Good day and welcome to AdvanSix Third Quarter 2024 Earnings Conference Call. [Operator Instructions] Please note, today’s event is being recorded. I would now like to turn the conference over to Adam Kressel, Vice President of Investor Relations and Treasurer. Please go ahead, sir.

Thank you, Rocco [ph]. Good morning and welcome to AdvanSix's third quarter 2024 earnings conference call. With me here today are President and CEO, Erin Kane; Senior Vice President and CFO, Sidd Manjeshwar; and Former Senior Vice President and CFO, Michael Preston. This call and webcast, including any non-GAAP reconciliations, are available on our website at investors.advansix.com. Note that elements of this presentation contain forward-looking statements that are based on our best view of the world and of our business as we see it today. Those elements can change and the actual results could differ materially from those projected and we ask that you consider them in that light. We refer you to the forward-looking statements included in our press release and earnings presentation. In addition, we identify the principal risks and uncertainties that affect our performance in our SEC filings, including our annual report on Form 10-K as further updated in subsequent filings with the SEC. This morning, we will review our financial results for the third quarter 2024 and share our outlook for our key product lines and end markets. Finally, we'll leave time for your questions at the end. So with that, I'll turn the call over to AdvanSix's President and CEO, Erin Kane.

Thanks, Adam and good morning, everyone. We appreciate you joining us here today for our quarterly call. As you saw in our press release, the AdvanSix team capitalized on the strength of our competitive position to deliver robust results with the continued realization of commercial performance across our diverse product portfolio and strong operational execution in the third quarter. We drove top and bottom line growth as well as continued cash flow improvement again this quarter, while maintaining our investments for long-term sustainable performance. During the third quarter, we successfully completed a responsible care recertification audit which is conducted by a third-party independent auditing firm which meets specific American Chemistry Council criteria. For more than 35 years, responsible care has been a core priority for American Chemistry Council members and represents our industry's commitment to the health and safety of our employees, the communities in which we operate and the environment as a whole. My thanks to the entire team for their commitment to continuously improving our health, safety and environmental performance alongside our financial results. The broader market backdrop in which we are operating remains favorable overall, with strong sulfur premiums supporting higher year-over-year pricing in our Ammonium Sulfate fall fill program, a constructive global acetone supply and demand environment and modestly improving North American nylon industry conditions. Our disciplined capital execution continued in support of long-term performance in growth, including SUSTAIN, or Sustainable U.S. Sulfate to Accelerate Increased Nutrition program. We were pleased to be awarded an approximately $12 million grant from the USDA through the fertilizer production expansion program, reinforcing a strong return profile for our series of projects. The grant and funding will be received during the program's execution on a milestone achievement basis and importantly supports the demand growth for our U.S. customers as we increase our production capacity of premium-grade product. Everyone at AdvanSix is proud to have true material impact in helping to nourish the world. Effective October 1, we welcomed Sidd Manjeshwar as our new Senior Vice President and Chief Financial Officer. Sidd has tremendous experience establishing corporate and financial strategies that accelerate growth and profitability and we look forward to his expertise as we advance our next chapter. I would like to take the opportunity to once again thank Mike Preston for a significant contribution to the success of AdvanSix as our founding CFO and wish him well in his retirement. Mike will remain with the company through year-end in an advisory role to ensure a smooth transition of responsibilities. We appreciate that we have a number of items to cover in our outlook which I'll dive more into later. Let me close here now with a reflection in our confidence to navigate, perform and execute in a multitude of environments. We remain convicted in the future prospects for AdvanSix and are committed to delivering sustainable long-term value to our shareholders. Let me now turn the call over to Sidd to walk through the quarter financials.

