Tronox(US:TROX)2024-08-02 20:08Financial Data and Key Metrics Changes - Revenue for Q2 2024 was $820 million, a 3% increase year-over-year and a 6% increase sequentially, primarily driven by higher TiO2 volumes [7] - Adjusted EBITDA was $161 million, with an adjusted EBITDA margin of 19.6%, reflecting a 4% decline year-on-year but a 23% improvement sequentially [9][10] - Net income attributable to Tronox was $16 million, with an adjusted diluted earnings per share of $0.07 [7][8] Business Line Data and Key Metrics Changes - TiO2 volumes improved by 8% sequentially and 16% year-over-year, with TiO2 revenues increasing by 7% year-over-year despite an 8% decline in price and mix [3][8] - Zircon demand remained stable compared to Q1, with a slight decrease due to shipments rolling into Q3, and Zircon pricing increased by 1% sequentially [8][9] Market Data and Key Metrics Changes - The company noted a significant recovery in TiO2 and Zircon volumes, with year-to-date TiO2 volumes up approximately 17% and Zircon volumes up approximately 20% compared to the prior year [11][12] - The EU has implemented provisional duties on Chinese imports, which is expected to benefit Tronox in the medium to long term [11][12] Company Strategy and Development Direction - Tronox is focused on sustainability, aiming to reduce Scope 1 and 2 carbon emissions intensity by 50% by 2030 and achieve carbon neutrality by 2050 [5][6] - The company is investing $395 million in capital expenditures primarily in the mining side of the business in South Africa to sustain vertical integration [13][14] - Tronox is exploring opportunities in the rare earth space as part of its growth strategy [17] Management's Comments on Operating Environment and Future Outlook - Management indicated that the first half of 2024 has shown a reversal of trends from the previous two years, with expectations for continued recovery [11][12] - The company anticipates TiO2 volumes to decline by 2% to 4% in Q3 compared to Q2, but this still represents a significant increase compared to Q3 2023 [14][15] - Management expressed confidence in achieving lower costs and improved margins in Q4 due to higher utilization rates and lower cost inventory being sold [20][26] Other Important Information - Total available liquidity as of June 30 was $680 million, with $201 million in cash and cash equivalents [10][11] - The company returned $41 million to shareholders, including dividends for the first and second quarters [11] Q&A Session Summary Question: Cost impact of ramp-up issues - Management indicated that the cost impact from ramp-up issues is split evenly between Q2 and Q3, with approximately $15 million each quarter [18][19] Question: Working capital as a source of cash - Management expects working capital to be a slight tailwind for the full year, with inventory levels being built up to meet demand [21][22] Question: Earnings momentum in Q4 - Management clarified that the expected step up in earnings momentum in Q4 is due to lower costs and higher margins from selling lower cost inventory [25][26] Question: Customer behavior changes due to EU tariffs - Management noted significant changes in customer behavior in the EU following the implementation of provisional duties, with a drop in Chinese exports to the region [29][30] Question: Zircon shipment delays - Management confirmed that the shipment pushing to Q3 was a couple of thousand tons, not significant, and that recovery in Chinese demand is necessary for volume improvement [33][34] Question: Future CapEx expectations - Management expects CapEx to decrease in 2025 and 2026 from the elevated levels in 2024, with ongoing investments in mining projects [35][36] Question: Inventory levels and working capital - Management explained that while overall inventory levels are high, there is a need to build finished goods inventory to meet demand [40][41]