Venator Materials PLC Ordinary Shares

Good day, ladies and gentlemen, and welcome to the Venator Materials Third Quarter 2020 Earnings Call. All participants are currently in listen-only mode, and 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. I would now like to turn the conference over to Kate Robertson. Please go ahead.

Thank you, Chris, and good morning, everyone. I am Kate Robertson, Investor Relations for Benatar Materials. Welcome to Benatar's third 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 third quarter 2020 via press release and posted the release and accompanying slides to our website at BenethorCorp.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 may involve risks and uncertainties and are not guarantees of future performance. You should review our filings of 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, Kate, and good morning, everyone. Welcome to our third quarter 2020 earnings call. Firstly, I would like to thank all of our associates for how they have responded to the constant challenge of the COVID-19 pandemic. They are all a credit to our business and our values. Let's begin on slide three. Venator delivered 17 million of adjusted EBITDA in the third quarter. Our total sales volume declined 9% compared to the prior year period, primarily as a result of the pandemic. Compared to the prior year quarter, we have seen a gradual recovery in demand for most of our products, resulting in a 3% increase in sales volumes, notwithstanding the fact that the third quarter is traditionally seasonally weaker than the second quarter. and we suffered the impact of Hurricane Laura within our CO2 segment. I would also like to point out that our timber treatment and color pigments businesses continue to demonstrate resilience in the challenging macroeconomic environment. We delivered $24 million of free cash flow in the quarter, primarily due to reduction of inventories as we aligned our production to meet demand. Turning to slide four on our cost programs. We are continuously looking to implement additional self-help actions to improve our cost profile and competitiveness. As you know, we have had several cost reduction programs that we have successfully delivered on. As previously promised, we recently started a new 2020 business improvement program focused on further reducing our cost. We expect this program to deliver 55 million of annual EBITDA improvement by the end of 2022 compared to 2019. The 2020 Business Improvement Programme is incremental to our 2019 Business Improvement Programme and includes 10 million of colour pigment savings previously identified and as well as 45 million of other savings from manufacturing cost improvement and SG&A. As a result, we anticipate there will be an approximately 10% reduction in workforce, primarily in Germany. These savings will more than replace approximately 30 million of non-recurring savings from our COVID-19 initiatives. The manufacturing cost improvements come from across our network and include our intention to permanently reduce 50 kilotons of CO2 and 50 kilotons of functional additives nameplate capacity in Germany. We expect future cash restructuring costs to deliver the 2020 Business Improvement Program to be within the range of 45 to 50 million. Of the $60 million we expect to save in 2020, we have recognized around 75% of these savings year-to-date. In 2021, we expect to deliver total savings of approximately $65 million as we more than offset the non-recurring savings from our COVID-19 initiatives. Turning to slide five in our titanium dioxide segment. In the third quarter, our titanium dioxide sales volumes increased by 2% compared to the prior quarter. Excluding the impact of Hurricane Laura, the improvement would have been 4%. TO2 sales volumes declined by 11% compared to the prior year period and represents an improvement from the second quarter comparison as we return to a more normalized demand environment. Our average TO2 price remains stable in USD, but declined 3% sequentially in local currency, particularly as a result of unfavorable product mix, which lowered the TO2 average selling price. Looking at our business regionally, on a relative basis, North America was the most resilient region in the quarter, followed by APAC and Europe. Excluding the impact of Hurricane Laura, sales volumes in North America were comparable to the second quarter. APAC demand was stable with the second quarter, and there was a notable recovery in Europe for a myriad of our functional TO2 products, which was expected as Europe was impacted by the most restrictive policy responses to the pandemic. in the first half of 2020. In the third quarter, we generated $21 million of adjusted EBITDA on our titanium dioxide segment, compared to $51 million in 3Q19 and $35 million in the prior quarter. The impact of unabsorbed fixed costs as we moderated production at our manufacturing facilities to better align with demand was the largest driver of the decrease. These costs were partially offset by our cost reduction initiative. Turning to the outlook, we are monitoring the current resurgence of COVID-19 across various locations and corresponding impacts on our businesses. At this moment, our sales in October and order book for November do not suggest any further weakness to the COVID-19 resurgence. In the fourth quarter, we expect to see some seasonality with our sales volumes compared to the third quarter of 2020 and expect prices to remain stable. We are beginning to see a modest improvement in textile demand within our specialty TO2 business. The pace and shape of recovery remains contingent on policy responses to the pandemic. Turning to slide six and performance additives. Revenues in the third quarter of 2020 were similar to the prior year. An improvement in average selling prices and positive sales makes more than offset lower demand related to COVID-19. We continue to see weak demand in automotive end-use applications, impacting demand for certain of our functional additives products. On the other hand, we continue to see strong demand for our timber treatment products, as DIY trends in North America remain healthy. Sequential volume in color pigments improves significantly in a quarter which is typically seasonally softer due to higher construction sales, which in turn reduce the average selling price. The performance additive segment generated 5 million of adjusted EBITDA in the third quarter, down 8 million compared to the prior year period. The impact of unabsorbed fixed costs as we moderated production at our manufacturing facilities to better align with demand was the largest driver of the decrease. These costs were partially offset by our cost reduction initiatives. As I mentioned earlier, we intend to rationalize capacity of our functional alternatives facility in Germany to further manage our controllable costs. These actions, along with the 10 billion color pigments cost and operational efficiencies, will deliver incremental EBITDA within the performance additive segment through 2022. As an RTO2 business, we are monitoring the current resurgence of COVID-19 across various locations for any impact to our performance additive businesses. At the moment, our sales in October and order book for November do not suggest any further weakness due to COVID-19 resurgence. In the fourth quarter, we expect demand to decline in line with normal seasonality and pricing for our performance additive segment to remain stable compared to the prior quarter, with differences by product and application. I will now pass the call over to Kurt to discuss our financials. I will then return to provide some additional comments. Kurt? Thanks, Simon.