FutureFuel Corp. Common shares

and welcome to the Future Fuel second quarter results conference call. At this time, all participants are in a listen-only mode. A question and answer session will follow the formal presentation. If anyone should require operator assistance, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. It is now my pleasure to introduce Rose Sparks, Chief Financial Officer. Please go ahead.

Thank you. Good morning and welcome to the Future Fuel second quarter 2026 results conference call. Leading the call today are Chairman and CEO Roeland Polet and I'm Rose Sparks, the company's Chief Financial Officer. After the close of U.S. trading yesterday, we issued a press release detailing our second quarter operational and financial results. This release is publicly available in the investor relations section of our corporate website at www.futurefuelcorporation.com. I would like to remind you that management's commentary and responses to questions on today's conference call may include forward-looking statements which, by their nature, are uncertain and outside the company's control. Although these forward-looking statements are based on management's current expectations and beliefs, actual results could differ materially. For a discussion of some of the factors that could cause actual results to differ, Please refer to the risk factors section of our latest reports filed with the SEC. Additionally, please note that you can find reconciliations of all historical non-GAAP financial measures mentioned on this call in the press release issued this morning. Today's call will begin with prepared remarks from Roeland Polet, who will provide a business update, followed by my review of our second quarter financial performance. At the conclusion of these prepared remarks, We will open the line for questions. With that, I'll turn the call over to Roeland.

