LSB Industries, Inc. (NYSE:LXU) Q2 2023 Earnings Conference Call July 27, 2023 10:00 AM ET

Company Participants

Fred Buonocore - Vice President of Investor Relations

Mark Behrman - Chief Executive Officer

Cheryl Maguire - Chief Financial Officer

Conference Call Participants

Josh Spector - UBS

David Begleiter - Deutsche Bank

Andrew Wong - RBC Capital Markets

Adam Samuelson - Goldman Sachs

Dan Rizzo - Jefferies

Rob McGuire - Granite Research

Operator

Greetings, and welcome to the LSB Industries Second Quarter 2023 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. If anyone should require operator assistance during the conference, please type– on your telephone keypad. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Fred Buonocore, Vice President of Investor Relations. Please go ahead.

Fred Buonocore

Good morning, everyone. Joining me today are Mark Behrman, our Chief Executive Officer; and Cheryl Maguire, our Chief Financial Officer. Please note that today's call will include forward-looking statements and because the 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. As this call will include references to non-GAAP results, please see the press release 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 go ahead and turn the call over to Mark.

Mark Behrman

Thank you, Fred. We're happy to have the opportunity to speak with you today about our 2023 second quarter results and our outlook for the third quarter and full year of 2023. I'd like to start by once again congratulating our team on their outstand safety performance -- for the first 6 months of this year, we have -- we've had 0 recordable injuries and our trailing 12-month recordable injury rate as of June 30, 2023, stands at 0.5 and -- we are committed to ensuring that everything we do starts with safety. Looking at our 2023 second quarter summary on Page 3 of the presentation, our manufacturing and commercial teams performed very well during the quarter. which translated into a solid increase in both production and sales volume compared to Q2 2022.

I'm pleased to say that our average ammonia onstream rate for the second quarter and first half of 2023 and indicates that we are making good progress towards our stated goal of operating our ammonia plants and a 95% onstream rate. Reflecting the processes and procedures we've implemented coupled with our reliability investments. We expect to see that rate continue to improve as we mature our new programs and get through next year's turnarounds. As anticipated, our financial results were lower compared to the second quarter of 2022. The -- this was due to a decline in market prices for nitrogen products relative to last year's high pricing levels, resulting largely from the impact of lower natural gas prices in Europe and weaker industrial activity in Asia. Additionally, during the second quarter, domestic UAN demand was below our expectations headed into the period as farmers opted to apply more urea. -- to what had been a comparatively attractive pricing early this year for urea versus UAN. As we have generated significant free cash flow over the last 24 months and expect to continue to generate free cash flow, even in a lower nitrogen pricing environment.