LSB Industries, Inc.

Greetings and welcome to the LSB Industries fourth quarter 2023 earnings 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 during the conference, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. I would now like to turn the conference over to your host, Mr. Fred Bonacore, Vice President of Investor Relations for LSB Industries. Thank you, sir. You may begin.

Good morning, everyone. Joining me today are Mark Bierman, our Chief Executive Officer, and Cheryl McGuire, our Chief Financial 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. On the call, we will include references to non-GAAP results. Please see the press release in the investor section of our website, lsbindustries.com, for further information regarding forward-looking statements and reconciliations of non-GAAP results to GAAP results. As a reminder, we have a stockholder rights plan to protect certain tax attributes. Please see the investor section of our website at lsbindustries.com for further important details. At this time, I'd like to go ahead and turn the call over to Mark. Thank you, Fred.

Turning to page four of our presentation, while 2023 had its challenges, particularly in the form of product selling price headwinds, when it came to aspects of our business within our control, we were very successful. This was particularly the case with our safety performance. For the full year of 2023, our total recordable injury rate was 0.33, a significant improvement over 2022. Protect What Matters is a fundamental company core value, and I'd like to thank our employees for continuing their efforts to attain our goal zero, or zero recordable injuries. We know this is possible to achieve, as 2023 was the eighth consecutive year without a recordable injury for our Baytown nitric acid plant team. This site has continued to strive for excellence and represents a model for what we believe all of our manufacturing operations can achieve. In addition to our safety performance, We were also pleased with how our ammonia plants ran over the course of the year. With respect to our fourth quarter financial results, adjusted EBITDA was lower compared to the record fourth quarter of 2022. This was largely due to a decline in market prices for nitrogen products relative to the prior year, which was the case for each of our quarters during 2023. As we discussed on our last earnings call, In early October, we announced our collaboration with INPEX, Air Liquide, and Volpec Exelam Houston to develop a world-scale low-carbon ammonia production and export facility on the Houston Ship Channel. This project represents an important step in the emergence of LSB as a leader in the global energy transition and is potentially transformative to our growth profile as demand for clean energy increases. Since commencing this collaboration, we've reached some key milestones in the development of the ammonia loop, which is our section of the project. Lastly, in 2023, we repurchased 125 million of our outstanding bonds and repurchased approximately 29 million of our stock for a total return of value to shareholders of approximately $154 million. Page five of our presentation illustrates our ammonia production trend for the past several years, pro forma for turnarounds. This steady progress reflects the investments we've made in our facilities and the operating culture change that has occurred across our manufacturing facilities as we strive to be a top tier operator of our plants. Ultimately, we believe these efforts will allow us to consistently operate at 95% capacity, which will equate to a full year ammonia production level of 875,000 tons. Our profitability is further enhanced as we will look to upgrade ammonia into higher value downstream products. And in 2024, we will be intensifying our efforts to maximize the production of our downstream plants while optimizing the mix of those products to capture the highest margins possible. Relative to the production capacity of our facilities, over the course of 2023, we evaluated several potential expansion projects at our Eldorado facility with the goal of materially increasing our capacity to produce one or more key products. After assessing the current commodity market conditions, coupled with the rising costs of construction and access to the required technical capabilities, we determined that our best course of action at this time is to delay the expansion. Balancing our resources to successfully execute on the multiple growth initiatives we have underway is something that we are very focused on as well. Lastly, As we've stated in the past, preserving the health of our balance sheet is one of our top priorities, and we believe that our decision to delay the Eldorado expansion is consistent with that goal. We remain very interested in the Eldorado expansion and will continue to evaluate its feasibility and timing. Importantly, despite the delay, we will continue to work with the USDA on timing and eligibility for a potential USDA grant of up to $80 million towards the funding of this expansion project. On page six and seven of our presentation, we provide a current overview of our end markets and several commodity price dynamics that are important to our business. On the fertilizer demand side, while the corn stock to use ratios have been increasing, which has historically been a signal of potential pressure on grain prices, The price of corn has remained resilient, as evidenced by the December 24 corn price of approximately $4.60 per bushel. At these levels, we believe farmer incomes are healthy and that strong incentive exists to maximize corn yields through the application of nitrogen fertilizers. As a result, we expect nitrogen fertilizer demand to be strong for the spring planting season, supporting robust fertilizer prices. In our industrial business, Overall demand remains steady. As U.S. production remains stable, U.S. single-family housing starts have rebounded, and mining commodity prices remain stable. Specifically to the products we sell, demand for nitric acid continues to be supported by the resilient U.S. economy, while demand for ammonium nitrate for mining activity has been strong, driven by the infrastructure-related production of aggregates as well as metals mining to supply electric vehicle production and other applications. Lastly, on the cost and competitiveness of our business, the left-hand chart on page 7 shows the price trend for the TTF, the benchmark for natural gas prices in Europe, relative to the price for Henry Hub, the benchmark price for natural gas in the U.S. European gas prices spiked during 2022 and have come down significantly in 2023 due to a combination of a warm winter and heavy LNG imports. However, what is important to note is that gas prices in the U.S. continue to remain a fraction of those in Europe. The key takeaway here is that this represents a significant competitive advantage to U.S. producers and is one that we believe will remain for the foreseeable future. Putting this all together, we believe that fundamentals for nitrogen producers are attractive and that demand and pricing trends should allow for solid profitability and cash flow for the foreseeable future. Now, I'll turn the call over to Cheryl to discuss our fourth quarter results and our outlook. Cheryl?