Business Overview and History

Calumet, Inc. (CLMT) is a leading manufacturer and formulator of a diverse range of specialty branded products and renewable fuels, serving a wide array of consumer-facing and industrial markets. The company's operations are divided into three reportable segments: Specialty Products and Solutions, MontanaRenewables, and Performance Brands.

Calumet, Inc. (CLMT) was originally formed as Calumet Specialty Products Partners, L.P., a master limited partnership, in 2001. The company has since grown to operate twelve facilities across North America, manufacturing and marketing a diverse slate of specialty branded products and fuels to customers across consumer and industrial markets.

In its early years, Calumet focused on building its specialty products business, manufacturing and marketing lubricating oils, solvents, waxes, and other specialty products. The company expanded its operations through strategic acquisitions, including the purchase of the Penreco business in 2008 and the Great Falls refinery in 2012. These acquisitions allowed Calumet to broaden its specialty product offerings and geographic reach.

Over time, Calumet also developed its fuel products business, producing gasoline, diesel, jet fuel, and other fuel products at some of its facilities. However, the company's primary focus remained on its specialty products segment, which historically generated the majority of its gross profit.

The company's Specialty Products and Solutions segment produces a variety of solvents, waxes, lubricating oils, white oils, petrolatums, gels, esters, and other specialty products. These are sold primarily to domestic and international customers as raw material components for their own consumer-facing and industrial products.

The MontanaRenewables segment, which was established in 2021, operates two facilities in Montana. The first is a renewable fuels production facility that processes a range of organic waste and seed oils into lower-emission alternatives such as renewable diesel, sustainable aviation fuel (SAF), renewable hydrogen, renewable natural gas, renewable propane, and renewable naphtha. The second facility is a specialty asphalt production plant that processes Canadian crude oil into conventional fuels and specialty asphalt grades.

Calumet's Performance Brands segment blends, packages, and markets high-performance products under the Royal Purple, Bel-Ray, and TruFuel brands. These are sold into industrial, commercial, and automotive applications.

In July 2024, Calumet completed a corporate conversion from a master limited partnership (MLP) structure to a C-corporation. This change has simplified the company's financial reporting and provided greater flexibility for future strategic initiatives. During this time, Calumet also made significant investments to improve the reliability and efficiency of its specialty products facilities, particularly its integrated complex in Northwest Louisiana.

Financial Performance and Ratios

For the fiscal year ended December 31, 2024, Calumet reported total revenue of $4.19 billion, down slightly from $4.18 billion in the prior year. Net loss for the year was $222.0 million, compared to net income of $48.1 million in 2023. The company's Adjusted EBITDA, a key performance metric, was $194.8 million in 2024, down from $260.5 million in 2023.

Calumet's financial ratios indicate a mixed picture. The current ratio stood at 0.89 as of December 31, 2024, suggesting potential liquidity challenges, though the company has taken steps to improve its balance sheet. The debt-to-equity ratio was -3.87, reflecting Calumet's highly leveraged capital structure. However, the interest coverage ratio of 0.03 raises concerns about the company's ability to service its debt obligations.

In the most recent quarter (Q4 2024), Calumet reported revenue of $949.5 million and a net loss of $40.7 million. The company saw weaker margins across its fuel and asphalt businesses in Q4 2024, which contributed to the net loss. This was partially offset by strong performance in the Specialty Products and Solutions and Performance Brands segments.

For the full year 2024, Calumet's operating cash flow was negative $46.4 million, and free cash flow was negative $123.1 million. These figures highlight the company's challenges in generating positive cash flow, which it aims to address through its strategic initiatives and operational improvements.

Liquidity

Calumet's liquidity position remains a key focus area for the company. As of December 31, 2024, the company reported cash and cash equivalents of $38.1 million. The company has been taking steps to improve its liquidity through various measures, including strategic divestitures and securing additional financing. The recent sale of the industrial portion of its Royal Purple business for $110 million is expected to provide additional liquidity and strengthen the company's balance sheet.

Calumet had $140.1 million available under its revolving credit facilities, out of a total borrowing base of $472.1 million. The company's current ratio stood at 0.89, while its quick ratio was 0.41, indicating potential short-term liquidity challenges. The negative debt-to-equity ratio of -0.39 (due to negative equity) underscores the company's highly leveraged capital structure.

Operational Highlights and Strategic Initiatives

Calumet has made significant progress in enhancing its operational efficiency and strategic positioning in recent years. In the Specialty Products and Solutions segment, the company has focused on driving commercial excellence, aligning its sales, procurement, and operations functions to maximize product value and placement. This has resulted in strong volume growth, with a 7% year-over-year increase in 2024.

