Tronox Reports Third Quarter 2021 Financial Results

STAMFORD, Conn., Oct. 27, 2021 /PRNewswire/ -- Tronox Holdings plc (NYSE:TROX) ("Tronox" or the "Company"), the world's leading integrated manufacturer of titanium dioxide pigment, today reported its financial results for the quarter ending September 30, 2021:

Third Quarter 2021 Financial Highlights:

• Revenue of $870 million, an increase of 29% year over year, driven by higher TiO₂, zircon and pig iron average selling prices and higher TiO₂ and zircon volumes
• Income from operations of $168 million and net income of $113 million
• GAAP diluted EPS of $0.70 and adjusted diluted EPS of $0.72 (non-GAAP)
• Adjusted EBITDA of $252 million, in line with guidance, and an Adjusted EBITDA margin of 29% (non-GAAP)
• Record $191 million in free cash flow after $65 million in capital expenditures
• Reduced total debt to $2.7 billion, resulting in a net leverage ratio of 2.6x, within the communicated long-term targeted range of 2.0x-3.0x and ahead of the 2023 timeframe

Q4 2021 Summary Outlook:

• TiO₂ sales volumes expected to be flat to down mid-single digits sequentially
• Adjusted EBITDA expected to be $230-$245 million

Summary of Select Financial Results for the Quarter Ending September 30, 2021

Commenting on these results, John D. Romano, co-chief executive officer, stated, "Jean-François and I are proud of the way our team navigated through numerous external challenges this quarter to deliver financial results in line with our third quarter guidance. We are working tirelessly with our dedicated team of employees to ensure we are the supplier of choice for our customers by leveraging our unmatched global footprint and vertically integrated business model. This quarter we successfully continued the implementation of planned regional pricing initiatives for both TiO₂ and zircon, offsetting headwinds from inflationary pressures. Given inventory levels remain below normal, coupled with the strategic initiatives we have in place, we believe we are well positioned to continue to meet growing customer demand."

Third Quarter 2021 Results
_{(Comparisons are to prior year (Q3 2021 vs. Q3 2020) unless otherwise noted)}

The Company recorded third quarter revenue of $870 million, an increase of 29% year over year, primarily driven by higher TiO₂ and zircon volumes and higher average selling prices across all products. Revenue from TiO₂ sales was $682 million, an increase of 26% driven by a 13% increase in volumes and a 12% increase in average selling prices on both a US dollar and local currency basis. Sequentially, TiO₂ volumes declined 10%, at the low end of guidance, and average selling prices increased 4% on a local currency basis or 3% on a US dollar basis.

Zircon revenue increased 107% to $116 million driven by an 81% increase in volumes and a 13% increase in average selling prices. Sequentially, zircon volumes declined 14%, due to higher sales from inventory in the second quarter, while average selling prices increased 10%.

Revenue from feedstock and other products was $72 million, which represented a 5% decrease, due to no external feedstock sales in the quarter compared to the prior year, partially offset by increased pig iron revenue from higher average selling prices.

Net income attributable to Tronox in the third quarter 2021 of $111 million included non-recurring costs primarily related to debt extinguishment totaling $4 million or $0.03 per diluted share. Excluding these items, adjusted net income attributable to Tronox (non-GAAP) was $115 million, or $0.72 per diluted share.

Adjusted EBITDA of $252 million, another record achievement for the Company, increased by 70%. Adjusted EBITDA margin of 29% increased 700 basis points. The increase in Adjusted EBITDA was driven primarily by higher average selling prices across all products, increased zircon and TiO₂ volumes, favorable product mix and improved absorption at our mining and pigment sites, partially offset by unfavorable exchange rates and increased freight and commodity costs. Sequentially, Adjusted EBITDA improved on higher TiO₂, zircon, and pig iron pricing and favorable exchange rates, partially offset by lower sales volumes, as anticipated, and increased freight and commodity costs.

The Company's selling, general and administrative expenses were $76 million in the quarter. Interest expense was $37 million, a 23% decrease due to lower debt levels and reduced interest rates compared to the prior year. Depreciation, depletion and amortization expense was $72 million.

