Tronox Reports Second Quarter 2022 Financial Results

 

Delivered record earnings and strong margin performance

Returned $91 million to shareholders year-to-date

STAMFORD, Conn., Jul. 27, 2022/PRNewswire/ — Tronox Holdings plc (NYSE:TROX) (“Tronox” or the “Company”), the world’s leading integrated manufacturer of titanium dioxide ("TiO2") pigment, today reported its financial results for the quarter ending June 30, 2022, as follows:

($M unless otherwise noted)			Q2 2022				Q2 2021				Y-o-Y % ∆				Q1 2022				Q-o-Q % ∆
Revenue		$	945			$	927				2	%		$	965				(2	)%
TiO2		$	769			$	740				4	%		$	773				(1	)%
Zircon		$	111			$	121				(8	)%		$	108				3	%
Feedstock and other products		$	65			$	66				(2	)%		$	84				(23	)%
Income from operations		$	190			$	150				27	%		$	69				175	%
Net Income		$	375			$	77				387	%		$	16				n/m
Net Income attributable to Tronox		$	375			$	73				414	%		$	16				n/m
GAAP diluted earnings per share		$	2.37			$	0.46				415	%		$	0.10				n/m
Adjusted diluted earnings per share		$	0.84			$	0.61				38	%		$	0.60				40	%
Adjusted EBITDA		$	275			$	237				16	%		$	240				15	%
Adjusted EBITDA Margin %			29.1	%			25.6	%		350 bps					24.9	%		420 bps
Free cash flow		$	(67	)		$	150				(145	)%		$	86				(178	)%

		Y-o-Y % ∆												Q-o-Q % ∆
		Volume				Price								Volume				Price
TiO2			(9	)%			15	%							(3	)%			2	%
Local Currency Basis			n/a				19	%							n/a				4	%
Zircon			(38	)%			47	%							(5	)%			8	%

“We are pleased with Tronox’s performance in the second quarter and our employees' dedication to delivering on our commitments,” commented John D. Romano, co-chief executive officer. “The Company achieved a record Adjusted EBITDA of $275 million, slightly above the midpoint of our guided range, and an Adjusted EBITDA margin of 29.1%, exceeding expectations and improving 350 basis points year-over-year, owing to improved pricing and favorable product mix. This marks the twenty-first consecutive quarter in which Tronox has delivered an Adjusted EBITDA margin above 20%, evidence of the strength and resilience of our business. On a trailing twelve-month basis, Tronox achieved an Adjusted EBITDA of $1 billion, another demonstration of our earnings potential and a testament to the benefits of our vertically integrated business model.”

 

Mr. Romano continued, “Pricing across all products continued its upward trajectory in the second quarter, as a result of continued execution of our commercial pricing strategy. Demand remained solid in the quarter, though TiO2 volumes came in slightly below our expectations due to ongoing supply chain challenges across all regions. As we enter the second half of the year, despite changing macroeconomic conditions and increasing inflation, we continue to project solid financial performance through strong execution and operating agility. At this stage we continue to see steady demand across the majority of our end markets, though we expect demand in Asia Pacific and Europe to remain dynamic. Notwithstanding, we are confident in Tronox’s position and ability to deliver for our customers given our integrated business model and global footprint that allow us to quickly adapt to changing market conditions.”

 

Jean-François Turgeon, co-chief executive officer, added, "As we emphasized at our Investor Day in June, we are committed to driving continued value creation through our capital allocation strategy. The investments we make today in key projects, including newTRON and the mining development projects in Australia and South Africa, support our future growth and profitability and are critical to ensuring we remain competitive across all economic scenarios while enabling improved return on capital. In addition, we have returned $91 million to shareholders year-to-date, through $50 million in share repurchases and $41 million in dividend payments. We expect to continue share repurchases under the remaining ~$250 million program through February 2024 as cash generation permits.”

 

Mr. Turgeon concluded, “We are proactively monitoring the macroeconomic environment. We have ample levers available to ensure sufficient liquidity under any conceivable scenario. We remain focused on executing the strategy we detailed at Investor Day and delivering on our commitments. Our business has never been stronger, and we are confident we will continue to demonstrate the value of our vertically integrated business model and deliver safe, quality, low-cost, sustainable tons for our customers.”

 

(Comparisons are to prior year (Q2 2022 vs. Q2 2021) unless otherwise noted)

 

The Company recorded second quarter revenue of $945 million, an increase of 2%, due to higher TiO2 revenues. Revenue from TiO2 sales was $769 million, an increase of 4% driven by a 19% increase in average selling prices on a local currency basis, or a 15% increase on a US dollar basis, partially offset by a 9% decrease in volumes. Sequentially, TiO2 volumes decreased 3%, driven by lower volumes in Asia Pacific, partially offset by higher volumes in all other regions, while average selling prices increased 4% on a local currency basis, or 2% on a US dollar basis.

