Executive Summary / Key Takeaways

• CVR Partners (UAN) demonstrates robust financial performance, with significant year-over-year increases in net sales, net income, and EBITDA for the third quarter and first nine months of 2025, driven by strong fertilizer pricing and demand.
• The company is strategically investing in technological differentiators, including a dual-feedstock flexibility project at its Coffeyville facility that could expand ammonia production by up to 8%, and ongoing debottlenecking initiatives aimed at enhancing reliability and production rates across both plants.
• A tight global supply-demand balance for nitrogen fertilizers, exacerbated by geopolitical conflicts and production outages, is expected to sustain favorable pricing and strong demand into the first half of 2026.
• UAN maintains a strong liquidity position and a disciplined capital allocation strategy, funding growth projects through accumulated cash reserves while consistently distributing available cash to unitholders.
• Key risks include continued volatility in feedstock and product prices, geopolitical disruptions, and potential impacts from tariffs, though UAN's domestic focus and feedstock flexibility offer some mitigation.

The Foundation of Fertilizer: CVR Partners' Strategic Position

CVR Partners, LP, established in 2011, is a Delaware limited partnership focused on the production and distribution of vital nitrogen fertilizer products, primarily ammonia and urea ammonium nitrate (UAN), for agricultural and industrial customers across the United States. The company operates two key manufacturing facilities: one in Coffeyville, Kansas, and another in East Dubuque, Illinois. Its mission is to be a top-tier North American nitrogen-based fertilizer company, emphasizing safe and reliable operations, superior performance, and profitable growth. This foundational strategy has been consistently demonstrated through operational achievements, such as the East Dubuque Facility setting new records in 2024 for ammonia utilization at 102% and ammonia production volumes of approximately 399,000 tons. The company also reported a 40% reduction in its total recordable incident rate in 2024 compared to 2023, underscoring its commitment to safety and efficiency.

The nitrogen fertilizer industry is characterized by its cyclical and seasonal nature, heavily influenced by global grain demand, production levels, weather conditions, and feedstock prices. UAN operates within a competitive landscape that includes major players like CF Industries Holdings, Inc. (CF), The Mosaic Company (MOS), and Nutrien Ltd. (NTR). While CF Industries boasts a larger global footprint and diversified product portfolio, and Nutrien excels in retail distribution, CVR Partners carves out its niche through a focused domestic production strategy and a strong emphasis on operational efficiency. UAN's EBITDA margin of 39.13% reflects a robust operational efficiency, which is a critical advantage in a commodity-driven market.

Technological Edge and Strategic Expansion

CVR Partners is actively pursuing several strategic initiatives to enhance its operational capabilities and strengthen its competitive moat, particularly through technological differentiation and capacity expansion. A cornerstone of this strategy is the ongoing project at the Coffeyville Facility, which aims to introduce dual-feedstock flexibility by enabling the use of natural gas as an alternative to petroleum coke, alongside integrating additional hydrogen from CVR Energy (CVI)'s adjacent refinery. This innovative project, currently in detailed engineering and long lead-time equipment ordering phases, is expected to make Coffeyville the only nitrogen fertilizer facility in the U.S. with such feedstock optionality. This flexibility will allow the company to optimize feedstock mix based on prevailing prices, providing a significant cost advantage and enhancing margin resilience against energy price volatility. Management anticipates this project could expand Coffeyville's ammonia production capacity by up to 8%. The construction is planned for 2025, with the goal of enabling feedstock decisions for 2026.

Beyond this transformative project, CVR Partners is implementing a series of debottlenecking initiatives at both its Coffeyville and East Dubuque facilities. These projects are designed to improve overall reliability, reduce unplanned downtime, and facilitate incremental additions to production rates. Specific projects in 2025 include upgrades to water and electrical reliability at both facilities, as well as expansions of diesel exhaust fluid (DEF) production and loadout capabilities. These brownfield investments are highly capital-efficient, allowing the company to add capacity at a fraction of the cost of building new facilities. The overarching goal is to consistently operate the plants at utilization rates exceeding 95% of nameplate capacity, excluding planned turnarounds.

In line with its commitment to environmental stewardship and reducing its carbon footprint, CVR Partners is installing a nitrous oxide abatement unit at the Coffeyville plant during its fall 2025 turnaround. This will equip all four of its nitric acid plants with these units, aligning with the company's strategy to become a low-carbon nitrogen fertilizer production facility. These technological advancements and strategic expansions are crucial for CVR Partners, providing a competitive moat through enhanced cost efficiency, increased production capacity, and a more sustainable operational profile, all of which contribute directly to improved financial performance and long-term growth for investors.

Financial Performance and Liquidity Strength

CVR Partners has demonstrated strong financial performance in the recent periods, reflecting favorable market conditions and effective operational management. For the three months ended September 30, 2025, net sales reached $163.5 million, a substantial increase from $125.2 million in the same period of 2024. Net income surged to $43.1 million, compared to $3.8 million in the third quarter of 2024, while EBITDA more than doubled to $71 million from $36 million. This impressive growth was primarily driven by higher UAN and ammonia sales prices, coupled with increased UAN sales volumes. For the first nine months of 2025, net sales climbed to $475.0 million from $385.8 million in the prior year, with net income reaching $108.9 million, up from $42.6 million.

