Tronox Reports First Quarter 2022 Financial Results

Solid first quarter results despite ongoing cost inflation and logistics challenges

Focused investments to further strengthen business model durability and long-term profitability

 STAMFORD, Conn., April 27, 2022 /PRNewswire/ -- Tronox Holdings plc (NYSE:TROX) ("Tronox" or the "Company"), the world's leading integrated manufacturer of titanium dioxide ("TiO₂") pigment, today reported its financial results for the quarter ending March 31, 2022, as follows:

First Quarter 2022 Financial Highlights:

• Produced revenue of $965 million, an increase of 8% compared to the prior year, primarily driven by higher revenue from TiO₂ and pig iron
• Generated income from operations of $69 million and net income of $16 million, inclusive of a one-time fee regarding the settlement agreement reached with Venator totaling $85 million including the break fee and related negotiated interest
• Achieved GAAP diluted EPS of $0.10; adjusted diluted EPS of $0.60 (non-GAAP) primarily due to the settlement
• Delivered Adjusted EBITDA of $240 million, within the guided range, and an Adjusted EBITDA margin of 24.9%
• Invested $103 million in capital expenditures and generated free cash flow of $86 million
• Reaffirming 2022 Adjusted EBITDA and adjusted diluted EPS guidance; adjusting 2022 free cash flow lower largely to reflect the settlement

This outlook is based on Tronox's current views on current global economic activity and is subject to changes and impacts associated with the ongoing pandemic, global supply chain, and inflation-related challenges, among others.

"Tronox delivered solid first quarter results and continued to serve our customers against a backdrop of higher costs and logistics constraints," commented John D. Romano, co-chief executive officer. "It is a testament to the dedication of our employees that we have continued to deliver results in line with our expectations while overcoming these ongoing challenges, so we thank the Tronox team for their commitment."

Mr. Romano continued, "Market demand remains sound across all products, though we continue to monitor Europe given the crisis in Ukraine. Our financial exposure is minimal, with less than 1% of our total revenue from Russia and Ukraine combined in 2021. More importantly, our hearts go out to those impacted by the conflict, and we offer our support to those who are affected.

"Our demand outlook for the year remains strong as TiO₂ market tightness persists while inventories remain below seasonally normal levels, and similarly positive trends continue in the zircon and pig iron markets. While we experienced external challenges this quarter, Tronox remains well-positioned to continue to overcome adverse conditions. With our enterprise optimization model, we are able to optimize our global footprint, and we are investing to sustain our competitive advantage. We are focused on executing against our strategy to deliver safe, quality, low-cost, sustainable tons for our customers."

Jean-François Turgeon, co-chief executive officer, added, "We are committed to driving continued value creation through our capital allocation strategy. Our key capital projects, including newTRON and the mining development projects in Australia and South Africa, will unlock additional value from our vertically integrated business model and ensure we remain competitive across all economic scenarios while enabling improved return on capital. In the first quarter, after announcing the refinancing transaction that enabled the achievement of reaching our previous gross debt target, we repurchased approximately 1.4 million shares for a total of $25 million. We expect to continue share repurchases under the remaining $275 million program through February 2024 as cash generation permits. Additional debt reduction below our previous target of $2.5 billion will further strengthen our balance sheet and reduce interest costs. We look forward to sharing more details on our long-term strategy, outlook, and capital allocation priorities at our Investor Day on June 16, 2022."

The Company recorded first quarter revenue of $965 million, an increase of 8%, largely driven by higher revenue from TiO₂ and pig iron. Revenue from TiO₂ sales was $773 million, an increase of 11% driven by a 20% increase in average selling prices on a local currency basis, or an 18% increase on a US dollar basis, partially offset by a 6% decrease in volumes. Sequentially, TiO₂ volumes increased 9%, in line with previously communicated expectations, driven by higher volumes across all regions, while average selling prices increased 6% on both a local currency and US dollar basis.

Zircon revenue decreased 12% to $108 million driven by a 38% decrease in volumes partially offset by a 43% increase in average selling prices. Sequentially, zircon volumes declined 20%, while average selling prices increased 14%. The volume decline on both a year-over-year and sequential basis are due to higher sales from inventory in previous quarters.

