Tronox(US:TROX)2023-02-22 21:09Market Risks - The company is exposed to various market risks, including fluctuations in titanium dioxide (TiO2) prices, which may impact profitability due to changes in supply and demand fundamentals [328]. - The company has significant exposure to currency risk, particularly in South Africa and Australia, where revenues are primarily earned in U.S. dollars while expenses are incurred in local currencies [334]. - The company is subject to increased regulatory scrutiny regarding its TiO2 products, which may impede business growth or add significant costs [334]. - The company operates in a competitive and rapidly changing environment, with numerous risks and uncertainties that could materially affect future results [14]. Customer and Credit Risk - In 2022, the company's ten largest third-party customers represented 30% of consolidated net sales, indicating a significant concentration of credit risk [330]. - The company maintains allowances for potential credit losses based on specific customer reviews and current financial conditions, with historic losses due to write-offs of bad debt being relatively low [330]. Interest Rate Risk - A hypothetical 1% increase in interest rates would result in a net decrease to pre-tax income of approximately $6 million on an annualized basis, highlighting interest rate risk exposure [331]. - The company entered into interest-rate swap agreements to manage exposure to interest rate movements, which are set to expire in September 2024 [332]. - The company recognized approximately $21 million in "Loss on extinguishment of debt" related to the redemption of 6.5% Senior Secured Notes due 2025 during the year ended December 31, 2022 [484]. - The average effective interest rate on the Cash Flow Revolver was 5.1% for the year ended December 31, 2022 [476]. Financial Performance - Net sales for the year ended December 31, 2022, were $3,454 million, a decrease of 3.3% compared to $3,572 million in 2021 [357]. - Gross profit for 2022 was $832 million, down from $895 million in 2021, reflecting a gross margin of approximately 24.1% [357]. - Net income attributable to Tronox Holdings plc for 2022 was $497 million, an increase of 73.7% from $286 million in 2021 [357]. - Total comprehensive income for 2022 was $473 million, compared to $199 million in 2021, indicating a significant increase in overall profitability [360]. Cash Flow and Liquidity - Cash provided by operating activities decreased to $598 million in 2022 from $740 million in 2021, reflecting a decline of approximately 19% [365]. - Cash and cash equivalents decreased to $164 million in 2022 from $228 million in 2021 [363]. - The company reported a net decrease in cash and cash equivalents of $68 million for the year, compared to a decrease of $416 million in 2021 [365]. Assets and Liabilities - Total assets increased to $6,306 million as of December 31, 2022, up from $5,987 million in 2021 [363]. - Total liabilities decreased slightly to $3,903 million in 2022 from $3,945 million in 2021 [363]. - The company retained approximately $69 million of unsold receivables pledged as collateral for sold receivables as of December 31, 2022 [351]. Taxation and Deferred Tax Assets - The effective tax rate for 2022 was -62%, significantly lower than the statutory tax rate of 19% [429]. - The net deferred tax assets increased from $1,104 million in 2021 to $1,382 million in 2022, reflecting a decrease in valuation allowances by $314 million [434]. - The company recognized a non-cash deferred tax benefit of $300 million in 2022 due to the reversal of a portion of the valuation allowance for Australian deferred tax assets [435]. Capital Expenditures and Investments - Capital expenditures increased to $428 million in 2022, up from $272 million in 2021, representing a rise of 57% [365]. - Total cash used in investing activities was $415 million in 2022, compared to $269 million in 2021, indicating a 54% increase [365]. Debt Management - Long-term debt, net, decreased to $2,464 million in 2022 from $2,558 million in 2021, with the average effective interest rate for the Term Loan Facility at 4.8% [466]. - The company entered into a new seven-year Term Loan Facility of $1.3 billion and a five-year Cash Flow Revolver with initial commitments of $350 million on March 11, 2021 [471]. - The company terminated the Wells Fargo Revolver in 2021, which had initially provided up to $550 million in revolving credit lines [470]. Inventory and Receivables - Total inventories, net, increased to $1,278 million in 2022 from $1,048 million in 2021, with finished goods net rising to $641 million from $461 million [455]. - The company sold accounts receivable totaling $123 million in 2022, resulting in cash proceeds of $75 million from the initial sale and an additional $72 million from subsequent sales [451][452].