NL Industries(NL) - 2025 Q2 - Quarterly Results

Executive Summary NL Industries Consolidated Financial Performance NL Industries reported a significant decrease in net income attributable to stockholders for both the second quarter and first six months of 2025 compared to 2024, primarily driven by an unrealized loss on marketable equity securities and a shift from equity in Kronos earnings to losses NL Industries Consolidated Financial Highlights | Metric | Q2 2024 ($M) | Q2 2025 ($M) | H1 2024 ($M) | H1 2025 ($M) | | :-------------------------------------- | :----------- | :----------- | :----------- | :----------- | | Net Income Attributable to NL Stockholders | 7.9 | 0.3 | 14.7 | 1.0 | | Net Income per Share (EPS) | 0.16 | 0.01 | 0.30 | 0.02 | | Marketable Equity Securities (Unrealized Gain/Loss) | 0.8 | (0.1) | 3.2 | (8.6) | | Equity in Kronos Earnings (Losses) | 6.0 | (2.8) | 8.5 | 2.7 | Segment Performance Overview CompX demonstrated strong growth in both net sales and segment profit for Q2 and H1 2025, while Kronos experienced a slight decrease in Q2 net sales but a slight increase for H1, with its income from operations significantly declining in both periods - CompX's net sales increased to $40.3 million in Q2 2025 (from $35.9M in Q2 2024) and $80.6 million in H1 2025 (from $73.9M in H1 2024), driven by higher Security Products and Marine Components sales[3] - Kronos's net sales were $494.4 million in Q2 2025 (1% lower YoY) and $984.2 million in H1 2025 (1% higher YoY)[5] - Kronos's income from operations significantly decreased to $7.4 million in Q2 2025 (from $35.9M in Q2 2024) and $45.8 million in H1 2025 (from $55.4M in H1 2024)[6] Detailed Segment Performance CompX Segment Performance CompX achieved robust growth in both net sales and segment profit for the second quarter and first six months of 2025, primarily attributed to increased sales in Security Products and Marine Components, coupled with improved gross margins across both segments CompX Segment Financials | Metric | Q2 2024 ($M) | Q2 2025 ($M) | H1 2024 ($M) | H1 2025 ($M) | | :--------------- | :----------- | :----------- | :----------- | :----------- | | Net Sales | 35.9 | 40.3 | 73.9 | 80.6 | | Segment Profit | 5.1 | 6.3 | 8.8 | 12.2 | - The increase in sales for both periods is due to higher Security Products sales primarily to the government security market and higher Marine Components sales primarily to the government and towboat markets[3] - CompX's segment profit increased due to higher sales and gross margin at each of the Security Products and Marine Components segments[3] Kronos Worldwide, Inc. Performance Kronos's financial performance was mixed, with a slight decrease in Q2 2025 net sales but a slight increase for H1 2025, while income from operations significantly declined in both periods, impacted by lower TiO2 selling prices, unfavorable fixed cost absorption, and higher production costs, with the acquisition of the remaining 50% interest in Louisiana Pigment Company, L.P. in July 2024 also noted Kronos Key Financials | Metric | Q2 2024 ($M) | Q2 2025 ($M) | H1 2024 ($M) | H1 2025 ($M) | | :----------------------- | :----------- | :----------- | :----------- | :----------- | | Net Sales | 500.5 | 494.4 | 979.3 | 984.2 | | Income from Operations | 35.9 | 7.4 | 55.4 | 45.8 | - Effective July 16, 2024, Kronos acquired the remaining 50% joint venture interest in Louisiana Pigment Company, L.P. (LPC), making LPC a wholly-owned subsidiary[4] Kronos Net Sales Analysis Kronos's Q2 2025 net sales decreased by 1% year-over-year, primarily due to lower average TiO2 selling prices, changes in product mix, and reduced sales volumes in export markets, partially offset by higher North American sales volumes, while H1 2025 net sales increased by 1% year-over-year, driven by higher sales volumes in North American and European markets, despite lower export volumes and product mix changes, with currency exchange rates also influencing comparisons Change in Kronos' Net Sales (YoY Percentage) | Factor | Q2 2025 vs. 2024 | H1 2025 vs. 2024 | | :-------------------------- | :--------------- | :--------------- | | TiO2 sales volume | (1)% | 2% | | TiO2 product pricing | (1)% | — | | Product mix/other TiO2 | (1)% | (1)% | | Changes in currency exchange rates | 2% | — | | Total | (1)% | 1% | - Kronos's average TiO2 selling prices declined 4% during the first six months of 2025, with Q2 2025 prices 1% lower YoY[5] - The TiO2 market in H1 2025 was impacted by global uncertainty related to U.S. trade policies, geopolitical tensions, and customer hesitancy to build inventories, deferring anticipated market recovery[5] Kronos Income from Operations Analysis Kronos's income from operations significantly decreased in both Q2 and H1 2025, with the Q2 decline primarily due to unfavorable fixed cost absorption from reduced operating rates, higher cost inventory, and currency fluctuations, and the H1 decline also attributed to additional unabsorbed fixed production costs and higher raw material costs, despite a 2% increase in TiO2 sales volumes Kronos Income from Operations | Metric | Q2 2024 ($M) | Q2 2025 ($M) | H1 2024 ($M) | H1 2025 ($M) | | :----------------------- | :----------- | :----------- | :----------- | :----------- | | Income from Operations | 35.9 | 7.4 | 55.4 | 45.8 | - Q2 2025 decrease primarily due to unfavorable fixed cost absorption from reduced operating rates, higher cost inventory produced in Q1, and currency fluctuations (primarily the euro)[7][8] - H1 2025 decrease primarily due to approximately $18 million in additional unabsorbed fixed production costs and higher production costs (primarily raw materials)[8] - Currency exchange rates (primarily the euro) increased Kronos's income from operations by approximately $14 million in Q2 2025 and $9 million in H1 2025[8] Kronos Operational Factors Kronos incurred approximately $20 million in unabsorbed fixed production costs in Q2 2025 and $18 million in H1 2025 due to operating its production facilities at reduced rates, with overall average capacity utilization for H1 2025 at 87%, a decrease from 93% in H1 2024, and prior year periods included charges related to workforce reductions and accelerated depreciation from the closure of a sulfate process line Kronos Unabsorbed Fixed Production Costs | Period | Unabsorbed Fixed Production Costs ($M) | | :----- | :------------------------------------- | | Q2 2025 | ~20 | | H1 2025 | ~18 | Kronos Capacity Utilization Rates | Period | Average Capacity Utilization | | :----- | :--------------------------- | | H1 2025 | 87% | | Q1 2025 | 93% | | Q2 2025 | 81% | | H1 2024 | 93% | | Q1 2024 | 87% | | Q2 2024 | 99% | - Kronos's income from operations in both Q2 and H1 2024 included a charge of approximately $2 million related to workforce reductions and approximately $10 million in non-cash charges primarily related to accelerated depreciation from the closure of its sulfate process line in Canada[8] Other Financial Items & Corporate Corporate Expenses and Other Income/Expense Corporate expenses decreased in both Q2 and H1 2025, primarily due to lower litigation fees and environmental remediation costs, while interest and dividend income also declined due to lower average interest rates and decreased cash balances, and the company recorded an unrealized loss on marketable equity securities in 2025, contrasting with gains in 2024 Corporate Expenses and Other Income/Expense | Metric | Q2 2024 ($M) | Q2 2025 ($M) | H1 2024 ($M) | H1 2025 ($M) | | :------------------------------ | :----------- | :----------- | :----------- | :----------- | | Corporate Expense | 4.3 | 3.5 | 6.7 | 6.2 | | Interest and Dividend Income | 2.6 | 1.5 | 5.2 | 3.5 | | Marketable Equity Securities (Unrealized Gain/Loss) | 0.8 | (0.1) | 3.2 | (8.6) | - Corporate expenses decreased primarily due to lower litigation fees and related costs and lower environmental remediation and related costs[9] - Net income attributable to NL stockholders for H1 2024 included a loss of $0.3 million due to Kronos's recognition of an aggregate charge related to a write-off of deferred financing costs[10] Business Overview & Forward-Looking Statements Business Description NL Industries, Inc. operates in two primary business segments: component products, which include security products and recreational marine components, and chemicals, specifically Titanium Dioxide (TiO2) - NL