Siddharth Manjeshwar
Thanks, Erin, and good morning all. I am now on slide 4, where I will provide a summary and highlight key items of the fourth quarter 2024 financials.
Sales of $329 million in the quarter decreased approximately 14% versus the prior year. Sales volume decreased approximately 16%, primarily driven by the delayed ramp to full operating rates following our plant turnaround. Market-based pricing was favorable by 2%, and including continued strength in ammonium sulfate and acetone.
Adjusted EBITDA of $10 million declined $5 million versus the prior year, primarily driven by the timing and impact of plant turnarounds partially offset by changes in favorable sales mix, including lower plant nutrients and nylon solutions export volumes, favorable pricing net of raw material costs and insurance claim proceeds.
As a reminder, the impact to pretax income due to the plant turnaround in the quarter was approximately $47 million compared to zero in the prior year period. Adjusted earnings per share of $0.09 increased by $0.19 versus the prior year. This included the impact of in 45Q carbon capture tax credits that reduced our effective tax rate to 3.1% for the full year 2024 compared to 21.1% in the prior year period.
Free cash flow was $30 million in the quarter, up $8 million versus the prior year. Cash flow from operations of $64 million increased $4 million versus the prior year, primarily due to the favorable impact of changes in working capital, including our strong ammonium sulfate pre-buy program in the quarter. Capital expenditures of $34 million in the quarter decreased $4 million.
Now let's turn to the next slide. On slide 5, we've summarized our full year 2024 financial results. Our diverse portfolio advantage of our integrated business model and favorable industry dynamics particularly in plant nutrients and acetone enabled us to successfully navigate the year and deliver full-year adjusted EBITDA of $142 million, adjusted earnings per share of $196 million, and positive free cash flow.
Now let's turn to slide 6. On the left side of the page, we've highlighted our cash flow profile by quarter. I, too, would like to thank all our dedicated and talented employees for their efforts to overcome and learn from the impacts of our operational challenges while driving commercial success. This demonstrates our persistent focus on effectively running our business to drive profitability.
Through 2024, we continue to fund key growth and enterprise investments, including our sustained program, return cash to shareholders and maintained prudent leverage levels. We ended the year at just about one turn of leverage, and our healthy balance sheet continues to support optionality for value-creative capital allocation initiatives moving forward.
Now let's turn to slide 7. As Erin mentioned, I will provide a bit more detail on the 45Q tax credit. We operate an approximately 600,000 metric ton ammonia plant at our Hopewell, Virginia facility, from which CO2 is generated. The captured CO2 is used as a feedstock in downstream products through chemical conversion or sold to our customers for beneficial reuse in essential applications, including food and beverage, cold chain storage and more.
Our recently approved life cycle assessment of greenhouse gas emissions allowed the federal tax credit based on the amount of CO2 captured that would otherwise be emitted into the atmosphere. These credits are eligible as of Feb 2018 when the tax code change and applies over a 12-year period.
The 45Q credits represent a significant value driver for our business, over the medium to long term. The credits reduce our effective tax rate are calculated for utilization and are adjusted annually for inflation. We claimed $9.7 million in the fourth quarter of 2024 for the 2018 and 2019 tax years and continue to pursue these credits for subsequent periods.
Now let me turn the call back to Erin.
Erin Kane
Thanks, Sid. I'm now on slide 8 to discuss each of our key product lines, starting with our plant in its business. Our continued strong performance in 4Q and market acceptance of our pre-buy program are further proof points to the resiliency of sulfur nutrition demand. Industry Corn Belt ammonium sulfate prices were up 15% year over year. In contrast, Corn Belt and nitrogen pricing saw an 8% decline supporting healthy realized sulfur premiums.
Moving into 2025, our order book is robust, and we are now sold out well into the second quarter, reflecting a favorable setup into the spring. The combination of strong sulfur nutrition demand and tailwinds from rising grain and nitrogen fertilizer prices is expected to support higher ammonium sulfate pricing in the first half year over year.
We remain confident that the underlying industry fundamentals supported by crop prices, stock-to-use ratios and expected planted acres, among others, will continue to support nutrient demand. We are, however, monitoring higher anticipated raw material prices, namely natural gas and sulfur, which impacts our overall price raw spread. Settled prices for both raws in the first quarter were higher than industry expectations and the forward curve and forecast would indicate a year-over-year headwind for 2025.
