LSBインダストリーズ（LXU）2026年第3四半期決算説明会：調整後EBITDAは55%増

LSBインダストリーズ（NYSE: LXU）が発表した2026年第3四半期決算は、定期修理に伴う販売量の減少を販売価格の上昇とコスト削減で補い、好調な結果となりました。経営陣はまた、業務改善の進捗、炭素回収の収益性、およびエルドラドでのアンモニア増設構想についても言及しました。

要点

• 2026年第3四半期の調整後EBITDAは、堅調な産業用および農業用需要、硝酸ならびに硝酸アンモニウム溶液の増産、好調な営業活動に支えられ、前年同期の4,000万ドルから55%増の6,200万ドルとなりました。
• 2026年最初の9か月間の営業キャッシュフローは1億3,200万ドルに達しました。維持的設備投資5,800万ドルを差し引いたフリーキャッシュフローは約7,400万ドルとなりました。
• LSBの当四半期末時点における現金・現金同等物および短期投資の残高は2億ドルを超え、純レバレッジ比率は約1.1倍でした。
• 経営陣は、目標とする5,500万ドルに対し、2026年末までに累計年換算で約3,500万ドルの業務改善効果を見込んでおり、さらに2027年末までに1,500万〜2,000万ドルの追加改善を目指しています。
• エルドラドにおける炭素回収・貯留（CCS）プロジェクトについて、経営陣は本格稼働後、45Q税額控除が適用される12年間にわたり、営業コスト控除後の年間収益として2,500万〜3,000万ドルを創出すると見込んでいます。
• 経営陣は、好調な需要に加え、10月のタンパ市場のアンモニア価格が1公定トンあたり545ドル、ニューオーリンズ（NOLA）のUAN価格が1トンあたり約390ドルで推移し、今四半期ここまでの天然ガス価格の平均が1 MMBtuあたり約3ドルとなっていることを挙げ、第4四半期の環境は良好であると説明しました。

主要財務データ

当四半期中に完了した定期修理に伴う販売量の減少に対し、販売価格の上昇とコスト削減の効果が上回りました。コスト面でのプラス効果の一部は貴金属の回収によるもので、第4四半期に向けた在庫積み増しによってコストの一部が当期から繰り延べられたことも寄与しました。

販管費（SG&A）は、リテンション（人材引き留め）契約に伴う株式報酬、変動報酬の増加、Leidos社との訴訟準備費用、CCS買収に関連する専門家報酬やその他の投資などにより、2025年の水準を上回った状態が続いています。経営陣は、これらの費用の大半が一時的なものであり、2027年まで継続することはないとしています。

事業および業績動向

産業用市場のファンダメンタルズは引き続き堅調でした。AI関連分野、電化、送電網、製造業の国内回帰、道路・高速道路に関連するインフレ投資が北米の採掘活動と硝酸アンモニウムの長期需要を支え続けました。

生産側の操業停止や需要がスポットおよび契約取引における硝酸アンモニウム価格を下支えしました。LSBは第3四半期中、利幅の大きい硝酸アンモニウム（AN）の生産と販売を優先し、停止中の業界設備が稼働を再開すると見込まれる2027年上半期まで、この戦略を継続する方針です。

農業用窒素市場も引き続き良好に推移しました。第3四半期中に世界的な尿素価格が1公定トンあたり約100ドル上昇し、UAN価格は7月初旬から1ショートトンあたり75ドル上昇しました。経営陣によると、9月のトウモロコシ相場の急上昇が先物購入の早期化を促し、例年秋に見られる需要の落ち込み期においても堅調な販売残高を確保できたとのことです。

過去3か月間で欧州TTF天然ガス価格が1 MMBtuあたり約18ドルから30ドルへ上昇し、欧州におけるアンモニアの推計生産コストは1公定トンあたり1,000ドルを超えました。LSBの試算では、欧州の減産規模は生産量の20%〜25%（最大200万公定トン）に達する可能性があります。これに対し、米国の天然ガス価格は1 MMBtuあたり約3ドルにとどまっており、LSBの構造的なコスト優位性を後押ししています。

定期修理完了後、エルドラド工場のアンモニア日産量は約1,350〜1,370トンとなり、当初の公称能力である日産1,150トンを上回る水準で稼働しています。プライヤー工場は日産約675〜700トン、チェロキー工場は日産520〜530トンで稼働しました。定期修理がなく、アンモニアプラントがフル稼働した場合の巡航ベースの年間総生産能力について、経営陣は約87万5,000〜90万トンと推計しています。

