OK
The Universal Selection Source:
Coatings Ingredients
Industry News

Tronox Reports Second Quarter 2015 Revenue of USD 617 Million

Published on 2015-08-17. Author : SpecialChem

STAMFORD, Conn. -- Tronox Limited reported second quarter 2015 revenue of $617 million compared to $490 million in the second quarter 2014 and $385 million in the first quarter 2015. Adjusted EBITDA was $116 million, excluding $49 million of net lower of cost or market (LCM) charges, compared to $103 million, excluding net non-cash LCM credits of $5 million, in the year-ago quarter and $73 million, excluding net non-cash LCM charges of $9 million, in the prior quarter. Adjusted net loss attributable to Tronox Limited in the second quarter was $81 million, or $0.70 per diluted share, versus breakeven net income, or $0.00 per diluted share, in the year-ago quarter and a loss of $51 million, or $0.44 per diluted share, in the first quarter 2015.

TRONOX
Fig. 1: TRONOX

Tom Casey, chairman and CEO of Tronox, said: "In our first quarter of operating two vertically integrated businesses, we delivered a high level of adjusted EBITDA and generated significant cash. Our two operating businesses, TiO2 and Alkali, generated adjusted EBITDA of $135 million in the quarter excluding net non-cash LCM charges. With that level of adjusted EBITDA, and after capital expenditures of $61 million, our businesses delivered $74 million of cash to the company. This quarter's performance demonstrated our cash generation strength even under difficult market conditions in our TiO2 business. We are increasing our cash generation across the company, including reducing our operating costs and working capital. In the second quarter, we signed a contract with a non-pigment company to sell high-quality ilmenite that we had previously stockpiled in a transaction that will produce cash of approximately $35-37 million over the next six quarters. This is but one example of our heightened focus on cash generation."

Casey continued: "Our TiO2 segment generated adjusted EBITDA of $85 million and delivered cash of $28 million in the second quarter, despite 5 percent lower average selling prices for pigment products compared to the first quarter. We have taken the appropriate steps in our pigment and feedstock operations to reduce production volumes to reduce inventory without affecting sales volumes, as demand will be met from reduced production levels and finished goods inventories. Our Alkali business continued its strong operating performance in its first quarter within Tronox, generating $50 million of adjusted EBITDA and delivering $46 million of cash. Alkali continues to operate in a sold-out mode driven by strong export demand growth and a continued recovery in the domestic market. The benefits of having Alkali in our portfolio are many, but its high cash generation is particularly valuable in this current period of depressed TiO2 conditions."

Casey concluded: "With the cash generation strength of our operating businesses, coupled with our cash generation initiatives sourced from operating cost and working capital reductions, as well as capital expenditure reductions, we expect to generate positive free cash flow in 2016 after capital expenditures, interest expense and dividend payments. We intend to focus this cash surplus on deleveraging and providing for future growth of the company."

Titanium Dioxide (TiO2 )

TiO2 segment revenue of $409 million was 17 percent lower than $490 million in the prior-year quarter, primarily the result of lower pigment products sales. Sales of pigment products declined 19 percent, as sales volumes declined 4 percent and average selling prices declined 16 percent (11 percent on a local currency basis). Sales volumes for pigment products rebounded in EMEA, declined in Asia-Pacific and softened modestly in North America versus the year-ago quarter. Sales of titanium feedstocks and co-products, including zircon and rutile, declined 15 percent versus the year-ago quarter. Selling prices increased in the 4-6 percent range for titanium feedstocks. Sales volumes increased for CP titanium slag and rutile products declined. Zircon sales volumes remained at normal levels but were lower compared to very strong sales volumes in the year-ago quarter and selling prices declined modestly.

Compared sequentially, TiO2 segment revenue of $409 million increased 6 percent versus $385 million in the first quarter, driven primarily by a 13 percent sales volumes increase for pigment products. Pigment products revenue increased 8 percent, as the 13 percent gain in sales volumes was partially offset by 5 percent lower average selling prices (3 percent on a local currency basis). Sales volume gains for pigment products were realized in North America, EMEA and Asia-Pacific. Finished pigment products inventory at the end of the second quarter was modestly above normal seasonal levels. Sales of titanium feedstocks and co-products, including zircon, increased 2 percent versus the prior quarter. Sales volumes for titanium feedstocks were lower. Selling prices for CP titanium slag increased 3 percent and rutile products remained level. Zircon sales increased 12 percent, driven by 18 percent higher sales volumes, partially offset by 5 percent lower selling prices.

