Venator Materials PLC Ordinary Shares

Good morning and welcome to the Venator second quarter 2020 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 and then one on your telephone keypad. To withdraw your question, please press star and then two. Please note that 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, Chris, and good morning, everyone. I'm Jeffrey Schnell, Director of Investor Relations for Venator Materials. Welcome to Venator's second quarter 2020 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 second quarter 2020 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. Before we begin, I'd like to express my gratitude on behalf of Venator to the individual and collective efforts of our associates over these past months. Because of these efforts, our corporate and business functions are running well, all our manufacturing activities continue to reliably serve our customers, and our safety performance continues to improve. Let's begin on slide three. Venator delivered 37 million of adjusted EBITDA in the second quarter, notwithstanding the significant challenges caused by COVID-19. Company-wide, our sales volumes declined 19% compared to the prior year period, primarily as a result of the pandemic. And we continue to deliver on our cost initiatives, which help mitigate the headwinds from lower demand. As I mentioned last quarter, we have some structural advantages against the impact of COVID-19, which helps insulate our exposure in the quarter. Namely, our higher contribution in plastics and food packaging applications and the resilience in our color pigments and timber treatment businesses. We also delivered 18 million of free cash flow in the quarter. Turning to slide four. At the onset of COVID-19, we immediately focused on protecting the health and safety of our people and the reliability of our assets. We enacted a range of safety measures at our manufacturing sites and instructed most of our office-based employees to work from home. We created a COVID-19 steering group to manage all critical facets of our business and meaningfully enhanced communication and transparency throughout the organization. We also took meaningful steps to improve our liquidity and made progress towards our target of returning to positive free cash flow. Specifically, we reduced our cash uses including reducing our expected capital expenditures to approximately $60 million for 2020 compared to $115 million last year. And we maintained an aggressive stance towards managing our working capital with strict inventory controls. We delivered $11 million of cost benefits in the quarter consisting of approximately $7 million of our COVID-19 cost initiative and an incremental $4 million benefit from our business improvement program. We reported 18 million of positive free cash flow due to careful working capital management, and we bolstered our liquidity, which at the end of the quarter stood in excess of 450 million. We are encouraged by the phased reopening of economies across the globe and the cadence of sales trends throughout the quarter. That said, we remain cautiously optimistic on the pace of recovery and believe the path will be uneven. From an operational stance, the close collaboration we have with our customers and suppliers and our modular, multi-line production network gives us the flexibility to respond to prolonged uncertainty in the supply chain and economy. We remain committed to improving our costs and delivering on our objectives. I believe our robust response, committed and experienced associates, and clear strategy will withstand the unique challenges that COVID-19 has presented. Turning to slide five and our cost programs. Strengthening our business and improving our cash flow was our top financial priority at Venator. We remain on track with our priority of improving our cost competitiveness. We delivered $7 million of cost benefits from our COVID-19 cost initiative and continue to expect to deliver more than $20 million for the full year compared to 2019, helping to mitigate the impact of the pandemic. We delivered $4 million of benefit from our 2019 Business Improvement Program in the second quarter and approximately two-thirds of our annual target of $13 million in the first half of 2020. And we have identified $10 million of cost and operational efficiencies within our color pigments business, which are incremental to savings from our 2019 Business Improvement Program. While I am pleased with the execution thus far, We have an unrelenting focus on improving our cost competitiveness. We are currently developing other initiatives to improve our cost profile, which we expect to announce and implement as we complete the initiatives associated with our 2019 Business Improvement Program. Turning to slide six in our titanium dioxide segment. Titanium dioxide volumes declined by 16% compared to the prior quarter. within the 15 to 20% range we provided on our first quarter earnings call. TIO2 volumes declined by 21% compared to the prior year period. Our average TIO2 price remains stable sequentially for the sixth consecutive quarter, highlighting one of the benefits of our customer tailored approach. Looking at our business regionally, on a relative basis, Asia and North America were the most resilient regions in the quarter. followed by Europe, which is also our largest market for TO2. Europe was impacted by the most restrictive policy responses to the pandemic, and therefore the result was generally expected. Our average TO2 price remains stable on a year-over-year and a sequential basis in all regions. In the second quarter, we generated 35 million of adjusted EBITDA in our titanium dioxide segment, compared to 55 million in 2Q19, and 46 million in the prior quarter. The impact on demand from COVID-19 was the largest driver of the decrease and was partially offset by our cost reduction initiatives. Turning to the outlook, COVID-19 continues to create significant uncertainty, yet we were encouraged by the cadence of sales volumes through July and our order book. In the third quarter, we expect sales volumes to be modestly better than the second quarter of 2020 and prices to remain stable. Though demand for many applications has improved, we continue to see weakness in textile demand impacting our specialty TIO2 business. This has a relatively limited impact on our total volume. However, the contribution margin is higher than our functional and differentiated TIO2 and therefore will adversely impact earnings in the third quarter. Additionally, we have taken further action to manage our production network to better align with demand and control our inventories. In the third quarter, we will contend with margin pressures associated with reduced operating rates, albeit with a corresponding inventory reduction. We expect to partially offset these headwinds with the incremental benefit from our cost initiatives. COVID-19 had a significant impact on the demand for our products in the second quarter. The timing and trajectory of the recovery remains uncertain. The actions we are taking now will better position Venator to benefit from what we believe are favorable long-term fundamentals for TO2. Turning to slide seven and performance additives. Revenues declined 15% compared to the prior year period. Sales volumes declined 16% compared to the prior year period and 11% sequentially, primarily due to lower demand related to COVID-19. The average price rose modestly in the quarter due to favorable product mix in our color pigments and timber treatment businesses. Softer demand for automotive coatings and construction end-use applications led to lower volumes in our functional additives and color pigments businesses. We saw relative strength in demand for our timber treatment business as DIY trends in North America remained resilient. Pricing in color pigments improved as we improved our mix. and we saw higher demand for our coatings, plastics, and specialty end-use applications compared to products used in non-residential construction. The performance additive segment generated $13 million of adjusted EBITDA in the second quarter, down $3 million compared to the prior year period. This was primarily a result of low demand due to COVID-19 and partially offset by our self-help initiatives, lower costs, and the impact on price from favorable mix. Notwithstanding COVID-19 in the first half of 2020, the performance additive segment delivered an improvement in EBITDA compared to 2019, primarily due to our self-help measures. We are taking meaningful steps in our performance additive segment to improve the probability of the segment. As I previously announced, we have identified 10 million of costs and operational efficiencies within our color pigments business. which are incremental to savings from our 2019 business improvements. As an RTO2 business, the ultimate trajectory, pace, and timing of the recovery remains uncertain. In the third quarter, we expect demand and pricing for our performance additive segments to remain stable compared to the prior quarter, with differences by product and application. Additionally, we expect margin pressure from reduced operating rates. particularly in our functional additives business as we adjust our production and manage our inventories. I will now pass the call over to Kurt to discuss our financials. I will then return to provide some additional comments. Kurt?