Tronox Holdings plc

This event is being recorded. I'd now like to turn the conference over to Jennifer Gunther, Vice President of Investor Relations. Please go ahead.

Thank you, and welcome to our fourth quarter and full year 2021 conference call and webcast. On our call today are John Romano and Jean-Francois Turgeon, 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 the presentation on our website at investor.tronoc.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 US GAAP terms are provided in our earnings release and in the appendix of the accompanying presentation. Additionally, please note that all financial comparisons made during the call are on a year-over-year basis unless otherwise noted. 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'll start this morning by setting the stage with a quick overview of Tronox. We are the world's largest vertically integrated TiO2 producer with nine pigment plants, six mines, five upgrading facilities across six continents. Our 2021 revenue totaled approximately $3.6 billion, which was 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 approximately 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 also generate significant value as the world's second largest producer of zircon with approximately 297,000 tons of capacity. We are proud of the organization we created following the transformative acquisition nearly three years ago and the value we have and will continue to generate for our stakeholders. Now let's turn to slide five for some of the highlights. 2021 was a record year for Tronox on a number of measures. During the year, we maintained our strong execution and delivered on our commitments to all of our stakeholders. Our record revenue of $3.6 billion was driven by robust customer demand and our ability to meet this demand with our unmatched global footprint. Our adjusted EBITDA of $947 million in margin expansion to 26.5% is attributable to our vertically integrated business model, a primary driver of our lower integrated cost per ton. Improved pricing across all product lines and cost savings through programs such as Neutron offset higher commodity and freight costs. In 2021, we invested just over $270 million in key capital projects. This included Neutron, our project to digitally transform our global portfolio, which is expected to meaningfully reduce production costs by $150 to $200 per ton on a run rate basis by the end of 2023. We're pleased with the progress we're making and we're tracking to our plan. We also invested in Atlas Compaspe, our mining project in Eastern Australia, to maintain our advantage vertically integrated position as it will replace our Ginkgo snapper mines. We generated a record $468 million in free cash flow from our strengthened and differentiated business model, allowing for deleveraging ahead of our targeted objectives. We paid down $745 million of debt in 2021, ending the year at $2.6 billion with a net leverage of two and a half times ahead of our previously stated timeline of achieving $2.5 billion in gross debt and two to three times net leverage by 2023. We plan to continue to pay down debt beyond our previously stated targets to ensure our business remains well positioned to withstand a range of economic scenarios. And last but certainly not least, we continue our progress towards achieving our sustainability goals that we published in 2021 including another solid year from a safety performance perspective, thanks to the unrelenting focus by our employees. Turning to slide six, I'll review our sustainability accomplishments for 2021 in more detail. In 2021, we made significant strides forward on our ESG efforts. In July, we formalized our commitments to align with a global warming scenario of below two degrees centigrade and set a target of net zero greenhouse gas emissions and zero waste to external dedicated landfills by 2050, as well as other ESG-related commitments, such as targeting zero workforce injuries. Additionally, Tronox joined the United Nations Global Compact. We mapped our long-term targets to the UN Sustainable Development Goals and committed to the Ten Principles. Incorporating the UN standards into our strategies and procedures will help us protect our privilege to operate and set the stage for long-term success. In August, we announced the reorganization of our board committee structure to enhance our oversight of our ESG efforts. Most recently, we achieved a platinum rating by ECOVATUS, the highest level of recognition awarded and a validation of our efforts. This represents a significant improvement over our silver rating in 2019 and 2020 and puts Tronox at the top 1% of companies evaluated. The step change in our 2021 rating reflects how deeply embedded sustainability and corporate social responsibility have become in our business practices and the advancements we've made in our public disclosure on these topics. Additionally, we've committed to be fully compliant with the applicable TCFD and SASB disclosure standards when our