Venator Materials PLC Ordinary Shares

Good day and welcome to the Venture First Quarter 2021 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 telephone keyboard. To answer a question, please press star then two. Please note this event is being recorded. I would like to turn the conference over to Kate Robertson, Investor Relations. Please go ahead.

Thank you, Francesca. Firstly, apologies to everyone. It appears that there was some technical problems when we were merged with another call. I'm Kate Robertson, Investor Relations for Venator Materials. Welcome to Venator's first quarter 2021 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 first quarter 2021 by a press release and posted the release and accompanying slides to our website at venetocorp.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 at www.benetalcorp.com. It is now my pleasure to turn the call over to Simon.

Thanks, Kate, and good morning, everyone. Welcome to our first quarter 2021 earnings call. The macroeconomic backdrop continues to improve. In many countries across the globe, coronavirus restrictions are beginning to relax, and the vaccine rollout is encouraging. Although we remain cautious, industry fundamentals across our portfolio are positive. Venator delivered 49 million of adjusted EBITDA in the first quarter, compared to 25 million in the fourth quarter of 2020. Turning to slide four on our titanium dioxide segments. In the first quarter, our titanium dioxide segment delivered 40 million of adjusted EBITDA compared to 46 million in the first quarter of 2020 and 25 million in the fourth quarter of 2020. Demand for functional CO2 was strong across all sectors and all regions. We also saw good recovery in demand for our specialty CO2 products, mainly in textiles and automotive sectors. We have more ground to cover for a full recovery. Total TO2 volumes were 1% lower compared to the prior year quarter and increased by 14% compared to the fourth quarter, which was slightly ahead of our expectations. As a result, inventories remained tight throughout the quarter, despite increased utilization rates compared to the fourth quarter of 2020. We experienced a minor disruption and additional cost due to Brexit, which have been resolved. Turning to price, excluding FX, TIO2 average selling price has declined by 1% compared to the prior year period and increased 3% compared to the prior quarter. The increasing selling price is due to successful implementation of our first quarter price increase initiative relating to our functional TIO2 products and has also resulted in more convergence of price across the region. Prior to this, TIO2 average selling prices have been relatively stable for eight quarters. However, during this time, we have onboarded meaningful raw material inflation. Our price increases are helping us reclaim lost margin. Chinese exports were stable compared to the prior quarter with the main export markets being Asia and the emerging markets. We continue to see a pullback in exports to Europe and North America due to stronger local Chinese demand for TIO2. coupled with shipping constraints, which is resulting in customers looking to us for reliable supply. As a result of higher raw material and shipping costs, we continue to see selling price increase announcements from Chinese producers, which in turn continues to narrow the arbitrage window. Turning to the outlook for TO2, we expect to see continued strong demand for our functional TO2 products across all regions, and demand for our specialty products to recover more slowly into textiles, personal care, and automotive. We expect sales volume in the second quarter to be similar to the first quarter as we restore production to pre-pandemic levels. However, inventories at the end of the first quarter were slightly lower than our expectation. And additionally, we continue to manage supply chain challenges. Both factors could limit our upside. We expect that the second quarter will bring further price capture across all regions from our second quarter selling price initiative. In the second half of 2021, we expect to incur some headwinds on feedstocks as a result of continued tightness in the feedstock market. In addition, we expect energy costs will be unfavorable due to rising prices. We expect to manage our margins through further TO2 price increase and pass these higher costs on to our customers. Turning to slide five and performance additives. Adjusted EBITDA improved by 8 million compared to the prior quarter and 1 million compared to the prior year period. This is primarily attributable to further recovery of demand and benefits from our 2020 business improvement program. In the first quarter, we saw further demand recovery for our functional additives products across automotive, electronics, and coatings applications. Our color pigments business continues to display strong demand, especially in European construction and coatings within Europe and Asia Pacific. Timber treatment demand has been robust as a result of positive home improvement trends in North America. Average selling prices were flat year on year and declined by 3% compared to the prior quarter. The decline in prices compared to the prior quarter is attributable to product mix as it relates to seasonal demand for certain products. In the near term, we expect to see favorable business conditions continue, with demand remaining strong for all businesses. Shipping costs and supply chain challenges continue to be managed and monitored. However, we expect to mitigate increased shipping costs with price increases to maintain our margins. We recently signed an agreement with Veralco Group to sell our water treatment business, which is part of our performance additive segment. for $6 million cash. We expect the transaction to be completed during the second quarter of 2021. Turning to slide six and our cost programs. Our cost reduction programs remain on track and restructuring costs continue to be in line with expectations. In the first quarter of 2021, we delivered incremental savings of $9 million, which brings total savings to date of $25 million from our 2020 Business Improvement Program. As we look to the remainder of the year, we expect the timing of savings to be uneven. Temporary COVID savings realized in 2020 will roll off and will be replaced by new 2020 business improvement savings. This should be most noticeable in the second and third quarter. Kurt will provide commentary of our financials before returning the call back over for some concluding remarks.