Venator Materials PLC Ordinary Shares

Good day and welcome to the Venezor Materials fourth quarter earnings conference call. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star then one on your telephone keypad. To withdraw your question, please press star then two. Please note this event is being recorded. I would now like to turn the conference over to Jeffrey Schnell, Director of Investor Relations. Please go ahead.

Thank you, Nicole. Good morning, everyone. I am Jeffrey Schnell, Director of Investor Relations for Venator Materials. Welcome to Venator's fourth quarter and year-end 2018 earnings call. Joining us on the call today are Simon Turner, President and CEO, and Kurt Ogden, Senior Vice President and CFO. This morning we released our earnings for the fourth quarter and year-end 2018 via press release and posted the release and a set of accompanying slides to our website at VenatorCorp.com. During this call, we may make statements about our projections or expectations for the future. All such statements are forward-looking, and while they reflect our current expectations, they involve risks and uncertainties and are not guarantees of future performance. You should review our filing with the SEC for more information regarding the factors that could cause actual results to differ materially from these projections or expectations. We do not plan on publicly updating or revising any forward-looking statements during the quarter. We will also refer to non-GAAP financial measures such as EBITDA, adjusted EBITDA, adjusted net income, free cash flow, and net debt. You can find reconciliations to the most directly comparable GAAP financial measures in our earnings release, which has been posted to our website. It is now my pleasure to turn the call over to Simon Turner, President and CEO of Venator.

Thanks, Jeff, and good morning, everyone. It's my pleasure to welcome you to our earnings call. Let's begin on slide three. Venator's strong performance in the first half of 2018 is compared to heightened volatility in the latter half of the year, as geopolitical factors and economic uncertainty drove customer destocking, primarily in Europe and Asia. These factors drove lower demand in both our TIO2 and performance additive segments and were partially offset by pricing momentum in specialty TIO2. Despite these second half dynamics, we reported $436 million of adjusted EBITDA in 2018. In 2018, we successfully completed the actions. which are expected to deliver the $60 million of fixed cost benefit from our 2017 Business Improvement Program. In response to the current economic and demand environment and our reduced CO2 manufacturing footprint, we commenced an additional and aggressive $40 million cost and operational improvement initiative. We are on track with the transfer of our specialty technology and subsequent shutdown of our Pori Finland CO2 manufacturing facility. Turning to slide 4 on our titanium dioxide segment. In the fourth quarter, our titanium dioxide segment generated $52 million of adjusted EBITDA, compared to $119 million in the fourth quarter of 2017, or $86 million after adjusting for lost EBITDA at Pori, which was reimbursed by insurance proceeds in the fourth quarter of 2017. Pricing was broadly in line with our expectations. Prices increased 1% compared to the prior year period, but declined 3% compared to the third quarter of 2018, primarily in functional grades in Europe and Asia. We continue to see positive momentum globally in our specialty TO2 pricing, reflecting solid underlying growth in these more specialized applications, underscoring our commitment to strengthening our leadership position in specialty TO2. We are encouraged by the deceleration in the rate of destocking in the fourth quarter with volumes declining 6% year on year compared to the 18% decline in the third quarter. Fourth quarter sales volumes declined primarily in functional grade products including coatings in Europe and Asia and due to lower availability for certain specialty product grades. In the quarter we incurred higher variable cost inflation including raw material and energy costs, which were partially offset by a $4 million benefit from our 2017 Business Improvement Program. As we mentioned on our third quarter earnings call, we envisage these raw material and energy cost trends will continue into 2019 and we are taking appropriate actions to mitigate these costs. In the near term, we expect differences in regional performance to persist, characterized by strength in North America Slower Growth in Europe and Weakness in China Notwithstanding this soft economic backdrop in 2019, longer-term CO2 industry fundamentals remain favourable. Turning to Slide 5 and Performance Additives Revenues declined 16% compared to the prior year period, driven by a 13% decline in volumes. Pricing declined 1% year-over-year, but increased 2% after adjusting for the impact of closed sites as part of our restructuring program. Performance additives generated $3 million of adjusted EBITDA in the quarter, down from $15 million in the prior year quarter. The decline in EBITDA can be attributed to customary stocking in functional additives, and to a lesser extent, color pigments. We were also impacted by low volumes in timber treatment as we are no longer selling one of our products to a large customer. In color pigments from the site closures at Easton and St. Louis as part of our restructuring program and higher raw material and energy costs. These headwinds were slightly offset by a $1 million EBITDA benefit from the 2017 Business Improvement Program. Throughout 2018, we took decisive action to better position the businesses within our performance additive segment. We restructured our North American iron oxides business through the closure of our eastern St. Louis facilities and we rationalized our Augusta facility. We expect to supplement these actions with further penetration into more differentiated applications and other operational and cost improvements as part of the 2019 Business Improvement Program. Based on the actions we've taken, we expect performance averages to deliver EBITDA in 2019 above 2018. Moving on to slide six and our business improvement programs. We captured an additional $5 million EBITDA benefit from our 2017 business improvement program in the fourth quarter, building on the $47 million captured through the third quarter of 2018. We have already taken the required actions that are expected to deliver the full extent of our fixed cost reduction target of $60 million in 2019. As we've previously communicated, The additional $30 million of improvements are volumetric-based and dependent on market conditions. We are committed to further strengthening our business. In light of the current economic and demand environments and our reduced TIO2 manufacturing footprint, we have commenced the 2019 Business Improvement Program, a comprehensive cost and operational improvement initiative designed to generate $40 million of EBITDA improvements, Building on the $60 million we delivered as part of our 2017 Business Improvement Program, we expect to complete all actions by the end of next year, ending 2020 at the full run rate. The total expected cash restructuring expense is approximately $15 million. My team is highly focused on delivering the benefits we've outlined, the full extent of which will further enhance our overall competitiveness, improve our cash flow, and enable us to invest in our future to better serve our customers. I will now pass the call over to Kurt Ogden, our CFO, to discuss our financials.