Tronox Q4 2024 Earnings Report

Tronox EPS Results

• Actual EPS: $0.03
• Consensus EPS: $0.06
• Beat/Miss: Missed by -$0.03
• One Year Ago EPS: N/A

Tronox Revenue Results

• Actual Revenue: N/A
• Expected Revenue: $690.94 million
• Beat/Miss: N/A
• YoY Revenue Growth: N/A

Tronox Announcement Details

• Quarter: Q4 2024
• Date: 2/12/2025
• Time: After Market Closes
• Conference Call Date: Thursday, February 13, 2025
• Conference Call Time: 9:00AM ET

Tronox (NYSE:TROX) operates as a vertically integrated manufacturer of TiO2 pigment in North America, South and Central America, Europe, the Middle East, Africa, and the Asia Pacific. The company operates titanium-bearing mineral sand mines; and engages in beneficiation and smelting operations. It offers TiO2 pigment; ultrafine specialty TiO2; zircon; feedstock; pig iron; monazite; titanium tetrachloride; and other products. The company's products are used for the manufacture of paints, coatings, plastics, and paper, as well as various other applications. Tronox Holdings plc is based in Stamford, Connecticut.

Tronox Q4 2024 Earnings Call Transcript

Presentation

[Operator]

Good morning. Welcome to the Tronox Holdings plc q four twenty twenty four earnings conference call. Following the presentation, we will conduct a question and answer session. All participants will be in a listen only mode until this part of the session. This call is being recorded.

[Operator]

If you have any objections, please disconnect at this time. I would now like to turn the call over to our host, Jennifer Gunther, chief sustainability officer, head of investor relations and external affairs. Please go ahead, Jennifer.

[Jennifer Guenther, Chief Sustainability Officer & Head of Investor Relations at Tronox]

Thank you, Danny, and welcome to our fourth quarter and full year twenty twenty four conference call and webcast. Turning to slide two, on our call today are John Romano, chief executive officer, and John Srivazal, Senior Vice President, Chief Financial Officer. We will be using slides as we move through today's call. You can access the presentation on our website at investor.tronox.com. Moving to slide three.

[Jennifer Guenther, Chief Sustainability Officer & Head of Investor Relations at Tronox]

A friendly reminder that comments made on this call and the information provided in our presentation and on our website include certain statements that are forward looking and subject to various risks and uncertainties, including but not limited to the specific factors summarized in our SEC filings. This information represents our best judgment based on what we know today. However, actual results may vary based on these risks and uncertainties. The company undertakes no obligation to update or revise any forward looking statements. During the conference call, we will refer to certain non US GAAP financial terms that we use in the management of our business and believe are useful to investors in evaluating the company's performance Reconciliations to their nearest US GAAP terms are provided in our earnings release and in the appendix of the accompanying presentation Additionally, please note that all financial comparisons made during the call are on a year over year basis unless otherwise noted.

[Jennifer Guenther, Chief Sustainability Officer & Head of Investor Relations at Tronox]

It is now my pleasure to turn the call over to John Romano. John?

[John Romano, CEO at Tronox]

Thanks, Jennifer, and good morning everyone. We'll begin this morning on Slide four with some key messages from 2024. Tronox delivered solid fourth quarter results in line with expectations despite continued macro weakness. Stronger TiO2 commercial performance in Asia Pacific and Latin America mitigated continuing lagging demand in Europe, while North America performed in line with our expectations. On zircon, our sales exceeded our previous guidance driven by strong execution from our commercial group.

[John Romano, CEO at Tronox]

Additionally, despite significant competitive dynamics across all products, pricing came in as anticipated. We also realized operational cost improvements as expected driven by consistent and reliable operational performance in the fourth quarter. Reflecting on the full year, I'm proud of the work our team did to stay focused on the things we can control and influence. As safety is our leading value, we heightened our focus and are happy to report that we reduced our total recordable injuries by twenty three percent in 2024. We enhanced our focus on operations and achieved our targeted operating rates resulting in production cost improvements in the second half of twenty twenty four.

[John Romano, CEO at Tronox]

We continued differentiating our company through sustainability projects such as the conversion of 40 of our power in South Africa to solar. And this not only benefits Tronox from a greenhouse gas reduction standpoint, but also allowed us to avoid $17,000,000 of additional electricity costs in 2024. We continued to execute on our capital allocation strategy through investments in the business, returning capital to shareholders in the form of dividends, and strengthened the balance sheet through opportunistic refinancing transactions. We also launched a new business strategy in the second half of the year as we referenced on our previous earnings call and initiated a cost improvement plan. This initiative is focused on enhancing cost efficiency, optimizing asset reliability, and driving operational excellence across all aspects of our business.

[John Romano, CEO at Tronox]

Through this work, we've identified $125,000,000 to $175,000,000 of additional cost improvement opportunities achievable on a run rate basis by the end of twenty twenty six. We are very excited about this program and believe it will deliver real sustainable cost improvements across all the business. I'll touch more on our strategy and the path forward, including more details on this cost improvement program a bit later in the call. But for now, I'm going to turn the call back over to John to review our financials from 2024 in more detail.

[John Romano, CEO at Tronox]

John?

[John Srivisal, Senior VP & CFO at Tronox]

Thank you, John. Turning to Slide five, we generated revenue of $3,100,000,000 an increase of 8% compared to the prior year, driven primarily by higher TiO2 and zircon sales volumes, which is partially offset by unfavorable price and product mix. Income from operations was $219,000,000 in the year, and we reported net loss attributable to Tronox of $48,000,000 Our full year adjusted EBITDA was $564,000,000 Our adjusted EBITDA margin was 18.3% Our free cash flow for the year was a use of $70,000,000 Turn to the next slide, I will now review fourth quarter results in more detail. We generated revenue of $676,000,000 in the fourth quarter, a decrease of 1% versus the prior year quarter driven by lower average selling prices and unfavorable mix impact on zircon and TiO2.

