Tronox Holdings plc

Hello and welcome to the Tronox Holdings Q3 of 2022 earnings call. My name is Harry and I'll be your coordinator today. If you'd like to ask a question during the Q&A, you may do so by pressing star one on your telephone keypad. I'd now like to hand you over to Jennifer Gunther, Vice President of Investor Relations to begin. Jennifer, please go ahead.

Thank you and welcome to our third 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. 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 filings. 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 U.S. GAAP terms are provided in our earnings release and in the appendix of this 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 is 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. For those of you who have joined who may be a little less familiar with the Tronoc story, we're the world's largest vertically integrated TiO2 producer with nine pigment plants six mines, and five upgrading facilities across six continents. 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. 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 300,000 tons of capacity. I invite you to listen to a replay of our Investor Day webcast from June, if you haven't already done so, to learn more about our strategy, key initiatives, and mid- and long-term financial targets. Now turning to slide five. Charnox's strong margin performance continued in the third quarter, enabled by our vertically integrated portfolio, despite difficult market conditions. We achieved adjusted EBITDA of $247 million within our updated guidance range and adjusted EBITDA margins of 27.6%. And this is now the 22nd quarter in a row that we've achieved adjusted EBITDA margins greater than 20% and the eighth consecutive quarter where margins were above 25%. Evidence of the strength and resilience of our business through a variety of economic scenarios. We invested $314 million in ongoing key capital projects that reinforced Tronox's commitment to strengthening our business model. And we returned $110 million to shareholders year-to-date, including share repurchases and dividend payments. And finally, we're now realizing increasing value from Tronox's higher-value coproduct streams, which include Monozyte, consisting of high-value rare earth elements. The monazite is a higher margin because it carries very little cost as historically those coproduct streams were stockpiled as waste. This demand for light rare earth elements found in monazite is increasing dramatically given their use in many facets of the emerging green economy, including permanent magnets for electric vehicle motors and wind turbines. While revenue for these coproduct streams is less than $30 million year to date, the rising interest has driven a 74% increase in high value coproduct revenues year over year, enabling Tronox to realize greater value from what it was previously viewed as waste. This provides an interesting growth opportunity for Tronox to not only generate incremental earnings, but also support growth in the renewable energy space. Turning to slide six, our third quarter revenue of $895 million represented a 3% increase driven by higher TIO2, zircon and pig iron prices, and higher pig iron volumes. Income from operations was $163 million, and net income attributable to Tronox was $121 million. Our GAAP diluted earnings per share was 77 cents, and our adjusted diluted earnings per share was 69 cents, with the primary difference being due to a 10% share benefit we recorded in the quarter for an adjustment to an evaluation allowance of an Australian deferred tax asset. Adjusted EBITDA of $247 million represented a 2% decrease, largely due to softer market conditions. Our margin decreased 140 basis points to 27.6%, driven by higher costs and unfavorable product mix from higher pig iron volumes that rolled from Q2 to Q3. And finally, we generated $25 million in free cash flow, which was impacted by the inventory build in the quarter from both Jezan feedstock purchases and the replenishment of safety stock as a result of softer demand. And we're taking action to address this in the fourth quarter, as J.F. will review with you in a few minutes. Moving to slide seven. As we communicated in our release last month, TIO2 volumes were softer in the quarter due to significant reduction in demand in Europe, Middle East, and Africa and Asia Pacific. Pricing across both TIO2 and Zircon was in line with our expectation, driven by our continued execution on our commercial pricing strategy. TIO2 volumes declined 13% sequentially, while average selling prices increased 3% on a local currency basis or 1% on a U.S. dollar basis. Zircon volumes improved 8% compared to the quarter, owing to the orders that rolled from the second quarter and into the third quarter, and positive pricing momentum continued in Zircon, resulting in a 7% price increase versus the prior quarter. Revenue from other products was $94 million, an increase of 31% driven by higher pig iron and rare earth revenues. The strengthening US dollar in the quarter was a headwind of revenue due to the unfavorable translation impacts, primarily from the weakening of the Euro. So looking to the remainder of the year, we expect fourth quarter pigment demand to decline 25% to 30% sequentially, driven by customer destocking, continued weakness in Europe, Middle East, and Africa and Asia Pacific, and seasonal weakness in the Americas. Customer inventory levels remain low relative to previous periods of economic weakness, so we do not believe we will see similar levels of destocking as we move into 2023. Based on this and direct customer feedback we've received, we are confident Q4 will be the trough for TiO2 volumes. We continue to see the benefits of our vertical integration and margin stability initiatives in our financial results. And as we've communicated previously, we do not expect pricing to move as it has in previous economic transitions, owing to the differentiated landscape and the commercial approach that we've implemented over the last several years. I'll now turn the call over to JF for a review of our operational performance. JF?