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 2026 results conference call. Currently, all participants are in a 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 Anges, Vice President, Head of Strategy and Investor Relations for Chemours. you may begin your conference.

Good morning, everybody. Welcome to the Chemours Company's first quarter 2026 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 Chemours' 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. Additionally, we posted our earnings presentation on our website yesterday evening as well. With that, I will turn the call over to Denise Dignam.

Thank you, Brandon, and thank you, everyone, for joining us. During today's call, I will begin by discussing highlights from our recent performance before turning it over to Shane, who will provide details around our outlook for the second quarter of 2026 and some commentary on the remainder of the year. Finally, I will provide updates on our meaningful progress against our Pathway to Thrive strategy and current view of our operating environment before taking your questions. We started 2026 with strong results, delivering a first quarter that was well above earnings expectations and showcased the strength of Chemours' disciplined execution and strategic focus across the company. Both thermal and specialized solutions and titanium technologies delivered standout performances, with TSS not only achieving another quarter of double-digit year-over-year growth in Option refrigerants, but also excelling in quota execution and capturing additional opportunities in Freon refrigerants, through sharp market focus and agile commercial execution. TT also exceeded our earnings expectations, driven by global pricing actions, strong commercial discipline across all regions and customer segments, and continued operational focus. In advanced performance materials, the business worked to quickly stabilize operations following the Washington Works outage and the same strength in our performance solutions order book. especially in high-value data center and semiconductor markets. Adding to this strong performance and aligning with our efforts to improve our balance sheet, we completed the sale of nearly all of our Quan Yin properties ahead of schedule and promptly used the available proceeds to pay down a meaningful portion of our near-term debt, further strengthening our balance sheet and enhancing Comor's financial flexibility as we look ahead. We remain on track to complete the sale of the remaining parcel of the land in 2026, which should provide an incremental $60 million of gross proceeds. This development followed the $700 million refinancing completed in March of our 2027 unsecured notes and a portion of our 2028 unsecured notes, extending these maturities out to 2034 and increasing our balance sheet flexibility. Let me expand a bit further on the quarter's business activities. Our TSS business delivered a record first quarter with continued strength in both Freon and Option refrigerants, driving double-digit year-over-year growth. Net sales for TSS increased 22% versus the prior year quarter, largely driven by higher pricing, stronger volume growth, and a favorable product mix across refrigerant markets. Pricing benefited from automotive aftermarket Freon refrigerant sales in North America and Option blends, while overall volume growth was supported by seasonal strength. These top line results translated into record adjusted EBITDA for TSS in the quarter, with margins expanding to 33%, reflecting strong pricing realization for Freon and an improved Option blend mix. While higher input costs, particularly R32, created some offsets, these results underscore the power of our commercial execution and disciplined quota management. Sequentially, net sales increased 28%, consistent with the typical seasonal ramp we see across refrigerants and pricing strength in certain products. For our TT business in the first quarter, the team executed well amid a challenging market environment. we experienced continued global stability and observed solid seasonal demand improvements in North America and Europe. However, lower volumes and less favorable product mix in certain non-Western markets offset these gains, resulting in reduced global volumes overall compared to the prior quarter. While volumes trended down sequentially, net sales finished within our expectations due to disciplined global pricing execution. Notably, adjusted EBITDA exceeded our expectations, driven by our pricing actions along with strong cost management and our focus on operational excellence. In line with our efforts to improve security of supply and input optimization, we've signed a long-term coring supply contract with Olin to service our Dalil site starting in 2028. This agreement ensures a reliable supply at value-accretive economics. strengthening Dalil's global competitiveness and supporting our operational excellence focus under Pathway to Thrive. It also reinforces Comor's commitment to being one of the lowest cost chloride TiO2 producers worldwide. While we had previously announced our intention to pursue an onsite chlorine facility at our Dalil site with a third party, in March, the supply agreement terminated and we will not be proceeding with this project. As we look ahead, our team remains agile and responsive to ongoing market changes and economic uncertainty. We continue to keep our manufacturing operations flexible, modifying production levels to meet shifting demand. Our pricing strategy is firmly in place, as exemplified in our recent price increase communication, first in December and continued on April 1st across all key end markets. These announcements demonstrate our ability to adjust prices while consistently delivering outstanding and dependable service and quality. The first quarter's results, with pricing up 3% sequentially, reflect the initial impact of implementing these price changes alongside our progress in operational reliability, which strengthens our ability to respond effectively to shifts in market demand. APM results in the first quarter reflected both operational and portfolio-related headwinds, with net sales down year-over-year due primarily to lower volumes. Overall, first quarter sales were constrained by the Washington Works outage and the prior closure of the Advanced Materials SPS capstone line. These factors provided a difficult comparison to last year, and the outage weighed meaningfully on sales and incremental costs. resulting in a $25 million headwind in adjusted EBITDA. While our first quarter performance was not what we believed that business is capable of, with these discrete events now behind us today, APM is building a more effective and efficient foundation for coming quarters. Notably, our performance solutions order book is seeing particular strength in high-value markets, positioning APM for continued improvement as we move through 2026. Separately, our corporate level performance also showed a significant decrease in expenses compared to the same quarter last year, largely due to lower costs associated with legacy litigation activities. We remain focused on balancing the timely execution of global corporate initiatives with appropriate cash expenditures. With that, I'll turn it over to Shane to walk through our outlook for the quarter ahead and provide thoughts on what remains for 2026.