[John Srivisal, Senior VP & CFO at Tronox]

We also saw lower sales volumes of other products, which were partially offset by higher sales of zircon and TiO2. Income from operations was $40,000,000 in the quarter and we reported net loss attributable to Tronox of $30,000,000 We delivered adjusted EBITDA in the quarter of $129,000,000 well within the guided range of $120,000,000 to $135,000,000 achieved adjusted EBITDA margins of 19.1%. CapEx for the quarter is $117,000,000 and free cash flow was a use of $35,000,000 Now let's move to the next slide for a review of our commercial performance. TI2 revenues increased 3% versus the year ago quarter as sales volumes improved 4%, partially offset by a 1% decline due to price and product mix. Sequentially, TI2 revenues declined 13%.

[John Srivisal, Senior VP & CFO at Tronox]

Fourth quarter TiO2 volumes declined 11% sequentially. This compares to our previous guidance of a 10% to 15% decrease. Lower average selling price and mix had an unfavorable impact of 1%, reflective of the current demand and competitive environment. Movements in the euro drove a 1% headwind. Zircon revenues increased 32% over Q4 twenty twenty three, as sales volumes increased 43% and partially offset by 11% headwind from price and product mix.

[John Srivisal, Senior VP & CFO at Tronox]

Sequentially, zircon revenues increased 1% driven by a 9% increase in volumes exceeding our guidance of flat to slightly down versus Q3, which is largely attributable to strong commercial execution in Asia Pacific. This was partially offset by 8% headwind from price and product mix. Revenue from other products decreased 38% compared to the prior year and 40% versus the prior quarter due to opportunistic sales of ilmenite and heavy mineral concentrates tailings sold in each of the comparable quarters that did not repeat in the fourth quarter of twenty twenty four. Turning to the next slide, I will now review our operating performance for the quarter. We saw significant cost improvements by achieving our targeted operating rates and benefited from the sales of lower cost tons in the quarter.

[John Srivisal, Senior VP & CFO at Tronox]

Our adjusted EBITDA of $129,000,000 for the quarter represented a 37% improvement year on year driven by lower production costs partially offset by unfavorable commercial impacts and headwinds from exchange rates. Year on year production costs improved $75,000,000 due to favorable fixed cost absorption, lower raw material costs and non repeating idle and LCM charges. Sequentially, adjusted EBITDA declined 10%. Unfavorable commercial impacts were partially offset by improved production costs and tailwinds from exchange rates. Turning to the next slide, we ended the year with total debt of $2,900,000,000 and net debt of $2,700,000,000 Our net leverage ratio at the December reduced to 4.8 times on a trailing twelve month basis.

[John Srivisal, Senior VP & CFO at Tronox]

Our balance sheet remains strong with ample liquidity of $578,000,000 including $151,000,000 in cash and cash equivalents. Additionally, in 2024, we strengthened our balance sheet by repricing and extending our revolver and term loan tranches. As a result of these activities, we have extended our debt maturities out to 2029 and 02/1931 and reduced our net cash interest expense by $10,000,000 Working capital was a use of $103,000,000 for 2024. This was mainly driven by the slowing of the market demand in the second half of the year, which drove higher finished goods inventory levels in the fourth quarter. Our capital expenditures totaled $370,000,000 with approximately 45% allocated to maintenance and safety and 55% to strategic mining extension and growth projects and we returned $80,000,000 to shareholders in the form of dividends.

[John Srivisal, Senior VP & CFO at Tronox]

Turning to our capital allocation strategy, our priorities remain unchanged. We continue to prioritize investments that are essential for advancing our strategy and maximizing value from our vertically integrated business. We also remain focused on strengthening our liquidity and resuming debt pay down as the market recovers. We are targeting a mid to long term net leverage ratio of less than three times through the cycle. Our dividend remains our priority and finally we will continue to assess strategic high growth opportunities as they merge including rare earths.

[John Srivisal, Senior VP & CFO at Tronox]

We'll now turn the call back over to John Romano to go over the outlook. John?

[John Romano, CEO at Tronox]

Thanks John. So for 2025, we decided to issue an outlook for the full year, providing a longer term outlook, meets our goal to be more transparent with investors while aligning how we think about and manage the company internally with how we talk about the company externally with the medium and long term in mind. Based on our current views on the market dynamics and global economic activity, we expect 2025 revenue to be in the range of $3,000,000,000 to $3,400,000,000 and our adjusted EBITDA to be in the range of $525,000,000 to $625,000,000 This forecast takes into account several factors, including the pace of the market recovery, antidumping impacts, competitive dynamics as it pertains to price and volume, some operating variability as we commission the Fairbreeze and Easto FS mine extensions, and our ongoing focus on accelerating and executing on our cost improvement program and financial performance. On the commercial side, we're seeing improvement in pigment and zircon volumes, partially offset by headwinds from non repeating other product sales in 2024. With respect to antidumping, we're already seeing an uplift in Europe and Brazil, and expect that benefits would materialize in other jurisdictions like India, where this morning the Indian trade defense industry recommended definitive duties that we expect will go into effect in the second quarter.

[John Romano, CEO at Tronox]

On the operations side, we assume benefits from non repeating idle facility and LCM charges and improving pigment production costs. This will be partially offset by higher mining production costs in the range of $50,000,000 to $60,000,000 as we transition out of older mines into newer mines with higher grade ore deposits. Our outlook also assumes that the second half of twenty twenty five will be stronger than the first half as pricing is expected to be more of a headwind in the first half of the year before recovering in the second half, and we're also expecting volumes to be stronger in the second half of the year. With regards to cash, we expect the following: net cash interest of approximately $130,000,000 net cash taxes of less than $10,000,000 as capital expenditures from projects in South Africa are deductible working capital to be a use of cash of approximately $70,000,000 to flattish for the year and capital expenditures to be in the range of $375,000,000 to $395,000,000 As a result, we expect free cash flow to be relatively flat at the midpoint of the range. We have realigned our expectations to reflect the latest macroeconomic backdrop.

[John Romano, CEO at Tronox]

Through the execution of our newly formed strategy and our cost improvement program, which I will cover on the next two slides, we see significant opportunity for earnings growth ahead. Slide 12 outlines our new business strategy that we previewed at the beginning of this call. And it consists of four key components: being the best at what we do, growing our future, leveraging what makes us unique, and being the benchmark for sustainability. This framework builds on the strong foundation previously established and enables us to continue executing on what we do best while capitalizing on new opportunities. Part of our strategy, as we referenced on the previous earnings call, includes the launch of a sustainable cost improvement program.

