Tronox Holdings plc

At any time during the call, if you require immediate assistance, please press star zero for operator assistance. This call is being recorded on Thursday, October 26, 2023. I would now like to turn the conference over to Jennifer Gunther, Chief Sustainability Officer and Head of Investor Relations and Financial Planning. Please go ahead.

Thank you and welcome to our third 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 Trevisall, 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.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 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. On slide four, we've included an introductory overview of Tronox as a reference for anyone who may be newer to our story. For more information, please visit our website. We also have a video on our homepage that does a great job of outlining the value that we bring to our customers through our vertically integrated, sustainable mining and upgrading solutions. Before turning the call over for first quarter highlights, I want to briefly comment on the situation in the Middle East. While our exposure is minimal, our hearts go out to those impacted by the conflict, and we offer our support to those who are affected. Now let's turn to slide five to review a few key messages from the quarter. We delivered third quarter performance within expectation despite softer market conditions by maintaining an unrelenting focus on managing what is within our control. Q3 saw relatively modest pricing declines across both TIO2 and Zircon as expected, despite depressed market volumes. This is a direct result of Tronox's differentiated offering and the value customers place on Tronox as a supplier. TIO2 volumes improved sequentially in the Americas, while volumes were sequentially weaker in other regions, most prominently in the Europe, Middle East, and Africa. This contributed to an overall weaker TIO2 demand environment in Q3 than anticipated. Zircon sales volumes recovered in August and September from the low level seen in July, as anticipated and communicated on our last earnings call. While overall market demand levels remain muted, we are confident that the July represents the trough as inventory levels are relatively normal throughout the supply chain. On the operational front, we're continuing to prudently manage utilizing rates at our pigment, mining, and upgrading sites as a result of lower customer demand to reduce inventory levels and generate cash. At our Botlik TIO2 facility, we experienced a supplier outage that resulted in our plant being taken offline in September. We have been working closely with our supplier and believe the plant will be restarted by November the 11th. Importantly, this has not disrupted our ability to fulfill customer demand as we had sufficient inventories on hand due to our ability to reposition product from other facilities as a benefit of our global asset footprint. We have, however, incurred incremental charges from unexpected downtime due to unabsorbed fixed costs and idle facilities charges, and we'll provide further details on that a little later in the call. Our finished goods inventory decreased in the quarter, driven primarily by lower pigment inventory, partially offset by higher Zircon inventories as Atlas ramped up against a backdrop of softer market demand. Additionally, in the third quarter, we bolstered the balance sheet by proactively raising a $350 million incremental term loan, the proceeds of which were used to enhance available liquidity and will enable us to prepare for critical vertical integration capital expenditures in 2024. This is a demonstration of our commitment to balancing the medium and long-term strategic needs of the business to position Tronox for future success while ensuring we're making the right decisions to manage what is within our control in the short term against the current macroeconomic landscape. Our performance quarter after quarter is made possible by our Tronox team to whom we extend our thanks and for their dedication and commitment. On slide six, we'll review a few updates on some of our key sustainability initiatives. First, the solar project in South Africa with South African independent power producer Solar Group continues to progress and construction remains on track to be completed in December of 2023. Delivery of first power is expected April 1st of 24. This is an incredibly impactful project for Tronox and our progress toward reducing our carbon emissions. Running at full power will convert approximately 40% of our electricity to solar power in South Africa and is expected to reduce our global emissions intensity by 13% against our 2019 baseline. Renewable power projects remain the highest return, highest impact opportunities in progressing towards our stated greenhouse gas emissions reduction targets. We are exploring green energy opportunities at all of our sites around the world. We are also progressing in other areas of sustainability as well, including reducing waste to external landfills. Our R&D teams are currently exploring alternative uses for waste in a number of opportunities, including cement, road base, bricks, and water treatment chemicals. Additionally, we're continuing to evaluate opportunities to extract valuable minerals and metals from waste, including rare earths, scandium, and vanadium. We firmly believe that these initiatives and many others ongoing at Tronux will continue to be key in not only preserving our privilege to operate, but differentiating Tronux for key stakeholders. We look forward to continue updating you on our journey. Now let's move to slide seven for review of second quarter financial performance in more detail. Revenue of $662 million declined 17% sequentially due to lower pricing and sales volume across all products. This represented a decline of 26% relative to the prior year due to continued market softness. Income from operations was $32 million in the quarter, and we reported a net loss in the quarter of $14 million. Our normalized Q3 effective tax rate was 14%, adjusting for non-benefiting items, and our adjusted diluted loss per share was 8 cents. Adjusted EBITDA for the quarter was $116 million, and our adjusted EBITDA margin was 17.5%. Free cash flow in the quarter was a use of $37 million. Now let's move to slide eight for a review of our commercial performance. TIO2 revenue decreased 9% versus the second quarter, driven by a 5% decrease in sales volume and a 4% decrease in average selling prices. TIO2 sales volumes declined 14% compared to a year-ago quarter, while average selling prices decreased 5%, partially offset by a 2% tailwind from favorable exchange rates. The modest decline in TIO2 pricing relative to volume levels continues to prove Tronoc's differentiated position and the success of our commercial strategy. Zircon volumes decreased 61% compared to the second quarter, representing a 71% decline year-over-year due to significant market softness experienced in July. As a result, Zircon pricing was lower by 4% compared to the prior quarter, which represented a decrease of 3% year-over-year. Revenue from other products was $71 million, a decrease of 24% to the prior year, largely driven by lower pig iron pricing and volumes. This was partially offset by higher sales of rare earths, which improved 27% year over year. As a result of our unique portfolio, we are currently evaluating a range of options to leverage our expertise to further unlock the value of the rare earths generated from our mining operations in South Africa and Australia. Our differentiated, integrated position sets us apart as a global leader in sustainable mining and upgrading solutions. Looking ahead to the fourth quarter, we expect pigment volumes to be relatively flat compared to the third quarter. This represents an approximate 20% increase compared to trough levels realized in the fourth quarter of 2022. We anticipate little to no seasonality in the fourth quarter as we believe customers have largely completed destocking. We do believe that we will see some restocking in the fourth quarter as customers prepare for 2024, which is reducing some of the seasonality impact. We expect that more stable pricing trends over the last year compared to the previous years of demand decline will continue. On Zircon, we expect volumes to continue to recover substantially from the third quarter of 2023 trough levels. We strongly believe in our strategy of being vertically integrated in the value that our Zircon provides to our customers. I'll now turn the call over to JF for a review of our operational performance. JF?