経営見通し

経営陣は、堅調な産業用および農業用需要に支えられ、2026年第4四半期も引き続き堅調な業績とキャッシュフローを維持できると見込んでいます。決算会見時点における第4四半期の受注確定率は約70%となっており、2027年第1四半期分についてはあえて受注を低水準にとどめているため、今後の価格上昇に伴う増益の恩恵を受けやすいポジションにあります。

LSBは、2026年末までに累計年換算で約3,500万ドルの業務改善を目指しています。さらに、生産効率化、製品ミックスの最適化、生産性の向上およびコスト削減施策を通じて、2027年末までに1,500万〜2,000万ドルの追加効果を目指します。

エルドラドのCCS施設の建設は進行中であり、同社は米国環境保護庁（EPA）のクラスVI許可取得に向けた協議を続けています。EPAのトラッカーでは2027年後半の稼働開始が示されているものの、経営陣はEPAの審査完了時期によっては前倒しできる可能性があると説明しています。

エルドラドにおけるアンモニア設備の拡張構想について、LSBは詳細設計・基本設計（FEED）調査を完了させ、2027年第2四半期に最終投資決定（FID）を行う予定です。承認された場合、同プロジェクトは2029年に予定されている同工場の定期修理に合わせて実施され、年間約10万トンのアンモニア生産能力が追加されます。経営陣は、1億500万〜1億2,000万ドルの純プロジェクト費用に対し、アンモニア価格に応じて年間2,000万〜2,500万ドルの調整後EBITDA上振れ効果が見込まれると試算しています。

リスクおよび注視事項

• EPAによるクラスVI許可の取得時期には不透明感が残っており、エルドラドCCSプロジェクトの開始時期に直接影響を与えます。
• 秋のアンモニア施肥は好天に左右されます。経営陣は、全米の一部地域における温暖乾燥な気候や収穫の遅れを短期的な変動要因として挙げました。
• 窒素およびエネルギー市場は、中東や黒海地域における地政学的紛争、貿易の中断、および広範なマクロ経済の変動リスクに引き続き直面しています。
• 第3四半期におけるコスト削減効果の一部は、在庫の動きや貴金属の回収など、一時的または時期的な要因によるものでした。経営陣は、電話会議で説明された好適なコスト効果のうち、持続可能なものは約半数であると試算しています。
• Leidos Engineeringに対するLSBの訴訟公判が電話会議の週に開始され、3〜4週間続く見込みです。経営陣は、判決結果について保証できるものはないと述べています。

アナリスト質疑応答のハイライト

経営陣によると、産業用および採掘用出荷量の約10%がスポット価格上昇の恩恵を受けており、この展開は2027年上半期末に向けて供給問題が緩和するまで続く見通しです。

資本配分について、経営陣はポートフォリオ買収の可能性に備えて流動性を維持する意向を示しました。また、効率的と判断される場合には、取締役会で承認済みの自社株買い枠を活用し、四半期ごとに小規模な買い付けを機動的に開始する見込みです。

LSBは、エルドラドでのアンモニア拡張およびボトルネック解消に関連し、すでに米国農務省（USDA）から約3,000万ドルの補助金を受け取っていることを確認しました。別途提出している第2フェーズ拡張案は最初に選定された8つのプロジェクトには含まれませんでしたが、USDAとの協議は継続しています。

同社が2027年に計画している定期修理は1件で、9月にアラバマ州チェロキーの施設で実施予定です。

決算電話会議トランスクリプト全文

決算説明会の完全なトランスクリプト

経営陣による説明

Operator

Greetings, and welcome to the LSB Industries Third Quarter 2026 Earnings Conference Call. [Operator Instructions] As a reminder, this conference is being recorded. [Operator Instructions]

It's now my pleasure to turn the call over to Kristy Carver, Senior Vice President and Treasurer. Kristy, please go ahead.

Kristy Carver

Good morning, everyone. Joining me today are Mark Behrman, our Chairman and Chief Executive Officer; Cheryl Maguire, our Chief Financial Officer; and Damien Renwick, our Chief Commercial 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. For more information about the risks and uncertainties that could cause actual results to differ materially from those projected or implied by forward-looking statements, please see the risk factors set forth in the company's most recent annual report on Form 10-K and quarterly reports on Form 10-Q.