Operations Summary

Commenting on operations, Jean-François Turgeon, co-chief executive officer added, "Tronox's global footprint enables us to be closely located to our customers, a significant advantage in a time when the logistics market is so challenged. While we have been impacted by supply chain disruptions both on the mining and pigment side of our business, we have remained focused on effectively managing through the constraints to deliver for our customers.

"Our vertically integrated business model continues to serve as a competitive differentiator allowing us to strengthen our customer relationships because we are able to deliver consistent quality, security of supply, and as well as offer access to a global footprint. This, along with ongoing benefit of having zircon as a co-product, contributes significant value to our portfolio. We remain well-positioned for the long-term to capitalize on the TiO₂ market's evolution and high growth rates in emerging markets around the world."

Balance Sheet, Cash Flow and Capital Allocation

Tronox paid down $156 million of debt in the third quarter for a total of $639 million year-to-date. Net leverage as of September 30, 2021 was 2.6x on a trailing twelve-month basis, down from 4.1x at the end of 2020, achieving the communicated net leverage target of 2.0x to 3.0x well ahead of our stated timeframe of 2023. Debt at the end of the quarter totaled $2.7 billion, $200 million away from its gross debt target of $2.5 billion, which the company expects to achieve no later than the close of Q1 2022. Available liquidity at the end of the quarter totaled $764 million, including $309 million in cash and cash equivalents and $455 million under existing revolving credit agreements.

Free cash flow for the third quarter was $191 million after $65 million in capital expenditures. This represents another record free cash flow quarter, bringing year-to-date total free cash flow generated to a record $418 million. Year-to-date capital expenditures as of September 30 totaled $183 million 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 provide additional zircon. These investments are expected to generate returns significantly above the Company's cost of capital.

With the Company's gross debt target in sight, Tronox expects to prioritize capital expenditures, continued annual dividend increases and share repurchases.

Sustainability

During the third quarter, Tronox announced the reorganization of its Board committee structure to enhance oversight of environmental, social and governance ("ESG") efforts. In addition, Tronox published its annual sustainability report in July outlining the Company's ESG commitments, including plans to align with a global warming scenario of below 2° Celsius and achieve an aspirational goal of net zero greenhouse gas emissions and zero waste to external dedicated landfills by 2050. The report also features the Company's 'Journey to Zero', an initiative to achieve zero injuries, zero incidents, and zero harm. Producing safe, quality, low-cost, sustainable tons has long been a key part of Tronox's strategy. The enhanced oversight and increased disclosure is evidence of the Company's ongoing commitment to ESG and sustainability.

Q4 2021 Outlook

• TiO₂ sales volumes expected to be flat to down mid-single digits sequentially
• Adjusted EBITDA expected to be $230-245 million due to logistics challenges, higher freight and commodity costs and some less favorable product mix

The Company continues to expect strong customer demand, partially offset by ongoing supply chain disruptions and inflationary pressures including elevated commodity prices. Zircon sales volumes are expected to remain elevated above 2019 and 2020 levels; however, volumes in the fourth quarter will be lower than those in the third quarter, more in line with production levels. Pricing is expected to continue to increase, consistent with the quarterly movements seen in 2021.

Mr. Turgeon concluded, "With our portfolio of assets and market position, we are confident in our ability to continue to capitalize on our momentum and deliver on our commitments to our stakeholders. 2021 thus far has been a great year for Tronox. We continue to navigate the current macro challenges while transforming our company, which will ensure our future remains bright."

Webcast Conference Call
Tronox will conduct a webcast conference call on Thursday, October 28, 2021, 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: +1.866.270.1533
International: +1.412.317.0797

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 October 28, 2021, 11:00 a.m. ET (New York), until November 4, 2021, 5:00 p.m. ET (New York)

Internet Replay: http://investor.tronox.com 
Replay Dial-in Telephone Numbers:
United States: +1.877.344.7529
International: +1.412.317.0088
Replay Access Code: 10161243

About Tronox
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.

Cautionary Statement about Forward-Looking Statements

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 the effects of the COVID-19 pandemic and 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, business and market disruptions related to the COVID-19 pandemic, including supply chain disruptions, market conditions and price volatility for titanium dioxide, zircon and other feedstock materials, as well as global and regional economic downturns, including as a result of the COVID-19 pandemic, 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.

Use of Non-GAAP Information

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 loss 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

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