Tronox Holdings plc

Good morning, everyone, and welcome to the TronAux Holdings Q3 2021 earnings conference call. All participants will be in a listen-only mode. Should you need assistance, please say no to a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star and then one using a touch-tone telephone. To withdraw your questions, you may press star and two. Please also note today's event is being recorded. And at this time, I'd like to turn the conference call over to Jennifer Gunther, Vice President of Investor Relations. Ma'am, please go ahead.

Thank you, and welcome to our third quarter 2021 conference call and webcast. On our call today are John Romano and Jean-Francois Tarjon, Co-Chief Executive Officers, and Tim Carlson, Chief Financial Officer. We will be using slides as we move through today's call. Those of you listening by Internet broadcast through our website should already have them. For those listening by telephone, if you haven't already done so, you can access them on our website at investor.tronox.com. Moving to slide three. 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 filing. This information represents our best judgment based on today's information. 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 U.S. GAAP terms are provided in our earnings release and in the appendix of the accompanying presentation. Moving to slide four, it's now my pleasure to turn the call over to John Romano. John?

Thanks, Jennifer, and good morning, everyone, and thank you for joining us today. I'd like to set the stage this morning by providing you with a quick overview of Tronox. We're the world's largest vertically integrated TIO2 producer with nine pigment plants, six mines, and five upgrading facilities on six continents. Our trailing 12-month revenue totaled approximately $3.5 billion, which is fairly evenly distributed across the Americas, Europe, Middle East, and Africa, and Asia Pacific. Our 1.1 million tons of pigment capacity supports our well-balanced base of more than 1,200 global customers. Our vertically integrated business model supplies approximately 85% of our internal feedstock needs, and this ensures consistent and secure supply for our customers. In addition to TIO2, we generate significant value as the world's second largest producer of Zircon, with approximately 297,000 tons of production capacity. We are very proud of the organization we've created following the transformative acquisition two years ago and the value we have and will continue to generate for our stakeholders. Turning to slide five, we've maintained our strong execution this quarter expanding margins as improved pricing and cost savings have offset increased commodity and freight costs we generated another record quarter of free cash flow from our differentiated business model allowing for deleveraging ahead of our targeted objectives the third quarter saw a continuation of higher volumes and average selling prices for both tio2 and zircon compared to the prior year owing to sustained recovery across our end markets, along with strong demand for our products. Additionally, our capital projects remain on track, with Neutron implementation progressing on schedule to provide the digital transformation that will enable meaningful long-term cost reduction. Turning to slide six, we are very pleased with our third quarter results, and they were in line with our previously issued guidance. Revenue in the third quarter increased 29% year-over-year, driven by higher average selling prices and volumes. Sequentially, this represented a 6% decline as higher average selling prices were offset by lower volumes as we anticipated and flagged last quarter. This was due to isolated client availability issues, which impacted production early in the quarter, but have since been resolved, and logistics challenges that persisted throughout the quarter. Net income from the quarter was $113 million, and diluted earnings per share was 70 cents, while adjusted earnings per share was 72 cents. The difference between diluted EPS and adjusted EPS is due primarily to debt redemption costs. The company delivered third quarter adjusted EBITDA of $252 million, another record for Tronox, and a year-over-year improvement of $104 million. This figure came in in the middle of our guided range due to higher average selling prices across all products, increased Zircon and TIO2 volumes, and improved absorption at our mining and pigment sites, partially offset by unfavorable exchange rates, increased freight costs, and higher process chemical and energy costs compared to the prior year quarter. Our adjusted EBITDA margin was 29%. a 700 basis point improvement year over year due to increased pricing, favorable product mix, and our ability to deliver on our cost improvement initiatives. We generated record-free cash flow of $191 million in the third quarter, owing to our differentiated business model focused on vertical integration, enabling favorable fixed cost absorption and lower feedstock costs relative to the market, an ongoing benefit of having Zircon as a co-product in our portfolio. We continue deleveraging in the quarter, reducing total debt to $2.7 billion and net leverage ratio to 2.6 times, within our long-term targeted range of two to three times, well ahead of our stated 2023 timeframe. Moving to slide seven, I'll now review our commercial performance in more detail. As previously highlighted, the third quarter saw strong pricing trends driven by the continuation of our regional pricing initiatives. TIO2 sold the strongest third quarter volume on record due to high demand as it continues to outstrip supply and inventories that remain below normal levels throughout the supply chain. TIO2 revenue was $682 million, an increase of 26% year over year, driven by a 13% increase in volumes and a 12% increase in average selling prices on both a local and U.S. currency basis. Volume growth was led by double-digit growth in Europe, Middle East, and Africa and Asia Pacific compared to the prior year. Compared to the second quarter, TIO2 revenues declined 8%. This was driven by a 4% increase in TIO2 prices on a local currency basis, offset by volumes declining 10% at the bottom end of our guided range. Zircon also saw the strongest third quarter volumes on record. Volumes were up 81% year-over-year on sustained strong demand, and average selling prices increased 13%, leading to an increase in revenue of 107%. As anticipated, Zircon volumes declined sequentially due to higher sales from inventory in the second quarter. Feedstock and other products declined year-over-year due to no external feedstock sales in the quarter compared to the prior year. partially offset by increased pig iron revenue and higher average selling prices. Our quarter-over-quarter basis revenue increased, driven by higher pig iron pricing. JF and I are once again very 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're 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. Given inventory levels remain below normal, coupled with the strategic initiatives we have in place, we believe we're well positioned to continue to meet growing customer demand. In the fourth quarter, demand is expected to outpace supply. We're anticipating fourth quarter TIO2 volume levels to be flat to down mid-single digits due to continued supply chain disruptions. Pricing is expected to continue to increase, consistent with the quarterly movement we've seen in 2021. 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. Zircon pricing improvement in the fourth quarter is expected to more than offset volume headwinds on an EBITDA basis, and we now expect this trend to continue for the full year 2022. I'll now turn the call over to JF for a review of our operating performance and profitability in the quarter.