On the call, we will reference non-GAAP results. Please see the press release in the Investors section of our website, lsbindustries.com, and the appendix of the related investor presentation 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, Kristy, and good morning, everyone. Our teams delivered strong third quarter results, supported by strong demand across both our industrial and agricultural businesses and continued execution across the organization. This translated into significant year-over-year growth in adjusted EBITDA and EPS and reflected the progress we are making in overall reliability, efficiency and product mix optimization.

We are pleased to see these operational improvements increasingly reflected in our financial performance, while we continue to advance several growth initiatives that we believe can drive additional earnings and cash flow over the next several years. Last quarter, we assumed full ownership of our El Dorado carbon capture and sequestration project from Lapis Carbon Solutions. Construction of the carbon capture facility is in full swing, and we continue to work closely with the EPA to secure approval of our Class VI permit. I'll provide additional details about the project later on in the call.

As we look to the final quarter of 2026 and into 2027, we remain focused on continuing to improve our plant reliability and increasing production to meet customer demand. We believe these efforts will help us to generate strong free cash flow and increase shareholder value.

Now I'll turn over the call to Damien to provide more detail on the commercial environment.

Damien Renwick

Thanks, Mark, and good morning, everyone. Supply constraints stemming from continued geopolitical conflicts in the Middle East and Black Sea region continue to challenge global nitrogen and energy markets. Over the last 3 months, European TTF natural gas prices have risen from about $18 to $30 per MMBtu, pushing European ammonia production costs to over $1,000 per metric ton, well above import parity.

In response, European producers are curtailing production and relying more heavily on imports, further tightening already limited global supplies as we head towards winter in the coming months. We estimate that ammonia producers may have either shut down production or reduced production rates to minimum levels, resulting in curtailments of between 20% to 25% or up to 2 million metric tons of production. In the U.S., natural gas remains around $3 per MMBtu, giving us a significant structural cost advantage.

Turning to our industrial business. Fundamentals remain strong. Infrastructure spending continues to grow, driven by AI-related sectors, electrification, power and grid investment, onshoring of manufacturing and continued spending on roads and highways. As a result, copper prices continue to rise, and gold prices remain elevated despite easing from record highs earlier this year. These market fundamentals and resulting strong prices are driving solid mining activity across North America, and the growing pipeline of mining projects advancing as quickly as permitting allows supports robust long-term demand for AN.

Producer outages and strong demand continued to support both spot and contract AN pricing. During the third quarter, we used the flexibility of our production assets to prioritize higher-margin AN production and sales. We expect to continue favoring AN until sometime in the first half of 2027 when shuttered production is expected to return to the market.

Turning to Page 5. Fertilizer market conditions remain firm as global supply conditions continue to evolve. Ongoing supply uncertainty, trade disruptions and broader macro volatility have kept prices above historical levels. And, importantly, demand for our products is strong.

Ammonia prices eased during the third quarter with Tampa settling at $545 per metric ton for October, reflecting lower phosphate demand amid extremely high sulfur prices. Subject to favorable application weather, we continue to expect a strong fall ammonia season because ammonia's significant price discount to other products should encourage application. Confirmed sales position our forward order book well through year-end, while preserving flexibility to capture additional volume if prices rise.

Global urea prices strengthened by approximately $100 per metric ton through the third quarter. Volumes from the Middle East remain limited. And while China has increased exports by approximately 4 million metric tons this year after the government eased export restrictions, this has done little to ease the shortage of supply impacting global markets. Strong European import demand is adding further support. We expect this dynamic to continue through Q4.

UAN pricing followed higher urea pricing, increasing by $75 per short ton since early July. The September corn rally improved affordability and encouraged growers to book more forward tons and to book earlier than they did last year. This activity drove healthy retailer demand during the quarter. Although we expect the typical lull in fall buy, our order book is well sold through this period, positioning us to capture additional upside as we enter a healthy spring season.

We also expect support for corn prices as the USDA projects 2026-'27 record world corn consumption exceeding production. That would push global stocks-to-use down to about 21% from 23% last year. Stocks at the major exporters are also shrinking and Europe's drought-damaged crop is down to 48 million tons. We believe these conditions will keep U.S. grower economics stable and support healthy nitrogen demand into the 2027 planting season.

