Chemours Company (The)

Good morning, my name is Michelle and I will be your conference operator today. I would like to welcome everyone to the Chemours Company first quarter full year 2025 results conference call. Currently all participants are in the listen only mode. A question and answer session will follow the conclusion of the prepared remarks. I would like to remind everyone that this conference call is being recorded. I would now like to hand the conference over to Brandon on just Vice President, Head of Strategy and Investor Relations for Chemours. You may begin your call.

Good morning, everybody. Welcome to the Chemours Company's first quarter 2025 earnings conference call. I'm joined today by Denise Dignam, Chemours' President and Chief Executive Officer, and our Senior Vice President and Chief Financial Officer, Shane Hostetter. Before we start, I would like to remind you that comments made on this call, as well as in the supplemental information provided on our website, contain forward-looking statements that involve risks and uncertainties as described in CMORS' SEC filings. These forward-looking statements are not guarantees of future performance and are based on certain assumptions and expectations of future events that may not be realized. Actual results may differ, and Chemours undertakes no duty to update any forward-looking statements as a result of future developments or new information. During the course of this call, we will refer to certain non-GAAP financial measures that we believe are useful to investors evaluating the company's performance. A reconciliation of non-GAAP terms and adjustments is included in our press release issued yesterday evening. Also, we posted our earnings presentation to our website yesterday as well. With that, I will turn the call over to Denise Dignam.