We believe that because of oversupply conditions in the TiO2 market, average selling prices are at levels that are producing inadequate returns. As a result, we have reduced production volumes at both our pigment and feedstock operations. Production has been suspended at one of six processing lines at our Hamilton pigment plant and one of four processing lines at our Kwinana pigment plant. Together, these processing line curtailments represent approximately 15 percent of total pigment production. We have also suspended operation at one slag smelter at our KZN Sands facility, which has reduced our slag production capacity by approximately 12 percent. We expect sales volumes for both pigment products and titanium feedstocks to be unaffected, as we intend to meet demand from reduced production levels and finished goods inventories. If demand exceeds our forecasts over the balance of 2015, we have the operating flexibility to quickly increase production.

TiO2 segment adjusted EBITDA of $85 million, excluding $49 million of net lower of cost or market (LCM) charges, compares to adjusted EBITDA of $120 million, excluding net non-cash credits of $5 million, in the prior-year quarter and $94 million, excluding net non-cash LCM charges of $9 million, in the prior quarter. TiO2 segment operating loss of $41 million compares to operating income of $30 million in the year-ago quarter and $9 million in the prior quarter.

Capital expenditures of $57 million in the quarter included $31 million related to the Fairbreeze mine project that will produce feedstock to supply the slag furnaces at our KZN Sands operations and provide new zircon and rutile co-products. The Fairbreeze mine is expected to be commissioned as planned by the end of 2015 and be fully operational in 2016. In 2016, production of ilmenite feedstock and co-products zircon and natural rutile will ramp to full production by mid-year. Total capital expenditures related to the Fairbreeze mine from project commencement through 2016 are estimated to be approximately $225 million. Approximately $125 million was spent from commencement through the second quarter 2015.

With adjusted EBITDA of $85 million excluding net non-cash LCM charges and capital expenditures of $57 million, TiO2 delivered cash of approximately $28 million in the second quarter. We are enhancing cash generation in our TiO2 business in multiple ways - by focusing on significant working capital reductions, driving operating cost reductions and reducing capital expenditures. Since a substantial portion of our operating costs are incurred in currencies that have depreciated relative to the U.S. dollar, we believe our cost structure has improved in U.S. dollar terms more than that of other producers that incur a larger portion of their operating costs in U.S. dollars.

Alkali

Alkali segment revenue of $208 million increased 8 percent compared to $194 million in the year-ago quarter on a pro forma basis, as sales volumes gained 4 percent and average selling prices increased 3 percent. Export sales led the volume growth, supported by increased demand in the domestic market. Higher selling prices were realized in both export and domestic markets. Compared sequentially to the first quarter on a pro forma basis, Alkali revenue increased 7 percent, as sales volumes increased 8 percent, again led by export volume growth and supported by increased momentum in the domestic market, while average selling prices declined 1 percent as a result of customer and regional mix. Alkali continues to operate in a sold-out mode driven by strong export demand growth and a continued recovery in the domestic market.

Alkali adjusted EBITDA of $50 million increased 14 percent compared to pro forma adjusted EBITDA of $44 million in the prior-year quarter, driven by higher sales volumes and selling prices coupled with lower energy costs. Compared sequentially, adjusted EBITDA increased 22 percent from pro forma adjusted EBITDA of $41 million in the prior quarter. Alkali segment operating income of $25 million compares to operating income of $31 million in the year-ago quarter and $28 million in the prior quarter, both on a pro forma basis. Capital expenditures in the second quarter were $4 million. With adjusted EBITDA of $50 million and capital expenditures of $4 million, Alkali delivered cash of $46 million in the second quarter.

Corporate

Corporate adjusted EBITDA was ($19) million in the second quarter versus ($17) million in the year-ago quarter and ($21) million in the prior quarter. The Corporate loss from operations was $34 million, including one-time expenses of approximately $21 million related to the Alkali acquisition, compared to $15 million in the prior-year quarter and $18 million in the prior quarter.

Consolidated

Selling, general and administrative expenses for the company in the second quarter were $72 million, including one-time expenses of approximately $21 million related to the Alkali acquisition and on-going expenses of approximately $7 million related to Alkali business operations. This compares to $45 million in the prior-year quarter and $44 million in the prior quarter.

Interest and debt expense of $52 million increased from $33 million in the year-ago quarter primarily due to a higher debt level and a bridge loan financing expense of $8 million related to the Alkali acquisition. On June 30, 2015, gross consolidated debt was $3,134 million, and debt, net of cash, was $2,929 million. For the quarter, capital expenditures were $61 million and depreciation, depletion and amortization was $75 million.

About Tronox

Tronox Limited is one of the global leaders in the mining, production, and marketing of inorganic minerals and chemicals. The company operates two vertically integrated businesses: Tronox Titanium Dioxide (TiO2 ) and Tronox Alkali.

Source: Tronox
 


FEICA 2018 European Adhesive and Sealant Conference and EXPO
Channel Alerts

Receive weekly digests on hot topics

Back to Top