While the path of the geopolitical conflict is difficult to predict, we expect elevated European gas costs to persist through the winter, supporting a constructive nitrogen market through at least spring 2027. As a domestic low-cost supplier to two critical end markets, agriculture and industrial, we will continue to manage our production flexibility to meet demand and capture the best available margins across both.

Now I'll turn the call over to Cheryl to discuss our third quarter financial results and our outlook. Cheryl?

Cheryl Maguire

Thanks, Damien, and good morning. On Page 6, you'll see a summary of our third quarter 2026 financial results. Strong demand across our industrial and agricultural businesses, combined with higher nitric acid and AN solution production and effective commercial execution drove a 55% increase in adjusted EBITDA compared to the third quarter of last year. As of September 30, we have generated more than $220 million of adjusted EBITDA on a trailing 12-month basis, which remains an important reference point as we evaluate the earnings power of the business across different market environments and cycles.

Page 7 bridges our third quarter 2025 adjusted EBITDA of $40 million to our third quarter 2026 adjusted EBITDA of $62 million. Higher selling prices and lower costs more than offset lower sales volumes, primarily driven by the prior turnaround, which was completed in the third quarter. Part of the lower cost relates to precious metals recoveries received in the quarter, which are a normal part of our operations, although amounts realized can vary based on recovery activities.

One other thing worth pointing out is that while we are seeing decreased costs related to our optimization initiatives, SG&A is tracking above 2025 levels, primarily reflecting stock-based compensation relating to a retention arrangement established earlier this year, higher variable compensation, costs associated with the ramp-up of the Leidos trial preparation as well as professional fees related to the acquisition of the carbon capture project and other investments. The majority of these costs are nonrecurring in nature and not expected to continue into 2027.

Lastly, on Page 8, you can see that our balance sheet remains solid. We ended the third quarter with more than $200 million in cash, cash equivalents and short-term investments and net leverage of approximately 1.1x. Through the first 9 months of 2026, we generated $132 million of operating cash flow. After subtracting $58 million of sustaining capital, we generated approximately $74 million of free cash flow through September 30.

We also invested approximately $31 million in growth-related projects, including approximately $24 million for the acquisition and development of the carbon capture project at our El Dorado facility.

Looking ahead to the remainder of 2026, demand remains strong across both our industrial and agricultural businesses. Pricing also remains favorable with Tampa Ammonia settled at $545 per metric ton for October and NOLA UAN currently trading around $390 per ton, while natural gas costs have averaged approximately $3 per MMBtu so far in the fourth quarter. Together, these conditions position us to deliver another strong quarter of earnings and cash flow for our shareholders.

And now I'll turn it back over to Mark.

Mark Behrman

Thank you, Cheryl. Turning to Page 9. I'd like to spend a few minutes discussing the progress we've made on our value creation initiatives over the past several years as well as the opportunities that lie ahead. Coming out of 2023, we announced a focused effort to achieve an additional $55 million of run rate adjusted EBITDA through increased ammonia production and greater focus on upgrading that ammonia into high-value downstream products, including nitric acid, ammonium nitrate solution and UAN.

We've also been focused on fixed and variable cost optimization, process efficiency and cost reduction. As a reminder, at the end of 2025, we had achieved approximately $20 million of annual run rate improvement. I'm pleased to report that we expect to add another $15 million of annual EBITDA improvement by the end of 2026. That would bring us to approximately $35 million in cumulative annual run rate improvements against our $55 million target. We expect to capture another $15 million to $20 million of annual EBITDA improvement by the end of 2027. In addition to these operational improvements, we continue to make progress on our carbon capture and sequestration or CCS project at El Dorado.

To quickly recap, our investment in assuming full ownership of the El Dorado CCS project is being made in stages tied to key milestones as we focus on project development, permitting, construction, et cetera. Full ownership of the project provides us with the enhanced commercial flexibility to optimize the use of our CO2 and evaluate future expansion opportunities without limitations.

Although the published EPA underground injection control Class VI permit tracker reflects a potential operational date in the second half of 2027, based on our continued engagement with senior officials from the EPA's Region 6 office, we believe an earlier operational date is possible depending on the timing of the EPA's completion of its review. When fully operational, we expect to generate between $25 million and $30 million of annual earnings, net of any operating costs associated with CCS operations over the 12-year 45Q credit period.

Turning to the potential expansion of our ammonia production capacity at El Dorado. We expect to complete a FEED study and move to FID sometime during the second quarter of 2027. Should we decide to move forward, we would look to complete the project alongside the planned 2029 turnaround at the El Dorado site.

