Tronox Holdings plc

Good morning and welcome to the Tronex Holdings first quarter 2023 earnings call and webcast. My name is Brika and I will be your event specialist running today's call. All lines have been placed on mute to prevent any background noise and after the speaker's remarks we will conduct a question and answer session. To ask a question at this time please press star followed by one on your telephone keypad. If you change your mind at any time, please press star then two to remove your request to speak. And for operator assistance at any point, please press the star zero key. Thank you. I will now turn the conference call over to Jennifer Gunther, Chief Sustainability Officer and Head of Investor Relations and Financial Planning to begin today's call. So, Jennifer, please go ahead when you're ready.

Thank you, Brika, and welcome to our first quarter 2023 conference call and webcast. Turning to slide two, on our call today are John Romano and Jean-Francois Turgeon, co-chief executive officers, and John Srivazal, senior vice president, 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.toronox.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 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 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. I'd like to start the call today with a brief summary on Tronox for anyone who may be a little bit newer to our story. We're the world's largest vertically integrated TO2 producer with nine pigment plants, six mines, and five upgrading facilities across six continents. Our sales are fairly evenly distributed across the Americas, Europe, Middle East, and Africa, and Asia Pacific, and 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 about 85% of our internal feedstock needs at full effective capacity, 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. Our strategy is focused on positioning Tronox as the advantage global TiO2 leaders through the production of safe, quality, low-cost, sustainable tons. So now let's turn to slide five. In the first quarter, we saw the recovery from the fourth quarter trough levels we predicted and guided on our fourth quarter earnings call. Sequentially, TIO2 volumes improved 14% within our previously guided range, while average TIO2 selling prices improved 1% from the fourth quarter, or 3% compared to the prior year, despite 30% lower volumes year over year. As we emphasized to our investors over the last few years, we have continued to transform our business and our first quarter performance is a demonstration of that. We delivered adjusted EBITDA of $146 million, exceeding the top end of our guided range by $16 million. And we delivered adjusted EBITDA margins of 20.6% above the high teens range we previously anticipated. Our outperformance was due to several factors, including favorable exchange rates relative to our assumptions mainly on the South African Rand and the Australian dollar, prudent costs and discretionary spend management, and the sale of lower-cost inventory in the quarter versus what we anticipated. We're proud of the team's focus this quarter, and despite the continued macroeconomic challenges we face, our team continues to step up and deliver. We also wanted to provide a brief update on the fourth quarter events we spoke about last quarter. We're happy to report that our upgrading operations at KZN in South Africa are back to full utilization levels following a fire in the fourth quarter that impacted production rates. There will be no further impacts from the KZN event in the second quarter or going forward. Additionally, our Atlas mining operations in Australia are also now up and running. We're continuing to work with local authorities towards being able to utilize the primary roads for hauling material off site which we anticipate will occur mid-2023. Until then, we're continuing to utilize the higher cost alternative haul roads and moving lower volumes compared to what we could ship on the primary roads. Our costs will remain elevated in the second quarter due to these higher hauling costs and in the second half of the year as we consume the higher cost feedstock at our pigment plants. Our free cash flow for the quarter was a use of $172 million, primarily due to increased inventories, including , higher accounts receivables driven by improved sales, and lower accounts payable. As we communicated on our last earnings call, while we reduced our pigment production rates as a result of lower demand, we did not bring production levels down to align with market demand, since we projected demand would not sustain at the Q4 trough levels. Additionally, we've slowed some of our upgrading operations in South Africa, and we continue to purchase slag under our contract. We anticipate generating positive free cash flow for the remainder of the year to more than offset the first quarter use of cash. Moving to slide six. We are relentlessly focused on our sustainability efforts at Tronox, as this area is becoming an increasingly significant focal point and part of our conversations externally with investors, customers, and other key stakeholders. In an effort to create a centralized approach to communicating our sustainability efforts, we appointed Jennifer Gunther to the role of Chief Sustainability Officer and Head of Investor Relations and Financial Planning. Having Jennifer lead these efforts will provide greater insight externally into the exciting ongoing work around ESG and ensure our efforts continue to align Tronox towards a profitable and sustainable future as we believe these two go hand in hand. I also wanted to highlight that we'll be publishing our 2022 sustainability report in May. This report will reinforce our previously disclosed path to carbon neutrality by 2050. Additionally, we're committing for the first time to targets to reduce Scope 3 emissions intensity by 9% by 2025 and 16% by 2030 against a 2021 baseline. We're excited about the continued progress we make each year to become more fully aligned with the expectations of our key stakeholders. Now let's move to slide seven for a review of our first quarter financial performance in more detail. Revenue of $708 million improved 9% sequentially due to improved TO2 revenues, but represented a decline of 27% to the prior year due to continued market softness. Income from operations was $62 million in the quarter, and net income was $25 million. Our effective tax rate in the quarter was 26%, and our GAAP diluted earnings per share and our adjusted diluted earnings per share were both 15 cents. Adjusted EBITDA in the quarter was $146 million, and our adjusted EBITDA margin was 20.6%, both exceeding our previous guidance. Our free cash flow in the quarter was a use of $172 million, as previously outlined. Now let's move to slide eight for a review of our commercial performance. Our TIO2 volumes came in within our previously guided range. Volumes increased 14% versus the fourth quarter, driven by increases in Europe, Middle East, and Africa, Asia Pacific, and the Americas. TIO2 pricing continued to improve by 1% sequentially and 3% on a year-over-year basis, in line with our expectations. We continue to deliver against our commercial strategy and realize favorable pricing trends despite the current macro backdrop. Zircon volumes declined as anticipated due to lower production as a result of the fourth quarter events. Zircon pricing remained relatively flat to the prior quarter, which represented an increase of 10% year on year. Revenue from other products was $76 million, a decrease of 10% to the prior year, largely driven by lower pig iron volumes and pricing. Partially offsetting the lower pig iron sales were sales of rare earths, which increased 62% year over year. We're continuing to evaluate opportunities in the rare earth space to enhance our earnings potential from what was previously considered a waste stream. The Euro was a headwind to revenues compared to the prior year, but represented an improvement sequentially as currencies strengthened in the first quarter versus the fourth. As we stated on our last earnings call, we expected the fourth quarter to be the trough for TO2 volumes, and it was. We saw the rebound in the first quarter and expect it to continue in the second quarter, albeit still at lower levels relative to the second quarter of 2022. We expect second quarter pigment sales volumes to increase from the first quarter in the mid to high teens range. This would represent a decline in the mid-teens range versus the prior year as the recovery in volumes begins to close the gap into the prior year. We can continue to see the benefits of our margin stability initiatives in our financial results. Even with the recent significant volume reductions, we anticipate our overall TO2 pricing to be flat to slightly down from the first quarter to the second quarter, largely driven by pricing declines in the Middle East and Latin America. As we've communicated previously and demonstrated over the last several quarters, we do not expect pricing to move as significantly as it has in previous economic transitions, owing in large part to our commercial approach we've successfully implemented over the last several years. I'll now turn the call over to JF for a review of our operational performance. JF?