Tronox(US:TROX)2023-04-27 20:06Financial Data and Key Metrics Changes - Adjusted EBITDA for Q1 2023 was $146 million, exceeding the top end of the guidance by $16 million, with adjusted EBITDA margins at 20.6% [6][12][18] - Revenue for Q1 2023 was $708 million, a 9% sequential improvement but a 27% decline year-over-year due to market softness [11][12] - Free cash flow for the quarter was a use of $172 million, primarily due to increased inventories and higher accounts receivables [8][21] Business Line Data and Key Metrics Changes - TiO2 volumes improved by 14% sequentially but were down 30% year-over-year, with average selling prices up 1% sequentially and 3% year-over-year [6][12][14] - Zircon volumes declined as anticipated due to lower production, but pricing remained flat compared to the prior quarter, with a 10% year-over-year increase [13] - Revenue from other products decreased by 10% year-over-year, largely driven by lower pig iron volumes and pricing, while rare earth sales increased by 62% year-over-year [13] Market Data and Key Metrics Changes - The company expects TiO2 sales volumes to increase in the mid- to high-teens range in Q2 2023, although still down in the mid-teens range compared to Q2 2022 [14] - The macroeconomic environment continues to impact pricing, with expectations for flat to slightly down pricing in Q2, particularly in the Middle East and Latin America [15][34] Company Strategy and Development Direction - Tronox aims to position itself as a global leader in TiO2 production through sustainable practices and cost-effective production [5][10] - The company is focused on sustainability efforts, including a commitment to carbon neutrality by 2050 and specific targets to reduce Scope 3 emissions intensity [11][48] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the recovery of TiO2 volumes and pricing, despite ongoing macroeconomic challenges [6][14] - The company anticipates generating positive free cash flow for the remainder of the year to offset the first quarter cash use [9][19] Other Important Information - The company has implemented a hiring freeze and reduced discretionary spending to navigate the current economic landscape [18] - Capital expenditures are expected to be below $275 million for the year, reflecting a cautious approach to investment [19][23] Q&A Session Summary Question: Sequential increase in Q2 versus Q1 - Management indicated that the sequential increase is not necessarily less than normal seasonality, with good visibility into orders for May and June [25][26] Question: Impact of Atlas mining operations - If Atlas had been fully operational, it would have contributed an additional $70 million to $90 million for the year, with a similar impact expected in Q2 [27] Question: Guidance on Q3 run rate - Management expressed confidence in achieving a run rate at the low end of the recession case for Q3, but did not provide strict guidance [30][31] Question: Pricing expectations - Pricing is expected to be flat to slightly down, influenced by competition in the Middle East and Latin America [34] Question: Update on Jazan operations - One furnace is operating at about 50% capacity, with ongoing discussions to improve operations [45] Question: Carbon reduction targets - The company is focused on reducing emissions through renewable energy projects and is exploring new technologies for further reductions [48][49] Question: Working capital build - Approximately 30% of the working capital build is related to slag purchases that are not expected to be sold through this year [54]