Long term, we remain excited about the growth prospects for this business and leveraging our expertise as a leader in this space. We continue to see strong demand for ammonium sulfate as growers understand the value and seek ways to maximize crop yields.
Our multiyear sustained growth program remains on track and is supporting market demand in North America with potential upside driven by increased adoption on soybeans. We anticipate production capability by the end of 2025 to reach a milestone of 72% granular conversion up from roughly 70% at the end of 2024.
Let's turn to slide 9. For nylon, persisting global oversupply conditions continue to pressure pricing and spreads. The Asia caprolactam of benzene spreads have essentially bounced around trough levels exiting 2024. We now expect a slower recovery off the trough. North American end market demand is relatively stable with improved domestic supply given the absence of supply chain disruptions in 2024.
As a result, from a volume perspective, it's been a relatively slow start to the year including less disciplined competitive behavior impacting spreads in North America. Trade flows out of China primarily to Southeast Asia and Europe have also continued to limit pricing improvement globally.
From a North America demand perspective, a lower rate interest rate environment in time is expected to favorably impact building construction end markets. However, the pace and size of those potential reductions is likely to draw out the time for meaningful impact to translate to fiber and filament applications. Demand across engineering plastics and packaging remain stable overall, with trade policy and tariffs potentially having the greatest impact on pricing and demand in the auto value chain in the near term.
As we navigate what has become a protracted downturn in the cycle, we remain highly focused on supporting improved through-cycle profitability by driving productivity, optimizing our regional and product sales mix, and continuing to promote the value proposition of our differentiated nylon offerings, while benefiting from running at higher operating rates relative to our peers. Given our cost advantage, our caprolactam utilization rate at Hopewell is targeted to be 90% plus for 2025.
Let's turn to slide 10. Moving to chemical intermediates. Industry realized acetone prices of refinery-grade propylene costs generally remain healthy amid continued balanced global supply and demand as lower phenol operating rates continue.
While for the year, balanced supply and demand conditions are expected to support acetone spreads above cycle averages, here, we have also seen a lower start to the year, with demand for acetone into the MMA markets remaining soft along with several downstream industry turnarounds occurring this quarter.
We're monitoring for any change in fee on demand signals, which can impact market supply. With potential interest rate cuts likely pushed out further, fee on demand into building construction applications is also expected to be subdued.
Demand across the chemical intermediates -- the rest of chemical intermediates (inaudible) , remains mixed overall. Though many of these chemistries serve high-value applications in support of longer-term growth and profitability. We are pleased to receive our new European patent grant in the fourth quarter for our EZBlocks-2PO product used as an anti-skinning agent for alkali paints and coatings.
Let's turn to slide 11. To better help frame the various factors that impact our commercial results, given the number of moving parts year over year and sequentially, we've highlighted here several relevant KPIs and industry pricing metrics.
Starting with raw materials. Forward curves and forecasts indicate significant year over year and sequential increases for both natural gas and sulfur prices in the first quarter as well as for the remainder of 2025. Natural gas and sulfur represented approximately 10% and 6%, respectively, of our raw material costs in 2024.
Implant nutrients, while we do expect ammonium sulfate premiums over urea to remain near the high end of historical ranges in 2025, the price raw spread is being impacted by these anticipated higher raw material prices. As a reminder, roughly half of our total company portfolio is on formula or index-based pricing, where we can pass through changes in our raw materials.
For ammonium sulfate, however, this business is all freely negotiated, and market oriented as farmers ultimately buy nutrients on their value. Underlying nitrogen nutrient values are influenced by urea prices, which are currently based on industry margin and producer of gas costs out of Europe and not the US. We then price our product with a premium for the value proposition of software nutrition.
Another important dynamic is to highlight that our ammonium sulfate order book is typically sold out one quarter. As I mentioned earlier, we are currently sold into the second quarter. So industry pricing quote today reflects sales we're recognizing several months out.
We'll also be unwinding our fourth quarter 2024 pre-buy cash advances throughout the first half of the year, with the majority of those sales in the second quarter. For the remainder of our key product lines, we're seeing estimated spreads declined sequentially into the first quarter. Acetone spreads are off the prior year highs, but are expected to remain above cycle averages, while the global nylon spreads are near trough levels entering 2025.
Lastly, we anticipate our first quarter nylon export mix to return to historical averages, representing a sequential headwind.
