LSB Industries: Turnarounds and Geopolitics Set Up a Stronger Second Half
The nitrogen producer completes major turnarounds, assumes full CCS ownership, and rides Middle East disruption to a 40% EBITDA gain—yet the stock is down 20% over 90 days.
LXU · Earnings Call · 2026-07-30
Strong quarter, softer tape
LSB Industries delivered a beat-style quarter on the back of elevated nitrogen pricing and operational progress, but the tape doesn't seem to care yet. Shares are down ~21% in the last 90 days, even as management guides to a stronger second half. The reported adjusted EBITDA of $53M was a 40% year-over-year increase, but the real headline is what they are calling "illustrative"—the profitability absent the $35-40M turnaround drag.
Excluding the estimated impact from both turnarounds, illustrative second quarter adjusted EBITDA is approximately $90 million.
That $90M run-rate (vs $38M last year) underscores how much the business has improved. Yet the stock's recent 90-day drawdown of 28% suggests investors are either focused on moderating spot prices or already priced in the good news. The full history shows a stock that has whipsawed with nitrogen cycles, so the current pullback may be a classic "sell the news" after a strong first half.
The operational story: turnarounds and reliability
This quarter's defining theme is turnaround activity. Management executed an extensive El Dorado turnaround and pulled forward Pryor work, accepting Q2 downtime to secure higher reliability and production in H2. The early results are encouraging: El Dorado is already running ~1,380 tons per day, well above nameplate, and Mark Behrman highlighted the progress.
“We are already seeing the benefits of this work with El Dorado achieving some of the highest daily production rates since we went into production in 2016.” — Mark T. Behrman, Chairman and Chief Executive Officer · 2026-07-30
This is a company-specific narrative—the keyword spiked to #1 for the quarter—and it directly supports the $35M of additional annual EBITDA management has promised through production and cost initiatives. With turnarounds behind them, LSB expects to operate at higher rates for the balance of 2026.
Middle East conflict as a structural tailwind
The macro driver is unmistakable. Damien Renwick opened with a blunt assessment of how the Strait of Hormuz disruption is reshaping the industry.
“It is no secret that the conflict in The Middle East is having a considerable impact on our industry.” — Damien J. Renwick, Chief Commercial Officer · 2026-07-30
The impact is broad: European TTF gas prices have surged to $19-20/MMBtu, pushing European ammonia production costs to nearly $700/MT. This widens the cost advantage of U.S. nitrogen producers like LSB, which enjoys gas costs of roughly $3.20/MMBtu. Ammonia price and Natural gas prices are both top keywords this quarter, and the company is capturing higher margins on a high-margin product—ammonium nitrate sold into industrial markets, partly driven by AI infrastructure buildouts (data centers, power generation). This ties LSB into a global theme that many other reporters are highlighting this cycle.
The agricultural side is also constructive: corn ending stocks are projected at decade lows, incentivizing farmers to plant more acres and apply more nitrogen. The summer fill programs saw strong uptake, and the order book is well positioned for fall prepay and winter fill.
Growth projects: CCS and the El Dorado expansion
Beyond the cyclical tailwind, LSB is advancing two strategic projects that could add meaningful mid-cycle earnings. The company took full ownership of the El Dorado carbon capture and sequestration project, with operations expected to begin in Q1 2027. Management expects $25-30M of annual EBITDA from the project once fully operational.
“When fully operational, we expect to generate between $25 and $30 million of annual earnings and cash flow net of any operating costs associated with CCS operations.” — Mark T. Behrman, Chairman and Chief Executive Officer · 2026-07-30
Additionally, the company is de-risking an ammonia expansion at El Dorado—a ~100k-ton debottleneck that could add ~$20M of annual EBITDA. The FEED study and FID are slated for Q2 2027, and a USDA grant already covers ~20% of the project cost. These are long-term value creators that could shift LSB from a pure cyclical to a hybrid with some structural growth.
Why the stock is lagging
The obvious question is: why is the stock down if the quarter was this good? One reason may be that the market is seeing the same thing management is—ammonia prices have moderated from their spike (Tampa settled at $635/MT for August), and the Middle East situation is fluid. The stock's 90-day decline mirrors a broader pullback in fertilizer equities, and LSB's beta to product prices is high. But there is also a contrarian opportunity: the operational improvements are sticky, and the CCS project provides tangible upside optionality.
Consistency with prior calls adds confidence. In April, Mark Behrman explicitly said the Strait disruption would take "through the end of this year and into next year" to normalize. That view is now being validated by the sustained pricing environment. Management has also been steadily executing on its $35M EBITDA program, as discussed on the 2025-10-30 call.
The fundamentals support the narrative. Gross margin in the latest reported quarter hit 21.1%, up 11.1pp year-over-year, even with the turnaround noise—and that was before the second half's full production benefit.
Gross margin reached 21.1% in the most recent reported quarter, up from 10.0% a year earlier.
If management hits its production targets and the Middle East risk premium persists, LSB could easily print $90M+ quarters on a normalized basis. The stock's slide may be premature, but the cyclicality remains—and investors will need to watch whether geopolitical ease or demand destruction cuts the cycle short.