Venator Materials PLC Ordinary Shares

Hello, and welcome to the Ventura Materials Fourth Quarter Earnings 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 touch-tone phone. 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 your host today, Jeffrey Schnell.

Please go ahead. Thank you, Keith, and good morning, everybody. I'm Jeffrey Schnell, Director of Investor Relations for Venator Materials. Welcome to Venator's fourth quarter 2019 earnings call. Joining us on the call today are Simon Turner, President and CEO, and Kurt Ogden, Executive Vice President and CFO. This morning, we released our earnings for the fourth quarter and full year 2019 via press release. and posted the release and 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 filings 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.

Thanks, Jeff, and good morning, everyone. Let's begin on slide three. 2019 was a challenging year as macroeconomic uncertainty led to limited visibility. Notwithstanding these headwinds, Venator delivered $194 million of adjusted EBITDA and 24 cents of adjusted diluted earnings per share. We made significant progress on our strategic priorities in 2019 and delivered on those items within our control. including improving our cost base, strengthening our position in specialty and differentiated TO2, and advancing our customer-tailored approach to reduce our TO2 price and margin volatility. Turning to slide four on our titanium dioxide segment. In the fourth quarter, our titanium dioxide segment generated $30 million of adjusted EBITDA compared to $52 million in the fourth quarter of 2018. The average TIO2 selling price declined 4% in local currency compared to the prior year, but remained stable on a sequential basis for the third consecutive quarter. This reflects our ongoing approach of matching our supply network to customer commitments to reduce price and margin volatility. Prices for functional TIO2 products were most impacted in Europe on a year-over-year basis. We exited the fourth quarter of 2019 with average prices in Europe and Asia below that of the more stable North American region on a US dollar basis. Sequentially, prices in local currency were relatively stable in our three main regions, despite the historically softest quarter for demand. Titanium dioxide volumes increased 5% compared to the prior year period. The increase, which was in Europe and North America, was primarily a result of increased sales of new differentiated products improved availability of certain products and high demand compared to the same period last year, which was impacted by customer inventory reductions. On a sequential basis, TIO2 volumes declined in line with normal seasonality. Before I highlight the regional trends impacting the TIO2 industry, I'd like to update you on recent trends in specialty TIO2. In the fourth quarter, we experienced soft demand in certain specialty applications namely for textiles. This was primarily a result of destocking within the textile supply chain in China and elsewhere in Asia and was precipitated in part by the U.S.-China trade disputes. We estimate more than three-quarters of global industry demand for these products in Asia, including China. Notwithstanding soft demand in textiles, prices for our specialty TO2 products remained relatively stable, adjusting for the impact of mix. Prices and demand for our specialty CO2 products tend to be more resilient across the cycle due to the applications into which we sell. These dynamics underscore the investment in our specialty and differentiated CO2 portfolio to strengthen our position in these higher value applications. We expect demand for our specialty and differentiated products to progressively improve throughout 2020. That said, We continue to monitor the impact the coronavirus is having on demand and the supply chain. It remains too early for us to provide an assessment of the ultimate impact as the situation is still evolving. Looking at our business regionally, in North America, demand increased in the fourth quarter compared to a weaker prior year quarter and was flat sequentially. Our average TO2 selling price in North America was stable, both on a year-over-year and sequential basis, reflecting our more stable customer mix and our customer tailored approach. Demand and pricing in Asia stabilized in the fourth quarter. However, as I previously mentioned, it is too early to opine on the impact of the coronavirus on growth in Asia. Europe is our largest market for TO2. Compared to the fourth quarter of 2018, volumes in Europe increased modestly, benefiting from higher sales of new differentiated products and improved demand compared to the fourth quarter of 2018, when customers reduced their inventory levels. Our average TO2 price in Europe declined modestly in local currency compared to the prior year quarter and was stable on a sequential basis. In the fourth quarter, raw material costs moved higher, primarily from high-grade ores. These headwinds, which were in line with our expectations, were partially offset by a $3 million benefit from our business improvement program. Turning to the TIO2 outlook for 2020, macroeconomic challenges are expected to remain in 2020. In the near term, we expect volumes to improve sequentially and follow normal seasonal patterns. Specialty volumes are expected to progressively improve throughout the year, subject to my comments earlier on China. We expect more modest raw material cost inflation in 2020 and are actively engaged with customers to implement price increases in all regions to the inflationary pressures on our business. Longer term, TO2 industry fundamentals remain favorable. We remain focused on our customer tailored approach, enhancing our specialty and differentiated TO2 portfolio, and improving our cost competitiveness throughout the TO2 cycle. Turning to slide five and performance additives. Revenues declined 7% compared to the prior year period, driven by a 5% decline in volumes and a 2% unfavorable impact from foreign currency translation. Our average selling price was flat compared with the fourth quarter of 2018. I will provide some additional comments on the three main businesses within performance additives. Compared to the fourth quarter of 2018, color pigments volumes were primarily impacted by lower demand for products into construction-related applications in North America and portfolio optimization as we exited some low-margin business. The impact from lower volumes was partially upset by lower raw material costs and the benefits of our cost and operational improvement initiatives. Simba treatment volumes declined compared to the prior year period, primarily due to lower construction activity. The average selling price and margins were impacted by an adverse mix of sales. However, it was offset by lower raw material and other costs. Functional additive volumes were impacted by weaker than expected demand for automotive coatings and plastics. We are taking meaningful steps as part of our business improvement program to offset these market challenges. and improved the profitability of this business. The performance additive segment generated $4 million of adjusted EBITDA in the quarter, up $1 million compared to the prior year quarter. In 2019, performance of this segment was impacted by significant market forces, especially in the automotive coatings, plastics, and construction applications. In 2020, we expect to capture additional benefits from our self-help initiatives. We continue to explore a potential sale of the color pigments business. This process is ongoing, and we have set an aggressive timeline. The color pigments business generated $17 million of adjusted EBITDA in 2019, and we expect to benefit from our targeted cost initiatives in 2020. But because we are actively involved in a process to explore the potential sale of our color pigments business, we will not be providing additional commentary or taking questions on the matter. Turning to slide six, we continue to be intensely focused on strengthening our business and improving our cash flow. We accelerated our 2019 Business Improvement Program and delivered $20 million of benefits in 2019, including $5 million in the fourth quarter, double our original full-year target. We expect to complete all the actions necessary to deliver on our full $40 million target by the end of 2020, Exiting the year at the full run rate level. On an absolute basis, this program is expected to deliver $12 million of benefit in 2020. This does not include the benefits which I highlighted as part of the color pigments review. We are pleased with the execution to date and are confident in our ability to deliver the target benefits as promised. I will now pass the call over to Kurt to discuss our financials. I will then return to provide some additional comments. Kurt?