Thank you, Denise, and good morning, everyone. As shared in the earnings materials available on our investor website, I now would like to discuss our expectations for the second quarter and provide some updates on our business as we look ahead. Beginning with TSS, for the second quarter, we project net sales to rise sequentially in the low to mid-teens percent range, primarily attributable to favorable seasonal trends related to the cooling season in the northern hemisphere. It is worth noting that some demand and associated sales, having about a $10 million impact on adjusted EBITDA, was pulled forward into the first quarter due to timing, which modestly tempers the sequential progression we would have otherwise expected and added strength to our first quarter TSS performance. Despite this pull forward, the seasonal uplift we anticipate for TSS will be underpinned by strength across our Option and Freon refrigerant channels. Adjusted EBITDA for TSS is also expected to grow sequentially, ranging from $210 million to $225 million, primarily driven by seasonality, as well as specific opportunities our commercial team is capturing in the Freon aftermarket and continued transition to Option refrigerants. In the first quarter and into the second, weakness in residential demand was more pronounced than anticipated. This softer demand has been largely driven by a slower start to the reference cooling season, which has delayed equipment installations and associated aftermarket activity, and is consistent with what we are hearing more broadly across the residential HVAC value chain. Specific to expectations in the first quarter and into the second quarter, overall aftermarket demand has slowed, as new equipment demand has decelerated into distribution networks, an important leading indicator for downstream demand. Looking to the full year, we continue to expect year-over-year growth in the business, supported by our strong market position, regulatory tailwinds, and overall price insurance. However, we remain appropriately cautious on residential demand signals. One other important factor to consider is that TSS is a quota-driven business. Our company can drive differentiated values through disciplined execution and allocating our available quota to the most attractive pockets of demand. While we do not expect the same year-over-year double-digit top-line growth for the remainder of 2026, as comparisons begin to reflect the regulatory-driven adoption under the U.S. AIM Act that drove robust demand in late 2025, we remain bullish on the opportunity ahead as we allocate our quota to achieve optimal profitability. Overall, demand across our Option channels, together with continued momentum in the Freon Automotive aftermarket, supports the growth profile and consistent margins we outlined last quarter. For our TT business, we expect sequential net sales to increase in the mid to high teens percentage range in the second quarter, driven by a more favorable seasonal comparison and related pricing actions. This improvement is supported by increased mineral sales following first quarter timing dynamics related to our mining restructure as well as some strength we are seeing in our TIO2 pigment sales amid actively developing global market conditions. Our guide for the second quarter anticipates the initial effects of the price increase on April 1st, as well as the continuing effects from pricing increases announced in December. These adjustments are being applied across our key end markets as contracts allow. Although global geopolitical events continue to affect supply chains and impact the worldwide TIO2 market both directly and indirectly, we are confident that our TT business is strategically positioned to take advantage of emerging opportunities. Aligned with the current market environment and the improved agility of our operational circuit, for the second quarter, we expect TT's adjusted EBITDA to range between $40 million and $50 million. Although geopolitical outcomes remain uncertain and the related market impact is unclear, recent enhancements to our operating circuit and improved visibility of order patterns support the second quarter earnings growth. As the year develops, consistent with prior messaging, we are controlling what we can control, and we intend to stay true to our commercial strategy, which will be supported by robust pricing efforts that will continue based on our assessment of market conditions. We remain resolute in our belief that this strategy positions our TT business for success, regardless of market and demand conditions. Now for our APM business. For the second quarter, we anticipate net sales to increase within the low to high 30% range on a sequential basis, primarily due to the