Thanks, Erin and good morning. I'm excited to be joining my first earnings call as a member of AdvanSix and look forward to engaging with our analysts and investors moving forward as well as delivering upon our compelling investment thesis. I'm now on Slide 4, where I will provide a summary of our third quarter 2024 financials. As Erin mentioned, our performance in the third quarter was terrific with robust sales and earnings performance as well as strong cash generation. I would like to thank all of our talented and dedicated employees for delivering these outstanding results. Sales of $398 million in the quarter increased approximately 23% versus the prior year with contributions from both volume and price. Sales volume increased roughly 11%, primarily driven by higher sales of Ammonium Sulfate. Raw material pass-through pricing was 8% favorable as a result of net cost increase in benzene and propylene. Market-based pricing was favorable by 5%, including continued strength in acetone as well as Ammonium Sulfate as growers seeking to maximize crop yields continue to recognize the benefits of sulfur nutrition. Adjusted EBITDA was $53 million and adjusted EBITDA margin was 13.4%. I'll walk through the key year-over-year variances on the next slide. Our adjusted earnings per share of $0.88 increased by $1.24 versus the prior year. The effective tax rate was 25.1% compared to 20.7% in the third quarter of 2023, primarily driven by the pre-tax loss in the prior year period. Free cash flow was $27 million in the quarter, up $31 million year-over-year and an improvement of $10 million sequentially from the second quarter. Cash from operations of $57 million increased $37 million versus the prior year, primarily due to higher net income. Capital expenditures of $30 million in the quarter increased $5 million, reflecting our planned increased…

Thanks, Sidd. I'm now on Slide 7 to discuss each of our product lines, starting with our plant nutrients business. While we navigated typical seasonal pricing considerations, our continued strong performance in Q3, including the higher year-over-year pricing of our fall fill program are further proof points to the resiliency of sulfur nutrition demand. Industry Corn Belt Ammonium Sulfate prices were up 16% year-over-year. In contrast, Corn Belt nitrogen pricing saw both a sequential reduction into the third quarter as well as an 18% decline year-over-year, supporting continued robust realized sulfur premiums. We also continue to see strong demand for Ammonium Sulfate, including tons for sulfur [ph] application which led to higher anticipated volumes in the third quarter ahead of our fourth quarter 2024 planned plant turnaround. Looking ahead, our order book is sold out through the end of this year and we remain focused on being well positioned for an anticipated favorable Ammonium Sulfate environment in the spring. We continue to expect strong performance despite recent industry data signaling caution around crop prices. As we've seen in past periods, when farmer economics were on the decline, we typically see strong demand for Ammonium Sulfate as growers seek ways to maximize crop yields. There continues to be supporting evidence that farmers understand the investment trade-off in driving better yield while managing their cost structure and profitability. As we have had a number of questions in the past regarding our regional and product sales mix, we have added a table here to characterize our 2024 first half versus second half sales volumes. As you can see in the table, we ship and sell domestically on a fairly consistent basis through the year. And as a reminder, this is where we sell the vast majority of our premium granular product. Export sales…

Great. Thanks, Erin. Rocco [ph], can you please open the line for questions?

[Operator Instructions] And our first question today comes from David Silver with CL King.

This is Kevin Holder on for David. My first topic would be on your fertilizer business. I was wondering if we could get a bit more color on how that business performed over the summer. Could you first discuss the factors that led to your success on your most recent fall fill program despite the less than robust farm income and crop price outlook? And then secondly, how would you characterize your fertilizer demand in your Southern Hemisphere markets?

Thanks, Kevin, for joining here this morning. I start by saying if you kind of think about where we left off, AS pricing did experience its typical seasonal decline in 3Q 2024. But as shared, pricing was higher on a year-over-year basis and reflecting really the recognition of our sulfur value proposition and continued strong sulfur premiums. And when we think about the proof points here, as we've seen, certainly, farmer economics are notably on a decline but we continue to see the strong demand as growers continue to seek ways to maximize crop yields. When you think about certainly where we have been and why we fared a bit better than broader nitrogen, there is a tighter North American supply-demand environment for AF. And we continue to have the research that has shown that growers need a premium source of sulfur to ensure high-yielding crops. And so these are proof points that through the demand, the volume we sold and the pricing that growers will continue to invest in Ammonium Sulfate to support their yield and profitability. So when you look at third-party industry data, we've seen the long-term average of premiums in the 85% range over the sort of the last 10 years. And certainly while that ebbs and flows from year-to-year, it's strongly influenced by industry supply and farmer sentiment. And so again, the strong premiums in the current environment demonstrate that value proposition that we are delivering to growers and hence, ultimately, our excitement to continue to take our industry position here and the technology we have and growing it through our sustained growth program. So positive here in the North American domestic space and our focus here is to continue to support that growing demand. When we think about certainly the hemispheres and we are in the back half of the year where we will sell into South America, again, as you've shown on the table there, we'll have an uptick in demand. This is predominantly where we sell our standard grade product. And again, the places where we're selling is providing a proposition on the crops there and things look good here for the back half.