 

Zircon revenue decreased 8% to $111 million driven by a 38% decrease in volumes, partially offset by a 47% increase in average selling prices. Sequentially, zircon revenue increased 3%, driven by an 8% increase in average selling prices, partially offset by a 5% decline in volumes. The volume decline year-over-year was due to higher sales from inventory in 2021, while the volume decline sequentially was due to logistics challenges and shipping delays.

 

Revenue from other products was $65 million, relatively in line with revenue in the year-ago quarter. Lower pig iron volumes were partially offset by higher pig iron average selling prices. Revenue declined 23% sequentially, primarily due to lower pig iron volumes, partially offset by higher pig iron average selling prices.

 

Net income attributable to Tronox in the quarter of $375 million included non-recurring items such as the reversal of a tax valuation allowance of $262 million and a loss on extinguishment of debt of $20 million. Together, these and other adjustments totaled $241 million or $1.52 per diluted share. Excluding these items, adjusted net income attributable to Tronox (non-GAAP) was $134 million, or $0.84 per diluted share, an increase of 40% and 38%, respectively. The Australian tax valuation allowance was reversed given the recent and anticipated earnings generation of our Australian business.

 

Adjusted EBITDA of $275 million represented an increase of 16% driven by higher pricing across all products and favorable exchange rates, partially offset by higher costs to serve our customers, including increased commodity costs and higher freight costs, as well as lower volumes. Adjusted EBITDA margin improved to 29.1% for the quarter.

Sequentially, Adjusted EBITDA increased 15% due to higher average selling prices and improved manufacturing costs, partially offset by lower volumes, higher freight costs and unfavorable exchange rates.

 

The Company's selling, general and administrative expenses were $73 million in the quarter. Tronox's second quarter net interest expense was $26 million, a 24% decrease due to lower debt levels and reduced interest rates compared to the prior year. Depreciation, depletion and amortization expense was $67 million.

 

Tronox ended the quarter with $2.5 billion of total debt and a net leverage ratio of 2.5x. Available liquidity at the end of the quarter totaled $508 million, including $112 million in cash and cash equivalents and $396 million available under revolving credit agreements. There are no significant debt maturities until 2028 and no financial covenants on the Company's term loans or bonds.

 

Free cash flow for the second quarter was a use of $67 million, due to the $85 million settlement payment in the quarter. Second quarter capital expenditures were $99 million, including investments in key capital projects such as newTRON, the Company's global business transformation project to improve, automate, and digitize; and Atlas Campaspe, the mining development project in Eastern Australia that will sustain Tronox's internalization of feedstocks and associated cost advantages and also provide additional zircon supply. These investments are expected to generate returns significantly above the Company's cost of capital and sustain Tronox's position as a leading low-cost producer.

 

In the second quarter of 2022, the Company returned $25 million to shareholders through the repurchase of approximately 1.5 million shares and paid $41 million in dividends. On a year-to-date basis, Tronox returned $91 million to shareholders across share repurchases and dividend payments.

In June, Tronox published its 2021 sustainability report detailing the significant steps taken over the last year to advance its leadership role in sustainability and protecting the environment. Melissa Zona, senior vice president, chief sustainability and human resources officer, commented, “The ESG targets we set in last year's report were our first public targets and were done as steps toward achieving carbon neutrality. Just one year later, we are updating and accelerating these targets, enabled by successes across the organization.” Tronox remains committed to achieving carbon neutrality by 2050. The Company's initial goal to reduce GHG emissions intensity (compared to 2019 baseline) by 15% by 2025 has been increased to 35%. The initial goal of 35% by 2030 has been updated to 50%. Tronox intends to reduce the amount of waste that it sends to landfills by 15% in 2025 and 25% in 2030, with zero waste to external dedicated landfills by 2050. The Company is targeting a goal of zero injuries, zero incidents, and zero harm by building capabilities in its people, plants, and processes. Tronox is also striving to improve the gender balance and diversity of its workforce, leadership and succession planning in order to build a workplace that is even more representative of its local communities and where all people feel valued, represented and respected. For more details on these and other initiatives, download Tronox’s 2021 Sustainability Report at https://www.tronox.com/about-us/sustainability/sustainability-reports/.