[John Romano, CEO at Tronox]

So, let's turn to Slide 13 and review that program in more detail. As a result of the work completed over the last several months, we have identified $125,000,000 to $175,000,000 of sustainable run rate cost improvements by the end of twenty twenty six. This program is focused on enhancing cost efficiency and optimizing asset performance across all aspects of our business. Our target actions will include leveraging operational excellence, harnessing technology to drive efficiency and innovation, enhancing supply chain and integrated business planning strategies, and aligning SG and A to maximize the overall impact on our business. To give some context to this, operational excellence means improving the efficiency and effectiveness of our processes to achieve best in class performance through continuous improvement, accountability, accelerated learning supported by our global centers of excellence.

[John Romano, CEO at Tronox]

Harnessing technology will include expanding our Automated Process Control Program, or APC, to further enhance the efficiency and reliability of critical assets. By optimizing real time process adjustments, APC minimizes variability, improves yield and reduces energy consumption. Optimization of our integrated business planning process will enhance the impact of vertical integration throughout our asset portfolio as new mines come on later this year and in 2026. And we're also aligning SG and A to ensure resources are strategically positioned to drive the greatest business impact through disciplined cost management. These are just a few examples of the opportunities we've identified in the early stages of this project, and we will continue to evaluate every aspect of our business to drive further improvements.

[John Romano, CEO at Tronox]

At the core of our strategy is a commitment to be the best at what we do focusing resources on our strengths, while deprioritizing non essential activities. This program is not about short term cost reductions, but rather sustainable, long term improvements that drive structural efficiencies, including the standardization of best practices across all of our business. We remain committed to safety, continuous improvement, and disciplined cost management across our entire business as we navigate through economic uncertainties. We're focused on managing the controllables. These actions will secure Tronox's position as a leading vertically integrated titanium mining and upgrading producer.

[John Romano, CEO at Tronox]

And so that will conclude our prepared remarks and we'll now move to the Q and A portion of the call. So I'll turn the call back over to the operator to facilitate. Danny?

[Operator]

Thank you. We will now begin the question and answer session. If you are participating in the q and a and have joined via webinar, please use the raised hand icon, which can be found at the bottom of your webinar application screen. If you are participating in q and a and have joined via phone line, please press 9 on your keypad to raise your hand. When you are called upon, you will be prompted to unmute your line and ask your question.

[Operator]

We will now take a minute for the moment for the queue to roster. Our first question comes from John McNulty at BMO. Please press 9 to unmute your line.

[John McNulty, MD - Chemicals Analyst at BMO Capital Markets]

Sorry about that. Hopefully, you can hear me now. So a question on the pricing environment. Can you speak to, what's driving what sounds like slightly softer pricing in the first half of the year, especially given that we do have some of the tariffs in place now, and I would have thought that would have at least contributed a little bit to, to an improving pricing environment. So can you help us to think about that and also speak to maybe some of the competitive, issues that you alluded to in the prepared remarks.

[John Romano, CEO at Tronox]

Yeah. Thanks, John. So, you know, when we think about again, we're providing annual guidance, so we're not going to provide a lot on the quarter. But when we think about pricing and kind of the cadence that happened in the fourth quarter, you know, we're talking about the similar kind of movement in the first quarter. So it's not a significant move, but there is a lot of, I would say competitive activity in certain regions of the world.

[John Romano, CEO at Tronox]

And we're responding to that where we feel there's critical market share that we don't want to lose. That being said, there's also some opportunities where we've gotten some price increases, and as we think about what's happening in Europe, with regards to the traction we're starting to get from some of the activity that's happened from duties. You know, you've already probably seen some other competitors have announced increases, and we would expect that we'll start to see an opportunity for that to happen. But again, it's it's that recovery period. As the market starts to recovery, it's going to be a little bit slower.

[John Romano, CEO at Tronox]

And as the market starts to pick up and, you know, we mentioned in the prepared comments that, there was some other duty activity that's happening in India now where we would expect to see definitive duties possibly, as early as the second quarter, we'll start to see opportunities for price movement. But it's a bit of a mix, where we're protecting some share in some areas, but we're also getting price. It's not a significant move. I guess the point is there's still a little downward movement where we would expect upward movement in the second half.

[John McNulty, MD - Chemicals Analyst at BMO Capital Markets]

Got it. Okay. No. That makes sense. And then just a question on the cost cutting initiatives, the 01/2025 to 01/1975.

[John McNulty, MD - Chemicals Analyst at BMO Capital Markets]

I guess, how much of that is is reliant on on volumes versus just general efficiency moves and cost reduction that can happen regardless of whether the volume environment is better or not? And also, can you speak to how this will phase in? Is it relatively straight line through '25 '20 '6 or is it back end loaded? I guess, how should we be thinking about it?

[John Srivisal, Senior VP & CFO at Tronox]

Yeah. Thanks for the question, John. The way we've looked at this cost improvement program is really to focus on cost and less on volume. So that's really driving the improvement that we're going to be seeing, the 01/2025 to 01/1975. So primarily cost related through improved efficiencies and just an overall redeployment and better use of our spend.

[John Srivisal, Senior VP & CFO at Tronox]

As you look towards how we're gonna see that, play out over the next couple years, the majority of that will be in 2026. We do think that we can achieve about 25 to $30,000,000 of that $125,000,000 to $175,000,000 in 2025 on a run rate basis. So you won't see all of it in twenty twenty five million dollars but fully expect to see that in the $26,000,000 and then achieving our final run rate by the end of twenty twenty six.

[John Romano, CEO at Tronox]

And there's again, I would say that there's a lot of technology involvement. I'll give you an example of some of the work that's been doing that for instance at Hamilton where we've talked about automated process control, and we implemented that in our Spin Flash dryers recently. And, you know, that technology yielded a 6% improvement in productivity in those two in those two Spin Flash dryers along with an 8% improvement in energy consumption. And as we think about rolling that across all of our chlorinators and into oxidation and into our finishing lines, we're starting you know, that's where these programs are coming, taking the technology that we've already started to implement and rolling that out to the rest of our operations. And we had a, I would say, a very productive meeting with all of our site managers here very recently, to kind of validate the work that we're doing.