resumption of normal operations at the Washington Works facility. Adjusted EBITDA is forecasted to be between $12 million and $18 million. While sequential growth in EBITDA is expected, earnings remain below targeted levels as cost pressures and volume limitations related to the Washington Works downtime experienced in the first quarter continues to weigh with second quarter profitability. Although we are facing outage-related constraints, our APM order velocity has reached a level that has not been experienced in the past several years. Within our performance solutions portfolio, demand remains strong in the semiconductor and data center end markets, which are driving orders for our performance solutions products. These sectors are tied to growing and sustainable demand for APM's products, and our areas where Chemours is uniquely positioned to serve these markets. In addition to our higher value end market activity, our advanced materials portfolio is also experiencing strong order levels. While the industrial end markets that advanced materials generally serve remain weak, Our commercial team is seeing signs of destocking for specialty materials that may have been overbought in prior years. While the impact of these demand tailwinds is limited in our second quarter outlook, we see direct pathways to achieve significant secondhand strength while the macroeconomic environment remains tight. On a consolidated basis, we anticipate our second quarter net sales to increase in the range 15% to 20% sequentially. with consolidated adjusted EBITDA expected to range between 220 million to 250 million dollars. Also, we anticipate corporate expenses to range between 45 and 50 million dollars. Our capital expenditures for the second quarter are expected to be in the range of 50 million, with free cash flow generation of at least 100 million dollars. In connection with the strong free cash flow we anticipate for the second quarter, We expect to realize interest expense savings in the quarter, as we reduced our debt by approximately $160 million in April. Also, we remain committed to enhancing our balance sheet flexibility, including the $700 million refinancing completed in March, which builds on the close to $2 billion of near-term debt we have addressed since the fourth quarter of 2025. We are proud of these efforts, which strengthen our balance sheet and enhance financial flexibility. key enablers of our pathway to thrive strategy. Turning to the full year, despite a mixed global operating environment that includes challenging commercial and markets and overall raw material and other cost inflation, we still expect our full-year consolidated net sales, adjusted EBITDA, and capital expenditure forecast to align with our previous guidance. Full-year free cash flow conversion is now expected to be above 20%, slightly lower than our prior guidance. driven by Kuan Yin land sale tax implications, which impact free cash flow. That said, the earlier than anticipated closure of the majority of the Kuan Yin parcels positions Comores to immediately begin to deliver as we pay down approximately $160 million of our outstanding Euro term loan fee in late April. As we close the final Kuan Yin land parcel and repatriate the remaining proceeds expected this year, We intend to use those proceeds to continue redeeming future debt maturities. This positive development paired with our diligent cash management activities provides us with confidence towards achieving our liquidity objective of net leverage below three times adjusted EBITDA. For 2026, we now anticipate our net leverage ratio will be below 3.8 times adjusted EBITDA by the end of the year. Additionally, Our efforts will provide approximately $9 million in interest expense savings for the company going forward annually by year end, after the reference repayment in April. Overall, we started the year out well, and looking ahead, we see strong pricing momentum in TT, robust refrigerant demand, and operational reliability improvement across our sites, which gives us confidence to deliver a step-up performance in the second half of the year, enabling us to deliver on our full-year guide. Also, we remain front-footed on our assessment of operational and commercial impacts stemming from geopolitical considerations around the globe to ensure we address inflation ahead of any financial impact, as well as addressing any potential opportunities as they present themselves. We have the right team in place and a strong understanding of our customer base to achieve the goals and outlook we have laid out for the current year. Given these perspectives on the second quarter and remaining year, I'd like to now hand the call back over to Denise to share her closing thoughts and perspectives.

