Calumet Q2 Earnings Call Highlights

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Calumet (NASDAQ:CLMT) reported second-quarter adjusted EBITDA with tax attributes of $175 million, as strong performance in its Specialty Products and Solutions business helped offset downtime tied to planned turnarounds and the first phase of its MaxSAF 150 expansion at Montana Renewables.

Chief Executive Officer Todd Borgmann said the company began the period with three planned turnarounds at Princeton, Cotton Valley and Montana Renewables. Despite that activity, Calumet’s restricted-group leverage ratio fell below four times. Borgmann said the company expects to surpass three times leverage in the next quarter as cash flow supports faster debt reduction.

During the quarter and shortly afterward, Calumet called $100 million of notes and repurchased its CMR truck-rack sale-leaseback arrangement for $115 million, eliminating what Borgmann described as high-interest debt. Chief Financial Officer David Lunin said the debt reduction following the quarter was funded predominantly by cash generated from quarterly earnings.

Specialties segment drives earnings

Specialty Products and Solutions generated adjusted EBITDA of $161.7 million, more than double the prior-year figure. Lunin said the result reflected commercial and operating execution, including the full realization of more than 20 specialty-product price increases put in place during the first quarter.

The company completed planned turnarounds at Princeton and Cotton Valley on time and on budget, according to Lunin. Calumet has no turnarounds scheduled for the third quarter, while Shreveport is scheduled for a turnaround in the fourth quarter.

Specialty sales volumes exceeded 20,000 barrels per day for the seventh consecutive quarter, while specialty production reached a record during the period. Year-to-date specialty volumes were up more than 5% from 2025 levels, Lunin said.

Borgmann attributed the favorable market to global shortages in paraffinic base oils, as well as high fuel and asphalt values generated as co-products from specialty production. He said more than 10% of global paraffinic base-oil capacity was offline, with Middle Eastern capacity affected by the Iranian war and European Group I production reduced during the Russo-Ukrainian war.

Calumet produces both Group I and Group II base oils. Scott Obermeier, president of Specialties, said demand for those products has strengthened as customers seek substitutes for constrained Group III supply. He also cited refinery decisions to divert production toward distillates amid high crack spreads, along with additional refinery disruptions in Russia.

“We view the market as being tight, and we expect that to continue certainly into the coming months here through 2026,” Obermeier said.

Performance Brands recorded adjusted EBITDA of $6.3 million, down about $6.2 million from the prior year. Lunin said volume increased 18%, but higher input costs arrived before pricing actions could fully flow through to retail customers. He said the segment also faced a $7 million headwind from LIFO accounting during a period of rapid cost inflation, and management expects margins to recover as pricing catches up and inventory effects reverse.

Montana Renewables ramps after expansion downtime

Montana Renewables posted $17 million of adjusted EBITDA with tax attributes during the second quarter, although the site was offline throughout April and for part of May as it completed the first stage of the MaxSAF 150 expansion, a turnaround and recovery from a power outage. Lunin estimated that the downtime represented more than $40 million of foregone margin opportunity.

Management said the newly installed MaxSAF catalyst passed its performance test and met or exceeded expectations. The company expects third-quarter earnings at Montana Renewables to be meaningfully higher as the site operates for a full quarter and benefits from stronger renewable diesel and sustainable aviation fuel, or SAF, economics.

Lunin said renewable diesel index margins were approximately $2.60 per gallon and rising at the time of the call. Borgmann said the renewable volume obligation, or RVO, has supported a measured restart of biodiesel capacity, while soybean and canola crushing have reached record levels.

Bruce Fleming, executive vice president of Montana Renewables and corporate development, said Calumet’s view of mid-cycle renewable diesel margins has not changed. He said the market needs cash margins sufficient to cover fully loaded costs in order to bring capacity back online, and characterized 2024 as an aberration tied to the prior rulemaking.

Revised SAF expansion plan

Calumet outlined a revised approach for expanding SAF production at Montana Renewables. Rather than transporting a second reactor from the Gulf Coast as part of a larger project, the company plans to repurpose an existing reactor at its Great Falls site. Borgmann said the approach is expected to be cheaper, faster, lower risk and more capital efficient than the original plan.

The repurposed reactor will be used in a patent-pending polishing service designed to minimize lower-value byproducts, including renewable naphtha and fuel gas. Management said the configuration should improve SAF yields compared with a more severe cracking process.

Calumet expects to operate at an economically optimal SAF run rate of about 60 million gallons until a site reconfiguration planned for early winter. The company expects the reconfiguration to allow production to ramp to an 80 million to 100 million gallon annual run rate by the end of 2026 and more than 120 million gallons by spring 2027. Over the next two years, management expects the site to reach roughly 200 million gallons of SAF capacity as total fresh-feed rates rise to 17,000 barrels per day.

Borgmann said Calumet delayed the fossil-side reactor conversion because current CMR market conditions are expected to generate more than $50 million of EBITDA before the winter reconfiguration. The company plans to retain operations at CMR, including asphalt and gasoline racks, crude processing and the shared workforce supporting Montana Renewables.

Management said it expects to provide further details on the Department of Energy modification process, project costs, funding and the site reconfiguration before its next earnings call.

Capital allocation priorities

Calumet said it is examining a pipeline of low-risk, high-return specialty growth projects after directing most discretionary capital in recent years toward Montana Renewables and debt reduction. Borgmann said a number of projects could clear the front-end-loading process for deployment in 2027 and 2028.

The company discussed approximately $50 million of specialty growth capital spending, with most of the cash outlay expected in 2027 and the remainder in 2028. Management said the projects are generally smaller debottlenecking and expansion initiatives, with most financial benefits expected in 2028.

Borgmann also said Calumet continues to view a future separation or monetization of Montana Renewables as the appropriate long-term path, but said accelerated deleveraging means such a transaction is no longer required before investing in the specialties business. He said management will assess any potential Montana Renewables transaction through the lens of shareholder-value optimization while continuing to prioritize debt reduction.

About Calumet (NASDAQ:CLMT)

Calumet Specialty Products Partners, L.P. (NASDAQ: CLMT) is an independent provider of high-value, essential product solutions derived from both petroleum and renewable feedstocks. The company operates an integrated network of manufacturing plants, blending terminals and storage facilities across North America, delivering customized products and technical services to industrial, automotive, consumer and agricultural end markets. By leveraging its scale and technical expertise, Calumet tailors supply chain and formulation solutions to meet stringent regulatory and performance requirements.

Calumet's product portfolio includes specialty lubricants and base oils for high-performance applications; process oils and waxes for food-grade, cosmetic and packaging uses; industrial solvents and cleaning solutions; and fuel additives designed to optimize engine performance and emissions.

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