Once completed, we expect the expansion to add approximately 100,000 tons of annual ammonia production capacity, which we estimate could generate between $20 million and $25 million of incremental annual EBITDA, depending on the ammonia pricing market. We expect the total net project cost to be between $105 million and $120 million. And we anticipate that this project will be funded with existing cash on our balance sheet.

To bring all of this together, we are making meaningful progress towards generating approximately $100 million in cumulative incremental annualized EBITDA from initiatives launched since 2023. We expect to have captured approximately $35 million in annual run rate operational improvements by the end of 2026 with further operational improvements and our CCS project expected to contribute an additional $40 million to $50 million in annual run rate improvement by the end of 2027. Looking further ahead, the potential El Dorado ammonia expansion represents an additional $20 million to $25 million of incremental annual EBITDA should we proceed and complete the project in 2029.

I'm incredibly proud of the team and their dedication, hard work and discipline they bring to these efforts every day. The progress we've made is a direct reflection of their commitment to continuous improvement. We're excited about what we've accomplished and just as importantly, what lies ahead. We have a lot of opportunity.

Lastly, our trial against Leidos Engineering began earlier this week and is expected to last 3 to 4 weeks. While no outcome is guaranteed, we believe we have a strong case. We will not be commenting further on the case while the trial is underway.

Before we open it up for questions, I'd like to mention that Damien and I will be attending the RBC Global Industrials Conference in New York on November 17. We look forward to speaking with some of you there.

That concludes our prepared remarks, and we will now be happy to answer any of your questions. Thank you.

Operator

[Operator Instructions] Our first question today is coming from Lucas Beaumont from UBS.

質疑応答

Lucas Beaumont

I just wanted to start on kind of the benefits that you've been getting in the IM market with the supply disruptions there. So I guess my prior understanding was that maybe 10% of the volumes were going out at higher spot earnings levels there. I mean just thinking about, I guess, as the supply disruptions continue through early or mid part of next year and then start to revert. I was wondering if you could come up with a way to maybe size what the, I guess, the over-earning has been while the supply disruption has been in place either from a pricing point of view on the spot sales versus where contract pricing is? Or I mean, if you're able to size it in terms of EBITDA, just to think about how that kind of rolls off as we...

Mark Behrman

Damien, do you want to start off with that one?

Damien Renwick

Yes. Lucas, I think, I mean, directionally, the 10% is right. We would expect that to continue on all the way up until the supply issues are resolved sort of towards the end of first half next year. And, yes, again, I would just expect it to continue in line with what we've been doing.

Lucas Beaumont

Okay. And then I guess, just on the order book for the fourth quarter. So I mean, there's a fairly wide disconnect at the moment between where pricing has been and where the cost curve is. I mean, I'm expecting that's going to sort of need to move up into the spring. But I guess the timing is a bit uncertain here, and it's a bit uncertain around, I guess, the specific kind of product slates like ammonia versus UAN and so on.

So I just kind of wanted to get your view there on where you -- I guess, one, where you see pricing going relative to the cost curve? And then two, I mean, if we see a move higher, what's kind of locked in, in terms of your order book now coming out of a lower price period in the third quarter. So will we sort of capture some of that uplift into 4Q? Or are you going to kind of need to wait for the spring to kind of see more of that if that rolls through?

Mark Behrman

Yes. We're pretty bullish on where pricing is today and where it's going. I mean I think you just saw yesterday that Tampa Ammonia moved up slightly less than $100, driven by lots of things that are happening globally on top of, obviously, what's going on in the Middle East. As far as the order book, we're probably 70% or so sold for the fourth quarter. So we do have some upside. And of course, we're significantly less sold for the first quarter. So we'll have a lot of upside there.

Lucas Beaumont

Great. Also just the USDA has sort of been reporting the grant issuances recently for a number of projects. I know you guys had sort of submitted to try and sort of get match funding there on the El Dorado projects, but I didn't see that one announced. I'm not clear that allocated all of the funding yet, but I just wanted to ask if you had any update on that front. Do you know that, I guess, either you didn't get it or you're, kind of, still in the mix and it potentially hasn't been announced yet? Or what's kind of the latest there?