Despite these revenue gains, the company faced some headwinds from higher natural gas and electricity costs, which impacted direct operating expenses. However, lower pet coke prices partially offset these increases in the nine-month period. The decrease in depreciation and amortization expense was mainly due to accelerated depreciation in the prior year related to retired assets, partially offset by current year asset additions and accelerated depreciation for early asset retirements linked to the ammonia expansion project.

The Partnership maintains a robust liquidity position. As of September 30, 2025, total liquidity stood at $206.2 million, comprising $156.2 million in cash and cash equivalents and $50 million available under its ABL Credit Facility. This strong liquidity, combined with cash from operations and customer prepayments, is deemed sufficient to meet anticipated cash requirements for at least the next 12 months. CVR Partners also remains in compliance with all covenants under its debt instruments.

The company's variable distribution MLP structure means distributions fluctuate based on operating performance and cash needs. For the third quarter of 2025, a distribution of $4.02 per common unit was declared, reflecting $42 million of cash available for distribution after accounting for interest costs, maintenance capital expenditures, and other reserves.

Outlook and Forward Momentum

Management's outlook for CVR Partners remains optimistic, anticipating continued favorable market conditions into the first half of 2026. The company projects an ammonia utilization rate between 80% and 85% for the fourth quarter of 2025, primarily due to a planned 33-day turnaround at the Coffeyville facility, estimated to cost approximately $17 million. Direct operating expenses for Q4 2025, excluding inventory and turnaround impacts, are expected to range from $58 million to $63 million, with total capital spending estimated between $30 million and $35 million. For the full year 2025, total capital spending is projected to be between $58 million and $65 million, with maintenance capital accounting for $39 million to $42 million. A significant portion of the profit and growth capital spending is funded through cash reserves accumulated over the past two years, demonstrating a disciplined approach to financing strategic initiatives. The next major turnaround is scheduled for the East Dubuque Facility in the third quarter of 2026.

The market for nitrogen fertilizers is expected to remain tight, driven by increasing global population, decreasing arable land, evolving dietary preferences, and sustained demand for corn and soybeans in renewable fuels. The USDA estimates 98.7 million corn acres and 81.1 million soybean acres planted in spring 2025, representing an 8.6% increase for corn and a 7% decrease for soybeans year-over-year. This shift, favoring corn due to lower input costs and relative grain prices, supports strong nitrogen fertilizer demand. Management anticipates a "big fall ammonia run" and higher pricing in Q4 2025 compared to Q3, with tight inventory levels across the industry expected to persist into spring 2026.

Risks and Competitive Dynamics

Despite the positive outlook, CVR Partners faces several inherent risks. The general business environment is expected to remain volatile due to uncertainties in feedstock availability and prices, product demand, inflation, and global supply disruptions. Geopolitical conflicts, such as the Russia-Ukraine war and Middle East tensions, continue to impact the nitrogen fertilizer industry, potentially disrupting production and trade. The potential imposition of tariffs on Russian fertilizer imports remains a "wildcard" that could significantly affect near-term pricing and supply dynamics in the U.S. market, given Russia's role as a marginal producer, particularly for UAN.

Energy price volatility, especially for natural gas in Europe, poses a risk, as Europe's lower-than-normal inventory levels could lead to higher prices if winter is colder than expected. This structural natural gas supply issue in Europe is expected to persist through at least 2026, keeping European ammonia production costs high and creating export opportunities for U.S. Gulf Coast producers. However, UAN's Coffeyville dual-feedstock project aims to mitigate its own energy dependency by providing flexibility between natural gas and pet coke.

Regulatory changes, particularly those related to climate and environmental initiatives, could also impact operations and compliance costs. An ammonia release at the Coffeyville Facility in October 2025, while not yet determined to have a material adverse effect, highlights operational risks inherent in chemical manufacturing. In the broader competitive landscape, while UAN benefits from its domestic production and cost efficiency, larger competitors like CF Industries and Nutrien possess greater scale, diversification, and broader distribution networks. UAN's strategic investments in reliability and capacity expansion, coupled with its unique feedstock flexibility at Coffeyville, are critical for maintaining its competitive edge and driving long-term value in this dynamic market.

Conclusion

CVR Partners stands as a compelling investment opportunity within the agricultural inputs sector, underpinned by its robust operational performance, strategic technological investments, and favorable market dynamics. The company's consistent execution, evidenced by strong financial results in 2025 and a disciplined approach to capital allocation, positions it well to capitalize on the ongoing tightness in global nitrogen fertilizer supply and demand.

The strategic pivot towards dual-feedstock flexibility at Coffeyville and continuous debottlenecking across its facilities are not merely incremental improvements; they represent a fundamental enhancement of UAN's competitive moat, promising increased production capacity, greater cost resilience, and a reduced carbon footprint. While geopolitical uncertainties and commodity price volatility remain inherent risks, CVR Partners' focused strategy, operational excellence, and commitment to unitholder distributions suggest a resilient and rewarding path forward for discerning investors.