[John Romano, CEO at Tronox]

And that's why we feel comfortable, with the range that we put out. And we'll be doing everything we can to increase that $25,000,000 to $35,000,000 that John referenced at the end of twenty twenty five, but that's the target right now as we're still a bit early in the program.

[John McNulty, MD - Chemicals Analyst at BMO Capital Markets]

Great. Thanks very much for the color.

[John Romano, CEO at Tronox]

Thank you.

[Operator]

Our next question is from Joshua Spector at UBS. Joshua, please unmute your line to ask your question.

[Josh Spector, Executive Director at UBS Group]

Hi. Good morning. So I wanted to ask on the the mining costs and the transitionary impact of that in in 2025. So you called out 50 to 60,000,000. Is that the bulk of it?

[Josh Spector, Executive Director at UBS Group]

And then that does that immediately come back in 2026? Or does that linger? And then related to this, I mean, the whole goal is to to help maintain and improve your low cost position, get to better ore bodies. Is there a benefit in the cost that we should be layering in as you transition to the new mines or no?

[John Romano, CEO at Tronox]

So, I'll start and then I'll let John add to it. But so that $50,000,000 to $60,000,000 the majority of that is going to come back naturally. I'll let John touch on that a little bit more, but I'll also make reference that through the programs that we're doing around cost reduction, we're going to be looking at what we can do through our integrated business planning process to further improve that and those are improvements that are going to be part of that $125,000,000 to $175,000,000 But John?

[John Srivisal, Senior VP & CFO at Tronox]

Yeah, no, I think, as we've mentioned a couple of years ago, we did make the decision to delay our CapEx and investment in these mines given the market environment and uncertainty. And so that's what we're seeing. Unfortunately, the, the negative of doing that, this year. So as John mentioned, it is 50 to 60,000,000 that will hurt us this year. We do expect the majority of that just to naturally turn and recover in '26.

[John Srivisal, Senior VP & CFO at Tronox]

There is a portion of that that will require a lot of work as part of our cost improvement program, require some, you know, very significant and seamless execution on our operations as well as our integrated business planning processes in order to optimize that. But we do expect that we will be able to achieve that $60,000,000

[John Romano, CEO at Tronox]

And those two mining projects just for color, Fairbreeze comes online mid year and East OFS will start to come online at the end of the year. And the real delay was more on the East OFS and had we not delayed that we probably would have been coming online in the first quarter with that mine. So there's that there's that lag where we're in these ore bodies that are just not, as rich as they will be when we migrate into the new ore bodies.

[Josh Spector, Executive Director at UBS Group]

Right. Then just two quick ones on cash. I guess, working capital I mean, this is maybe the fifth year that working capital is a pretty significant use of cash for you guys. Is there anything that could be done there? Or when do you get relief on that side?

[Josh Spector, Executive Director at UBS Group]

And then just with the cost savings program, is there cash going out the door this year or next year that's either that we need to bake in?

[John Srivisal, Senior VP & CFO at Tronox]

Yeah. So, you know, obviously, you know, we working capital will still be, used up to flat for this year, but it is a significant improvement over last year when we were at $103,000,000 We do expect to show progress in all of the major working capital buckets. The biggest use of cash this year is actually AR, which obviously is a good investment in their working capital and driven, you know, by primarily by, you know, TiO2 both TiO2 and Zircon volumes increasing year over year. Obviously, that'll turn into cash, over time. But then inventory, obviously, it's ending the year at close to 1,600,000,000.0 total on our balance sheet, but we expect to make progress there throughout 2026.

[John Srivisal, Senior VP & CFO at Tronox]

Primarily, we've mentioned that we're running our rates much higher. That has an impact on our costs and what we're putting on the balance sheet. So we are replacing higher cost inventory with lower cost. So we are seeing inventory generate cash in 2025. AP, to conclude AP is, you know, gonna be relatively flat for the year and not a significant driver of it.

[John Srivisal, Senior VP & CFO at Tronox]

So, to conclude, we we are seeing, you know, that we are making progress on our working capital. Obviously, sorry, you will see Q1 be a big build like we normally see, traditionally. It's just the normal seasonal nature of our business. But, you know, we're negative 70,000,000 to flattish. This does take into account the current environment that we see right now.

[John Srivisal, Senior VP & CFO at Tronox]

And obviously, you know, if we and and we're running at current rates, and if we see a significant pickup, that will generate significant amount of cash.

[Josh Spector, Executive Director at UBS Group]

Cash costs of the cost savings?

[John Srivisal, Senior VP & CFO at Tronox]

Oh, sorry. We don't expect a significant amount of the the of cash going out to generate the cost savings for this year.

[Josh Spector, Executive Director at UBS Group]

Okay. Thank you.

[Operator]

Our next question comes from David Begleiter at Deutsche Bank. David, please unmute your line and ask your question.

[David Begleiter, Managing Director at Deutsche Bank]

Thank you. John?

[Jennifer Guenther, Chief Sustainability Officer & Head of Investor Relations at Tronox]

Hi, David.

[David Begleiter, Managing Director at Deutsche Bank]

How are you? Hey, John. And John, just on the new cost program, how does it relate to Project Neutron? Is this replaced Neutron or is Neutron still progressing or still in existence?

[John Romano, CEO at Tronox]

Well, Neutron's still in existence, but, again, a lot of what we talked about on Neutron as far as improvements had to do with volume. So this project does not have to do with volume. It has to do with I would say a lot of it is generated through operating improvements, but there's it's going across every aspect of our business. And we talked a little bit about technology, but another example would be, what we're doing with Accenture. So we partnered with Accenture about a year ago.

[John Romano, CEO at Tronox]

And although this you know, we're just starting to, you know, do pilots. We're doing a pilot with them on AI driven solutions to support process control and decision making, enabling predictive insights and faster response time and operational stability. So, you know, these are technology driven processes on what we've already done, rolling them out to other pieces of the business. Again, we're also looking at supply chain and optimizing our optimizing our vertical integration, with respect to prioritizing Orbalins. There's an SG and A element of it that we mentioned.