Mark Behrman

Yes. So, to be clear, we already have one grant from the old USDA grant program. And so that's roughly around $30 million, and that's for the expansion of ammonia production and debottlenecking of the ammonia plant at El Dorado. So that's locked in, and we're already working with the USDA and things go back and forth. And it's a reimbursement on an ongoing basis when we incur costs.

As far as, I'll call it, Phase 2 expansion down at El Dorado, which was to build some new assets, we did submit a project. There was a scoring system. They selected those eight projects for my understanding is the full amount. And yes, so we're still in conversations with them. I mean it's entirely possible that one of those eight that were chosen doesn't use all the money, doesn't use any of the money. I mean there's still things moving around. But no, we were not initially chosen for that, and it was a bit of a head scratcher on some of the projects, to be honest.

Operator

Our next question today is coming from Andrew Wong from RBC Capital Markets.

Andrew Wong

Now that you've had the plants running for a few months after the major turnaround, can you just give us a better sense on where you think nameplate production is today? What's a realistic normalized level for annual production across the fleet? And what do you think is like the upper limit that you could produce at right now?

Mark Behrman

Well, I think the turnarounds have left us in a really great place. So I'll start with El Dorado. So nameplate capacity for the plant when we actually started the plant is 1,150 tons per day. Having said that, we've been running significantly over that for a while. But I would say plus or minus 1,300 tons a day is where we had been before the turnaround.

Ammonia plants run at different rates summer versus winter. Just cooler weather allows them to run at higher rates, airflow, cooling systems, things like that. So we came out of the turnaround, and we're running about between 1,350 and 1,370. And we think we can run at higher rates in the cooler weather. So I'm kind of loath to throw another number out there, but higher than 1,370 in the winter. So again, pretty significant increase after the work that we did during the turnaround, and we're excited about that.

At Pryor, I think it was less about increase in rate and more about reliability. So that plant runs generally between 675 tons and 700 tons a day, depending on summer/winter. And we're at those rates, and we're expecting to run more reliably than we have historically. With Cherokee, generally speaking, that plant has run pretty well for a number of years and continues to run at 520 tons to 530 tons on a daily rate basis.

So what does that all mean on an annual basis? If we had no turnarounds in a year and we were running full out on our ammonia plants, we're probably 875,000 tons to 900,000 tons a year.

Andrew Wong

Great. That's great. That's really helpful. And then I guess kind of related to that would be your costs, right? Because the better you have on your production, the lower fixed cost per ton and you had a pretty good quarter. Can you talk about what you would see as sustainable going forward relative to what we saw this quarter?

Mark Behrman

First, I would say we had a really good quarter. Really good. Sustainable, you're talking about margins, you're talking about production, I didn't quite get that.

Andrew Wong

Like when we look at costs, excluding nat gas and other things that -- what I consider non -- what is considered controllable cost, they look really good this quarter. So how sustainable would you think that number is going forward? I know you don't have a specific number...

Cheryl Maguire

Andrew, let me just jump in on that one for a minute. So a couple of things. Costs are lower in the third quarter. We did build some inventory heading into the fourth quarter. And so of course, that does take some cost out of the P&L. And then we did have some precious metal recoveries. As you know, we use precious metals in our acid process, and we do have pretty standard routine recoveries from time to time. Sometimes they're just higher given the cost of the pricing of precious metals, things like that.

But then from a sustainable perspective, look, we're doing a lot of work on our margins right now and how we look at the efficiency of our maintenance organization, our gas efficiency, how we're handling our product. And so we're not -- you don't have scrap product, things like that. That's all very sustainable, and we'll continue as we ramp up our improvements into next year. So I would say if you're looking at the quarter. And you take out, kind of, the inventory build, that's timing, it's swings and some of the precious metals, you're looking at probably half of it being sustainable going forward.

Andrew Wong

Okay. That's great. That's helpful. And then just one last one for me is on your cash balance, it's pretty large right now. You're cash flowing pretty well. I know you have some expansion projects and things like that, that you're looking to do, but there's still a lot of cash that's available. So any thoughts on what you'll do with that, maybe just hang on to it for now in case something opportunistically comes up?

Mark Behrman

I think that's probably a good bet that we are looking to grow, and we want to keep some dry powder to see if there are some assets that will come up that fit our portfolio and makes sense for us. The other thing that I think we'll start doing -- and you're right, I think we're a lot more comfortable that we're cash generating now and cash generating fairly well. So I think you'll start to see us execute. We have a stock buyback authorization from the Board. And I think that we'll try and be -- even if it's small every quarter, be buying some stock back in where we think it makes sense and where it's efficient to do that.

