Tronox(TROX) - 2024 Q3 - Quarterly Results

Q3 2024 Earnings Overview Tronox's Q3 2024 performance, including financial highlights, CEO commentary, detailed financial analysis, and cash flow position Financial Highlights & Outlook Tronox reported Q3 2024 revenue of $804 million and a GAAP net loss of $25 million, with Q4 outlook anticipating TiO2 volume declines and Adjusted EBITDA of $120-135 million Third Quarter 2024 Financial Highlights | Metric | Value | | :--- | :--- | | Revenue | $804 million (+21% YoY, -2% QoQ) | | Income from Operations | $54 million | | Net Loss (GAAP) | $25 million | | Adjusted Net Loss (non-GAAP) | $21 million | | Diluted Loss Per Share (GAAP) | $0.16 | | Adjusted Diluted Loss Per Share (non-GAAP) | $0.13 | | Adjusted EBITDA (non-GAAP) | $143 million | | Adjusted EBITDA Margin (non-GAAP) | 17.8% | Q4 2024 Outlook | Metric | Outlook | | :--- | :--- | | TiO2 Volumes | Decline 10-15% vs. Q3 2024 | | Zircon Volumes | Flat to slightly down vs. Q3 2024 | | Adjusted EBITDA | $120 - $135 million | | Adjusted EBITDA Margin | High-teens | CEO's Remarks and Market Commentary Q3 results fell short of expectations due to slower demand recovery, particularly in Europe and Asia Pacific, with Q4 facing seasonal declines, but long-term optimism remains - Q3 results were below expectations as the pace of demand recovery slowed late in the quarter, with softer than forecasted demand in Europe and Asia Pacific[5] - Production utilization rates averaged the targeted ~80%, but the benefit of lower-cost inventory did not flow through due to weaker demand, which also led to higher finished goods inventory[6] - For Q4, TiO2 volumes are expected to decline 10-15% sequentially due to higher seasonal demand declines in North America, Europe, and China[6] - The company sees significant positive long-term tailwinds, including market recovery aided by interest rate cuts, stimulus measures, and anti-dumping investigations in key regions[6] Detailed Financial Performance Analysis Q3 2024 revenue grew 21% year-over-year to $804 million driven by volume, despite a wider GAAP net loss of $25 million, while Adjusted EBITDA increased 23% Revenue Analysis Q3 2024 revenue of $804 million was driven by strong volume growth in TiO2 (+12%) and Zircon (+134%), offsetting lower pricing Q3 2024 Revenue Breakdown by Product ($M) | Product | Q3 2024 Revenue | YoY Change | QoQ Change | Key Drivers (YoY) | | :--- | :--- | :--- | :--- | :--- | | TiO2 | $616 | +10% | -6% | +12% volume, -2% price/mix | | Zircon | $74 | +124% | -13% | +134% volume, -10% price/mix | | Other Products | $114 | +61% | +39% | Opportunistic sales of ilmenite and heavy mineral concentrate tailings | Profitability Analysis Q3 2024 saw a GAAP net loss of $25 million and an Adjusted EBITDA of $143 million, reflecting improved volumes despite a wider net loss Q3 2024 Profitability Metrics | Metric | Q3 2024 | Q3 2023 | YoY Change | | :--- | :--- | :--- | :--- | | Net Loss Attributable to Tronox | $(25) million | $(14) million | n/m | | GAAP Diluted Loss Per Share | $(0.16) | $(0.09) | n/m | | Adjusted Net Loss (non-GAAP) | $(21) million | $(12) million | n/m | | Adjusted Diluted Loss Per Share (non-GAAP) | $(0.13) | $(0.08) | n/m | Q3 2024 Adjusted EBITDA Performance | Metric | Q3 2024 | Q3 2023 | YoY Change | | :--- | :--- | :--- | :--- | | Adjusted EBITDA | $143 million | $116 million | +23% | | Adjusted EBITDA Margin | 17.8% | 17.5% | +30 bps | Financial Position and Cash Flow Tronox ended Q3 with $2.7 billion net debt and $668 million liquidity, successfully refinancing debt, while free cash flow was a $14 million use due to capital expenditures - Ended the quarter with $2.8 billion total debt, $2.7 billion net debt, a 5.0x net leverage ratio, and $668 million in available liquidity[12] - Successfully refinanced a term loan due 2029 with a new loan due 2031, extending the company's debt maturity profile. The next significant maturity is not until 2029[12] Q3 2024 Cash Flow and Capital Allocation | Metric | Value | | :--- | :--- | | Free Cash Flow | $(14) million | | Capital Expenditures | $101 million | | Dividends Paid | $20 million | Financial Statements and Reconciliations Comprehensive financial statements and non-GAAP reconciliations provide a detailed view of Tronox's Q3 2024 operational results, balance sheet, and cash flow performance Condensed Consolidated Statements of Operations (U.S. GAAP) Q3 2024 net sales increased to $804 million, with improved gross profit, but higher expenses led to a net loss of $25 million Q3 2024 Statement of Operations Highlights ($M) | Line Item | Three Months Ended Sep 30, 2024 | Three Months Ended Sep 30, 2023 | | :--- | :--- | :--- | | Net Sales | $804 | $662 | | Gross Profit | $128 | $94 | | Income from Operations | $54 | $32 | | Net Loss | $(25) | $(14) | | Diluted Loss Per Share | $(0.16) | $(0.09) | Condensed Consolidated Balance Sheets (U.S. GAAP) As of September 30, 2024, total assets were $6.19 billion, with $167 million cash and $1.48 billion inventories, and long-term debt at $2.77 billion Balance Sheet Highlights ($M) | Account | Sep 30, 2024 | Dec 31, 2023 | | :--- | :--- | :--- | | Cash and cash equivalents | $167 | $273 | | Inventories, net | $1,482 | $1,421 | | Total current assets | $2,219 | $2,135 | | Total assets | $6,191 | $6,134 | | Long-term debt, net | $2,767 | $2,786 | | Total liabilities | $4,245 | $4,154 | | Total equity | $1,946 | $1,980 | Consolidated Statements of Cash Flows (U.S. GAAP) For the nine months ended September 30, 2024, operating cash flow significantly improved to $218 million, while investing activities used $226 million primarily for capital expenditures Cash Flow Summary for Nine Months Ended Sep 30 ($M) | Cash Flow Activity | 2024 | 2023 | | :--- | :--- | :--- | | Cash provided by operating activities | $218 | $74 | | Cash used in investing activities | $(226) | $(199) | | Cash (used in) provided by financing activities | $(97) | $207 | | Net decrease in cash | $(105) | $82 | Non-GAAP Reconciliations Detailed reconciliations show the adjustment of GAAP net loss of $25 million to Adjusted Net Loss of $21 million and Adjusted EBITDA of $143 million, and free cash flow calculation - The Q3 2024 GAAP Net Loss of $25 million was reconciled to a non-GAAP Adjusted Net Loss of $21 million. Key adjustments included a $3 million loss on extinguishment of debt[24] - Adjusted EBITDA for Q3 2024 was $143 million. This was derived from a GAAP Net Loss of $25 million by adding back items such as interest expense ($42M), income tax ($26M), D&A ($70M), and other adjustments[27] - Free Cash Flow for Q3 2024 was a use of $14 million, calculated from cash provided by operating activities ($87 million) minus capital expenditures ($101 million)[29]