Tronox 1Q 2019 results: revenue down 12% from year ago to $390 million

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Tronox 1Q 2019 results: revenue down 12% from year ago to $390 million

May 10, 2019 - 04:52
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STAMFORD, CT , May 9, 2019 (PRNewswire) -First Quarter 2019 Highlights:

  • Revenue of $390 million down 12 percent versus first quarter 2018; down 9 percent excluding $12 million of revenue in prior-year quarter from Electrolytic business sold in September 2018; primary drivers were 10 percent lower pigment sales volumes and $6 million of unfavorable Euro translation
  • Revenue down 9 percent versus fourth quarter 2018, as higher pigment sales volumes were more than offset by lower zircon, feedstock and pig iron sales volumes due to shipment timing
  • Income from operations of $16 million; Adjusted EBITDA of $80 million (Non-GAAP) reflected transitioning TiO2 pigment market conditions that improved as the quarter was completed and the financial impact of certain actions taken in operations in preparation for moving from a long to short feedstock position following the closing of the Cristal acquisition
  • For the second quarter 2019, Adjusted EBITDA (Non-GAAP) of $125 million to $135 million expected for legacy Tronox driven by improved pigment market conditions, increased zircon shipments and the margin benefits of the actions taken in operations prior to closing the Cristal acquisition (1)
  • GAAP diluted loss per share ($0.27); adjusted diluted loss per share of ($0.18) (Non-GAAP)
  • Continued to successfully work with our pigment customers on margin stability initiatives; TiO2 pigment selling prices 2 percent lower than prior-year quarter and 1 percent lower than prior quarter on local currency basis

Strategic Developments:

  • Transformational acquisition of Cristal TiO2 business completed on April 10, 2019
  • Sale of Cristal’s former North American TiO2 business to INEOS Enterprises for $700 million closed on May 1, 2019 and divestiture of 8120 paper laminate grade to Venator Materials closed on April 26, 2019
  • Repurchased 14 million Tronox shares directly from Exxaro Resources at a price of $14.32 per share on May 9, 2019, using portion of proceeds from INEOS transaction

Tronox Holdings plc (“Tronox” or the “Company”), the world’s leading integrated manufacturer of titanium dioxide pigment, reported revenue of $390 million for the first quarter 2019, down 12 percent from $442 million in the prior-year quarter and down 9 percent from $429 million in the prior quarter.  Excluding revenue of $12 million in the year-ago quarter from the Electrolytic business sold in September 2018, revenue declined 9 percent versus the prior-year quarter.  Income from operations of $16 million compared to $14 million in the year-ago quarter and $68 million in the prior quarter.  Net loss attributable to Tronox of $34 million, or ($0.27) per diluted share, compared to a net loss attributable to Tronox of $44 million, or ($0.36) per diluted share, in the year-ago quarter and a net loss attributable to Tronox of $5 million, or ($0.05) per diluted share in the prior quarter.  Net loss attributable to Tronox in the first quarter 2019 included transaction costs primarily related to the Cristal acquisition, debt modification costs and a charge to indemnify Exxaro Resources for capital gains tax pursuant to the Mineral Sands Completion Agreement that, combined, totaled $11 million or $0.09 per diluted share.  Excluding these items, adjusted net loss attributable to Tronox (Non-GAAP) was $23 million, or ($0.18) per diluted share.  Adjusted EBITDA of $80 million compared to $117 million in the prior-year quarter and $120 million in the prior quarter.

The Board of Directors declared a quarterly dividend of $0.045 per share payable on May 31, 2019, to shareholders of record of the company’s ordinary shares at the close of business on May 20, 2019.

Jeffry Quinn, chairman and chief executive officer of Tronox commented on the recent developments by noting, “The closing of the game-changing Cristal acquisition comes at an opportune time, as pigment markets in Europe and Asia are stabilizing, inventories are normalizing as destocking runs its course, and North American market conditions remain resilient. We continue to successfully work with our pigment customers on our unique win-win margin stability initiative and now with the closing of the Cristal transaction, we will accelerate our work on this important initiative.”

Discussing the unique positioning of Tronox as an integrated pigment producer in favorable feedstock conditions, Quinn stated, “Furthermore, we are in an advantaged position to benefit from both zircon and feedstock integration. We expect zircon to continue to deliver significant profitability and margin enhancement,” Quinn continued, “and we expect to fully derive the benefits of vertical integration in future quarters that were substantially muted in the first quarter.”

Finally, because of these positive developments, Quinn stated, “For the second quarter of 2019, we expect Adjusted EBITDA (Non-GAAP) to range between $125 million to $135 million for legacy Tronox, a substantial increase from the first quarter.”