Let's wrap up on slide 12 before moving to Q&A. While like many others, 2025 is off to a slower start, we continue to anticipate meaningful year-over-year earnings improvement for the full year 2025. This is supported by expected operational excellence and strong commercial performance across our diverse product portfolio.
Our plant turnarounds are anticipated to be a tailwind year-over-year based on the scope and focus of this year's activities. We also expect CapEx to be in the range of $140 million to $160 million, reflecting the planned progression of growth projects, including our SUSTAIN program and refined execution timing to address critical enterprise risk mitigation.
Our organization's efforts are centered around improving through-cycle profitability, which requires us to drive productivity, optimize our regional and product sales mix and continue to promote the value proposition of our differentiated product portfolio. We understand that we're operating in an uncertain environment. However, the macro backdrop for the industries we serve remains largely favorable overall.
We expect strong sulfur premium supporting plant nutrients, and a constructive global acetone supply and demand environment, which should serve as a counterbalance to an anticipated slower recovery across the nylon solutions business. We continue to protect our healthy balance sheet, enabling our capital allocation framework to provide optionality for further value creation.
We remain confident in the future prospects for AdvanSix and are committed to delivering sustainable long-term value to our shareholders.
With that, Adam, let's move to Q&A.
Adam Kressel
Great. Thanks, Erin. MJ, please open the line for questions.
Operator
(Operator Instructions) Charles Neivert, Piper Sandler.
Charles Neivert
A couple of questions. One, on the conversion to granular side, you said you're heading for, what, 72%. I mean is there a maximum would you go to 100%? Or does the market not given that you move a lot to the Latin American market at certain times of the year, does that include going to that higher level? And ultimately, what level do you guys want to attain in terms of granular production on AS?
Erin Kane
Yes. So Charles, the SUSTAIN program, as you may recall, is being driven to a 75% target conversion. And so we don't anticipate that our assets will get to 100%. The 75% is a nice stretch matching sort of the North American domestic demand for this higher premium product. And certainly, on the export side, that is typically more in our standard grade that we focused on there at this time. But obviously, there is a -- both a technical max that can be achieved and certainly making sure that we are driving to support our domestic customers.
Charles Neivert
Got it. And one question, is the phenol market still problematic and therefore, creating some opportunity for your assets on site since you guys consume a vast proportion of your phenol, are you still running at above I would say, industry rates for phenol and therefore, producing the more acetone and acetone remains sort of snug for that reason. Is that still the situation out there?
Erin Kane
When you look at sort of broader operating rates in the US, for rates are sitting at about 65%-plus, minus. And we are targeting a rate that is higher than that, obviously, because of our strong integration into our capital action value chain. Obviously, given the vast majority of what we produce is forward integrated. So again, as we've talked in the past, for us, acetone serves as a bit of a naval hedge, right, and a lower funeral operating rate environment.
Charles Neivert
Got it. And then just on the carbon capture side, obviously, the assumption is going to be that you're going to -- you've collected '18, '19, you've got '20, '21, '22, '23 and '24 to still deal with. But is there any idea about just what '25 will produce excluding anything you may get from prior years. Do you guys have any estimate on that or any guidance on that number, what it might be? And I know it may or not occur in '25, but just what are we potentially looking at there?
Siddharth Manjeshwar
No. Good question, Charlie, and I hope you're doing well. I think, look, the way to think about it is it's taken us five years to get to this point, right, with all the approvals, filings, et cetera, for the 2018 and 2019 year. So on a run rate basis for the next several years, you could assume a $5 million that escalates given there's -- based on our utilization and what is being published by the IRS in terms of a credit schedule with inflation baked in. So that $5 million, $6 million run rate would expand.
Charles Neivert
Okay. And then if I'm looking at -- I'm sorry, go ahead.
Erin Kane
No, I was just going to say, the one thing to consider here, Charlie, is where we do move sequentially because we have to file life cycle assessments for certain time periods and then go back and perfect claims. So when you think about sort of our time frame here, we are moving sequentially just as a note for your consideration.
Charles Neivert
Okay. And then on that front, I mean, if you look at all the carbon you're doing now, is that basically all you can do? I mean, physically can do? Or is there potentially more coming, meaning you have to have the offtake agreement, all the offtakes and all the rest of that stuff. But are you capturing all that you can? Or is there more that conceivably could be captured if you can find the home for it?
Erin Kane
Yes. So effectively, when you look at what we consume internally and sort of incorporate through chemical and conversion into our downstream products and then with our partners for the offtake for beneficial reuse, we effectively have been emitting or benching very little process CO2 for quite some time.