Great. That's very helpful. My next question is directed towards Sid. Congratulations on your appointment. In the press release when you were announced as CFO, you stated, I'm looking forward to joining the AdvanSix leadership team to drive accelerated profitable growth in support of the company's long-term sustainable performance. What do you envision your strategies will be to drive that accelerated profitable growth?

Thanks, Kevin. Hope you're doing well and thanks for your thoughtful question. I'm looking forward to seeing you and David in person at some point in the near future. Look, if you look back over the last 8 years or so, the team has done a tremendous job of growing the company's underlying EBITDA and through-cycle profitability, right, while navigating a fairly shifting macro backdrop. As the newest member of the team, what I'd look to do is further that growth, both organically and inorganically. As a diversified chemical -- chemistry company, our focus is on accelerating our profitable growth in the most attractive end markets we participate in. So my focus will be around helping the company improve our productivity, our margins, expanding our commercial earnings growth through targeted differentiated products and high-return growth investments like SUSTAIN and then seek the best risk-adjusted capital allocation outcomes for AdvanSix.

Yes, we're looking forward to meeting you as well. That's all my questions. Appreciate it.

And our next question comes from Charles Neivert with Piper Sandler.

A couple of questions. One, you said your order book was basically built on Ammonium Sulfate through end of year. In looking at that is -- again, that's always associated with the amount of Caprolactam. So if you're sort of ordered out, does that mean that Caprolactam is going to also be running very hard through the rest of the year in order to make sure that supply is available? Or we shouldn't necessarily make that conclusion?

Yes. As our standard targeted approach here is certainly with our competitive advantage in our Hopewell facility, we are targeting full rates here. Leveraging our assets will be important to, again, just get the benefits of the expanded granular conversion and maximizing the opportunity set. So certainly, as we've come through the turnaround, that is the intent here now through generally the spring, right? It's a good opportunity for us. So making sure that we're using all of our degrees of freedom that we have and that we're investing in to have success here for [indiscernible]. We definitely will continue to service our important Caprolactam customers, rebuild our merchant pipelines up there as well. So that is the intended strategy here.

Okay. Another question on the acetone front. I know a lot of your acetone sales are based on the costs and any movement in the cost will just move the pricing. But in terms of the margin over propylene in this case, on the stuff that's not tied directly to the cost structure, are you seeing an improving margin in that business because, again, it's a bit tight because of the phenol issues?

Yes. So in general, certainly, the supply-demand environment is supportive and constructive for acetone spreads. Our GP certainly moved in Q3. You have seen in the chart here in the presentation, it has come off a bit from those peaks. But certainly, as long as lower global phenol operating rates persist, it does lend to the tighter market for us. We will watch certainly the demand side on paints and coatings if that could influence any sort of moderation there. But -- and then certainly, you have to look forward, as I mentioned, if building construction, when that starts to come back, that is really the key we're watching for when phenol operating rates would likely improve. We do think we have some time here in a continued constructive space.

Got it. And then lastly, China has been exporting a lot of ammonium sulfate. And I know in the near term, during the spring and fall, you're really more focused on U.S. deliveries. But now as you move into the Latin American markets, are you finding any significant amounts of Chinese product down there? Anything that might be affecting pricing, things like that? I know, again, China hasn't done much on urea but they've been in effect substituting nitrogen export through ammonium sulfate.

Yes. No, certainly, we watch that closely. And as you point out, on a rolling 12-month basis, they are really at peak levels of exports at this time, just with the underlying operating rates remaining high there. China remains the primary source to Brazil at this point. So for us, focusing more on Central and other countries in South America, we have strong sales with long-term customers. And yes, there is that influence of sort of the global pricing. But I think here, the sales team, the commercial execution, the strength of our relationships and operating in spaces that are key for us is serving us well.

And this concludes our question-and-answer session. I'd like to turn the conference back over to Erin Kane for closing remarks.

Great. Thank you, all, again for your time and interest this morning. Despite the challenges of the extended turnaround in the fourth quarter, our performance through 2024 reflects the resilience of our business model, our position as a diversified chemistry company and our ability to navigate and execute in a multitude of environments. We hope today's call helped to continue clarifying the key strategies that we're executing across the organization to support safe, stable and sustainable operations, improve through-cycle profitability and total shareholder returns. With that, we look forward to speaking with you again next quarter. Stay safe and be well.

Thank you. This concludes today's conference call. We thank you all for attending today's presentation. You may now disconnect your lines and have a wonderful weekend.