First Quarter 2019

First Quarter 2019 versus First Quarter 2018

Revenue of $390 million was 12 percent lower than $442 million in the year-ago quarter primarily due to lower pigment sales volumes, the absence of revenue from the Electrolytic business sold in September 2018 and unfavorable Euro translation, partially offset by higher zircon selling prices.  Revenue was 9 percent lower excluding $12 million of revenue from the Electrolytic business in the prior-year quarter.

Pigment sales of $286 million compared to $333 million in the year-ago quarter.  Sales volumes were 10 percent lower as customer destocking in Europe and Asia continued in the first quarter.  Selling prices were 2 percent lower on a local currency basis and 5 percent lower on a U.S. dollar basis, as translation of the Euro was a $6 million headwind on revenue.

Titanium feedstock and co-products sales of $104 million increased 7 percent from $97 million in the year-ago quarter.  Zircon sales of $64 million increased 5 percent from $61 million in the year-ago quarter driven by 17 percent higher selling prices, partially offset by 10 percent lower sales volumes due to the timing of shipments.  Pig iron sales of $19 million were level to the year-ago quarter, as 2 percent higher selling prices were offset by 2 percent lower sales volumes.  Feedstock and other products sales of $21 million increased from $17 million in the year-ago quarter primarily driven by higher synthetic rutile and slag fines sales volumes.  There were no ilmenite sales in the first quarter compared to $5 million in the year-ago quarter, as we were not actively selling ilmenite in the market in preparation for increased internal requirements following the closing of the Cristal acquisition.

Adjusted EBITDA of $80 million was 32 percent lower than $117 million in the year-ago quarter.  Higher zircon selling prices and favorable foreign exchange on costs were more than offset by lower pigment and zircon sales volumes, unfavorable overhead absorption related to planned maintenance in South Africa, higher costs for coke, electrodes, anthracite and labor, higher one-time SG&A costs associated with re-domiciliation and other initiatives, and a $9 million royalty refund received in the year-ago quarter.

First Quarter 2019 versus Fourth Quarter 2018

Revenue of $390 million decreased 9 percent from $429 million in the prior quarter, as higher pigment sales volumes were more than offset by lower sales volumes for feedstock, zircon and pig iron due to the timing of shipments.

Pigment sales of $286 million increased 9 percent from $263 million in the prior quarter.  Sales volumes increased 10 percent driven by the normal seasonal increase coupled with positive momentum in March in European and Asian markets as destocking runs its course.  Selling prices were 1 percent lower on a local currency basis and 2 percent lower on a U.S. dollar basis.  The impact of translation of the Euro on pigment sales was negligible compared to the prior quarter.

Titanium feedstock and co-products sales of $104 million decreased 37 percent from $166 million in the prior quarter, driven by lower sales volumes for CP slag, zircon and pig iron due to the timing of shipments.  Zircon sales of $64 million were 22 percent lower than $82 million in the prior quarter, as 3 percent higher selling prices were more than offset by a 24 percent decline in sales volumes due to shipment timing.  Pig iron sales of $19 million decreased 24 percent from $25 million in the prior quarter on 24 percent lower sales volumes, also due to shipment timing, while selling prices were level.  Feedstock and other products sales of $21 million decreased 64 percent from $59 million in the prior quarter.  There were no ilmenite sales in the current or prior quarter, and there were no CP slag sales in the current quarter in preparation for increased internal requirements following the closing of the Cristal acquisition, compared to $29 million of sales in the prior quarter.

Adjusted EBITDA of $80 million was 33 percent lower than $120 million in the prior quarter, driven primarily by lower sales volumes for feedstock and zircon due to shipment timing, unfavorable foreign exchange on costs and higher pigment unit costs related to planned maintenance undertaken in the fourth quarter 2018 that reduced margins on pigment products sold in the first quarter.

Other Financial Information

Selling, general and administrative expenses were $67 million compared to $76 million in the year-ago quarter and $50 million in the prior quarter.  Selling, general and administrative expenses primarily attributable to the Cristal acquisition were $8 million in the first quarter 2019 compared to $20 million in the year-ago quarter and $7 million in the prior quarter.  Interest expense of $49 million was level to the year-ago quarter and prior quarter.  On March 31, 2019, debt was $3,375 million and debt, net of cash and cash equivalents, was $1,641 million, including $666 million of cash restricted for the Cristal transaction.  Liquidity was $1,947 million comprised of cash and cash equivalents of $1,734 million, including $666 million of restricted cash, and $213 million available under revolving credit agreements.  In the first quarter 2019, capital expenditures were $25 million and depreciation, depletion and amortization expense was $47 million.

About Tronox

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 nearly 7,000 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.