[John Romano, CEO at Tronox]

So this is across the entire business. A significant portion is in fact around, you know, our operational efficiency and reliability. But every aspect of our business is part of this program. And, we feel confident in that range of $125,000,000 to $175,000,000 run rate by the end of twenty twenty six. And to, you know, our objective will be to try to fast track as much of that as we can by prioritizing the projects that we feel will yield the biggest results or the fastest results and resourcing those appropriately.

[David Begleiter, Managing Director at Deutsche Bank]

And on the SG and A portion of this program, how many are there layoffs included in this number or how many are included in this to get to that target?

[John Srivisal, Senior VP & CFO at Tronox]

You know, David, as we mentioned well, John mentioned, we're looking at everything here. The the biggest part of our SG and A is to make sure that our spend in SG and A is much more efficient here. As I mentioned, we don't see from this program particularly in year one having a significant amount of cash costs associated with it. So it is really driving SG and A improvement. But again, we are looking at every aspect of SG and A as well as other parts of our business to drive value.

[David Begleiter, Managing Director at Deutsche Bank]

Thank you.

[John Romano, CEO at Tronox]

I mean, so if you're curious if there's going to be a

[John Romano, CEO at Tronox]

big

[John Romano, CEO at Tronox]

dollar amount attached to the SG and A, this is working the SG and A throughout the process, looking at how we're filling vacancy and how we're redeploying that SG and A. So from a cost perspective, we don't anticipate this to be a huge cost.

[David Begleiter, Managing Director at Deutsche Bank]

Perfect. Thank you.

[Operator]

Our next question is from Peter Osterland at Truist. Peter, please unmute your line and ask your question. Thank you.

[Pete Osterland, Equity Research Analyst at Truist Securities]

Hey. Good morning. Can you hear me?

[John Romano, CEO at Tronox]

Yes. Thanks, Peter.

[Pete Osterland, Equity Research Analyst at Truist Securities]

Good. Thank you. Within your 2025 guidance, could you size or give a range for the volume growth you were assuming for TiO2 and Zircon?

[John Romano, CEO at Tronox]

Well, I'll give you a little bit of, you know, when we think about, so on a percentage basis in the first quarter, when we think about where we were in the first quarter of last year, so q four to q one, you know, we saw a pretty sizable increase, and we're seeing that, as we move forward into twenty twenty five first quarter, it's kind of the same kind of range. From a pure percentage basis, John, high single digits?

[John Srivisal, Senior VP & CFO at Tronox]

High single digits. Yeah. Yep.

[John Romano, CEO at Tronox]

Again, we've also got zircon improvement in that as well. So across t I o '2, I'd say it's, you know, high single digits on both percentage.

[John Srivisal, Senior VP & CFO at Tronox]

Obviously, as we look in the higher end of the range, you know, we do see more robust, that's driving, you know, the spread in our range primarily. It's, you know, volume and price at the, the higher end.

[John Romano, CEO at Tronox]

Again, we're not we don't we won't give a lot of color specifically on regional, breakdowns, but in the first quarter, we made reference that we were already starting to see some improvement, as a result of some of the duties that are already in place in Latin America, specifically Brazil and Europe. So now we're starting to see a little bit of a lift even in the order book in Asia Pacific. North America is still remaining relatively stable. We haven't seen a huge pickup there yet. But, as we as we move throughout the year, we're expecting those numbers to increase.

[Pete Osterland, Equity Research Analyst at Truist Securities]

That's very helpful. Thank you. And then, just as a follow-up, what are you assuming in the guidance in terms of TiO2 market share? Do you maintain your share from 2024? Do you expect you may be able to gain share?

[John Romano, CEO at Tronox]

So clearly, we have lost some share to the Chinese, over the course of the last several years. And as demand has an impact on our numbers for this year, but clearly, part of that will be market share recovery from what we've lost from China. So I'd say the majority of the share gain is gonna come in that area. We've talked about this, you know, historically, strategically protecting some market share where, we had to be somewhat competitive on price with, you know, some of the pretty significant moves China made on pricing, with dumping in place in Europe and in Brazil. And as I mentioned earlier, it looks like it's gonna be moving into, India by the second quarter.

[John Romano, CEO at Tronox]

We have a bit of a unique advantage, because we've got a free trade agreement, from the facility that we ship the majority of our material out of Australia into India. So I would say there'll be share gain in that area.

[Pete Osterland, Equity Research Analyst at Truist Securities]

Got it. Thanks for the color.

[Operator]

Our next question comes from Frank Mitch at Fermium Research. Frank, please unmute your line to ask your

[Josh Spector, Executive Director at UBS Group]

question.

[Frank Mitsch, President at Fermium Research]

Okay. Good morning. I want to come back to the mining costs of $50,000,000 to $60,000,000 negative impact for 2025. You mentioned Fairbreeze starting up midyear. Is it fair to say that most of that impact comes in the first half of the year and then starts to decline when Fairbreeze comes up?

[Frank Mitsch, President at Fermium Research]

And, you know, $50,000,000 to $60,000,000 kind of sounds like a sizable number. I'm curious if you guys have looked at your input costs, your mining costs, and getting the ore and so forth versus if you were to buy on a depressed open market today, how much of a competitive advantage, if any, are you seeing in the early part of 2025 in terms of make versus pie?

[John Romano, CEO at Tronox]

Thanks, Frank. So I'll start and I'll let John add some color to it. So just I mean, when we think about the additional cost it really has a lot to do with East OFS and the delay that we had. So we're mining in areas right now that historically you know had we not made that delay we probably wouldn't be mining in. So there is a bridge to get to these richer ore deposits.

[John Romano, CEO at Tronox]

We've historically said that our advantage from vertical integration is $300 to $400 a tonne. And, you know, it's definitely being impacted in the first half of the year to your point as we migrate out of these older mines into richer ore bodies. So, you know, would it make it would still it's still advantageous for us to be vertically integrated, but the advantage that we have and have historically described as $300 to $400 a ton is a bit less as we're transitioning out of these two old mines into the newer ones. John? Yeah.

