Valhi(VHI) - 2025 Q1 - Quarterly Results

Financial Highlights Valhi, Inc. reported strong Q1 2025 financial results, highlighted by a significant increase in net income and improved segment performance Overall Performance Valhi, Inc. reported a significant increase in net income for the first quarter of 2025, reaching $16.9 million, more than double the $7.8 million from the same period in 2024, primarily driven by stronger operating results in the Chemicals Segment Q1 2025 vs Q1 2024 Performance Summary | Metric | Q1 2025 | Q1 2024 | Change | | :--- | :--- | :--- | :--- | | Net Income Attributable to Valhi Stockholders | $16.9 million | $7.8 million | +116.7% | | Diluted EPS | $0.59 | $0.27 | +118.5% | - The increase in net income was primarily due to higher operating results from the Chemicals Segment[1] - Effective July 16, 2024, the Chemicals Segment acquired the remaining 50% of Louisiana Pigment Company, L.P. (LPC), making it a wholly-owned subsidiary, with LPC's results included in the consolidated financials from the acquisition date[1] Segment Performance Analysis of Valhi's business segments reveals varied performance, with strong growth in Chemicals and Component Products offsetting declines in Real Estate Chemicals Segment The Chemicals Segment's net sales rose by 2% to $489.8 million in Q1 2025, driven by higher sales volumes in North America and Europe and increased TiO2 prices, while operating income surged by 80.7% to $41.2 million due to higher production volumes, improved pricing, and lower per-ton production costs Chemicals Segment Financials (Q1 2025 vs Q1 2024) | Metric | Q1 2025 | Q1 2024 | Change | | :--- | :--- | :--- | :--- | | Net Sales | $489.8 M | $478.8 M | +2.3% | | Operating Income | $41.2 M | $22.8 M | +80.7% | - Net sales increased due to higher sales volumes in North American and European markets and 2% higher average TiO2 selling prices, partially offset by lower export volumes and an $11 million negative impact from currency fluctuations[2] - Operating income growth was driven by higher sales and production volumes, higher prices, and lower per-metric-ton production costs, with TiO2 production volumes 18% higher than in Q1 2024[3] - The segment operated at 93% of average capacity in Q1 2025, up from 87% in Q1 2024[3] Component Products Segment The Component Products Segment saw net sales increase to $40.3 million and operating income rise to $5.9 million in Q1 2025, primarily attributed to higher sales of marine components to the towboat and government markets, along with increased sales of security products to the government security market Component Products Segment Financials (Q1 2025 vs Q1 2024) | Metric | Q1 2025 | Q1 2024 | Change | | :--- | :--- | :--- | :--- | | Net Sales | $40.3 M | $38.0 M | +6.1% | | Operating Income | $5.9 M | $3.7 M | +59.5% | - The increase in sales and operating income was driven by higher marine components sales (to towboat and government markets) and higher security products sales (to the government security market)[4] Real Estate Management and Development Segment This segment experienced a significant decline in performance, with net sales dropping to $8.5 million from $13.8 million in the prior-year quarter, linked to a slower pace of development activities caused by delays in obtaining city permits and environmental approvals Real Estate Segment Financials (Q1 2025 vs Q1 2024) | Metric | Q1 2025 | Q1 2024 | Change | | :--- | :--- | :--- | :--- | | Net Sales | $8.5 M | $13.8 M | -38.4% | | Operating Income | $3.0 M | $5.0 M | -40.0% | - Land sales revenue is recognized over time based on development spending, and revenue declined due to a slower pace of development activities[5] - Development has been slowed by delays in obtaining city permits and environmental approvals from the Nevada Department of Environmental Protection[6] Corporate Items and Expenses Corporate financials show stable expenses but increased interest costs due to higher debt levels Summary of Corporate-Level Financials In Q1 2025, corporate expenses remained stable compared to the previous year, however, interest income decreased by $1.4 million due to lower interest rates and cash balances, while interest expense rose by $1.9 million, primarily because of higher debt levels at the Chemicals Segment from transactions in 2024 - Corporate expenses were comparable between Q1 2025 and Q1 2024[7] - Interest income and other decreased by $1.4 million due to lower average interest rates and decreased cash balances[7] - Interest expense increased by $1.9 million, mainly due to higher overall debt levels resulting from the Chemicals Segment's debt transactions in 2024[7] Forward-Looking Statements and Risk Factors The report outlines significant risks and uncertainties that could impact future financial performance Risk Disclosure The report includes forward-looking statements based on current management beliefs, which are subject to substantial risks and uncertainties, with numerous factors identified that could cause actual results to differ materially, including market supply and demand, raw material costs, global economic conditions, operational interruptions, currency fluctuations, and regulatory changes - The report contains forward-looking statements that are not historical facts and involve substantial risks and uncertainties[8] - Key risk factors include: * Future supply and demand for products like TiO2 * Changes in raw material and operating costs (ore, energy) * General global economic and political conditions * Operating interruptions, including labor disputes, natural disasters, and cyber-attacks * Fluctuations in currency exchange rates (USD vs. euro, Norwegian krone, Canadian dollar) * Environmental matters and changes in government laws and regulations[8][11] Financial Statements Detailed financial statements provide a comprehensive overview of income and key segment performance drivers Condensed Summary of Income For the first quarter of 2025, Valhi's total net sales grew to $538.6 million from $530.6 million year-over-year, total operating income increased significantly to $50.1 million from $31.5 million, and after accounting for corporate items and taxes, net income attributable to stockholders was $16.9 million, or $0.59 per share, a substantial increase from $7.8 million, or $0.27 per share, in Q1 2024 Condensed Summary of Income (In millions, except per share) | | Three months ended March 31, | | | :--- | :--- | :--- | | | 2024 | 2025 | | Total net sales | $530.6 | $538.6 | | Total operating income | $31.5 | $50.1 | | Income before income taxes | $18.0 | $30.8 | | Net income | $13.6 | $22.8 | | Net income attributable to Valhi stockholders | $7.8 | $16.9 | | Basic and diluted net income per share | $0.27 | $0.59 | Impact of Percentage Change in Chemical Segment's Net Sales The 2% net sales growth in the Chemicals Segment for Q1 2025 was a result of positive and negative factors, with a 5% increase from TiO2 sales volumes and a 2% increase from pricing being the primary drivers, partially offset by a 2% negative impact from product mix/other factors and a 3% negative impact from currency exchange rates Drivers of Chemical Segment's Net Sales Change (Q1 2025 vs Q1 2024) | Factor | Percentage Change | | :--- | :--- | | TiO2 sales volumes | 5% | | TiO2 product pricing | 2% | | TiO2 product mix/other | (2%) | | Changes in currency exchange rates | (3%) | | Total | 2% |