Valhi(VHI) - 2024 Q3 - Quarterly Report

Financial Performance - Net income attributable to Valhi stockholders increased to $57.5 million or$2.01 per diluted share in Q3 2024, compared to a net loss of $5.8 million or$0.21 per diluted share in Q3 2023[114]. - For the first nine months of 2024, net income attributable to Valhi stockholders was $85.2 million or$2.99 per diluted share, compared to a net loss of $14.8 million or$0.52 per diluted share in the same period of 2023[116]. - Consolidated operating income for the first nine months of 2024 was $154.0 million, an increase of$137.0 million compared to $17.0 million in the same period of 2023[190]. - Income tax expense was$34.3 million in Q3 2024, compared to a benefit of $7.8 million in Q3 2023, driven by higher earnings and jurisdictional mix[180]. Chemicals Segment Performance - Operating income from the Chemicals Segment rose to$42.6 million in Q3 2024, compared to an operating loss of $21.8 million in Q3 2023[114]. - The Chemicals Segment's operating income for the first nine months of 2024 was$105.9 million, compared to an operating loss of $39.5 million in the same period of 2023[116]. - Net sales for the Chemicals Segment increased by 22$484.7 million in Q3 2024, driven by a 21% increase in sales volumes[131]. - Sales volumes for TiO2 increased by 21% in Q3 2024, reflecting improved demand across all major markets[132]. - The Chemicals Segment's cost of sales as a percentage of net sales decreased to 79% in Q3 2024 from 91% in Q3 2023, attributed to lower production costs and higher production volumes[135]. Market Demand and Pricing - Demand for TiO2 is expected to grow by 2% to 3% per year, consistent with long-term GDP growth expectations[119]. - Average TiO2 selling prices in the first nine months of 2024 were 7% lower than in the same period of 2023, impacting net sales negatively[126]. - The Chemicals Segment's reported operating results are significantly impacted by TiO2 selling prices, sales and production volumes, manufacturing costs, and currency exchange rates[120]. Cost Management and Efficiency - The Chemicals Segment implemented cost reduction initiatives throughout 2023, leading to improved gross margins in 2024 as higher-cost inventory is replaced[152]. - The Chemicals Segment operated at 93% of practical capacity utilization in the first nine months of 2024, up from 71% in the same period of 2023[126]. - Gross margin as a percentage of net sales improved to 21% in Q3 2024, compared to 9% in Q3 2023, due to higher sales and production volumes[136]. Interest and Debt Management - Higher interest expense is anticipated in 2024 due to refinancing of the Chemicals Segment's Senior Secured Notes and debt incurred for the LPC acquisition[118]. - Interest expense increased by $6.2 million and$15.2 million in Q3 and the first nine months of 2024 compared to the same periods in 2023, primarily due to new debt issuances and a subordinated loan[178]. - The company expects higher interest expenses in 2024 compared to 2023 due to increased debt balances and higher interest rates on new debt[179]. Component Products Segment Performance - The Component Products Segment's operating income decreased to $3.3 million in Q3 2024 from$6.6 million in Q3 2023, primarily due to lower sales and gross margin[157]. - Total net sales for the Component Products Segment decreased by $6.7 million in Q3 2024 compared to Q3 2023, mainly due to lower security products sales[158]. - The Component Products Segment expects lower gross margin and operating income margin for 2024 compared to 2023 due to reduced sales coverage of fixed costs and higher material and labor costs[164]. Land Sales and Revenue - Land sales revenue in Q3 2024 was$15.3 million, down from $31.3 million in Q3 2023, and$52.2 million in the first nine months of 2024 compared to $83.2 million in the same prior year period[168]. - Deferred revenue related to post-closing obligations on land sales closed prior to 2024 amounted to$45.8 million as of September 30, 2024[170]. Cash Flow and Liquidity - Cash used in operating activities decreased to $1.8 million in the first nine months of 2024 from$61.2 million in the same period of 2023, reflecting improved cash flow management[187]. - The company anticipates sufficient liquidity to meet short-term obligations through September 30, 2025, and long-term obligations through September 30, 2029[202]. Acquisitions and Investments - Kronos acquired the remaining 50% interest in Louisiana Pigment Company for $185 million, with an additional earn-out payment of up to$15 million based on EBITDA for 2025 and 2026[123]. - Kronos paid $156.8 million for the remaining interest in the TiO2 manufacturing joint venture in LPC during the nine months ended September 30, 2024[194]. Shareholder Returns - Kronos paid a regular dividend of$0.19 per share in each quarter of 2023, totaling $44.1 million, and announced a decrease to$0.05 per share starting in the third quarter of 2024[212]. - The company has authorized the repurchase of up to 2.0 million shares of Kronos common stock, with approximately 1.0 million shares available for repurchase as of September 30, 2024[210].