Tronox Reports First Quarter 2018 Financial Results

Strategic Developments:
– Obtaining European Commission’s conditional clearance of Cristal acquisition now only dependent on finalizing agreement on proposed remedy to address their remaining objection; negotiating with possible counterparties to execute the remedy
– Motion filed with U.S. Federal Trade Commission (FTC) to stay Part 3 administrative process seeking to engage in direct settlement negotiations with Commissioners or commencement of expedited preliminary injunction suit
– Technical Services Agreement and Option Agreement signed with regard to Jazan, Saudi Arabia titanium slag smelter to further optimize TiO2 pigment and feedstock integration
First Quarter 2018 Highlights:
– Strong top and bottom line performance reflects benefits of vertical integration and continued favorable market conditions across TiO2 pigment, feedstock and co-products
– Revenue of $442 million up 17 percent versus prior year
– Income from operations of $14 million; adjusted EBITDA of $113 million up 79 percent versus prior year (Non-GAAP)
– TiO2 income from operations of $52 million; adjusted EBITDA of $138 million up 62 percent versus prior year (Non-GAAP)
– TiO2 adjusted EBITDA margin of 31 percent; free cash flow of $52 million (1)
– GAAP diluted EPS of ($0.36); adjusted diluted EPS of $0.01 (Non-GAAP)

Tronox Limited (NYSE:TROX) reported revenue of $442 million for the first quarter 2018, up 17 percent from $378 million in the year-ago quarter and 5 percent lower than $464 million in the prior quarter. Income from operations of $14 million improved from a loss from operations of $3 million in the year-ago quarter and compared to $60 million in the prior quarter. Net loss from continuing operations attributable to Tronox Limited was $44 million, or ($0.36) per diluted share, compared to a net loss from continuing operations attributable to Tronox Limited of $56 million, or ($0.48) per diluted share, in the year-ago quarter and net income from continuing operations attributable to Tronox Limited of breakeven, or $0.00 per diluted share in the prior quarter. Net income from continuing operations attributable to Tronox Limited in the first quarter of 2018 included an impairment loss related to the sale of the company’s Electrolytic operations and transaction costs related to the Cristal acquisition that, combined, totaled $45 million or $0.37 per diluted share. Excluding these items, adjusted net income from continuing operations attributable to Tronox Limited (Non-GAAP) was $1 million, or $0.01 per diluted share. Adjusted EBITDA of $113 million increased 79 percent from $63 million in the year-ago quarter and compared to $135 million in the prior quarter.

Jeffry Quinn, president and chief executive officer of Tronox, said: “The last several weeks have seen significant progress toward closing the Cristal acquisition. As a result of our discussions with the European Commission through the formal hearing process and the follow-on state-of-play meeting, we’ve narrowed the issues and the Commission’s conditional clearance is now only dependent on finalizing an agreement on a proposed remedy to address their remaining objection. We are also negotiating with possible counterparties regarding execution of the proposed remedy. In the United States, we filed a motion with the FTC seeking to stay the administrative proceeding scheduled to start on May 18. If granted, the stay will allow direct discussions with the FTC Commissioners — something not permitted while an administrative process is pending. If settlement efforts are unsuccessful, we will ask the FTC Commissioners, in the alternative, to consider pursuing the FTC’s case through the typical Federal Court process, which is much more likely to result in a timely resolution.

“We also announced our entry into a Technical Services Agreement and an Option Agreement with AMIC, an entity equally owned by Cristal and Tasnee, regarding the titanium slag smelter facility located in Jazan, Saudi Arabia. These agreements are another integral step to enable the combined company to further optimize the level of vertical integration between its production of TiO2 pigment and feedstock over the long term. By combining our slagger operations expertise with that of AMIC under the technical services agreement, we will work together to ensure the successful commissioning of this world-class smelter to become a low-cost source of feedstock for the 11 pigment plants that would comprise the combined company. We continue to work hand in hand with our partners at Cristal and Tasnee with the shared goal of creating the premier company in the TiO2 industry.”

Quinn continued, “Our first quarter performance clearly reflected the benefits of our vertical integration, as our TiO2 business delivered revenue growth of 17 percent, adjusted EBITDA growth of 62 percent, an adjusted EBITDA margin of 31 percent and free cash flow of $52 million. Both our downstream TiO2 pigment and upstream feedstock and co-products operations continued to benefit from favorable market conditions across the value chain. Our strong top- and bottom-line results came despite the timing impact of several large feedstock and co-product shipments. This is not a reflection of softening market conditions. The opposite is true. We see continued strengthening in feedstock and co-products markets, such as zircon and pig iron. We expect favorable market trends to continue in pigment, feedstock and co-products across the year. Our strong first quarter results were delivered in the face of significant foreign exchange headwinds primarily related to the strengthening of the South African Rand relative to the U.S. Dollar. Despite this short-term impact, the recent political changes in South Africa, which triggered the strengthening of the Rand, bode well for the future of our South African operations.”
more detail at: http://investor.tronox.com/releasedetail.cfm?ReleaseID=1067020