[John Srivisal, Senior VP & CFO at Tronox]

No. You're absolutely right. You know, we are seeing much more hurt in the first quarter, a little bit less than the second quarter and then, you know, tailing off in throughout the rest of the year. As you mentioned, we'll see that fully revert in 2026. And, yeah, as we mentioned, we are still maintaining a significant advantage over competitors from vertical integration.

[John Srivisal, Senior VP & CFO at Tronox]

If we look at what's out there from a comparable or market price, it has gone down a little less but still within our range that we normally quote around $300,000,000 per ton.

[John Romano, CEO at Tronox]

And I guess the other element to that is, if we were to go out and start buying a lot of ore, we still are we've got our upgrading facilities where we're making slag and this is a short transition period. So, from a cost perspective, a short bridge by buying externally versus using our current assets would be more of a hurt than it would be a help.

[Frank Mitsch, President at Fermium Research]

Okay. Thank you. That's helpful. And I also want to talk about starting 2025. Some of the problems in 2024 were the high cost inventory flowing through.

[Frank Mitsch, President at Fermium Research]

That was on the order of magnitude of, like, $30,000,000 a quarter. You also referenced the cost improvements in the second half of twenty four. I assume that that's part of the cost improvement that's happened. So I what sort of expectation, you know, just kinda isolating the, the high cost inventory that you faced in 2024, abates in 2025 and the sort of improvement that we can see from that?

[John Srivisal, Senior VP & CFO at Tronox]

Yes. I mean, Frank, thanks for that question. As you know, we have been running our facilities at expected utilization rates in the third quarter and fourth quarter. And so, we actually have seen that in our numbers. And you can just take a look at our year over year bridges where we have, you know, we've we've mentioned that we have 75,000,000 in Q4 versus prior year Q4 when we were running at lower rates.

[John Srivisal, Senior VP & CFO at Tronox]

So that 75,000,000 is real and we're seeing it come through our numbers. And as we mentioned, we expect to run that at that level throughout the year and expect, you know, not that every quarter as we've as, you know, we've ramped up, in the second half of twenty twenty four. So we'll see that benefit flow through in the first half of the year more, but, as we're running at, rates in the second half of twenty five consistent with '24, you'll see less of that benefit. But, as we mentioned, the biggest headwind there is in the mining side of it that pretty much, if not more than offsets at this point the, the benefits that we expect to see from our pigment plants cost improvement.

[Frank Mitsch, President at Fermium Research]

Okay. More than offset. All right. Thanks so much, John.

[John Srivisal, Senior VP & CFO at Tronox]

Thank you.

[Operator]

Our next question is from Michael Lighthead at Barclays. Michael, you may now unmute your line and ask your question.

[Michael Leithead, Director - Equity Research at Barclays]

Great. Thank you. Good morning, team. First question, outside of ore, how are you seeing other inputs such as chlorine and energy trend for 2025?

[John Srivisal, Senior VP & CFO at Tronox]

Yeah. So we're seeing, generally speaking, outside of ore that our raw material costs will be declining on average in the low single digits year over year from a pricing perspective. It will depend by material. For example, we we probably said, you know, electricity, we consume a lot of electricity in South Africa. That does go up pretty significantly double digits every year, as well as, you know, things like very specific, coal in Australia.

[John Srivisal, Senior VP & CFO at Tronox]

That has gone up pretty significantly given the priorities they have there. But we do expect to have savings, as you mentioned, in areas like chlorine, anthracite, and coke. So overall, down low single digits.

[Michael Leithead, Director - Equity Research at Barclays]

Great. That's helpful. And then, if I think about the full year EBITDA guide and the cadence, Tronox historically seen a bit of a seasonal pickup from the fourth quarter to the first quarter. It seems like based off your full year midpoint and the heavier second half weighting, it seems like first quarter might be relatively flat sequentially or maybe even down a smidge. Is that the right calibration or no?

[John Srivisal, Senior VP & CFO at Tronox]

Yeah, I think you are getting at the right numbers on Q1 versus Q4.

[John Romano, CEO at Tronox]

And when you think, you know, there's a couple of things that are going into that, right? We talked a little bit about the price. There's another element, where we had a planned outage at our Bartlett facility in the first quarter. That outage is actually planned around our chlorine providers outage. Normally this outage happens every two years and then historically we've been able to buy merchant chlorine during that outage.

[John Romano, CEO at Tronox]

Regulations have changed, which don't allow us to buy chlorine via rail or truck. So that outage is going to be a bit longer than it would be normally and it's aligned with our chlorine producers. So there's an element of that, which in the first quarter is, you know, call it $7,000,000 to $10,000,000

[John Srivisal, Senior VP & CFO at Tronox]

Yeah. And just to complete a couple more things on Q1, obviously, it's the mining herd that I mentioned, in an earlier question. But also normally Q4 to Q1 when you turn the year there's usually a reset on employee costs when you're making higher contributions on employee benefits and then normal merit.

[Michael Leithead, Director - Equity Research at Barclays]

Got it. Thank

[Operator]

you. Our next question comes from Jeff Zekauskas at JPMorgan. Jeff, please press 6 to unmute your phone line. Thank you.

[Jeff Zekauskas, Analyst at JPMorgan Chase]

Thanks very much. Earlier in the call, did you say that you were going to build inventories in the first quarter? It's true that sometimes you do build inventories in the first quarter, but you didn't do that in 2024 or 2022 and your inventories are high. Why would you build inventories?

[John Srivisal, Senior VP & CFO at Tronox]

Yes. So what I mentioned on the call was that, the largest builder of working capital or use of working capital is AR. We do expect throughout the year, that inventory will be a source of cash, but it is primarily driven by the lower cost per tonne. So the value of inventory, as we have improved our cost structure there is going down.

[John Romano, CEO at Tronox]

And I think historically, first quarter, as we think about seasonal builds for painting season, we would build inventory, and you draw it down in the second and third and you build in the fourth. And again, when we think about where we are, depending upon where we land in that range, we're planning to produce what we sell throughout the year.

