NL Industries(NL) - 2025 Q1 - Quarterly Results

Q1 2025 Financial Highlights NL Industries reported a significant decrease in Q1 2025 net income, primarily due to an unrealized loss on marketable equity securities, despite improved segment profitability Overall Performance NL Industries reported a significant decrease in net income for the first quarter of 2025, falling to $0.7 million from $6.8 million in the prior-year period. This decline was primarily driven by an $8.5 million unrealized loss on marketable equity securities, contrasting with a $2.4 million gain in Q1 2024 Q1 2025 vs Q1 2024 Key Financial Metrics (In millions, except EPS) | Metric | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | Net Income Attributable to NL Stockholders | $0.7 million | $6.8 million | | Earnings Per Share (EPS) | $0.01 | $0.14 | | Unrealized Gain/(Loss) on Marketable Equity Securities | ($8.5 million) | $2.4 million | Segment Performance Both CompX and Kronos segments demonstrated strong operational improvements in Q1 2025, driven by increased sales and improved margins CompX Segment CompX reported strong growth in the first quarter of 2025, with net sales increasing to $40.3 million from $38.0 million in Q1 2024. The segment's profit saw a substantial rise to $5.9 million, up from $3.7 million, driven by higher sales and gross margins in its Marine Components division CompX Q1 Performance (In millions) | Metric | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | Net Sales | $40.3 million | $38.0 million | | Segment Profit | $5.9 million | $3.7 million | - The sales increase was primarily due to higher Marine Components sales to the towboat and government markets, along with increased Security Products sales to the government security market[3] Kronos Worldwide, Inc. Segment NL's equity in earnings from Kronos increased to $5.5 million. Kronos' net sales rose 2% to $489.8 million, driven by higher sales volumes in North America and Europe and a 2% increase in average TiO2 selling prices year-over-year. Operating income more than doubled to $38.4 million, benefiting from higher sales, increased production volumes, and lower per-ton production costs. Production facility operating rates increased to 93% from 87% in the prior year - Effective July 16, 2024, Kronos acquired the remaining 50% interest in Louisiana Pigment Company, L.P. (LPC), making it a wholly-owned subsidiary. LPC's results are included in Kronos' operations from the acquisition date[4] Kronos Q1 Performance (In millions) | Metric | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | Net Sales | $489.8 million | $478.8 million* | | Income from Operations | $38.4 million | $19.5 million | | Equity in Earnings for NL | $5.5 million | $2.5 million | *Calculated from Q1 2025 sales of $489.8M, which was $11.0M higher than Q1 2024. - Key drivers for Kronos' improved performance include: - Sales: Higher volumes in North America and Europe and a 2% YoY increase in average TiO2 selling prices, partially offset by lower export volumes and negative currency effects of $11 million - Operating Income: Higher sales and production volumes, better selling prices, and lower per-metric-ton production costs - Production: TiO2 production volumes were 18% higher YoY, with plant capacity utilization rising to 93% from 87%[5][6] Corporate Expenses and Other Income Corporate expenses increased slightly in Q1 2025, while interest and dividend income decreased, and a significant unrealized loss was recorded on marketable equity securities Changes in Corporate and Other Items In Q1 2025, corporate expenses saw a slight increase of $0.3 million due to higher environmental and administrative costs. Interest and dividend income decreased by $0.6 million, attributed to lower interest rates and cash balances. The most significant change was the $8.5 million unrealized loss from marketable equity securities - Corporate Expenses: Increased by $0.3 million due to higher environmental remediation and administrative costs, partially offset by lower litigation fees[7] - Interest and Dividend Income: Decreased by $0.6 million primarily due to lower average interest rates and reduced cash balances[7] - Marketable Equity Securities: Recorded an unrealized loss of $8.5 million, a significant negative swing from the $2.4 million gain in Q1 2024[2][7] Forward-Looking Statements and Risk Factors The company's forward-looking statements are subject to significant risks, including market dynamics, operational costs, economic conditions, competition, and regulatory changes Summary of Risks The company highlights that forward-looking statements are subject to substantial risks and uncertainties. Key factors that could materially affect future results include supply and demand for products, the cyclicality of the TiO2 business, raw material costs, global economic conditions, competition from Chinese suppliers, currency fluctuations, and regulatory changes - The company faces numerous risks that could cause actual results to differ from expectations, including but not limited to[10] - Market & Operations: Future supply/demand, business cyclicality, customer inventory levels, and industry capacity expansion - Costs & Supply Chain: Changes in raw material and energy costs, availability of raw materials, and supply chain disruptions from global events - Economic & Political: General global economic conditions, tariffs, trade disputes, and currency exchange rate fluctuations - Competition: Competitive products, strategies from competitors (including Chinese suppliers), and potential consolidation of customers or competitors - Regulatory & Legal: Environmental regulations, changes in laws (e.g., regarding lead pigment), and the outcome of pending litigation[10][13] Financial Statements The financial statements detail the company's Q1 2025 performance, including consolidated income, operational components, and Kronos' sales changes Condensed Consolidated Statements of Income The condensed consolidated statement of income shows net sales of $40.3 million and income from operations of $3.2 million for Q1 2025. After accounting for equity earnings from Kronos, a significant loss on marketable securities, and other items, net income attributable to NL stockholders was $0.7 million, or $0.01 per share, down from $6.8 million, or $0.14 per share, in Q1 2024 Condensed Consolidated Statements of Income (In millions, except EPS) | | Three months ended March 31, | | :--- | :---: | :---: | | | 2024 | 2025 | | Net sales | $38.0 | $40.3 | | Cost of sales | 28.3 | 28.1 | | Gross margin | 9.7 | 12.2 | | Selling, general and administrative expense | 6.0 | 6.3 | | Corporate expense | 2.4 | 2.7 | | Income from operations | 1.3 | 3.2 | | Equity in earnings of Kronos Worldwide, Inc. | 2.5 | 5.5 | | Interest and dividend income | 2.6 | 2.0 | | Marketable equity securities | 2.4 | (8.5) | | Other components of net periodic pension and OPEB cost | (0.3) | (0.3) | | Interest expense | (0.2) | (0.6) | | Income before income taxes | 8.3 | 1.3 | | Income tax expense | 1.0 | — | | Net income | 7.3 | 1.3 | | Noncontrolling interest in net income of subsidiary | 0.5 | 0.6 | | Net income attributable to NL stockholders | $6.8 | $0.7 | | Net income per share attributable to NL stockholders | $0.14 | $0.01 | Components of Income from Operations The company's income from operations increased to $3.2 million in Q1 2025 from $1.3 million in Q1 2024. This improvement was entirely driven by a $2.2 million increase in CompX's segment profit, which was partially offset by a $0.3 million increase in corporate expenses Components of Income from Operations (In millions) | | Three months ended March 31, | | :--- | :---: | :---: | | | 2024 | 2025 | | CompX segment profit | $3.7 | $5.9 | | Corporate expense | (2.4) | (2.7) | | Income from operations | $1.3 | $3.2 | Change in Kronos' Net Sales Kronos' net sales increased by a net 2% in Q1 2025 compared to Q1 2024. This was composed of a 5% increase from TiO2 sales volume and a 2% increase from pricing, which were partially offset by a 2% decrease from product mix/other and a 3% decrease from currency exchange rates Percentage Change in Kronos' Net Sales (Q1 2025 vs. Q1 2024) | Component | Percentage Change | | :--- | :---: | | TiO2 Sales Volume | 5% | | TiO2 Product Pricing | 2% | | TiO2 Product Mix/Other | (2%) | | Changes in Currency Exchange Rates | (3%) | | Total | 2% |