 

Mr. Romano concluded, "We remain confident in the mid- and long-term fundamentals of our business, owing to the actions we have taken over the last several years to create a stronger and more resilient enterprise. While there have been recent shifts in the broader macro-economic backdrop, and we are monitoring developments given the dynamic market conditions, our business remains sound. We are committed to executing against our strategy and delivering value to our stakeholders."

Tronox will conduct a webcast conference call on Thursday, July 28, 2022, at 8:00 a.m. ET (New York).  The live call is open to the public via internet broadcast and telephone.

Dial-in Telephone Numbers:

United States: 1 (844) 200-6205

International: +1 929 526 1599

Access code: 603841

Conference Call Presentation Slides will be used during the conference call and will be available on our website: http://investor.tronox.com

Conference Call Replay: Available via the internet and telephone beginning on July 28, 2022, by 11:00 a.m. ET (New York), until August 2, 2022, 5:00 p.m. ET (New York)

Replay Dial-in Telephone Numbers:

US Toll Free: 1 (866) 813-9403 

International: +44 204 525 0658 

Replay Access Code: 720357

Tronox Holdings plc is one of the world's leading producers of high-quality titanium products, including titanium dioxide pigment, specialty-grade titanium dioxide products and high-purity titanium chemicals, and zircon. We mine titanium-bearing mineral sands and operate upgrading facilities that produce high-grade titanium feedstock materials, pig iron and other minerals. With approximately 6,500 employees across six continents, our rich diversity, unmatched vertical integration model, and unparalleled operational and technical expertise across the value chain, position Tronox as the preeminent titanium dioxide producer in the world. For more information about how our products add brightness and durability to paints, plastics, paper and other everyday products, visit tronox.com.

Cautionary Statement about Forward-Looking Statements

Statements in this release that are not historical are forward-looking statements within the meaning of the U.S. Private Securities Litigation Reform Act of 1995. These forward-looking statements, which are subject to known and unknown risks, uncertainties and assumptions about us, may include projections of our future financial performance including anticipated synergies based on our growth and other strategies, anticipated completion of extensions and upgrades to our mining and operations, anticipated trends in our business, anticipated costs and benefits of project newTRON and Atlas Campaspe, the Company's anticipated capital allocation strategy, and our sustainability goals, commitments and programs. These statements are only predictions based on our current expectations and projections about future events. There are important factors that could cause our actual results, level of activity, performance, actual synergies, or achievements to differ materially from the results, level of activity, performance, anticipated synergies or achievements expressed or implied by the forward-looking statements. Significant risks and uncertainties may relate to, but are not limited to, macroeconomic conditions; inflationary pressures; political instability, including the ongoing Russia and Ukraine conflict and any expansion of such conflict; supply chain disruptions; market conditions and price volatility for titanium dioxide, zircon and other feedstock materials, as well as global and regional economic downturns, that adversely affect the demand for our end-use products; disruptions in production at our mining and manufacturing facilities; and other financial, economic, competitive, environmental, political, legal and regulatory factors. These and other risk factors are discussed in the Company's filings with the Securities and Exchange Commission.

Moreover, we operate in a very competitive and rapidly changing environment. New risks and uncertainties emerge from time to time, and it is not possible for our management to predict all risks and uncertainties, nor can management assess the impact of all factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements. Although we believe the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, level of activity, performance, synergies or achievements. Neither we nor any other person assumes responsibility for the accuracy or completeness of any of these forward-looking statements. You should not rely upon forward-looking statements as predictions of future events. Unless otherwise required by applicable laws, we undertake no obligation to update or revise any forward-looking statements, whether because of new information or future developments.

Use of Non-GAAP Information

To provide investors and others with additional information regarding the financial results of Tronox Holdings plc, we have disclosed in this release certain non-U.S. GAAP operating performance measures of EBITDA, Adjusted EBITDA, Adjusted EBITDA margin and Adjusted net income attributable to Tronox, including its presentation on a per share basis, and a non-U.S. GAAP liquidity measure of Free Cash Flow.  These non-U.S. GAAP financial measures are a supplement to and not a substitute for or superior to, the Company's results presented in accordance with U.S. GAAP.  The non-U.S. GAAP financial measures presented by the Company may be different from non-U.S. GAAP financial measures presented by other companies. Specifically, the Company believes the non-U.S. GAAP information provides useful measures to investors regarding the Company's financial performance by excluding certain costs and expenses that the Company believes are not indicative of its core operating results.  The presentation of these non-U.S. GAAP financial measures is not meant to be considered in isolation or as a substitute for results or guidance prepared and presented in accordance with U.S. GAAP.  A reconciliation of the non-U.S. GAAP financial measures to U.S. GAAP results is included herein.

Media Contact: Melissa Zona

Investor Contact: Jennifer Guenther

 

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