Thank you, Shane. As I look across our first quarter performance, we continue to see clear progress against our Pathway to Thrive strategy, which remains the foundation for how we operate, allocate capital, and create long-term value. We remain on track and are seeing tangible accomplishments across all pillars, including improved operational reliability, disciplined cost execution, targeted growth investments, continued portfolio improvements, and efforts to de-risk our balance sheet aimed at strengthening the business over time. Our teams are performing effectively across all Pathway to Thrive pillars. In the area of operational excellence, we continue to integrate the Chemours business system to implement lean principles, ensuring a high standard of consistency, reliability, and cost efficiency. Although CVS was implemented earlier this year, we are already observing positive outcomes. For enabling growth, our focus remains on areas that set us apart and provide clear market advantages. This is evidenced by ongoing momentum in Option refrigerants, increased engagement within high-value end markets across TSS and APM, and continued efforts to drive value through recent pricing strategies. For portfolio management paired with our discipline capital allocation approach, we've improved our balance sheet with the nearly completed Kwan Yin land sale and existing cash reserves, enabling a reduction in debt that will continue through the year. We are dedicated to aggressively reducing our leverage while making steady progress and are strengthening the long-term pillar where we are progressively working to reduce our exposure to legacy matters. These efforts highlight our focus on de-risking Chemours to ensure our ability to secure our future in exciting high-value end markets and opportunities. In taking a broader view of Chemours, we are closely monitoring the ongoing conflict in the Middle East and the resulting volatility across energy markets and global chemical supply chains, which is adding uncertainty to the broader macro environment with the potential to weigh on demand, particularly in more impacted regions. To this, we are focused on actively working to mitigate cost headwinds through core price and other pricing mechanisms. As sulfur markets tighten due to this conflict, sulfate-based TiO2 producers are seeing tangible cost inflation, creating potential opportunities for those positioned to respond. Morse has decades of leadership in the titanium dioxide market with deep technical, commercial, and regional expertise. As conditions evolve and potential tailwinds emerge, we are applying that experience with discipline, remaining selective and deliberate as we monitor the macro environment and act accordingly. In parallel, we are taking a disciplined approach to risk management across the enterprise, prioritizing cost control, supply chain resilience, and capital allocation to ensure flexibility in this more uncertain macro environment. We believe that our positioning, considering these market dynamics, could provide opportunities for Chemours as we move into the second half. Before we move to questions, I want to thank our employees around the world for their continued focus, resilience, and commitment. Their execution and adaptability are central to our performance and our progress against Pathway to Thrive. I'd also like to thank our customers for their ongoing partnership and trust as we support their needs across critical end markets. With a strong start to the year, the right strategic actions underway, and a proven ability to execute through uncertainty, Chemours is well positioned to deliver on our commitment and drive sustained value creation for all of our stakeholders as 2026 progresses. With that, I'd like to open the line for your questions.