next sustainability report is published by mid-year. While sustainability has long been a part of everything we do at Tronox, we remain committed to continuous improvement and further enhancing how we disclose our progress and efforts. Turning to slide seven, I will briefly review our full-year financial highlights before turning to the fourth quarter review. Revenue of $3.6 billion represented a 30% increase versus the prior year. Income from operations of $577 million grew 113%, while net income of $303 million was lowered due to a tax benefit of $903 million in 2020 that did not repeat. Our effective tax rate in 2021 was 19%. Our GAAP diluted earnings per share was $1.81, and our adjusted diluted earnings per share was $2.29. more than 300% higher than 2020. Adjusted EBITDA of $947 million represented a 42% increase over 2020, and our margin increased 230 basis points. Free cash flow of $468 million increased 200%. Now turning to slide eight, let me provide more detail into our fourth quarter. Our fourth quarter results came in line with our previously issued guidance. Revenue in the quarter increased 13%, driven by higher average selling prices. Sequentially, this represented a 2% increase. Our effective tax rate in the quarter was 16%, and our net income for the quarter was $87 million, a 53% improvement. Diluted earnings per share was 52 cents, and adjusted diluted earnings per share was 53 cents, an improvement of 179%. Adjusted EBITDA of $233 million improved 14%, and our adjusted EBITDA margin was 26.4%. And we generated free cash flow of $50 million in the quarter. Moving to Slide 9, I will now review our fourth quarter commercial performance in more detail. Our fourth quarter results were in line with our expectation, with our team managing strong customer demand while navigating a number of macro challenges, including input cost inflation and supply chain disruptions. Total revenue increased versus the prior year as higher selling prices were partially offset by lower feedstock and other volumes and the unfavorable euro exchange rate. TIO2 revenue of $675 million increased 15% versus the prior year due to higher prices across all markets. Volumes were flat year on year and lower by 4% versus the third quarter within our anticipated and communicated range. The TO2 supply-demand balance remains tight due to continued strong demand, while TO2 inventories remain well below seasonally normal levels and delivery times are extended by shipping delays and supply chain disruptions. Zircon revenue increased 26% versus the prior year due to continued pricing momentum as volumes were in line with the strong volume levels in Q4 of 2020. Sequentially, Zircon volumes were lower due to higher sales from inventory in the third quarter. In 2022, Zircon Vines will be more in line with production as we have sold the excess inventory out of the system. Feedstocks and other products declined due to the internalization of all feedstock sales in the quarter compared to the prior year, partially offset by increased pig iron revenue from higher average selling prices. On a quarter-over-quarter basis, the increase in revenue was driven by higher pig iron pricing. JF and I are grateful to the approximately 6,500 global employees whose dedication, perseverance, and ingenuity allowed us to deliver outstanding performance in spite of numerous external pressures. 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 our vertically integrated business model, we remain well positioned to continue managing through and overcoming these challenges. Our global footprint positions us close to our customers, while vertically integrated business model ensures security of supply. Customers are increasingly recognizing our reliability as a differentiator, which is a significant advantage. For example, in 2021, we were able to substantially increase the number of long-term volume contracts with our global customer base, securing our market share well beyond 2022. We anticipate TIO2 market demand to grow in line with GDP in 22, and will be supported by the need to replenish inventory throughout our customer supply chain channels. In the first quarter, demand is expected to continue to be very strong, and while distribution remains challenged, we are anticipating the first quarter TIO2 volumes to increase sequentially in the upper single digits as we work to meet our customer needs. Pricing will continue to increase in the quarter and offset recent inflationary pressures to allow for continued margin expansion. Zircon sales volumes are expected to remain elevated above 2019 and 2020 levels. However, volumes in the first quarter will be lower than those in the fourth quarter, more in line with production levels. Zircon pricing improvement in the first quarter is expected to more than offset the volume headwind on an EBITDA basis, and we expect this trend to continue for the full year. I will now turn the call over to JF for a review of our operating performance and profitability in the quarter. JF?