The MontanaRenewables segment has also achieved important milestones. After a challenging ramp-up period, the facility successfully reached its targeted operational cost of $0.70 per gallon in 2024, a significant improvement from the initial $1.30 per gallon cost. The segment's reliable operations and cost optimization have positioned it well to capitalize on the growing demand for renewable fuels, particularly sustainable aviation fuel (SAF).

In February 2025, Calumet's MontanaRenewables subsidiary received the first tranche of a $1.44 billion loan guarantee from the U.S. Department of Energy (DOE). This funding will support the expansion of the facility's SAF production capacity to 300 million gallons per year, solidifying its position as a leading producer in the rapidly growing SAF market.

Calumet has also taken steps to streamline its portfolio and focus on its core competencies. In February 2025, the company announced the sale of the industrial portion of its Royal Purple business for $110 million, representing a transaction multiple of approximately 10x EBITDA. This divestiture aligns with Calumet's strategy of preserving liquidity and strengthening its balance sheet.

Segment Performance and Product Mix

Calumet's diversified product slate and focus on specialty and renewable products have been key drivers of the company's financial performance. In 2024, the company's three reportable segments contributed to its total sales as follows:

1. Specialty Products and Solutions: This segment is Calumet's core business, accounting for 66.6% of the company's total sales in 2024, generating $2.79 billion in revenue. The segment's product mix includes lubricating oils (18.8% of total sales), solvents (9.7%), and fuels/asphalt/other by-products (34.4%).

2. MontanaRenewables: This segment contributed 25.4% of total sales, or $1.06 billion in revenue for 2024. The segment's product mix includes renewable fuels (15.1% of total sales), gasoline (3.4%), diesel (2.7%), and asphalt/heavy fuel oils (3.8%).

3. Performance Brands: This segment accounted for 8.0% of total sales, generating $335.2 million in revenue for 2024. The segment focuses on high-performance branded products sold under the Royal Purple, Bel-Ray, and TruFuel brands.

Geographic Markets and Industry Trends

Calumet primarily operates in the United States, with less than 10% of consolidated sales coming from international markets in recent years. The specialty products and renewable fuels industries that Calumet operates in have experienced modest growth in recent years, with compound annual growth rates (CAGRs) of 3-5% for specialty products and over 100% for renewable diesel/SAF in the last three years.

Guidance and Future Outlook

Based on recent performance and management commentary, Calumet has provided the following guidance and outlook:

For 2025, Calumet expects capital expenditures to be in the $60-90 million range for the entire company, before accounting for an additional $40-60 million in capital spend related to the MaxSAF expansion project at Montana Renewables.

The company plans to use all available free cash flow to pay down debt. Calumet's Specialty Products segment is expected to generate $95-115 million in mid-cycle free cash flow, while Montana Renewables is projected to generate $65-85 million in annual cash flow at a $1.50 per gallon index margin.

Calumet has set a target to reduce its total debt to $800 million, down from the current $1.6 billion. The company aims to achieve this through a combination of debt paydown from free cash flow, asset sales, and eventually monetizing Montana Renewables.

Risks and Challenges

Calumet faces several risks and challenges that investors should consider. The company operates in highly competitive markets, with larger integrated players and alternative energy sources posing competitive threats. Volatility in commodity prices, particularly crude oil and natural gas, can significantly impact the company's margins and profitability.

Regulatory changes, such as those related to the Renewable Fuel Standard (RFS) program, can also have a material effect on Calumet's operations and financial performance. The company's ongoing litigation regarding small refinery exemptions under the RFS program remains a source of uncertainty.

Additionally, Calumet's highly leveraged balance sheet and the potential for rising interest rates pose refinancing risks and may limit the company's financial flexibility.

Outlook and Conclusion

Despite the challenges, Calumet's long-term prospects appear promising. The company's focus on operational excellence, strategic initiatives, and the expansion of its renewable fuels business position it well to capitalize on the growing demand for sustainable energy solutions.

The successful funding of the DOE loan and the divestiture of the Royal Purple industrial business are significant steps in Calumet's deleveraging efforts and strategic repositioning. As the company continues to optimize its operations, improve its financial profile, and expand its renewable fuels capabilities, it may offer attractive long-term investment opportunities for investors willing to navigate the near-term risks.

Calumet's integrated asset base, flexible operations, and customer-centric approach have allowed it to navigate market challenges and position the business for growth in both specialty products and the evolving renewable fuels landscape. The company's ability to execute on its debt reduction targets and successfully ramp up its renewable fuels production will be crucial factors in determining its future success and potential for value creation for shareholders.