Revenue from other products was $84 million, representing a 17% increase, primarily due to higher pig iron volumes and average selling prices. Revenue declined 8% sequentially, primarily due to lower pig iron volume and average selling prices.

Net income attributable to Tronox in the quarter of $16 million included non-recurring items such as the settlement and a deferred tax benefit. Together, these totaled $80 million or $0.51 per diluted share. Excluding these items, adjusted net income attributable to Tronox (non-GAAP) was $96 million, or $0.60 per diluted share, an increase of 45% and 40%, respectively.

Adjusted EBITDA of $240 million represented an increase of 7% driven by higher pricing across all products and favorable exchange rates, partially offset by higher costs to serve our customers, increased commodity costs, impacts from the extended downtime at the Company's Stallingborough, U.K. TiO₂ pigment plant, lower volumes and product mix. Adjusted EBITDA margin was 24.9% for the quarter.

Sequentially, Adjusted EBITDA improved 3% due to higher average selling prices and improved TiO₂ volumes, partially offset by higher costs to serve our customers, increased commodity costs, impacts from the Stallingborough facility extended downtime, lower zircon volumes, product mix and unfavorable exchange rates. 

The Company's selling, general and administrative expenses were $78 million in the quarter. The Company incurred an $85 million one-time fee related to the settlement, inclusive of the break fee and related interest. Tronox's first quarter net interest was $30 million, a 39% decrease due to lower debt levels and reduced interest rates compared to the prior year. Depreciation, depletion and amortization expense was $68 million.

Tronox ended the quarter with $2.6 billion of total debt and a net leverage ratio of 2.4x. Available liquidity at the end of the quarter totaled $758 million, including $292 million in cash and cash equivalents and $466 million available under revolving credit agreements.

Free cash flow for the first quarter was $86 million after $103 million in capital expenditures, including investments in key capital projects such as newTRON, the Company's global business transformation project to improve, automate, and digitize; and Atlas Campaspe, the mining development project in Eastern Australia that will sustain Tronox's internalization of feedstocks and associated cost advantages and also provide additional zircon supply. These investments are expected to generate returns significantly above the Company's cost of capital and sustain Tronox's position as a leading low-cost producer.

In the first quarter of 2022, the Company returned $25 million to shareholders through the repurchase of approximately 1.4 million shares. Tronox expects free cash flow generation to enable further debt reduction, annual dividend increases, and share repurchases, taking into account the significant capital expenditures forecasted this year.

In March, Tronox announced it had entered into a long-term power purchase agreement with the South African independent power producer, SOLA Group, to provide 200 MW of solar power to Tronox's mines and smelters in the Republic of South Africa. This project is expected to provide approximately 40% of Tronox's South African electricity needs and lower its worldwide scope 1 and 2 emissions by approximately 13%. The Company anticipates the project should be fully implemented by the fourth quarter of 2023. This project is only one example of numerous initiatives and investments being pursued by Tronox to meet its publicly announced goal to align with a global warming scenario below 2°C and achieve net zero greenhouse gas emissions by 2050. More information about the Company's sustainability initiatives will be available in the 2021 Sustainability Report, which is expected to be published mid-year and will be expanded further upon at Tronox's 2022 Investor Day.

The 2022 outlook reflects continued solid demand as well as persistent macro challenges including inflation and supply chain disruptions.

• FY 2022:
• Reaffirming Adjusted EBITDA guided range at $1.025-$1.125 billion
• Reaffirming Adjusted diluted EPS guided range at $3.08 to $3.59¹
• Adjusting free cash flow expectation lower to at least $265 million, reflecting the settlement ($85 million), increased 2022 capital expenditures ($25 million) and increased working capital requirements ($25 million)
• Q2 2022: Adjusted EBITDA expected to be $265-280 million

Mr. Romano concluded, "Based on what we see today, we remain confident in our outlook for the year given the continued strong demand trends we are seeing in the market. We are continuing to monitor recent macro developments including the conflict in Ukraine, which we anticipate will have a muting effect on European growth, but given tight inventories throughout the chain, we do not expect this to materially impact our end market demand. We remain committed to delivering on our commitments and driving value for our stakeholders."

Tronox will conduct a webcast conference call on Thursday, April 28, 2022, at 8:00 a.m. ET (New York).  The live call is open to the public via internet broadcast and telephone.

