Tronox 1Q 2018 results: revenue up 17% from year ago to $442 million

Read so far

Tronox 1Q 2018 results: revenue up 17% from year ago to $442 million

May 10, 2018 - 04:44
Posted in:

STAMFORD, CT , May 9, 2018 (PRNewswire) -Strategic Developments:

  • Obtaining European Commission's conditional clearance of Cristal acquisition now only dependent on finalizing agreement on proposed remedy to address their remaining objection; negotiating with possible counterparties to execute the remedy
  • Motion filed with U.S. Federal Trade Commission (FTC) to stay Part 3 administrative process seeking to engage in direct settlement negotiations with Commissioners or commencement of expedited preliminary injunction suit
  • Technical Services Agreement and Option Agreement signed with regard to Jazan, Saudi Arabia titanium slag smelter to further optimize TiO2 pigment and feedstock integration
  • First Quarter 2018 Highlights:
  • Strong top and bottom line performance reflects benefits of vertical integration and continued favorable market conditions across TiO2 pigment, feedstock and co-products
  • Revenue of $442 million up 17 percent versus prior year
  • Income from operations of $14 million; adjusted EBITDA of $113 million up 79 percent versus prior year (Non-GAAP)
  • TiO2 income from operations of $52 million; adjusted EBITDA of $138 million up 62 percent versus prior year (Non-GAAP)
  • TiO2 adjusted EBITDA margin of 31 percent; free cash flow of $52 million (1)
  • GAAP diluted EPS of ($0.36); adjusted diluted EPS of $0.01 (Non-GAAP)

1) Free cash flow equals cash flow provided by (used in) operating activities less capital expenditures (Non-GAAP)

Tronox Limited reported revenue of $442 million for the first quarter 2018, up 17 percent from $378 million in the year-ago quarter and 5 percent lower than $464 million in the prior quarter.  Income from operations of $14 million improved from a loss from operations of $3 million in the year-ago quarter and compared to $60 million in the prior quarter.  Net loss from continuing operations attributable to Tronox Limited was $44 million, or ($0.36) per diluted share, compared to a net loss from continuing operations attributable to Tronox Limited of $56 million, or ($0.48) per diluted share, in the year-ago quarter and net income from continuing operations attributable to Tronox Limited of breakeven, or $0.00 per diluted share in the prior quarter.  Net income from continuing operations attributable to Tronox Limited in the first quarter of 2018 included an impairment loss related to the sale of the company's Electrolytic operations and transaction costs related to the Cristal acquisition that, combined, totaled $45 million or $0.37 per diluted share.  Excluding these items, adjusted net income from continuing operations attributable to Tronox Limited (Non-GAAP) was $1 million, or $0.01 per diluted share.  Adjusted EBITDA of $113 million increased 79 percent from $63 million in the year-ago quarter and compared to $135 million in the prior quarter.

The Board of Directors declared a quarterly dividend of $0.045 per share payable on June 1, 2018, to shareholders of record of the company's Class A and Class B ordinary shares at the close of business on May 21, 2018.

Jeffry Quinn, president and chief executive officer of Tronox, said: "The last several weeks have seen significant progress toward closing the Cristal acquisition.  As a result of our discussions with the European Commission through the formal hearing process and the follow-on state-of-play meeting, we've narrowed the issues and the Commission's conditional clearance is now only dependent on finalizing an agreement on a proposed remedy to address their remaining objection.  We are also negotiating with possible counterparties regarding execution of the proposed remedy.  In the United States, we filed a motion with the FTC seeking to stay the administrative proceeding scheduled to start on May 18.  If granted, the stay will allow direct discussions with the FTC Commissioners -- something not permitted while an administrative process is pending.  If settlement efforts are unsuccessful, we will ask the FTC Commissioners, in the alternative, to consider pursuing the FTC's case through the typical Federal Court process, which is much more likely to result in a timely resolution.

"We also announced our entry into a Technical Services Agreement and an Option Agreement with AMIC, an entity equally owned by Cristal and Tasnee, regarding the titanium slag smelter facility located in Jazan, Saudi Arabia.  These agreements are another integral step to enable the combined company to further optimize the level of vertical integration between its production of TiO2 pigment and feedstock over the long term.  By combining our slagger operations expertise with that of AMIC under the technical services agreement, we will work together to ensure the successful commissioning of this world-class smelter to become a low-cost source of feedstock for the 11 pigment plants that would comprise the combined company.  We continue to work hand in hand with our partners at Cristal and Tasnee with the shared goal of creating the premier company in the TiO2 industry."