Operator

[Operator Instructions] Our next question is coming from Rob McGuire from Granite Research.

Robert McGuire

What are you seeing in terms of nitric acid demand just from MDI tariffs and countervailing duties? I'm wondering if that is shaping the market at this point to be a stronger market in the U.S. going forward? And anything you can give us color on there?

Mark Behrman

Damien?

Damien Renwick

Yes. Rob, I think it's -- the market has found a good equilibrium. I mean the duties have been in place for some time now, and the market locally is, I think, has increased production up to where it can sustainably run. And we've seen that through our own offtake. So I think, yes, it's been generally a positive thing. I wouldn't foresee any major changes going forward other than BASF has started the commissioning process for its new facility in Geismar. So I think that's generally good, and that will take nitric acid from the market. So we'll see that growth, but that's been coming for a long time.

Robert McGuire

And then can you elaborate on the variable costs and other costs discussed in the waterfall? Does the $3 million variable represent the SG&A you referenced that will not be there in 2028? And any other color? I'm curious about the $8 million of fixed costs, how you view that in terms of longevity of fixed costs showing up in the waterfall?

Cheryl Maguire

Yes. So, a couple of quick things there, Rob. On the variable cost, it's primarily sulfur. We do have a small sulfuric acid business, as you know. So we do buy sulfur. That gets passed along though in the selling prices. So, net-net, the higher variable costs there are going to be passed along through higher pricing.

The other amount that you referenced on the bridge, that's -- I'll elaborate just a bit more. That's, as I mentioned earlier, related to a couple of different things. One, some precious metals recoveries that we got in the period. We do precious metal recovery pretty routinely. The timing and amounts can vary, though, based on the price of metals and things like that. So we did have some precious metal recoveries.

And then, in addition to that, we are doing a lot of work around the efficiency of our operations in terms of our maintenance teams, handling of product, scrap product, things like that. So that lowers your cost base overall, and that's part of that $8 million. I would say it's about 50%. We should see that going forward, and that should continue to accelerate as we continue on our optimization path.

Mark Behrman

Yes. Just to add on to that. I mean, we've discussed this, Rob, on a couple of calls now about the -- or maybe for a while, even longer than that, about the efficiencies and the cost optimization that we're really focused on. So I think we tend to talk about, which makes sense, increased production and lowering our fixed cost per ton, but a lot of that is not just about increasing our production. It's also now focusing on how do we reduce cost and become more efficient as a business as we've now worked to get our reliability and our production up. So we expect a lot of this to be sustainable, and that's the goal is every year to figure out how we can continue to try and offset inflation and hopefully continue to reduce some costs.

Robert McGuire

That's very helpful color. And then I was wondering just with regards to the fall application season, can you discuss just how it's gone so far, how you anticipate it finishing up? And any other color on what's going on in the present?

Damien Renwick

Yes. Look, we're optimistic that as we move into the bigger chunk of fall application, that will be pretty robust. I think there's a weather watch at the moment. It's been pretty warm and dry in parts, and harvest has been running behind in some parts of the country. So that's -- we're watching that, but we still think that the fall period will be pretty much in line with past seasons. We think there's a lot of incentive there for application given where ammonia prices are at. There was a good chunk of purchases when the corn price rallied back in September. But admittedly, that has softened a little bit in the last few weeks. But I think, generally speaking, the growers will be pretty aggressive and look to set themselves up for spring next year.

Operator

Next question is coming from Vitaly Kononov from Freedom Capital Markets.

Vitaly Kononov

Well, I'd like to ask what does the turnaround calendar look for 2027?

Mark Behrman

Yes. For 2027, we have one turnaround set for our Cherokee, Alabama facility, and that will be in September of next year.

Vitaly Kononov

Okay. And can you just confirm [Technical Difficulty]

Operator

And we have lost Vitaly. We reached the end of our question-and-answer session. I'd like to turn the floor back over for any further or closing comments.

Mark Behrman

Great. Well, as always, I appreciate everyone who joined the call and listened in on the call. I'm happy to answer any other questions. As a follow-up, if you have them, feel free to call myself or Cheryl. And thank you, and have a great day.

Operator

Thank you. That does conclude today's teleconference. You may disconnect your line at this time, and have a wonderful day. We thank you for your participation today.