Internet Broadcast: http://investor.tronox.com 
Dial-in Telephone Numbers:
United States: 1-844-200-6205
International: 1- 929-526-1599
Access code: 603841

Conference Call Presentation Slides will be used during the conference call and will be available on our website: http://investor.tronox.com

Conference Call Replay: Available via the internet and telephone beginning on April 28, 2022, 11:00 a.m. ET (New York), until May 5, 2022, 5:00 p.m. ET (New York)

Internet Replay: http://investor.tronox.com
Replay Dial-in Telephone Numbers:
US Toll Free: 1- 866-813-9403   
International: +44 204 525 0658   
Replay Access Code: 329532

Tronox Holdings plc is one of the world's leading producers of high-quality titanium products, including titanium dioxide pigment, specialty-grade titanium dioxide products and high-purity titanium chemicals; and zircon. We mine titanium-bearing mineral sands and operate upgrading facilities that produce high-grade titanium feedstock materials, pig iron and other minerals. With approximately 6,500 employees across six continents, our rich diversity, unmatched vertical integration model, and unparalleled operational and technical expertise across the value chain, position Tronox as the preeminent titanium dioxide producer in the world. For more information about how our products add brightness and durability to paints, plastics, paper and other everyday products, visit tronox.com.

Statements in this release that are not historical are forward-looking statements within the meaning of the U.S. Private Securities Litigation Reform Act of 1995. These forward-looking statements, which are subject to known and unknown risks, uncertainties and assumptions about us, may include projections of our future financial performance including anticipated synergies based on our growth and other strategies, anticipated completion of extensions and upgrades to our mining and operations, anticipated trends in our business, anticipated costs and benefits of project newTRON and Atlas Campaspe and the Company's anticipated capital allocation strategy. These statements are only predictions based on our current expectations and projections about future events. There are important factors that could cause our actual results, level of activity, performance, actual synergies, or achievements to differ materially from the results, level of activity, performance, anticipated synergies or achievements expressed or implied by the forward-looking statements. Significant risks and uncertainties may relate to, but are not limited to, macroeconomic conditions, inflationary pressures, political instability, including the ongoing Russia and Ukraine conflict and any expansion of such conflict, supply chain disruptions, market conditions and price volatility for titanium dioxide, zircon and other feedstock materials, as well as global and regional economic downturns, that adversely affect the demand for our end-use products; disruptions in production at our mining and manufacturing facilities; and other financial, economic, competitive, environmental, political, legal and regulatory factors. These and other risk factors are discussed in the Company's filings with the Securities and Exchange Commission.

Moreover, we operate in a very competitive and rapidly changing environment. New risks and uncertainties emerge from time to time, and it is not possible for our management to predict all risks and uncertainties, nor can management assess the impact of all factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements. Although we believe the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, level of activity, performance, synergies or achievements. Neither we nor any other person assumes responsibility for the accuracy or completeness of any of these forward-looking statements. You should not rely upon forward-looking statements as predictions of future events. Unless otherwise required by applicable laws, we undertake no obligation to update or revise any forward-looking statements, whether because of new information or future developments.

To provide investors and others with additional information regarding the financial results of Tronox Holdings plc, we have disclosed in this release certain non-U.S. GAAP operating performance measures of EBITDA, Adjusted EBITDA, Adjusted EBITDA margin and Adjusted net income attributable to Tronox, including its presentation on a per share basis, and a non-U.S. GAAP liquidity measure of Free Cash Flow.  These non-U.S. GAAP financial measures are a supplement to and not a substitute for or superior to, the Company's results presented in accordance with U.S. GAAP.  The non-U.S. GAAP financial measures presented by the Company may be different from non-U.S. GAAP financial measures presented by other companies. Specifically, the Company believes the non-U.S. GAAP information provides useful measures to investors regarding the Company's financial performance by excluding certain costs and expenses that the Company believes are not indicative of its core operating results.  The presentation of these non-U.S. GAAP financial measures is not meant to be considered in isolation or as a substitute for results or guidance prepared and presented in accordance with U.S. GAAP.  A reconciliation of the non-U.S. GAAP financial measures to U.S. GAAP results is included herein.

Media Contact: Melissa Zona
+1.636.751.4057

Investor Contact: Jennifer Guenther
+1.646.960.6598

SOURCE Tronox Holdings plc