[Jeff Zekauskas, Analyst at JPMorgan Chase]

Which are the geographic regions where prices are going down and which are the geographic regions where prices are going up?

[John Romano, CEO at Tronox]

Yes. We don't typically provide a lot of guidance on regional pricing, but I'll give you some color. As I mentioned, in Europe, we have seen some competitive activity on pricing and at the same time in some areas in Europe, we're starting to get price traction. So, Brazil, we're starting to see some opportunities to move price in the upwards direction. So in the first quarter, I'd say it's a bit of a mix.

[John Romano, CEO at Tronox]

There's still some competitive activity in Asia, although we're starting to see an opportunity from some of the announcements that have come from China where pricing is starting to move up. So it's a bit of a mix. And as I mentioned, when we think about pricing for the first quarter, it's going to be in the same kind of range, call it 1% to 2% down in the first quarter, and then we'll start to see, or we'll start to plan for looking at price improvement towards the second half of the year.

[Jeff Zekauskas, Analyst at JPMorgan Chase]

Great. Thank you so much.

[Operator]

Our next question is from John Roberts at Mizuho. John, please unmute your line to ask your question. Thank you.

[John Roberts, Managing Director at Mizuho Financial Group]

Thank you. Can you hear

[John Roberts, Managing Director at Mizuho Financial Group]

me?

[John Romano, CEO at Tronox]

Yes.

[John Roberts, Managing Director at Mizuho Financial Group]

Yes. What do you think China capacity in production will grow in 2025?

[John Romano, CEO at Tronox]

Great question. It depends on what they announce and what they do. I mean, we're hearing a lot of pullback, from some of the production. So I guess it just depends on what source you read. If you read, you know, some of the consultants out there are saying that there's still announcements and what we're seeing on the ground, again, we have a plant there, and we would expect that there shouldn't be a lot of growth in TiO2, as far as production goes as a lot of these duties are starting to play out.

[John Romano, CEO at Tronox]

But it's, there's still some announcements out there. The question is whether or not they can implement it. But again, we're starting to see pullbacks. Whether they're, you know, short term pullbacks on production or longer term mothballing is still yet to be determined.

[John Roberts, Managing Director at Mizuho Financial Group]

And do you have inventory of ilmenite and heavy mineral concentrate, but just no opportunities for sale? Or have you depleted your excess inventories?

[John Romano, CEO at Tronox]

We have some inventory, but those one off sales were more of tailings that we're not planning on selling those or repeating those anymore. So we have, I believe, the inventory that we need, therefore, we're not looking to sell that material anymore.

[John Srivisal, Senior VP & CFO at Tronox]

Yeah. And with our mining developments, we do continue to grow our inventory there as we progress throughout the mines.

[John Roberts, Managing Director at Mizuho Financial Group]

Great. Thank

[John Roberts, Managing Director at Mizuho Financial Group]

you.

[Operator]

Our next question is from Duffy Fischer at Goldman Sachs. Duffy, please unmute your line and ask your question.

[Duffy Fischer, Equity Research Analyst at Goldman Sachs]

Yeah. Good morning. There was one strategic move in North America, where Venator basically exited via the sale of its JV. In your view, what's happened to the market share that they had in the North American market?

[John Romano, CEO at Tronox]

Well, by definition, the acquirer of Venator should have picked that up. And then I would say that they're trying to make sure they maintain that share. So that was, we all know who bought that.

[Duffy Fischer, Equity Research Analyst at Goldman Sachs]

So you think it was a one for one because they said that they did not buy the client list for that. So it seemed like that was kind of a a ball that was up for grabs. But you think, basically, they just backed into all of the same volume and there weren't meaningful shifts in in customers versus producers?

[John Romano, CEO at Tronox]

Yeah. Again, it's a pretty known universe with regards to who the customers are in North America. So I can't tell you exactly because I don't go

[John Srivisal, Senior VP & CFO at Tronox]

ahead.

[John Romano, CEO at Tronox]

Go ahead. Old vision into that, but I wouldn't suspect they lost a lot of share.

[Duffy Fischer, Equity Research Analyst at Goldman Sachs]

Okay. And then even though you don't play a lot in this market, what's your view what happens with both ilmenite and higher grade ores, in the global market for this year as far as pricing goes?

[John Romano, CEO at Tronox]

Yeah, I think John touched on it earlier, around other raw materials, but right now we don't see a significant outlook where pricing for ores are going to go up a lot. Because a lot of that will depend on the speed of the recovery.

[Duffy Fischer, Equity Research Analyst at Goldman Sachs]

Well, I guess more importantly, do you see raw materials for your competitors going down this year?

[John Romano, CEO at Tronox]

We're not in the market for ore, but we have a good window on that and I don't see that ore prices should be going down significantly in 2025.

[John Srivisal, Senior VP & CFO at Tronox]

I mean, there hasn't been over the past couple of years significant investment in the mining expansions other than us. So it does take many years, as we are well aware of to bring those online. And so without that investment, we would expect it to maintain relatively similar to what we've been experiencing in the past couple of years.

[Duffy Fischer, Equity Research Analyst at Goldman Sachs]

Great. Thank you, guys.

[Operator]

Our next question is from Hassan Ahmed at Alembic Global Advisors. Hassan, please hit 6 to unmute your phone line.

[John Romano, CEO at Tronox]

Yes,

[John Romano, CEO at Tronox]

we can hear you.

[Hassan Ahmed, Co-Founder at Alembic Global Advisors]

Good morning, John. So first on the guidance, I was a bit surprised by it. I mean, you guys are guiding to an increment year on year of $10,000,000 to $110,000,000 And as I sort of look at the macro environment, inventories are lean, right? Pricing in theory should go up because the marginal producer is actually not really making any cash. So is pricing play playing a role?

[Hassan Ahmed, Co-Founder at Alembic Global Advisors]

Are So is pricing play playing a role? Are you factoring in any inventory restocking? I mean, some more color around the guidance would be helpful.

[John Romano, CEO at Tronox]

Yes. So, Son, we're not only focusing on volume growth. There is an assumption in the back half of the year that pricing moves as well. But if you're backing into margin based off of the revenue guide versus the EBITDA guide, there's also this cost element that we talked about on the mining side. Again, we referenced it at 50 to $60,000,000.

