The Chemours Company (CC) on Q1 2021 Results - Earnings Call Transcript
Operator: Good day, and thank you for standing by. Welcome to The Chemours Company's First Quarter 2021 Earnings Call. . I would now like to hand the conference over to your speaker today, Jonathan Lock, VP, Corporate Development and Investor Relations. Please go ahead, sir. Jonathan Lock: Good morning, and welcome to The Chemours Company's First Quarter 2021 Earnings Conference Call. I'm joined today by Mark Vergnano, President and Chief Executive Officer; Mark Newman, Senior Vice President and Chief Operating Officer; and Sameer Ralhan, Senior Vice President and Chief Financial Officer. Mark Vergnano: Thank you, Jonathan, and thank you, everyone, for joining us today. I'll begin my commentary with the first quarter highlights on Chart 3. It is hard to believe, but it has now been more than 1 full year since the beginning of the COVID-19 pandemic. Throughout that time, I have continually been impressed by the company's focus on our North Star, the safety of our people and their families while supporting our customers and the communities in which we operate. That bedrock commitment has allowed us to serve our customers safely and respond quickly as the recovery has gained momentum. I would like to recognize the efforts of our entire global employee base over what has been a difficult period. Your focus, diligence and resilience is truly amazing. Looking at the Q1 results, demand remains strong as the world moves to what we hope are the final few months of the pandemic. Net sales rose 10% to $1.4 billion, with adjusted EBITDA up 4% to $268 million despite weather challenges we encountered in the quarter. In our Titanium Technologies segment, we continue to see a rising tide of coatings, plastics and laminate demand into the second quarter. Contractor and renovation and remodel demand have been strong thus far in 2021, building on the strong DIY momentum from 2020. Our customers continue to see the value proposition of our long-term AVA contracts, and we continue to add new customers across all segments to the TVS family. Sameer Ralhan: Thanks, Mark. Turning to Chart 5. Results in the first quarter were solid as demand continued to improve steadily from Q4. Q1 net sales of $1.4 billion was up 10% year-over-year and grew nearly $100 million or 7% on a sequential basis. Demand was strong across most segments and end markets. GAAP EPS came in at $0.57 per share with adjusted EPS of $0.71 per share. Adjusted EBITDA in the first quarter rose to $268 million compared to $257 million in the prior year quarter. Adjusted EBITDA was negatively impacted by $9 million due to fixed costs under absorption related to operational disruptions created by Winter Storm Uri. As a result, margins in the quarter were 19%, 1 percentage point lower as compared to the prior year quarter. We expect storm-related cost headwinds to ease through the second quarter. I'll cover these in more detail on the subsequent charts. CapEx for the quarter was $60 million. Our use of cash was just $21 million, up $41 million from the prior year period. First quarter is typically a heavy cash usage quarter for Chemours as we build inventory in anticipation of both coatings season and cooling season in our core markets. Consistent with the past several quarters, we have put a strong focus on cash, and our results speak to our ability to execute against that strategy. And we continue to believe that we are well positioned to serve our customers in the spring and summer months. On April 29, our Board of Directors approved a second quarter 2021 dividend of $0.25 per share. This is unchanged from the prior quarter, and will be payable to shareholders of record as of May 17, 2021. We continue to deliver consistent and stable dividends to our shareholders. This quarter marks the 12th consecutive quarter of dividends at the current level, a stable return of cash to shareholders through all parts of the economic cycle. Mark Newman: Thanks, Sameer. Good morning, everyone. I hope you're all safe and well. On Chart 9, I'll cover the results and outlook of our Titanium Technologies segment. Titanium Technologies continues to experience improving pigment demand as the economic recovery gains speed. Ti-Pure demand across all end markets, product categories and geographies remained strong, a sign that the momentum from Q4 has carried into the first part of 2021. As you heard from Sameer, global logistics issues and Winter Storm Uri were both headwinds in the quarter. But our operations, supply chain and logistics teams have rallied in their support of our customers. We have prioritized product availability for our long-term AVA contract customers, consistent with our TVS strategy. I am very proud of our ability to deliver high-quality Ti-Pure pigment around the world at a time when some of our competitors have struggled. Activity on our Flex portal has been robust and spans all regions and product grades. Price continues to inflect upward, reflecting stronger demand conditions. As a result of these tighter market dynamics, we continue to sign up new AVA customers who are drawn to the combination of supply reliability, service and quality that only Chemours can provide. These new long-term contracts demonstrate the value of TVS, and are the foundation for deep long-term relationships with these customers. Turning to the numbers. First quarter net sales rose 18% to $723 million. Volume increased 16% versus the prior year. Adjusted EBITDA for the segment rose 22% to $169 million despite the headwinds from the winter storm and logistics issues around the globe. Price was up slightly on a sequential basis despite some customer and product mix drag. As we look ahead, a return to more normalized order patterns and AVA growth in Q1 leads us to believe volumes