Tronox(TROX) - 2024 Q1 - Quarterly Results

Financial and Operational Highlights Tronox's Q1 2024 results surpassed expectations, with revenue of $774 million and Adjusted EBITDA of $131 million, forecasting Q2 growth First Quarter 2024 Financial Highlights Q1 2024 Key Financial Metrics | Metric | Value (million USD) | Comparison (QoQ) | Comparison (YoY) | | :--- | :--- | :--- | :--- | | Revenue | $774 | +13% | +9% | | Income from Operations | $41 | - | - | | Net Loss | $9 | - | - | | Adjusted Net Loss (non-GAAP) | $7 | - | - | | GAAP Diluted Loss Per Share | $0.06 | - | - | | Adjusted Diluted Loss Per Share (non-GAAP) | $0.05 | - | - | | Adjusted EBITDA (non-GAAP) | $131 | - | - | | Adjusted EBITDA Margin (non-GAAP) | 16.9% | - | - | | Capital Expenditures (million USD) | $76 | - | - | Second Quarter 2024 Outlook - The company provides the following guidance for Q2 2024: - TiO2 volumes: Expected to increase 7-10% compared to Q1 2024 - Zircon volumes: Expected to be relatively flat compared to Q1 2024 - Adjusted EBITDA: Expected to be in the range of $160-180 million - Adjusted EBITDA margin: Expected to be in the range of 20%[2] CEO's Remarks and Outlook The CEO attributed strong Q1 performance to lower production costs, completed destocking, and robust demand, anticipating continued margin improvement - Q1 performance was stronger than anticipated due to lower production costs, demand outpacing seasonal levels, and the completion of supply chain destocking[6] - Demand improved across all regions, with notable outperformance in Europe, the Middle East, Africa, and Latin America[6] - Manufacturing costs improved compared to both the prior year and prior quarter as the company increased operating rates in response to market recovery[7] - The CEO stated that Q1 was a "true inflection point" and expects trends in both market demand and cost reduction to continue, leading to a "step change in earnings power"[7] Detailed Financial Performance Analysis Q1 2024 revenue grew 9% YoY to $774 million, with Adjusted EBITDA up 39% sequentially to $131 million, ending with $2.7 billion net debt Overall Performance Q1 2024 Performance Summary | Metric | Q1 2024 | YoY Change | QoQ Change | | :--- | :--- | :--- | :--- | | Revenue (million USD) | $774 | +9% | +13% | | Net Loss (million USD) | ($9) | n/m | n/m | | Adjusted EBITDA (million USD) | $131 | -10% | +39% | | Adjusted EBITDA Margin | 16.9% | -370 bps | +320 bps | - The year-over-year decrease in Adjusted EBITDA was driven by headwinds from product pricing and mix, partially offset by higher sales volumes and improved production absorption[13] - The sequential increase in Adjusted EBITDA was due to improved production absorption, absence of non-repeating charges from Q4, and higher sales volumes[14] Segment Performance - TiO2: Revenue increased 8% YoY to $605 million, driven by an 18% volume increase, partially offset by a 10% decrease in average selling prices[9] - Zircon: Revenue increased 22% YoY to $88 million, driven by a 43% volume increase, partially offset by a 21% decrease in average selling prices[10] - Other Products: Revenue decreased 26% sequentially to $81 million, primarily due to non-repeating opportunistic sales of ilmenite and rare earths tailings in Q4 2023[11] Balance Sheet and Cash Flow - Ended Q1 with total debt of $2.8 billion, net debt of $2.7 billion, and a net leverage ratio of 5.2x on a trailing twelve-month basis[16] - Total available liquidity was $629 million, consisting of $152 million in cash and $477 million available under revolving credit agreements[16] - Free cash flow was a use of $105 million, primarily due to higher working capital needs from improved sales. Capital expenditures were $76 million[17] Corporate Updates Tronox advanced sustainability by activating a 200 MW solar project in South Africa, reducing carbon emissions intensity by 13%, and announced its Q1 2024 earnings call Sustainability Initiatives - Tronox began receiving power from a 200 MW solar project in South Africa, which is projected to reduce the company's global Scope 1 and Scope 2 carbon emissions intensity by 13%[18] - The company reaffirmed its commitment to achieve "net zero" by 2050 in its upcoming 2023 Sustainability Report[18] Conference Call Information - A webcast conference call to discuss the Q1 2024 results was scheduled for Thursday, May 2, 2024, at 8:00 AM ET[19] Appendix: Financial Statements and Reconciliations This appendix provides unaudited condensed consolidated financial statements for Q1 2024, including core financial statements and non-GAAP reconciliations Condensed Consolidated Statements of Operations Q1 2024 Statement of Operations (in millions) | Line Item | Q1 2024 | Q1 2023 | | :--- | :--- | :--- | | Net sales | $774 | $708 | | Gross profit | $120 | $133 | | Income from operations | $41 | $62 | | Net (loss) income | ($9) | $25 | | Net (loss) income attributable to Tronox | ($9) | $23 | | Diluted (loss) earnings per share | ($0.06) | $0.15 | Condensed Consolidated Balance Sheets Balance Sheet Summary (in millions) | Line Item | March 31, 2024 | Dec 31, 2023 | | :--- | :--- | :--- | | Cash and cash equivalents | $152 | $273 | | Total current assets | $2,159 | $2,135 | | Total assets | $6,022 | $6,134 | | Total current liabilities | $691 | $753 | | Long-term debt, net | $2,780 | $2,786 | | Total liabilities | $4,097 | $4,154 | | Total equity | $1,925 | $1,980 | Consolidated Statements of Cash Flows Q1 2024 Cash Flow Summary (in millions) | Line Item | Q1 2024 | Q1 2023 | | :--- | :--- | :--- | | Cash used in operating activities | ($29) | ($79) | | Cash used in investing activities | ($76) | ($91) | | Cash (used in) provided by financing activities | ($12) | $120 | | Net decrease in cash | ($119) | ($49) | Non-GAAP Reconciliations Reconciliation to Adjusted EBITDA (Q1 2024, in millions) | Line Item | Value | | :--- | :--- | | Net (loss) income (U.S. GAAP) | ($9) | | Interest expense | $42 | | Income tax provision | $11 | | Depreciation, depletion and amortization | $72 | | EBITDA (non-U.S. GAAP) | $112 | | Adjustments | $19 | | Adjusted EBITDA (non-U.S. GAAP) | $131 | Reconciliation to Free Cash Flow (Q1 2024, in millions) | Line Item | Value | | :--- | :--- | | Cash used in operating activities | ($29) | | Capital expenditures | ($76) | | Free cash flow (non-U.S. GAAP) | ($105) |