Industries, Inc. is engaged in component products (security products and recreational marine components) and chemicals (TiO2) businesses[14] Forward-Looking Statements and Risk Factors The report contains forward-looking statements that are subject to substantial risks and uncertainties, which could cause actual future results to differ materially from expectations, with key risk factors including market supply and demand, Kronos's ability to achieve cost savings and integrate acquisitions, business cyclicality, raw material costs, global economic and political conditions, operating interruptions, technology disruptions, competition, currency fluctuations, and various legal, environmental, and regulatory matters - Statements in this release that are not historical facts are forward-looking and involve substantial risks and uncertainties that could significantly impact expected results[11] - Key risk factors include future supply and demand for products, Kronos's ability to realize cost savings and integrate acquisitions (like LPC), cyclicality of businesses (e.g., Kronos's TiO2 operations), changes in raw material and operating costs, global economic and political conditions, operating interruptions, technology-related disruptions, competitive pressures, currency exchange rate fluctuations, and various legal and environmental matters[11][12][15] - The company disclaims any intention or obligation to update or revise any forward-looking statement[13] Financial Statements Condensed Consolidated Statements of Income This section presents the unaudited condensed consolidated statements of income for NL Industries, Inc. for the three and six months ended June 30, 2025, and 2024, detailing net sales, cost of sales, gross margin, various expenses, income from operations, equity in Kronos, other income/expense items, net income, and earnings per share NL INDUSTRIES, INC. CONDENSED CONSOLIDATED STATEMENTS OF INCOME | Metric | Q2 2024 ($M) | Q2 2025 ($M) | H1 2024 ($M) | H1 2025 ($M) | | :-------------------------------------- | :----------- | :----------- | :----------- | :----------- | | Net sales | 35.9 | 40.3 | 73.9 | 80.6 | | Cost of sales | 24.8 | 27.4 | 53.1 | 55.5 | | Gross margin | 11.1 | 12.9 | 20.8 | 25.1 | | Selling, general and administrative expense | 6.0 | 6.6 | 12.0 | 12.9 | | Corporate expense | 4.3 | 3.5 | 6.7 | 6.2 | | Income from operations | 0.8 | 2.8 | 2.1 | 6.0 | | Equity in earnings (losses) of Kronos Worldwide, Inc. | 6.0 | (2.8) | 8.5 | 2.7 | | Interest and dividend income | 2.6 | 1.5 | 5.2 | 3.5 | | Marketable equity securities | 0.8 | (0.1) | 3.2 | (8.6) | | Income before income taxes | 9.8 | 1.0 | 18.1 | 2.3 | | Income tax expense | 1.3 | — | 2.3 | — | | Net income | 8.5 | 1.0 | 15.8 | 2.3 | | Net income attributable to NL stockholders | 7.9 | 0.3 | 14.7 | 1.0 | | Net income per share attributable to NL stockholders | 0.16 | 0.01 | 0.30 | 0.02 | Components of Income from Operations This table details the breakdown of NL Industries' consolidated income from operations, showing the contributions from CompX segment profit and the impact of Corporate expense for the three and six months ended June 30, 2025, and 2024 NL INDUSTRIES, INC. COMPONENTS OF INCOME FROM OPERATIONS | Metric | Q2 2024 ($M) | Q2 2025 ($M) | H1 2024 ($M) | H1 2025 ($M) | | :---------------------- | :----------- | :----------- | :----------- | :----------- | | CompX segment profit | 5.1 | 6.3 | 8.8 | 12.2 | | Corporate expense | (4.3) | (3.5) | (6.7) | (6.2) | | Income from operations | 0.8 | 2.8 | 2.1 | 6.0 | Change in Kronos' Net Sales This table provides a detailed analysis of the percentage change in Kronos's net sales for the three and six months ended June 30, 2025, compared to the prior year, attributing changes to specific factors such as TiO2 sales volume, product pricing, product mix, and currency exchange rates CHANGE IN KRONOS' NET SALES (YoY Percentage) | Factor | Q2 2025 vs. 2024 | H1 2025 vs. 2024 | | :-------------------------- | :--------------- | :--------------- | | TiO2 sales volume | (1)% | 2% | | TiO2 product pricing | (1)% | — | | Product mix/other TiO2 | (1)% | (1)% | | Changes in currency exchange rates | 2% | — | | Total | (1)% | 1% |