[John Romano, CEO at Tronox]

You know, we gave you a little bit of a preview even on this, again, planned outage, we've got a bottle which, you know, I'd reference $7,000,000 to $10,000,000 But there's definitely an assumption, and I would say it's a reasonable assumption on pricing in the second half, but it's not all based on volume.

[John Srivisal, Senior VP & CFO at Tronox]

And just to recall, as we mentioned earlier, we did have some other products one time sales in last year that as John mentioned, we will not be doing in 2025.

[Hassan Ahmed, Co-Founder at Alembic Global Advisors]

Understood. Understood. And now as a follow-up on the antidumping side of things. I mean, look, historically we've talked about the sort of potential market share gain being north of 600,000 tons, right? I mean, where does that stand?

[Hassan Ahmed, Co-Founder at Alembic Global Advisors]

Because as I sort of take a look at the trade data, it seems that China in particular through the course of 2024 was exporting pretty heavily. So I mean and maybe you could also sort of shed some light on how that reflects in your guidance as well. Are you factoring in any sort of anti dumping tailwinds for you guys?

[John Romano, CEO at Tronox]

Yes. So if you think about the last several months and almost like the last five to six months, exports out of China have started to trail down and that 600,000 tons that you referenced, is basically made up of Brazil, The EU, and India. And we have started to see an uplift in Europe, and we've started to see an uplift in Europe, I mean, in Brazil. So there's absolutely an element of the volume growth that is factored to what we believe we will attain through that, you know, the, you know, activity that's going on in anti doping. And, as I mentioned in India this morning, definitive duties, were recommended.

[John Romano, CEO at Tronox]

And the way that process goes now is that it must be approved by the minister of finance in India within ninety days. And we have a pretty high level of confidence that those will get approved. So, you know, India is a market that call it 460,000 tons a year. 300,000 tons of that comes from China, and the duties that were outlined, range from $600 a ton depending upon supplier down to around $500 a ton. So those are meaningful duties, and that's something that hasn't been factored in to our first quarter, but we should start to see those numbers play out.

[John Romano, CEO at Tronox]

And again, that was announced this morning.

[Hassan Ahmed, Co-Founder at Alembic Global Advisors]

Very helpful, John. Thanks so much.

[Operator]

Okay. Our next question is from Vincent Andrews at Morgan Stanley. Vincent, please unmute your line and ask your question.

[Justin Pellegrino, Analyst at Morgan Stanley]

Good morning. This is Justin Pellegrino on for Vincent. You gave some really helpful color on the the South African projects there and and the slide deck and and the CapEx you spent over the last couple of years. No, the projects were delayed from 'twenty three and then done in 'twenty four. And we just wanted to get an idea of what maintenance CapEx is for 2025 versus growth and kind of what does that look like in a standard year given we've had some ups and downs over the last couple of years?

[Justin Pellegrino, Analyst at Morgan Stanley]

Any color around that would be helpful. Thank you.

[John Srivisal, Senior VP & CFO at Tronox]

Yeah. Generally, our maintenance CapEx ranges from about $125,000,000 to $150,000,000 in the past several years. It is at the more elevated level, just given cost inflation and where we're focusing on our plants. So the majority of the remaining, it does relate to growth areas. We did spend 130,000,000 last year in mining CapEx.

[John Srivisal, Senior VP & CFO at Tronox]

Do you expect roughly around that level a little bit lower this year?

[Justin Pellegrino, Analyst at Morgan Stanley]

Perfect. Thank you.

[Operator]

For our final question, we are headed back to Frank Mitsch from Fermion. Frank, please unmute your line and ask your question.

[Frank Mitsch, President at Fermium Research]

Very happy that you headed back to me. Just a question on Slide 10, capital allocation priorities. If I'm just looking at how they're ranked, number one, investing in value creation projects number two, pay down debt and preserve liquidity number three, maintaining the dividend. So I'm just curious, you know, am I looking at that right? I assume basically, I'm asking the commitment to the dividend, you know, given the fact, you know, free cash flow might be neutral to negative and so forth.

[Frank Mitsch, President at Fermium Research]

And, you know, how do you think about your dividend?

[John Romano, CEO at Tronox]

Yep. Thanks, Frank. Look, we're still supporting the dividend. It's still a priority for us. And when we think about, 2025 and the guidance we provided, our plan is to maintain the dividend.

[Frank Mitsch, President at Fermium Research]

Thank you.

[Operator]

And that concludes the Q and A portion of the webcast. I will now turn the call back over to John Romano for closing remarks. Thank you.

[John Romano, CEO at Tronox]

Thanks, Danny. So just to summarize a few key points from the call. You know, while we are incurring some higher costs on the mining side of the business as a result of capital delays as we discussed from two years ago, we're making a lot of progress on the overall business and we're already seeing cost improvements on the pigment side of the business with the work we've already started to execute on cost savings opportunities and we will deliver significant additional value from the cost savings program that we size today. We remain well positioned to respond to the market and meet the customer needs as the market continues to improve. And we're improving our cash flow this year and have a line of sight to significant cash flow improvements in the future.

[John Romano, CEO at Tronox]

We are excited about the path ahead and look forward to keeping you updated on our journey. That is the call for the day. We thank you for joining.

Participants

Executives

• Jennifer Guenther, Chief Sustainability Officer & Head of Investor Relations
• John Romano, CEO
• John Srivisal, Senior VP & CFO

Analysts

• John McNulty, MD - Chemicals Analyst at BMO Capital Markets
• Josh Spector, Executive Director at UBS Group
• David Begleiter, Managing Director at Deutsche Bank
• Pete Osterland, Equity Research Analyst at Truist Securities
• Frank Mitsch, President at Fermium Research
• Michael Leithead, Director - Equity Research at Barclays
• Jeff Zekauskas, Analyst at JPMorgan Chase
• John Roberts, Managing Director at Mizuho Financial Group
• Duffy Fischer, Equity Research Analyst at Goldman Sachs
• Hassan Ahmed, Co-Founder at Alembic Global Advisors
• Justin Pellegrino, Analyst at Morgan Stanley