Charles Neivert
So maybe you've got pretty much all you can get out of it, the number will be whatever?
Erin Kane
Yes, the opportunity is it finally -- yes, they finally get the credit for it.
Operator
David Silver, C.L. King.
David Silver
I guess I have several questions. First, let me just look here. First, if you don't mind, you did sketch out a range for capital spending in 2025 of $160 million. And I was hoping you could just take a minute and maybe call out the different buckets there in particular. I mean, as I recall, I think $75 million or $80 million might be sustaining.
So I'm kind of more interested on the discretionary side or the nonsustaining side, Certainly, some of that goes into the ammonium sulfate expansion. But can you just maybe take a minute and where else are you directing discretionary CapEx in '25?
Siddharth Manjeshwar
Yes. Thanks, David. Good question. Yes, maybe I'll walk you through the framework and the various buckets like you suggested. So look, this year, it's $140 million to $160 million. It's up from the $134 million in 2024, but it primarily reflects the planned progression of our growth projects including our SUSTAIN program and a refinement, I'd say, on the execution timing of the various critical enterprise risk mitigation.
Also, there was a $10 million carryover from 2024 to 2025 based on execution. So that's one piece of it. On the base maintenance capital, which improves and supports our safe and stable operations, year-over-year, we expect that to be down and within our framework, that's offset by some of the enterprise programs, including spend for our Hopewell water permit.
And then as you know, the Frankfurt dock and boiler upgrade is supposed to wrap up this year. So that's another piece of it. But primarily, the major driver moving the needle here is the growth of capital investment related to sustain. It was roughly $8 million last year and is projected to be in the $20 million to $25 million in 2025. So if you think about this year versus next year as well, '26 spend is likely to be flatter down with that framework that we adopt in terms of how we bucket and budget for.
David Silver
Okay. Great. Next question would be about the natural gas costs and in particular, regional spreads. So Erin, I think in your prepared remarks on maybe the KPI page, you did touch on this briefly. But I do kind of track that regional spread from when it got extremely wide a few years ago.
And it's certainly not back to where it was in, I don't know, 2021 or 2022, but it has been ticking up pretty noticeably through the last few months of the year. So firstly, I mean, I guess I was just wondering if you consider that kind of maybe a secondary or a background support to your fertilizer business? And then more directly, but do you think that, that has redirected global trade in (inaudible) sulfate or other products that impact on your competitiveness or competitive advantage in the domestic market?
Erin Kane
Yes. So certainly from a nutrient or let's call it plantations perspective, energy costs are important. Certainly, as we think about how that impacts the marginal producer around the world for nitrogen. And certainly, the EU is currently the marginal producer and as part of certainly what is supporting the higher global urea prices, certainly, in combination, though, with some supply disruptions higher India demand, other things around the world, but isn't necessarily impacting global AS trade, if you will. It certainly is enabling a higher nitrogen-based pricing, and again, in which we are then working to drive our premium for sulfur nutrition on top of that.
So there is a play there, right, as a follow through on the nitrogen side. Relative to energy costs in Europe, to your point, it definitely does impact producers and other value chains in which we operate when we think about the chemical intermediates peers that are producing pheno acetone in the region as well as certainly caprolactam and nylon.
And so -- we continue to see that, that impacts their utilization rates. And as we've seen in nylon, that continues to attract imports from Asia and China because of where they sit on the cost curve. So I think the dynamic has remained the same. It may just be sort of an amplification just given the current energy prices.
David Silver
Okay. And again, on ammonium sulfate, but you called out the improved sulfur values implied or direct an ammonium sulfate. And I'm just wondering, I mean, there are very few fertilizer products that include sulfur directly. But in the domestic market, what is the most competitive way of providing that incremental sulfur, let's say, to a fertilizer blend. Is that just elemental sulfur? Or is there another way that the channel gets the sulfur they need other than through yours or someone else's ammonium sulfate product?
Erin Kane
Yes. There certainly are alternatives elemental sulfur as the one as you point out. But when you just look at the sulfate form of sulfur that we provide, certainly, it's the best option sort of pound for pound to deliver the nutrition that the plants require. Elemental fall far comparison has just different types of issues and becoming plan available from a timing standpoint because it has oxidized in the soil, which is slow, right? So again, we go back to sort of the years of field research. The education that we spend with retailers and growers into the value chain, that AS certainly is, again, pound for pound, the best nutrient for software and nutrition available.
