A maker of nitrogen-based chemicals, LSB Industries runs chemical plants that produce ammonia, UAN fertilizer, and nitric acid used by farmers for crops and by miners for explosives. The company began in 1968 as a holding company built around the L&S Bearing Company, an Oklahoma City parts maker that Jack Golsen acquired; its "LSB" name is just those initials. A fun quirk: this fertilizer and chemicals firm got its start rebuilding ball bearings in short supply after World War II.
Gross profit fell 51% to $11.5M as $28.8M in turnaround costs at two plants overwhelmed an 11% revenue increase.
Turnarounds at two plants erased the benefit of higher selling prices. rose 11% to $168.1 million, but compressed to 6.8% from 15.3% a year ago as $28.8 million in planned turnaround expenses hit the quarter. The underlying business strengthened— rose 34%—but the reported loss leaves the company dependent on executing the second half of its 2026 turnaround schedule without disruption.
Key takeaways
fell 51% to $11.5 million, entirely because $28.8 million in planned at the El Dorado and Pryor facilities hit the quarter, compared to just $2.6 million in turnaround expenses a year ago.
, which excludes , , and , rose 34% to $62.1 million, revealing that the underlying spread between product selling prices and feedstock costs improved.
rose 11% to $168.1 million, driven by higher average selling prices across all major products—UAN prices rose 39% and ammonia prices rose 76%—though volumes fell as the turnarounds reduced production.
Section summaries
Management's Discussion and Analysis
Q2 2026 net sales rose 11% to $168.1M on higher prices, but gross profit fell 51% to $11.5M due to $28.8M in turnaround costs at two plants.
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increased 11% to $168.1M, driven by higher average selling prices across all major products, partially offset by lower volumes due to turnarounds at the El Dorado and Pryor facilities.
swung to a $2.7 million loss from a $10.5 million profit a year ago, and swung to a $6.2 million loss, or $0.09 per diluted share, from a $3.0 million profit.
for the first half of 2026 reached $111.2 million, up from $25.0 million a year ago, driven by improved before the Q2 and favorable changes.
The company reiterated its 2026 plan: approximately $80 million on core expenditures and $95 million on the carbon capture and sequestration project at El Dorado, which is expected to generate $25 million to $30 million in annual earnings once operational.
What changed
The Q1 2026 filing flagged whether the product-price-to-feedstock-cost spread would widen or narrow into Q2. The spread widened: rose 34% to $62.1 million, and adjusted reached 36.9% of sales, up from 30.7% a year ago.
The planned 2026 turnarounds at El Dorado and Pryor—flagged in the FY 2025 10-K and Q1 2026 10-Q—arrived in Q2 with a $28.8 million cost, compressing reported to 6.8%. The company must still complete the Pryor turnaround, which extends into Q3.
The FY 2025 10-K flagged whether the company would resume repurchasing its 6.25% Senior Secured Notes at a discount. No repurchases occurred in Q2 2026; remained essentially flat at $440.6 million.
The Q1 2026 10-Q noted $3.1 million in accelerated tied to a CEO equity award modification. SG&A rose again in Q2, up 31% to $12.9 million, with the filing citing higher salaries, incentive compensation, and stock-based compensation tied to a one-time CEO retention award.
What to watch
Whether the Pryor facility turnaround is completed on schedule and on budget in Q3 2026, and whether the company can still achieve its 2026 ammonia production target of 780,000 to 810,000 tons after losing output at two plants in Q2.
Whether the adjusted improvement to 36.9% holds into the second half of 2026, as the spread between product selling prices and natural gas feedstock costs remains the primary driver of profitability and the company holds no hedges.
Progress on the EPA Class VI permit for the El Dorado carbon capture project, now flagged as a material risk—failure to obtain it would jeopardize the $95 million investment, the Freeport Minerals supply agreement, and eligibility for Section 45Q tax credits.
