Tronox(US:TROX)2022-04-28 20:44Financial Data and Key Metrics Changes - Tronox reported revenue of $965 million for Q1 2022, an 8% increase year-over-year, driven by higher TiO2 and pig iron revenue [16][17] - Adjusted EBITDA was $240 million, a 7% increase, while the margin decreased by 40 basis points to 24.9% due to unfavorable product mix and higher costs [17][26] - GAAP diluted earnings per share was $0.10, and adjusted diluted earnings per share was $0.60, reflecting a 40% year-over-year increase [17][46] Business Line Data and Key Metrics Changes - TiO2 revenue increased by 11% to $773 million, with a 20% rise in average selling prices, despite a 6% decrease in volumes [20] - Zircon revenue decreased by 12% to $108 million, driven by a 38% decrease in volumes, partially offset by a 43% increase in average selling prices [21] - Revenue from other products rose by 17% to $84 million, primarily due to higher pig iron volumes and prices [22] Market Data and Key Metrics Changes - The TiO2 market remains tight with low inventories and extended delivery times due to supply chain disruptions [20][24] - Demand for zircon is expected to increase slightly, with pricing improvements anticipated to offset volume declines [25][99] Company Strategy and Development Direction - Tronox aims to maintain its position as a vertically integrated global TiO2 leader, focusing on low-cost, high-quality production [30][31] - The company is investing in projects like newTRON for digital transformation and mining extensions to enhance operational efficiency and sustainability [12][35] - A significant renewable energy project in South Africa is expected to reduce emissions and provide 40% of the company's electricity needs in the region [14][15] Management's Comments on Operating Environment and Future Outlook - Management acknowledged ongoing challenges from inflation, supply chain disruptions, and geopolitical instability but remains confident in demand for TiO2 and zircon [46] - The company anticipates adjusted EBITDA for Q2 2022 to be between $265 million and $280 million, driven by pricing increases and production rates [47] - Free cash flow outlook for the year has been updated to a minimum of $265 million, reflecting strong cash earnings and disciplined expense management [50] Other Important Information - Tronox repurchased 1.4 million shares for $25 million in Q1 2022, with $275 million remaining under the share repurchase program [13][44] - The company plans to hold its second Investor Day on June 16, 2022, to provide more details on long-term strategy and operational aspects [55] Q&A Session Summary Question: TiO2 volume outlook and limiting factors - Management indicated that the flat volume outlook is due to inventory levels being below seasonal norms and logistics challenges, not demand [57] Question: Pig iron demand and pricing - Management noted that pig iron prices have increased due to limited production from Russia and Ukraine, but they remain cautious in their assumptions for future pricing [60][61] Question: Energy outlook in Europe - Management confirmed that they have hedged a significant portion of their energy exposure in Europe and expect pricing to offset cost increases [66] Question: Impact of Stallingborough outage - The unplanned outage at Stallingborough cost approximately $10 million in Q1, but operations have since resumed [73] Question: TiO2 pricing guidance - Management expects TiO2 pricing to continue to rise in Q2 and the second half of the year due to low inventories and strong demand [81] Question: Cost inflation and its impact - Management acknowledged a 20% increase in cost structure, primarily in process chemicals and energy, but expects pricing to cover these costs [68] Question: Jazan facility ramp-up - The Jazan facility is on track to achieve sustainable operations in the second half of 2022 [103] Question: Capital expenditures and inflation - Management indicated that the increase in capital expenditures is primarily due to inflationary pressures [70]