Thank you. As a reminder, to ask a question, please press star 11 on your telephone and wait for your name to be announced. To withdraw your question, please press star 11 again. We ask that you please limit yourselves to two questions. Please stand by while we compile our Q&A roster. Our first question is going to come from the line of Joshua Spector with UBS. Your line is open. Please go ahead.

Yeah. Hey, good morning. I wanted to ask just on TSS and specifically in first quarter, you know, where you're talking about some of the benefits from the pricing step up in the Freon products into the auto aftermarket. I was wondering if you can characterize that. Was that more of a step up in some contract type structure or is that more of a tightening of the legacy refrigerant market? And did you expect that, I guess, when you gave your guidance earlier in the year?

question uh josh yeah from freon we we first of all we as a business are always looking to optimize our ebitda by per quota um so we do see strength in the auto aftermarket but we are uniquely positioned when it comes to the auto aftermarket we have um you're one of two domestic suppliers of 134a versus other foreign suppliers we also have a great quota position And then also, there are some constraints for other suppliers that are stemming from EPA regulated phase down of a key raw material that goes into their process of TCE. So, we see this as very sticky. I would say going into the quarter, we did anticipate strength going in, maybe not as high as it turned out to be, but we certainly expect that to continue.

Okay, so thanks for that.

And I guess just sticking with TSS and thinking about 2Q, I think your comments clearly say you expect weaker resi OEM. I think that's the interpretation. So you're being somewhat conservative there. Does that help your view on margins in the quarter? And I guess there's just a bunch of moving parts now. With costs moving up, you're trying to get pricing and generally just trying to understand kind of the margin cadence you'd expect as either OEM comes back into the mix or some other factors maybe help on the cost side as you go further through the year? Thank you.

Yeah, we always talk about the TSS business to be around, you know, the 30% margin or higher in the low 30s. So, you know, that's kind of where we are. When I think about equipment installations in 2026, we're really around the projection is around 7.5 million units, which is really low. and we expect that to grow as there's more optimism around housing and expecting more around the 9 million unit on a longer-term basis. We see a lot of strength in our aftermarket positioning and see a lot of growth that's coming from that. So we anticipate around Option still a really good growth year for us.

Hey, Josh, just to add, too, I mean, you mentioned about the Q2 guy in a little bit of weeks. I do want to emphasize in the script we talked about a $10 million adjustment EBITDA impact that was pulled into the first quarter. Our commercial team did great executing at the last part of the quarter, and we shifted about $10 million of EBITDA into the first quarter. So if you normalize the Q2 for that $10 million, I think you would see more seasonal trends.

Thank you.

Thank you. And one moment for our next question. Our next question is going to come from the line of John Roberts with Mizuho. Your line is open. Please go ahead.

Good morning. This is Fabian Jimenez on for John. Question on APM. With the Washington Works outage and your closure of SPS capstone line, what should we expect to see in terms of a sustainable earnings power of the segment? And also, what's the timing of this ramp?

Thanks for the question. Yeah, we expect the APM business to be in the $30 to $40 million EBITDA range, and we definitely expect getting back to that range in the back half of the year. We have a really strong order book when you look at our performance solutions portfolio, really centered around semiconductor growth and data center. So you'll start to see that as we get into the back half.

Thank you. And switching gears here, on Corpus Christi, can you share what your playbook is if the city declares a level one water emergency? What levers can you pull here potentially?

Thanks for the question. Hey, this is something that has been on our radar for the better part of two years. So, you know, we've been very proactive. We actually, if you've We don't see right now there's a potential for a 25% curtailment, which is potentially announced for the fourth quarter. That is already dialed into our outlook. So we do not see any hiccups from that. And we also have a very, very robust supply chain. So if it came to other knobs, we have other partners that we work with that we can supply our customers.

Thank you.

Thank you. And one moment for our next question.

Our next question comes from the line of John McNulty with BMO. Your line is open. Please go ahead.

Yeah, good morning. Thanks for taking my question. So I wanted to dig into one of the points that you were bringing up toward the end around some of the sulfur-related impact on other parts of the TiO2, I guess, producer market. We've seen, because of sulfur constraints, we've seen some really significant price hikes from a lot of the Chinese producers. I guess, how do you think about your playbook as you push through the rest of this year in terms of either going after price and kind of working underneath that higher pricing umbrella that some of your competitors are pushing, or going after the volumes that may be left on the table because you don't have to necessarily raise price quite as much? I guess, how are you thinking about that from a playbook perspective? And can you speak to your ability to address some of the international markets that are starting to see some of that really aggressive pricing pushing through?

Great. playbook is, as we've talked about before, where our strategy is around, you know, gaining share in fair trade regions, but along with that is also profitability and prioritizing price. So we came out in December, you know, ahead of any disruption with the Iran war and started raising prices and were successful. As you can see, you know, inches going into the first quarter of pricing's up So, we're going to continue as we see opportunities to raise price. So, we already made an announcement for a price increase of the same order of magnitude in April. One thing, you know, just to say we have great flexibility in our contracting around driving pricing. So, I would say we're going to continue around, our playbook is continuing around driving our share. in the fair trade market, but also prioritizing profitability and raising prices. It's clear with sulfur costs increasing, there is an opportunity to go back in history. As sulfur costs increase, there's a one-for-one correlation to what happens in the cost curve of sulfate producers.

