• Revenue: $804 million, an increase of 21% compared to the prior year.
• Income from Operations: $54 million for the quarter.
• Net Loss: $25 million attributable to Tronox.
• Adjusted EBITDA: $143 million with a margin of 17.8%.
• CapEx: $101 million for the quarter.
• Free Cash Flow: Use of $14 million in the quarter.
• Net Debt: $2.7 billion with a net leverage ratio of 5.0 times.
• Available Liquidity: $668 million, including $167 million in cash and cash equivalents.
• Dividends: $21 million returned to shareholders in the quarter.

• Warning! GuruFocus has detected 4 Warning Signs with TROX.

Release Date: October 25, 2024

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• Tronox Holdings PLC (NYSE:TROX) reported a 21% increase in revenue compared to the prior year, driven by higher sales volumes of Tio2, Zircon, and other products.
• The company achieved a targeted average pig utilization rate of approximately 80% during the quarter.
• Zircon volumes increased by 42% on a year-to-date basis, indicating a strong recovery from 2023 levels.
• Tronox Holdings PLC (NYSE:TROX) successfully refinanced its existing term loan, extending its debt maturity profile and optimizing its capital structure.
• The company is investing in strategic growth projects, particularly in mining, to sustain its vertical integration advantage and maintain a cost advantage for feedstock.

Negative Points

• Tronox Holdings PLC (NYSE:TROX) reported a net loss attributable to the company of $25 million for the quarter.
• The company's Tio2 volumes declined 7% sequentially, outside the guidance range, due to softer demand in Europe and Asia Pacific.
• Zircon volumes declined 12% sequentially, below guidance, due to weaker demand in China and orders rolling into Q4.
• Adjusted EBITDA of $143 million was slightly below the guided range, with a margin of approximately 18%.
• The company expects a decline in Tio2 volumes by 10% to 15% in Q4 due to higher seasonal demand declines in North America, Europe, and China.

Q & A Highlights

Q: Can you quantify the cost benefits expected in 2025 from operational efficiencies and high-cost inventory clearance? A: John Romano, CEO, explained that operational issues and lower utilization rates in 2024 cost about $25 million per quarter. Improvements in operational efficiency and reliability are expected to yield significant cost benefits in 2025, though specific figures are not yet available. John Serva, CFO, added that the high-cost inventory impact was $25 million to $35 million per quarter, which should improve as they run at higher utilization rates.

Q: How are the EU and Brazil tariffs expected to impact market dynamics and Tronox's market share in 2025? A: John Romano, CEO, stated that the EU is expected to finalize duties early next year, and Brazil has already implemented provisional duties. These tariffs are expected to positively impact Tronox in the mid to long term, potentially improving market share as Chinese exports adjust to the new duties.

Q: Why aren't cost benefits from lower-cost inventory reflected in Q4 guidance? A: John Romano, CEO, noted that while lower-cost inventory is starting to flow through, slower inventory movement due to higher-than-expected seasonality is delaying full benefits. John Serva, CFO, added that currency headwinds and increased freight costs are also impacting costs.

Q: What is the outlook for Tio2 and Zircon pricing and demand in 2025? A: John Romano, CEO, indicated that Tio2 pricing is expected to remain flat, with Zircon pricing slightly down in Q4. However, mid to long-term demand is expected to improve with economic recovery and stimulus measures, particularly in China and the US.

Q: How is Tronox addressing the inventory build-up, and is there a plan to sell ore inventory to free up cash? A: John Serva, CFO, explained that inventory build-up is partly due to vertical integration and market conditions. While some ore is sold opportunistically, there is no strategic shift to sell significant ore volumes. The focus remains on leveraging vertical integration for cost advantages.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.