Tronox Holdings plc

Thank you all for joining and welcome to the Tronex Holdings Q2 2022 earnings call. My name is Brita and I'll be your event specialist on today's call. During the presentation you will have the opportunity to ask a question by pressing star followed by one on your telephone keypads. If you change your mind please press star two and for operator assistance please press star zero. I now have the pleasure of handing the call over to our host Jennifer Gunther Vice President of Investor Relations. So, Jennifer, please go ahead.

Thank you, and welcome to our second quarter 2022 conference call and webcast. Turning to slide two, 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.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 what we know today. 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'd like to start this morning's call by setting the stage with a quick overview of Tronox. We're the world's largest vertically integrated TiO2 producer with nine pigment plants, six mines, five upgrading facilities across six continents. Our 2021 revenue totaled $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 customers globally. A 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 300,000 tons of capacity. We held an investor day in June to review the transformation of Tronox over the last several years and where we're heading. We are very proud of the organization we've created and the value we have and will continue to generate for our stakeholders. I invite you to listen to a replay of the webcast if you haven't already to learn more about our strategy, key initiatives, and our mid- and long-term financial targets. Now let's turn to slide five for a review of our key highlights. Tronox delivered record earnings and a strong margin performance this quarter. We achieved adjusted EBITDA of $275 million, slightly above the midpoint of our guided range, and adjusted EBITDA margin of 29.1%, exceeding expectations. This was the 21st quarter in a row that we achieved adjusted EBITDA margins greater than 20%, and the seventh consecutive quarter where margins were above 25%. evidence of the strength and resilience of our business through a variety of economic scenarios. We also achieved adjusted EBITDA of a billion dollars on a trailing 12-month basis, another demonstration of our earnings potential and a testament to the benefits of our vertically integrated business model. In the first half, we invested $202 million in key capital projects. This included Neutron, our project to digitally transform our global portfolio. which is expected to generate savings of $150 to $200 per ton on a run rate basis by the end of 2023. We also invested in our mining extensions in South Africa and the Atlas Compaspe mine in Eastern Australia, and JF will review these investments in more detail later in the call. We returned $91 million to shareholders year to date, including share repurchases and dividend payments. Finally, we published our 2021 sustainability report in June. highlighting the significant accomplishments the company has achieved over the last year and the ongoing projects to advance our leadership role and sustainability in protecting the environment. Turning to slide six. This year, as Missy Zun reviewed at Investor Day, we updated and accelerated our carbon neutrality targets enabled by our solar renewable energy project in South Africa that we announced earlier this year and numerous other initiatives we have ongoing across the company. Our initial goal of reducing greenhouse gas emissions intensity by 15% by 2025 has now been increased to 35%. And the initial goal of 35% reduction by 2030 has now been updated to 50%. We reiterated our goal of zero waste to external dedicated landfills by 2050, and we remain committed to our target of zero injuries, zero incidents, and zero harm. We are also striving to improve the gender balance and diversity of our workforce, leadership, and succession planning. I invite you to review our 2021 sustainability report on our website for more on these and other initiatives. Turning to slide seven, I'll briefly review our second quarter financial highlights. Revenue of $945 million represented a 2% increase versus the prior year driven by higher TIO2 revenues. Income from operations was $190 million an increase of 27% primarily due to improved pricing. Net income of $375 million included a $262 million reversal of a portion of our deferred taxes valuation allowance in Australia, which is further evidence of the strength of our business model and the earnings that it generates. Our effective tax rate in the quarter was negative 147% due to the valuation allowance reversal. Excluding this and the loss on debt extinguishment, our normalized second quarter effective tax rate was 22%. Our gap diluted in earnings per share was $2.37, and our adjusted diluted earnings per share was 84 cents, an increase of 38%. Adjusted EBITDA of $275 million represented a 16% increase, and our margin increased 350 basis points to 29.1%. driven by improved pricing and favorable product mix from pig iron volumes that rolled from Q2 to Q3 due to logistics and shipping delays. This shift of these volumes into Q3 will unfavorably impact our EBITDA margins in Q3, given the lower contribution margin from pig iron. And finally, we returned $66 million to shareholders in the second quarter through share repurchases and dividend payments. Moving to slide eight, While demand remained solid in the quarter, our TO2 volumes came in slightly below our expectations due to ongoing supply chain and logistics challenges across the regions. Pricing across both TO2 and Zircon was in line with our expectations, driven by continued execution of our commercial pricing strategy. Revenue from TO2 sales was $769 million, an increase of 4%, driven by 19% increase in average selling prices on a local currency basis, or a 15% increase on a U.S. dollar basis, partially offset by a 9% decrease in volumes. Compared to the prior quarter, TO2 revenues were relatively in line. Volumes declined 3% sequentially, driven by lower volumes in Asia Pacific, while average selling prices increased 4% on a local currency basis or 2% on a U.S. dollar basis. Zircon revenue decreased 8% to $111 million, driven by a 38% decrease in volumes which was partially offset by a 47% increase in average selling prices. The volume declined year over year due to higher sales from inventory in 2021, as we've communicated previously. Sequentially, Zircon volumes declined 5% driven by the orders that rolled into the third quarter due to logistics challenges and shipping delays in Australia and South Africa, while average selling prices increased 8%. Revenue from other products was $65 million, relatively flat versus the prior year quarter, primarily due to higher pig iron average selling prices offset by lower pig iron volumes. The strengthening of the U.S. dollar in the quarter was a headwind to revenue due to the unfavorable translation impacts, primarily from the weakening of the euro. As we enter the second half of the year, despite challenging macroeconomic conditions and increasing inflation, we continue to project solid financial performance through strong execution and operating agility. At this stage, we continue to see steady demand across the majority of our end markets, though we expect demand in Asia Pacific and Europe to remain dynamic. Notwithstanding, we are confident in Charnock's position and our ability to deliver for our customers, given our integrated business model and our global footprint that allows us to quickly adapt to changing market conditions. Our dedicated team of employees is working to ensure we earn the right to be the supplier of choice. Our enterprise optimization model enables us to maximize our global footprint, and we're investing today to advance and sustain our competitive advantage. We're focused on executing against our strategy to deliver safe, quality, low-cost, sustainable tons. Looking ahead into the third quarter, we anticipate TIO2 volumes to be relatively in line with the second quarter 2022 levels, based on what we're currently seeing in the market and our order books. In the third quarter, TIO2 pricing will continue to increase globally across all contract categories, including margin stability agreements and volume contracts. As Jeff Ingle outlined at Investor Day, our pricing strategy remains focused on optimizing pricing over the long term and supporting our margin stability initiatives. Zircon volumes are expected to increase sequentially, benefiting from the rolled orders from the second quarter. and fourth quarter volumes are forecasted to remain in line with production levels, while pricing in the third quarter is forecast to increase sequentially. And now I'm going to turn the call over to J.F. for a review of our operating performance and profitability in the quarter. J.F.?