I would just add too, John, if market disruptions occur and there's volume opportunities, You might remember in the third quarter last year, we talked about bringing capacity down about 10% to 20% just to align with where we thought demand was going to be. And we have flexible operating circuits that we can bring that back up to address that as well.

Yeah, and even in the first quarter, we saw volumes increasing over what we had expected we were able to, you know, respond.

Got it. Okay. No, helpful. Okay. And then I guess, can you just give us an update on your two-pick solution? I think NTT, you know, was doing some heavy trials on you. You know, I think you've also got some potential capacity coming up later on this year. I guess, can you give us an update as to how that's progressing?

So, yeah, we're excited about, you know, towards the end of the year, we're going to have the capacity that comes on. We're going to be using it to sample customers as well as refining our process technology for future scale-up. When it comes to NTT, the 12-month field trial using our fluid was successful. There were no signs of fluid or equipment degradation. There were over 200 prospective customers and partners that have seen the fluid in action. We're going to continue working with NTT through 2028 and really continue to expand the visibility of that technology.

Great. Thanks very much for the call.

Thank you.

And one moment for our next question. Our next question comes from the line of Hasan Ahmed with Olympic Global Advisors. Your line is open. Please go ahead.

Morning, Denise and Shane. You know, question around your Q2 as well as full year guidance. I mean, if I sort of take a look at what you guys have guided to, I mean, you're guiding to a first half EBITDA of around $404 million. And if I compare that to what that means or implies for the back half of the year, it's essentially a range of $396 to $496 million. So I'm just trying to sort of figure out that bridge to the higher end of that EBITDA range? I mean, what gets us to that incremental, call it almost 100 million on the higher end side of things? I mean, particularly factoring in seasonality and the like.

Thanks for the question, Hassan. I'll just start by saying, you know, coming into 2026, we were very optimistic on growth 2025 to 2026, and we remain very optimistic on that growth. When you think about pricing, we have very strong pricing. When you think about volume, we see very stable volume, and our cost actions are really working. So we feel good about the growth year over year, but I'm going to turn it over to Shane to get into more of the specifics around your question.

Yeah, thanks for the question, San. So certainly, you know, as you just put the mat to it, it looks as if, you know, we're back and waited. But you have to remember, you know, we started out the year you know, really slow in ATM with Washington Works outages. You know, we mentioned $25 million in the first quarter, and then we also had some expense come through as well as constraints on overall sales into the second quarter as well. You know, that normalized for the second half, you know, is a good runway to get to that balance. I would say outside of that, right, we talked a bit about TT. You know, we really are looking at strong pricing and some tailwinds according to that side. Denise mentioned the strong adoption in December, and we just announced April as well. You know, so on the backs of a lot of these efforts and controlling what we control as well as operating, you know, and then also APM had a really good order book, you know, I mentioned in the script, you know, the best we've seen in several years. So we feel very confident with this guide. And, you know, as we think about opportunities within TIO2, I think there's upside here from tailwinds as well.

Very helpful. And as a follow-up on the TT side of things, I mean, I know you guys commented on, you know, sulfuric acid and some of the price increases we've seen over there. As you take a look, the question really is around where cost curves sit today and also how that impacts the rationalization that we were seeing leading into some of these sulfuric acid price moves. If I've run my numbers correctly, some of the latest rounds of price hikes in TIO2 that we've seen it just seems barely cover the higher sort of costs coming out of, you know, higher sulfuric acid prices and the like. So, I mean, you know, the state of affairs for TiO2 cost curve wise was pretty dire, you know, even prior to this run up in sulfuric acid prices. So, I mean, where are the cost curves today? Are a large chunk of the producers still losing money despite these price hikes? And how does that impact sort of rationalization, particularly in China, on a go-forward basis?

Yeah, thanks for the question. First of all, let's just go back to what our strategy is, and it's really to be low-cost chloride producer globally, and we continue on that path. We don't have any sulfate production, so we are very much on the left side of the cost curve, Clearly, for sulfate producers, they're moving to the right. Depending on how much sulfur increases, that's how far they're going to the right. Can I say what kind of decisions they're going to make around their capacity? No, but what I can say is we are clearly focused on our strategy of gaining share in the fair trade markets, continuing our advocacy, and being reliable suppliers to our customers.