will be strong throughout the balance of the year. We believe that renovation and remodel trends are strong, with stimulus and infrastructure potentially providing longer-term tailwinds. Over the coming months, we intend to make steady market share gains, with the goal of returning to our capacity share by year-end. Margin should improve as production continues to ramp up across the next several quarters. I am very proud of the resilience that business has shown over the course of the first year of the COVID-19 pandemic and our ability to quickly pivot and adapt to the ever-changing market conditions. Through it all, we have demonstrated the quality and differentiation of the Ti-Pure franchise, setting the stage for significant value creation in the coming years. Mark Vergnano: Thanks, Mark. Turning to the last chart. I can say without hesitation that I have never felt as positive about the future of Chemours as I do today. To start, our foundation is strong, we continue to safely navigate the impact of the COVID-19 pandemic and have demonstrated our resilience as a company. Our balance sheet continues to be the source of strength even through the sharpest economic disruption since the financial crisis, and we have gained alignment with DuPont and Corteva on our legacy PFAS liabilities with a solid framework to reduce our risk and move forward. Secondly, the recovery across all our end markets is well underway. TiO2 dynamics continue to improve driven by end market demand across the globe. Opteon growth continues to gain steam as the world embraces climate friendly, low global warming potential HFO technology as the future of refrigeration and air conditioning. And APM demand continues to grow as industrial demand picks up, and advanced technology raises the bar for material performance. Finally, we are executing on new capacity and product development to fuel our future growth. In semicon, we are expanding our PFA capacity in order to meet increasing demand for semiconductor infrastructure. We are well positioned to provide strategic capacity in markets, including the U.S., where significant new fab capacity will come online over the coming decade. In 5G, we are working on the next-generation laminate structures to provide chipset solutions necessary to deliver the fastest implementations of 5G at frequencies above 24 gigahertz. In hydrogen, we are continuing our work on the fundamental electrochemistry of Nafion membranes to rapidly improve durability, efficiency and life cycle cost. Our work is critical to enabling low-cost hydrogen electrolysis and reaching diesel parity in heavy-duty transport to help decarbonize the global economy. By 2030, we believe the total addressable market in hydrogen membranes could be $2 billion to $3 billion. From the strength of the near-term recovery to the long-term potential of the portfolio, I believe the future is bright for Chemours. To our 6,500 employees, I'm so proud of your grit, determination and excellence. To our customers, you are the reason we are here. We will continue to bring the best products, services and values to help you win in the marketplace. And finally, to our investors, we appreciate your trust in us and your shared belief in the long-term value potential of Chemours. With that, operator, let's open the line for questions. Operator: . Your first question comes from John McNulty from BMO Capital Markets. John McNulty: Congratulations on a solid set of results despite a really difficult headwind. My first question was just on the Uri impact and supply chain impact on the Titanium Tech business. Specifically, I'd love to understand how that might have nicked the volumes in that business, and what you could have delivered if it hadn't been for those disruptions. And then also, I guess my assumption would be, since those volumes might have been directed more to the portal customers, that might have also had a negative impact on pricing for you in the quarter. And I guess, how would that have maybe played out differently if we hadn't seen the impact from Uri and the supply chain hit that business? Mark Vergnano: Yes. John, and great question. And your hypothesis is right on. The storm-affected -- the storm affected DeLisle, it affected our Johnsonville facility and because of natural gas issues affected Altamira as well. So we had supply issues through that storm. We prioritized our AVA contract customers. So we made sure that they got the supplies that they needed. We actually had customers come to us who are not AVA contract customers, looking for supply because if we weren't the only ones that were difficult in supplying. And again, as prioritizing our AVA contract customers, but also we added new AVA long-term contract customers during that period as well. So your hypothesis is right. We probably had less business through the portal maybe than we normally would, which probably skewed price a little bit from that standpoint. At the same time, because we have some of those disruptions, our ore blend was a little bit higher than normal to be able to get as much production out as possible. So our variable margin was a little bit higher as well because of that. So yes, it could have been a stronger quarter without that winter storm, both on a, I'd say, a supply standpoint, both on a cost standpoint as well as price. Still a solid quarter. The team did a great job of getting us back up, made sure we took care of all our AVA customers the right way, but it could have been a little bit stronger. John McNulty: Got it. Got it. No, that's helpful. And then maybe just a follow-up on the TT business. as we look throughout the rest of this year, I mean 1Q was obviously kind of an odd one for a whole host of reasons. I guess, how are you thinking about the normal seasonal pattern for the TiO2 business? And also, I