Quinn continued, "Our first quarter performance clearly reflected the benefits of our vertical integration, as our TiO2 business delivered revenue growth of 17 percent, adjusted EBITDA growth of 62 percent, an adjusted EBITDA margin of 31 percent and free cash flow of $52 million.  Both our downstream TiO2 pigment and upstream feedstock and co-products operations continued to benefit from favorable market conditions across the value chain.  Our strong top- and bottom-line results came despite the timing impact of several large feedstock and co-product shipments.  This is not a reflection of softening market conditions.  The opposite is true.  We see continued strengthening in feedstock and co-products markets, such as zircon and pig iron.  We expect favorable market trends to continue in pigment, feedstock and co-products across the year. Our strong first quarter results were delivered in the face of significant foreign exchange headwinds primarily related to the strengthening of the South African Rand relative to the U.S. Dollar.  Despite this short-term impact, the recent political changes in South Africa, which triggered the strengthening of the Rand, bode well for the future of our South African operations."

First Quarter 2018

Tronox TiO2

TiO2 revenue of $442 million increased 17 percent compared to $378 million in the year-ago quarter, driven primarily by higher selling prices for pigment, zircon and pig iron.  Pigment sales of $333 million increased 22 percent compared to $272 million in the year-ago quarter driven by 25 percent higher selling prices (20 percent on a local currency basis).  Sales volumes were 2 percent lower due to inventory availability related to the timing of plant maintenance.  Selling prices were higher in all regions.  Titanium feedstock and co-products sales of $97 million increased 5 percent from $92 million in the year-ago quarter, as average selling prices increased 34 percent and sales volumes were 22 percent lower due to the timing of shipments for zircon and CP titanium slag.  Zircon sales of $61 million increased 22 percent driven by 52 percent higher selling prices which more than offset 20 percent lower sales volumes, as shipments originally scheduled for the first quarter occurred in the prior quarter.  Pig iron sales of $19 million increased 73 percent as selling prices increased 18 percent and sales volumes increased 41 percent.  Feedstock and Other products sales of $17 million were 45 percent lower driven by shipment timing.  There were no sales of CP titanium slag in the first quarter compared to $12 million of sales in the year-ago quarter.

Compared sequentially, TiO2 revenue of $442 million was 5 percent lower than $464 million in the prior quarter.  Higher selling prices for pigment and all major product lines in feedstock and co-products were offset by lower sales volumes for zircon, pig iron and CP titanium slag due to the timing of shipments.  Pigment sales of $333 million increased 5 percent from $316 million in the prior quarter, as selling prices increased 3 percent (2 percent on a local currency basis) and sales volumes increased 2 percent.  Though feedstock and co-products markets continued to strengthen in the quarter, Titanium feedstock and co-products sales of $97 million decreased 27 percent from $133 million in the prior quarter reflecting the lower zircon, pig iron and CP titanium slag sales volumes due to shipment timing.  Zircon sales of $61 million were 9 percent lower as selling prices increased 12 percent which were more than offset by 19 percent lower sales volumes due to shipment timing.  Pig iron sales of $19 million were 5 percent lower, as 12 percent higher selling prices were more than offset by 16 percent lower sales volumes, also due to shipment timing.  There were no sales of CP titanium slag in the quarter compared to $12 million of sales in the prior quarter.  In the second quarter, we are expecting sequential growth in pigment sales and double-digit sequential sales growth in zircon and pig iron given the timing of planned shipments.

TiO2 adjusted EBITDA of $138 million increased 62 percent from $85 million in the year-ago quarter, driven primarily by higher selling prices for pigment and across all major product lines in feedstock and co-products.  Partially offsetting the gain were foreign exchange impacts on cost, primarily the South African Rand.  Compared sequentially, segment adjusted EBITDA of $138 million decreased by 12 percent from $156 million in the prior quarter.  Higher selling prices for pigment and across all major product lines in feedstock and co-products were more than offset by lower sales volumes due to the timing of shipments and unfavorable foreign exchange, primarily the South African Rand.  TiO2 income from operations of $52 million improved from income from operations of $32 million in the year-ago quarter and compared to $93 million in the prior quarter.  TiO2 delivered free cash flow of $52 million in the first quarter, as cash provided by operating activities was $79 million and capital expenditures were $27 million.

Consolidated

Selling, general and administrative expenses were $76 million, which included $20 million related to the Cristal acquisition, compared to $67 million in the year-ago quarter which included $11 million related to the Cristal acquisition, and $65 million in the prior quarter which included $15 million related to the Cristal acquisition.  Interest expense of $49 million compared to $46 million in the year-ago quarter and $48 million in the prior quarter.  On March 31, 2018, gross consolidated debt, net of debt issuance costs, was $3,146 million, and debt net of cash and cash equivalents was $1,419 million, including $653 million of cash restricted for the Cristal transaction.  Liquidity was $2,032 million comprised of cash and cash equivalents of $1,727 million, including $653 million of restricted cash, and $305 million available under revolving credit agreements.  Capital expenditures were $28 million and depreciation, depletion and amortization expense was $48 million.

About Tronox

Tronox Limited is a vertically integrated mining and inorganic chemical business. The Company mines and processes titanium ore, zircon and other minerals, and manufactures titanium dioxide pigments that add brightness and durability to paints, plastics, paper, and other everyday products.