Very helpful. Thank you so much.

Thank you, and one moment for our next question. Our next question comes from the line of Arun Viswanathan with RBC Capital Markets. Your line is open, please go ahead.

Great, thanks for taking my question. Congrats on the results here. So I guess I just wanted to follow up on the last point. So for TT, I think you're guiding to about 40 to 50 million for Q2 EBITDA. How does that evolve as you kind of move through the year? Are there any discrete items like cost reductions or maybe something on the ore supply side that would lift that in Q3?

Or is it going to be mainly dependent on demand? Thanks.

Yeah, I would say that we definitely see improvement as we go through the year. And I would point to two primary factors. We are not building any volume upside into our outlook. It's really pricing and continuing cost outwork, which we definitely see evidence every day. We saw it in the first quarter. We see it coming through the rest of the year.

Okay. Thanks for that. And another question on TSS, I guess, if I could. When you think about the last year and you did have a pretty big step up because of the step down in the quota, How are you seeing growth play out this year in TSS in absence of that? Do you still have a strong backlog that's trying to catch up to prior orders? And also, maybe if you could comment on, you know, the pricing environment and the mix environment. Will you be selling any more Freon? And would that affect the mix in a positive or negative way?

Or, you know, is that destocking all done? Thanks.

Great, thanks. Thanks for that. Yeah, so as it evolves, we've said, first of all, we still expect year-over-year growth in Option and in TSS. As we get to the second half of the year, you're going to see more of a slowdown, as we've talked about, because of the transition. But we see a lot of upside in the aftermarket as new equipment gets installed, and we have a really, really strong position in the aftermarket. When you think about Freon, as I said earlier, we see stickiness in our pricing and in our volumes because of our position in the auto aftermarket. So we feel very optimistic about the growth and our position for the rest of the year.

And as it relates to the margins, we've talked about a 30-plus margins in this business, and we feel very confident with that. Seasonally, Q2, Q3 tend to be the seasonally the strongest margins, and we anticipate such again.

Thanks.

Thank you. And one moment for our next question.

Our next question comes from the line of Pete Osterlund with True Securities. Your line is open. Please go ahead.

Hey, good morning. Thanks for taking the questions. Just wanted to start on TT. So you called out the lower TIO2 sales in North America in the first quarter. It looks like sales were down 12% year over year in the region. Was that a reflection of underlying market demand, I guess, or anything to note from a customer inventory perspective? And just going forward over the next couple of quarters, what's your outlook for the North American market?

Yeah, I mean, going into... Actually, coming into the year, we had projected the volume. Actually, we – and particularly in North America, then, we had anticipated. As we go into second quarter, we definitely see a step up with the coding season.

Okay, thanks. And then just as a clarification on your free cash flow guidance being lowered to 20% from 25%. Does that represent anything other than the tax outflow from the Kuan Yin proceeds?

I guess any other cash headwinds that you hadn't previously incorporated? Thanks, Pete. Yeah, I appreciate you bringing this up.

As you mentioned, yeah, this is really just specific to the Kuan Yin land sale. We had taxes that are forecasted to be in operating cash flow, whereas the Kuan Yin proceeds are going to be outside of operating cash flow. So it's really just a presentation milestone. but I will make sure to emphasize that 20% is a floor, right? We're confident in, you know, really generating upside here and we'll continue to focus on that free cash flow generation of this company.

Great. Thanks very much.

Thank you. And one moment for our next question. Our next question comes from the line of Duffy Fisher with Goldman Sachs. Your line is open. Please go ahead.

Yeah. Good morning. Question on the new chlorine contract. Um, One, is it more of a cost plus or is it a market minus type contract? And then two, if you look at it versus, you know, what you've paid over the last two or three years, is it a meaningful cost advantage for you when that rolls through?

Yeah, thanks for the question, Duffy. We can't talk about specifics of the contractual terms, but, you know, all I can say is this provides secure, reliable, supply chlorine at a very attractive rate. It secures our competitive position and is very aligned with our drive to the left side of the cost curve.

