Yahoo Finance Tronox Holdings PLC (TROX) Q1 2024 Earnings Call Transcript Highlights: Navigating Challenges ...
Revenue: $774 million, up 9% year-over-year, 13% sequentially.
Net Income: Reported a net loss of $9 million.
Adjusted EBITDA: $131 million, margin approximately 17%.
Free Cash Flow: Use of $105 million, with $76 million from capital expenditures.
TiO2 and Zircon Volume: TiO2 volumes increased 18% year-over-year and sequentially; Zircon volumes up 54% sequentially.
Adjusted Diluted EPS: Loss of $0.05.
Debt: Total debt of $2.8 billion, net debt of $2.7 billion.
Capital Expenditures: $76 million in the quarter.
Release Date: May 02, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
Tronox Holdings PLC reported a 13% increase in revenue compared to the previous quarter, driven by higher revenue from both TiO2 and zircon.
The company saw an 18% increase in TiO2 volumes from the fourth quarter, exceeding both the guidance and typical growth for this time of year.
Adjusted EBITDA for the quarter totaled $131 million, which was above the guided range, with an EBITDA margin of almost 17%.
Tronox Holdings PLC has begun receiving power from a 200 megawatt solar project in South Africa, contributing to a 13% CO2 emissions reduction.
The company successfully consolidated and repriced two tranches of its term loan, resulting in an estimated annual savings of approximately $5 million.
Negative Points
Tronox Holdings PLC reported a net loss of $9 million for the quarter.
Income from operations was relatively low at $41 million for the quarter.
The company experienced a free cash flow use of $105 million for the quarter, although it expects to generate positive free cash flow for the full year.
Revenue from other products decreased by 26% compared to the prior quarter, primarily due to nonrepeating sales of ilmenite and a portion of rare earth tailings.
Despite improvements, the company still faces challenges with high-cost inventory and the need to improve operating rates to reduce fixed cost absorption.
Q & A Highlights
Q: Good morning, John. A Chinese exports were at an elevated level in March. What are the things driving that is sustainable? And how much of a concern is it to your forecast for higher price back half of the year? A: John Romano, CEO, noted that the significant export numbers from China in March were likely due to repositioning of inventory in anticipation of potential anti-dumping measures, affecting exports but not imports into Europe. He expects provisional duties to possibly begin by end of June or early July, which could impact market dynamics.
Q: In terms of the asset utilization rates, how should we think about that as we progress through the year? A: John Romano, CEO, explained that the company's average capacity utilization across its nine pigment plants was around 70% last year, and it has now increased to over 80%. This improvement is expected to continue positively impacting manufacturing costs as demand recovers.
Q: Can you walk through the major geographies when you look at your Q2 guide, both on price and volume? A: John Romano, CEO, indicated growth in all regions with disproportionate growth in areas like Europe, Middle East, Africa, and Asia Pacific due to deeper volume declines in the past. He expects continued growth in these regions and more significant growth in North America aligning with the coating season.
Q: How should we think about your debt ratio improvement? A: John Romano, CEO, and D. John Srivisal, CFO, discussed the goal to reduce net debt to $2 billion, with expected significant free cash flow in the coming quarters aiding this reduction. The improvement in EBITDA will also contribute to lowering the net leverage ratio.
Q: Do you think your volumes benefited from competitor outages, and is any of that a permanent shift in market share for Tronox? A: John Romano, CEO, attributed volume increases not to competitor outages but to Tronox's ability to respond to early signs of market recovery due to its strong global footprint and strategic asset locations, which minimized logistical challenges.
Q: What are your expectations for inventory levels and working capital in 2024? A: D. John Srivisal, CFO, explained that while inventory levels were higher due to increased costs in previous years, they expect to recover a significant portion as costs normalize and sales volumes increase. The company anticipates working capital to be a tailwind for cash flow, depending on the market recovery's extent.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
This article first appeared on GuruFocus.
