. At this point, all open items on our side related to the LCAs and audits are closed. We are here to be responsive to the IRS and DOE in the event any questions arise as they complete their process.
Okay, great detail. Can I also just double check: is the total amount of credits you are ultimately targeting still in that $100 million to $125 million range, or has there been any variation based on the review by the federal authorities thus far?
No changes to that range at this point.
Okay, great. I'd like to switch over to the DEF opportunity that was highlighted last quarter. I understand it's at an early stage, but could you provide an update on progress to date and any notable developments at this early stage?
Certainly. The project remains on track and as planned. We announced it last quarter and entered into the licensing agreement to assess expansion on our integrated platform to supply DEF into the growing market in the Mid-Atlantic and East Coast. We continue to progress through our front-end engineering design work with our partners and remain on track for a final investment decision targeted for the first half of 2027. As a reminder, this is a multiyear capital investment with attractive financial returns that align with our long-term value creation objectives. Upon a successful FID, the timing for full operations would be in 2029. Also, while DEF itself did not require additional ammonia beyond our plans, the USDA launched a new FEEDS program — Fertilizer Investment in Expansion for Domestic Supply grants — which we are planning to apply for to expand ammonia capacity and increase nitrogen availability for domestic farmers. This grant is different: it is a one-for-one match on dollars spent with 50% covered, whereas our current grant under SUSTAIN is 20% coverage. We are excited about this opportunity and believe we have a more capital-efficient program than some others have discussed. More to come as we progress.
That is interesting. To clarify, you are saying a project to add or debottleneck ammonia capacity could be partially subsidized with roughly a 50% grant match on eligible costs under that program? Is that correct?
Yes. That is the opportunity ahead of us. The grant program was launched and applications are due; we are working through that now. We will provide more updates as they become available.
Okay. Just some comments on free cash flow prospects for the second half of the year: you highlighted that fourth-quarter cash receipts from growers might be a little lower this year but you have been efficient with turnarounds and maintenance, and inventory levels appear relatively low. What are the prospects for getting close to cash breakeven in the back half of the year?
I can give a couple of comments. First, on the Plant Nutrients pre-buy: in Q4 of last year, compared to the prior year, we were fairly selective on what we took in terms of pre-buy given the sulfur dynamics. So in terms of year-over-year comparison, Q4 of last year is a relatively soft comparison point. On CapEx, the sequencing lines up on a cash basis more heavily weighted to the front end of the calendar, so you see more CapEx cash outflows earlier in the year. The last piece is sequential earnings improvement in the second half, which will contribute additional cash. Also, payment timing affects the profile: some larger payments, such as insurance invoices, get paid earlier in the calendar year and lead to timing differences. Those are the big drivers that result in sequential improvement in cash from the first half to the second half.
Okay, great. Thanks for the detail. That is all for me. Appreciate the color.
Thanks, David. Have a great day.
This concludes our question and answer session.
I would like to turn the conference back over to Erin N. Kane for any closing remarks. 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. 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. With that, we look forward to speaking with you again next quarter. Stay safe and be well.
The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.