Okay. And then on the Q1 slide deck, you called out $17 million of kind of one-time impacts that you thought were going to happen in TT. With that quarter now done, did it come in at 17? Was it higher? Was it lower? Did some of that get pushed into Q2? Can you just talk about that?

Yeah, thanks, Duffy. Yeah, I appreciate you bringing that up. That was really related to some ore mix items within the cold season at some of our plants. I would say the 17 million we saw come through. However, we did have some one-time benefits that came through as well. We had less than the $17 million that we saw come through, but not too much of a quantum loss.

Great. Thank you, guys.

Thank you. And one moment for our next question. Our next question comes from the line of Lawrence Alexander with Jefferies.

Your line is open. Please go ahead.

Hi. Good morning. This is Dan Rizwan for Lawrence. You mentioned the Freons is sticky. When you say sticky, is it for this year where it's some sort of restock or is it like a multi-year growth story? And I guess more importantly, can it provide a tailwind when the Option adoption kind of slows a little bit?

I'm sorry, can you ask the second part of that question again?

Well, I was wondering if Freon is going to be a multi-year growth story because, I mean, Option is still very strong. It will eventually peter out. Not peter out, but it will slow to a more, I guess, longer pace. And I was wondering if Freon could kind of augment that?

Yeah, I mean, we see a multi-year trajectory around Freon Strength. So, as we said, we're always – the way we run this business is managing quota and getting the best margins per CO2 equivalent. As I said, we have a very advantaged position in the U.S. relative to this product. And, you know, we have a good quota position and we have our process is not impacted by some of the EPA actions. So definitely see this persistent.

And is the demand, I mean, and maybe a simple question, but is the demand coming almost entirely from auto aftermarket or are there other factors or other areas contributing?

Yeah, it's really auto aftermarket. And I would say, you know, if you look at even the trajectory of like ICE vehicles, you know, there's a long tail for that. So that's how you can kind of think about that Freon sales.

Thank you. And one moment for our next question. Our last question will come from the line of Vincent Andrews with Morgan Stanley. Your line is open. Please go ahead.

Thank you, and good morning. I'm just wondering if you could comment a little bit on the TiO2 market and what you think the impact to the market as well as to you will be from the restarts of the Venator assets. I guess there's one in Italy that's restarting, and then LB seems to have gotten approval for the one in the United Kingdom. It's not clear exactly when that might restart, but... I know Europe's not necessarily the biggest market for you, but what do you think it'll do to the market and how will you play around that?

Yeah, I mean, I think, thanks for the question. I think there's definitely, you know, will be a small impact. We'll see how those assets start up. They definitely need some work to get started. So I think if anything, we could start seeing something maybe next year. But, you know, we feel... especially around, let's say, the U.K. asset, you know, there's going to be, I would say our biggest concern there is can that asset be used for, you know, pull through of other Chinese volume? And, you know, we see the risk of that low. We have a lot of trade advocacy going on, making sure we're not, there's no circumvention of anti-dumping tariffs. And also really strengthening, working with authorities to strengthen the rules of origin definition. So I would just say, you know, it's really not something that we see as a big impact. These are also very high cost to operate facilities.

Okay. And then Shane, if I could just follow up on the cash flow. You know, with fourth quarter, when you put out the 25% number, you obviously had announced the sale of the land. At the time, did you just think there was going to be a way to not incur taxes on that, and then that didn't play out, or just what happened there?

Yeah, thanks. I appreciate the question. You know, I would say as we announced that, you know, I think we were fine-tuning the overall distribution plan, you know, out of Taiwan. we are going to carry with it. That said, we are, you know, we've announced net proceeds of $290 million here way ahead of time, right, as well as we're seeing net-net probably more than we expected. We said net roughly around $300. I would say net, we're roughly in the $310 million range. So, you know, yes, the original 25% did not take into account that tax item, but it was more presentation. We anticipated that net item being kind of netted with the quantity and proceeds instead of being presented in operating cash flow.

Okay, that's very clear. Thank you very much.

Thank you, and I'm showing no further questions at this time. Ladies and gentlemen, this will conclude today's question and answer session as well as today's conference call. Thank you for participating, and you may now disconnect. Everyone, have a great day.