Whether the company resumes repurchases of its 6.25% Senior Secured Notes at a discount, with $440.6 million in still outstanding ahead of the 2028 maturity and $181.6 million in cash and short-term investments available.
declined 51% to $11.5M as $28.8M in expenses (vs. $2.6M in Q2 2025) more than offset the benefit of higher prices; , which excludes these costs, rose 34% to $62.1M.
AN & Nitric Acid sales rose 13% on 11% higher volumes and 2% higher prices; UAN sales rose 20% on a 39% price increase despite a 14% volume decline; Ammonia sales fell 5% as a 76% price surge was offset by a 46% volume drop.
SG&A expense increased 31% to $12.9M, primarily from higher salaries, incentive compensation, and tied to a one-time CEO retention award.
surged to $111.2M for the first half of 2026 from $25.0M a year ago, driven by improved and favorable changes.
The company expects to spend approximately $80M on core and $95M on its CO2 capture and sequestration project in 2026, with the project projected to generate $25M-$30M in annual earnings once operational.
Quantitative and Qualitative Disclosures About Market Risk
General Our results of operations and operating cash flows are impacted by changes in market prices of ammonia and natural gas and changes in market interest rates. Forward Sales Commitments Risk Periodically, we enter into forward firm sales commitments for products to be deliv…
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General
Our results of operations and operating cash flows are impacted by changes in market prices of ammonia and natural gas and changes in market interest rates.
Forward Sales Commitments Risk
Periodically, we enter into forward firm sales commitments for products to be delivered in future periods. As a result, we could be exposed to embedded losses should our product costs exceed the firm sales prices at the end of a reporting period. At June 30, 2026, we had no embedded losses associated with sales commitments with firm sales prices.
Commodity Price Risk
A substantial portion of our products and raw materials are commodities whose prices fluctuate as market supply and demand fundamentals change. Since we are exposed to commodity price risk, we periodically enter into contracts to purchase natural gas for anticipated production needs to manage risk related to changes in prices of natural gas commodities. Generally, these contracts are considered normal purchases because they provide for the purchase of natural gas that will be delivered in quantities expected to be used over a reasonable period of time in the normal course of business, and as such, are exempt from derivative accounting requirements. At June 30, 2026, we had no outstanding natural gas contracts which are subject to derivative accounting requirements.
Interest Rate Risk
We may be exposed to variable interest rate risk with respect to our Revolving Credit Facility when there are outstanding borrowings. As of June 30, 2026, we had no outstanding borrowings on this credit facility and no other variable rate borrowings and, as a result, we currently do not hedge our interest rate risk associated with any variable interest rate loan.
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We are from time to time subject to various legal proceedings and claims arising in the ordinary course of business. For further discussion of our legal matters, see “Note 5. Commitments and Contingencies—Legal Matters” in the notes to the condensed consolidated financial statem…
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We are from time to time subject to various legal proceedings and claims arising in the ordinary course of business. For further discussion of our legal matters, see “Note 5. Commitments and Contingencies—Legal Matters” in the notes to the condensed consolidated financial statements in this report.
Geopolitical conflicts and a carbon capture project's regulatory hurdles are newly emphasized material risks.
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Geopolitical conflicts, specifically the Russia-Ukraine war and Middle East conflict involving Iran and the U.S., have already impacted financial results by disrupting commodity prices, fertilizer supply, and shipping routes.
The company's El Dorado carbon capture project requires a Class VI EPA permit, a multi-year process with no guarantee of approval, risking the loss of an estimated $95 million in purchase price and completion capital.
Failure to obtain the EPA permit would prevent the production of low carbon ammonia and ammonium nitrate, jeopardizing a supply agreement with Freeport Minerals Corporation and eligibility for .
Even with EPA approval, the project faces construction, commissioning, and third-party performance risks that could cause delays, cost overruns, or failure to achieve commercial operation.
The company's industrial facilities, which store significant quantities of ammonia, are potential targets for terrorist activities, where an attack could disrupt production and materially affect financial results.