Thank you, Rose, and good morning, everyone. Thank you for joining our call today. Again, I am Roeland Polet, Chairman and Chief Executive Officer of Future Fuel. I joined the company nearly two years ago following more than 35 years in the specialty chemicals industry, including senior leadership roles at global manufacturing companies such as Valspar, Felonies, and DHM Furmanish. Since joining Future Fuel in the late 2024, I've had the privilege of working alongside more than 500 dedicated employees to position the business for a new chapter of profitable growth and long-term value creation. Over that period, we have strengthened the foundation of the company, sharpened our strategic priorities, and developed a clear roadmap for the future, which I will be discussing in greater detail today. This is Future Fuel's first quarterly results conference call with investors in more than a decade. With that in mind, my remarks today will serve as a reintroduction of the company, who we are, what we do, how we are competitively differentiated, and the opportunities we see to create meaningful shareholder value over time. Going forward, our leadership team is committed to providing shareholders with great The resumption of quarterly investor conference calls is an important step in that commitment and reflects our intention to engage more consistently with the investment community. With that introduction, and given that this is our first conference call together, let's begin with a high-level overview of our business for those less acquainted with us. FutureFuel is a 100% U.S.-based manufacturing manufacture operating through two distinct businesses, Specialty Chemicals and Biofuels. Both are supported by our approximately 2,200 acre manufacturing complex in Batesville, Arkansas, where we combine product development, engineering, and commercial production on one integrated campus. The Batesville site has supported complex chemical manufacturing for approximately 50 years and represents an established operating platform that will be difficult to replicate where it's built today, given factors of scale, permitting, and production unit complexity. Our chemicals business has two primary areas of focus, custom chemicals manufacturing for third parties, together with proprietary specialty chemicals manufacturing. In custom manufacturing, we work closely with customers to develop scale and commercially produce specialized products on the long-term production agreements. Our proprietary portfolio involves the production of our formulations using our own IP, which are then sold into a variety of different applications. The total production capacity of our chemicals operations is approximately 250 million pounds annually. Our biofuels business and manufactures biodiesel from the same Batesville complex, which has approximately 60 million gallons of annual biodiesel production capacity. The business benefits from significant feedstock optionality, which allows us to optimize production economics. While biodiesel economics differ from those of our specialty chemical segments and are more influenced by commodity and regulatory conditions, the biofuel segment serves as a complementary business Specialty Chemicals Focus, Serving the Future Optimized, the Batesville Complex, while facilitating economies of scale. Next, let's walk through our unique value proposition and why we win in the markets we serve. Our primary competitive advantage is the scale, integration, and technical depth of our Batesville Complex. When a chemical customer comes to us, we provide Laboratories, Engineering Resources, Flexible Manufacturing Units, Wastewater Treatment, Logistic Infrastructure, Permits, and Experienced Technical Teams. Our platform allows customers to move from development to commercial production with fewer handoffs, lower execution risk, and more capital efficient production options. We offer a one-stop-shop solution that is difficult to replicate within the continental United States, positioning us as an attractive reshoring play for chemicals customers who want to avoid supply chain risk associated with sourcing key formulations from overseas partners. While the integration of the basal asset is itself a major draw for customers, Our deep technical expertise and experienced, skilled workforce are another integral piece of our overall value proposition. At Batesville, our teams manage production, raw material procurement, production quality and formulation consistency across batch and continuous processes. We have built a strong reputation for being the go-to production partner on complex technical demanding programs that customers may not be able to manufacture efficiently themselves. In regard to our value proposition, it centers on reducing technical, operational, and supply chain risk for the customer. A typical relationship begins with customer bringing us a molecule, process, or manufacturing challenge. We then evaluate the chemistry, safety requirements, production economics and equipment needs, then work through development and scale-up before entering commercial production. As we demonstrate value, the relationship may expand through additional volumes, longer contracts, new products, or customer-funded capacity. Because changing manufacturers can require re-qualifications, audits, process transfer, and production risk, customer programs are often multi-year engagements, creating long-term stickiness within the customer base. To that end, the average relationship of our top customers in 2025 was more than 15 to 20 years, highlighting the long-term nature and stickiness of our customer relationships. Before I walk us through what's next for Future Fuel, it is important to provide some perspective around the challenges we faced over the last several years, how we've responded to those challenges, and why we were excited about what comes next for the organization. In the years leading up to 2026, there were three primary factors that impacted our operational and financial performance. Plant and production reliability, regulatory certainty around biofuels economics, and elevated raw material input costs. Beginning with plant reliability, over the past two years, we have made strides to improve the plant process, enhancing the site safety, and driving higher site utilization through executing on a number of high-impact capital projects. As I'll discuss shortly, we were encouraged by the improvement utilization of Batesville in the first half of the year. Second, with respect to the regulatory environment, we, together with the broader biofuels industry, were granted much needed relief with a new set of two RFS volume mandates issued by the EPA in March of 2026. Under the new mandates, the EPA established the highest blending in the program's history, targeting a 60% increase over 2025. To meet the 2027 volume targets, existing U.S. domestic biofuels production levels are expected to reach peak capacity, which we expect will benefit us. Further, also, during the first quarter of 2026, the U.S. Treasury Department and the Internal Revenue Service issued regulations providing expanded guidance on the 45Z credit, integrating changes from the Budget Reconciliation Act of 2025. The rule was expected to help level the competitive environment for biodiesel by reducing the tax credit for SAF from $1.75 per gallon to $1 per gallon, effective January 1, 2026. requiring that all feedstocks be sourced from North America and requiring for biomass-based diesel and extending the 45-seat credit for additional two years through year-end 2029. Rose will speak more on how this benefits our business model shortly. Finally, while both plant reliability and regulatory environment have improved meaningfully for us, Raw material input costs remain elevated, which remains an area of focus for us. Looking ahead, our value creation roadmap centers on three key pillars, including commercial growth, operational excellence, and a return centric approach to capital allocation. Within our commercial growth pillar, our first priority is to increase penetration of key existing accounts, as well as scale production volumes across The Betel Complex. We are focused on expanding the specialty chemicals pipeline, converting development projects into commercial production, and securing additional volumes from existing customers. We will also pursue new custom manufacturing contracts and expand our proprietary chemicals portfolio into adjacent products and markets where our technical capabilities and our existing infrastructure provide a clear advantage. However, our objective is not simply to add volume. We intend to pursue programs that accelerate our shift towards higher value-added sales mix, whereby we capture rateable growth in margin realization within durable, reoccurring revenue streams. By applying greater commercial discipline, we can concentrate our resources on the customers and opportunities with strongest potential to deliver profitable growth through the cycle. Within our operational excellence pillar, we will seek to improve cost efficiency, utilization, safety, reliability across the Batesville complex. Higher sales volumes create value only when we can manufacture those volumes safely, consistently, and at an appropriate unit cost. We are therefore focused on plant reliability, production, scheduling, procurement, energy efficiency, maintenance practices, and process productivity. We also intend to make operating performance more measurable and transparent by tracking metrics such as capacity utilization, plant uptime, safety performance, and unit product costs. We can and will identify opportunities for improvement and hold the organization accountable for those improvement results. Finally, with respect to our capital allocation pillar, organic reinvestment will remain the top priority where products are supported by identifiable Where appropriate, we will continue to seek customer-funded capacity expansions while strengthening long-term commercial relationships. We will also evaluate complementary acquisition, particularly opportunities to add intellectual property, proprietary products, or specialized capabilities that can be integrated into our base-world platform. Any acquisition must strengthen our competitive position and meet disciplined financial return requirements. Beyond reinvestment and acquisitions, we will continue to evaluate cash dividends and optimistic share repurchases as part of a balanced approach to returning capital to shareholders. Taken together, each of the pillars of our strategic roadmap are designed to drive higher sales volumes, more efficient operations, and stronger returns on invested capital. By growing selectively, operating more efficiently, and allocating capital with discipline, we intend to produce more consistent earnings, cash generation, and long-term shareholder value. Turning now to review of our second quarter results. The second quarter marked a return to profitable growth for Future Fuel, a performance driven by strengthening end market demand, improved production economics, continued cost discipline and enhanced optimization of our Batesville plant. At a strategic level, we remain highly focused on driving safe, reliable operations across the organization while continuing to pursue customer co-investment in new capacity and capabilities as we seek to further accelerate growth within our core specialty chemical contract manufacturing markets. As before, we remain on pace to deliver positive adjusted EBITDA for the full year in 2026. At an operational level, total production increased 26% on a year-over-year basis in the second quarter, supported by broad-based demand growth across our specialty chemicals and biofuels end markets. Both segments generated positive gross profit per unit sold in the period and continue to exhibit strong operational momentum entering the second half of 2026. Total chemical segment production increased 34% year-over-year in the second quarter as increased demand across the energy and industrial end markets drove broad-based strength in both performance and custom chemical manufacturing. Chemical's gross profit was $5 million in the second quarter versus $1.1 million in the year-ago period, reflecting improved volume throughput and stronger margin realization. Fire fuel segment production increased 21% year-over-year in the second quarter, despite the impact of a more than three-week biodiesel plant outage during the period as improved regulatory clarity and mandated renewable fuel production targets for 2026 and 2027 incentivized domestic production. Biofuels gross profit was $10.1 million in the second quarter versus gross loss of $13.5 million in the year-ago period. reflecting improved plant reliability, higher throughputs, better production economics, including a timing benefit related to ongoing biofuels hedging activities. Our biodiesel production continues to ramp higher with third quarter production rates expected to exceed second quarter levels. Looking ahead, demand continues to remain robust across our chemicals and biofuels segment. While elevated input costs may continue to represent a near-term headwind, Thank you, Roeland, and good morning again to all those joining us.