Thank you, Brandon, and thank you, everyone, for joining us. In starting off our call today, I want to highlight an announcement that was released concurrent with our earnings release yesterday evening regarding our strategic agreement with Naveen Fluorine to produce our Option two-phase immersion cooling fluid. This manufacturing partnership leverages Naveen's manufacturing expertise and Camorra's innovation in this space to address the data cooling center needs created by AI and next generation chips. I will share more about the development of Camorra's participation in this market later in the call, but I want to highlight this exciting development with you as we remain focused on executing our pathway to thrive, enabling growth pillar, and serving the market. During today's call, I will begin by discussing our first quarter performance followed by Shane, who will provide details around our financial results and outlook. Finally, I will address the positive progress we've made on our Pathway to Thrive strategy before taking your questions. Beginning with our results for the quarter. For our TSS business, we exceeded our overall expectations, delivering another strong quarter with a 40% year-over-year net sales increase in Option refrigerants from increased demand for blends, Opt-in refrigerant blend demand has been even higher than expected as stationary OEMs build inventories and experience increased sell-through demand in connection with the 2025 transition mandate under the U.S. AMAC. This stronger-than-anticipated demand is also putting pressure on various areas of the supply chain, noticeably around cylinders used to ship and transport the R454B blends for stationary aftermarket sales. While we understand that there is tightness in the supply of cylinders used, we are increasing our line fill capacity in order to quickly fill cylinders as they arrive from our sources. We believe this situation will correct itself quickly and will not be a long-term issue for Comor's ability to support the R454B market transition. An important component to serving this increased customer demand has been directly correlated to the successful grant of our 40% capacity expansion of Option feedstock at our Corpus Christi site. While we did experience a brief full-site outage in January, this outage did not have an impact on our ability to serve the market. This outage was related to a third-party utility provider onsite that was outside of our control. Incurring this unplanned outage in a very tight demand environment was not ideal. However, I want to highlight the impressive work from our team onsite to quickly get our plan up and running, ensuring no disruption to filling our customer orders. Altogether, our strong contribution from Option sales and performance during the quarter enabled our ability to drive margins of 30%, positioning us well as we move into peak cooling season for our TSS business over the next quarters. Stepping back from our recent performance, I also want to touch on a few other topics related to TSS. In our last earnings call, I referenced broader cost inflation anticipated around R32, which is an important feedstock for our Option refrigerant blends and efforts underway to pass these costs through. Since our last update, we've been working closely with our customers to better align our agreements to address these headwinds, inclusive of tariff exposure. As a result, we will be able to successfully offset these elevated input costs through our pricing going forward. Although we are reliant on third-party production of R32, we have limited tariff exposure considering that we are able to source product directly in the U.S. where needed, with most of our shipments going to Mexico, where we can then sell directly to our customers. While having the highest tariff exposure for Chemours, it is this supply chain flexibility which allows us to be able to mitigate the exposure of tariffs on the TSS refrigerant portfolio of our business. As an asset-light business, TSS is advantaged with the flexibility to serve our customers using third-party products around the world and leverage different points of storage or blending to reduce tariff exposure. Moving over to TT. In TT, our team remains focused on executing against our strategic priorities and delivering for our customers amid an evolving TIO2 landscape in an uncertain macroeconomic and regulatory environment. For the broader TIO2 market, what has become apparent is a clear differentiation between those markets with fair trade regulations announced or in place versus those where actions against Chinese TIO2 dumping has not yet been pursued. For Comores, North America, Europe, and Brazil, which we categorize as our Western markets, reflect those markets with a more robust set of fair trade regulations in place or are evaluating final implementation after a trial period. Over time, these Western markets provide an added opportunity for Comores with North America and Europe making up nearly 70% of global TIO2 sales. Speaking to the first quarter, these combined regions and countries actually drove a 12% sales increase sequentially from continued efforts to regain share and reflects the highest first quarter combined regional sales since 2022. Alternatively, In those markets not yet possessing or pursuing a fair trade regulatory framework, primarily in other parts of Asia and Latin America, we're experiencing a high level of Chinese TIO2 product being dumped, driving lower pricing. In India, more specifically, we know that while fair trade regulations are being considered, there's a large amount of Chinese-based TIO2 product being exported to this region, driving near-term market dislocation. Our first quarter results reflected this impact with clear commercial volume strength in those Western markets and with weaker sales in China, India, and other parts of Asia and Latin America. With the context around our view of the global market and where opportunities may develop as more countries adopt fair trade provisions, we also believe that Chinese capacity, while publicly announced, will not fully materialize in years ahead. This belief is based on Chinese producer awareness around the overcapacity and the challenges as to where these producers can sell products with key markets pursuing more fair trade regulations. This is further supported by a combination of other factors, such as plant idling and shutdowns, a persisting weak domestic market, along with impacts from higher sulfate pricing. To this, we are anticipating Chinese lower production levels in 2025 breaking a 10-year trend of increasing output. As we continue to pursue opportunities in this transitioning global TIO2 landscape, it brings back the importance of driving our low-cost TIO2 position globally. In the first quarter, while we did continue to drive cost reductions, our cost savings realized were offset by the cold weather downtime we experienced earlier in the quarter. While this preserves the approximately $40 million that took out in the first quarter of 2024, we have to be even more aggressive in our cost-out and operational efforts to offset any potential near-term pricing volatility as we move through this transition and to protect our margins. Our work to drive incremental volumes across targeted markets and our laser focus on cost-out efforts will be evident in our margins as the market gains more certainty. Turning now to APM, As anticipated, we continue to see weakness in cyclical end markets and products serving the hydrogen market, which impacted our net sales for the quarter. Despite continued softness in the market, we increased our adjusted EBITDA margin by one percentage point to 11%, driven by lower cost. As a further part of our strategy execution, we also advanced our portfolio management initiatives in APM, which I'll discuss in more detail later in today's call. At the corporate level, while we continue to remain focused on reducing costs, we did incur additional costs associated with legal preparation efforts in connection with upcoming litigation matters aligned with our strength in the long-term strategic pillar. Before handing it off to Shane, I'd like to address some of the geopolitical and macroeconomic dynamics we are watching. As it pertains to recent tariff announcements, we've determined that provided there is not a material impact to consumer confidence, these regulatory actions are not expected to have a significant impact on our current outlook due to the mitigation plans we have in place. Previously, I referenced our mitigation plan for TSS, but in other parts of our business, notably in APM, we have implemented surcharges and are pursuing opportunities to sell product in place of Chinese-sourced products in the U.S. In TT, we don't expect much impact from tariffs considering that TIO2 is excluded. but continue to pursue efforts to protect US tier two production and the markets we sell into. We also do not see any significant impact to TT raw material pricing due to tariffs. Across our portfolio, we are regularly monitoring the regulatory environment, ensuring the reliability of our supply and continuing ongoing advocacy efforts to highlight the importance of Comoros offerings across key markets. We are confident in the steps we are taking today as well as our ability to be agile and adapt to these dynamic market conditions. We'll continue to evaluate further mitigation efforts as needed and are confident in our strong competitive position across our key markets. With that, I'll turn it over to Shane to walk through our financial results.