David Silver
Okay. Yes, I knew there would be different agronomic benefits based on the form of the sulfur. Question on nylon. But you did call out increased competitive pressures. And I was hoping you might be able to just add a little bit more color there.
So is this the case where I don't know the slope marketing is maybe showing up in the form of extra spot product availability? Or is this the type of thing where maybe there's competition in unexpected kind of end markets where you're having to defend some maybe long-held contract business.
But -- and I guess I'm asking that as kind of a metric for whether this is something that might last a quarter or two or whether it's maybe more structural. But if you could maybe just touch on where the increased competitive pressures in the domestic market are most visible.
Erin Kane
Sure. When you think just sort of kind of the standard sort of supply-demand fundamentals, demand has been relatively stable, right? I think it's mixed across the end markets relative to where it sits from, let's say, history or pre-COVID levels, fiber and filament is down enjoying plastics has sort of recovered. But it's been year on year and we kind of see it as stable given kind of where the value chains exist today.
The big difference between 2024 and 2025 is we were transparent in our operational disruptions. Another North American competitor that had several force majeures as well last year. And so the supply side was a bit tighter domestically.
Certainly, we saw imports continuing to compete here. But what's restored now is the domestic supply, right? So I think it's a natural consideration of where folks are establishing and looking to either gain or defend share, as you say, in the year given sort of that fundamental change.
Relative to timing, Dave, I think what we wanted to clarify in remarks is that it clearly, this chain is dealing with persistent oversupply. And we need to continue to watch. I think third-party views are that it's reached a point like in many other value chains, right, where ultimately, some restructuring, some exits have to take place here.
And we -- I would note there were recent announcements (inaudible) is a large multinational operating in the space is going to seize production of caprolactam and nylon in Japan by March 2027. They're going to remain running their (inaudible) in Spain.
Solana in the Czech Republic is exiting caprolactam by mid-2025. So there are some starts. These 2 announcements are not fully restructuring. But I think this is where we're at, we've been watching it. And so -- and hence, sort of our commentary that this is going to be a slower recovery than perhaps we had previously anticipated.
David Silver
Okay. Very good. And then maybe just the last one for me. But you've called out the positive outlook for your fertilizer products sold into the ag markets. You also make some chemicals that end up in crop chemicals and pesticides and whatnot. Would you say the outlook for that portion of your business is also as robust or positive or not tracking, but how might your broader ag portfolio be doing above and beyond the ammonium sulfate?
Erin Kane
We do certainly see kind of a continued challenge in the ag chemical space. I think that there's challenges that might see similar sentiment from others, although it's kind of mixed depending on perhaps what chemical you are operating in and where you sit.
So we continue to contend with low-priced competition in Chinese in course in certain markets, particularly in our means of business. So this is an area where, certainly, we see our downstream customers who are taking our products and transforming into glyphosate-type products are also varianting some challenges. So this is a space we continue to perhaps see lag relative to the positive trends we're seeing in the dry fertilizer space.
Operator
Charles Neivert, Piper Sandler.
Charles Neivert
Just on a quick thing. You were talking about nylon production in China are maintaining a fairly high level despite issues in their economy. Has that created anything that -- or any sort of additional competition for you guys are seeing any extra products from the AS side since they are running a lot of capital as well to run the nylon, has that created any issues in any particular markets? Or you're just not seeing anything at this point?
Erin Kane
Yes. Certainly, all of that extra caprolactam production does come with ammonium sulfate output as you point out, albeit it comes out of a different ratio. But China has been primarily focused on the Brazil market. And so we have continued to see increasing exports there. And their focus there. And as a reminder, we do have the antidumping in the US here. So obviously, when you look at sort of the two largest markets that exist today. They are focused there, and that enables us to continue to grow here in North America.
Operator
This concludes our question-and-answer session. I will now turn the call back over to Erin Kane for closing remarks.
Erin Kane
Thank you all again for your time and interest this morning. Looking forward, we are confident in our demonstrated ability to perform through a multitude of environments. We are well positioned to deliver improved earnings performance year over year, supported by our resilient business model, our position as a diversified chemistry company and our strategic growth focus. We are confident in our strategies to support higher through-cycle profitability and total shareholder returns.
With that, we look forward to speaking with you again next quarter. Stay safe and be well.
Operator
The conference has now concluded. Thank you for attending today's presentation. You may now disconnect your lines.