guess, compounded by that, how should I think about your ability to meet the capacity out there versus what seems to be a pretty tight market where maybe others can. I guess how should we be thinking about that? Mark Vergnano: Yes. I'd say it is a tight market. We continue to operate all our facilities very strongly, almost full from that standpoint. We believe we have the capacity to be able to service our customers going forward. As we've talked about in the past, we have some incremental capacity work that we can do across the fleet of our facilities that would come on board in the '22, '23 kind of time frame. But in the meantime, we feel like we have adequate capacity to be able to handle that. Just as you said, what you're seeing is a very different dynamic here which is you're not seeing a lot of inventory build in the channel. You're seeing prices being thoughtful in terms of how they're being -- going into the market from that standpoint. So I believe -- and as we look at the portal, we have a portal that people are putting in orders even 6 months out, and those prices are different than what they would be now. So I think we can service our customers going forward. I just don't think there's excess inventory anywhere in the channel right now. Operator: Your next question comes from Josh Spector from UBS. Matthew Skowronski: This is Matt Skowronski on for Josh. Can you provide us some details on what is baked into guidance regarding production costs such as energy or other inputs? Mark Vergnano: Yes. And I'll let Sameer give you a little bit more detail. But maybe just from a standpoint of how we're looking at guidance, we see strong demand across all our segments right now. Our guidance reflects probably a level of conservatism, which is really based on macroeconomic issues, things -- we're keeping an eye on the pandemic. From a standpoint of India and Brazil still have some issues. Our hearts and thoughts go out to our colleagues in India and Brazil, who are still struggling through the pandemic maybe more than anywhere else in the world. And we're keeping our eye on auto OEM builds across the world as the chip shortage is getting in the way of that right now. So those are the things that are probably driving our conservatism from that standpoint. But outside of that, we expect very strong demand. We're operating our facilities extremely well. We don't see any -- foresee any other issues. Sameer, anything you'd want to add to that? Sameer Ralhan: No. I think, Mark, you summarized it well. And the only other thing I would say is on the cost side of the question, look, as you said earlier, we're layering our contracts pretty nicely. So given the contracts that we have in place for majority thereof, we feel we are in a pretty good position and the nature of those contracts is already reflected in the guide. Matthew Skowronski: And then for my follow-up, the release mentioned that the percent of customers on long-term agreements increased during the quarter. Were these new contracts materially different in terms of pricing than the previous contract? Mark Vergnano: Well, I'll let Mark dive in that for you. But just to sort of level set for everyone. We've said on the TiO2 side, that we want -- our balance of AVA contracts to be somewhere between 60% to 70% of our total volume, and we're going to stay in that range. I think the perturbation that we saw from Winter Storm Uri prove that you want to be in that range to be able to support your AVA customers going forward. So we're going to sit sort of in that range. As we go into new contracts or with new customers in AVA contracts, prices are set at where they are today. They're not set at some previous level. But Mark, do you want to go into any more detail on that? Mark Newman: Mark, we don't comment on price by channel, but I just emphasize the point you raised, which is when we enter into new contracts, the reference point for pricing is where pricing is today, not where it was previously. So that's the benchmark rate. And then maybe I'll just emphasize also that we're leveraging this very tight demand situation on TiO2 to improve the quality of our business and to layer in more business that's on long-term contracts, and which we think is desirable as we improve the TiO2 business going forward, and we continue to regain market share across all product segments. Operator: Your next question comes from Bob Koort from Goldman Sachs. Thomas Glinski: This is Tom Glinski on for Bob. First question, just on the TT business. Should we think about what you have baked in to the full year guide from a pricing standpoint? I think, based on your earlier comments that the sequential improvement in the second quarter should likely exceed the sequential improvement that you realized in the first quarter. So just some commentary there would be helpful. Mark Vergnano: Sure, Tom. Mark, why don't you answer that? Mark Newman: Yes. I think our -- as we indicated in our call, we have seen an inflection in price. We see good market momentum. So our expectation going forward is that the market remains strong, and we'll certainly have a good mix of both AVA and Flex business. I'd also mention that since Winter Storm Uri, our plants have run very well. So our plants ran well in March. Our plants have run well in April. So our ability to serve all of our channels remains very favorable. And clearly, as you would expect, the Flex channel is where when markets are tight, you can take the most price. So I'd say we factored certainly that into our outlook. And as Mark mentioned, some of our guidance philosophy has been somewhat conservative given some of the broader macroeconomic factors that we're watching. Thomas Glinski: Got it. Okay. That's helpful. And then on the TSS business, you called out additional phases of illegal refrigerants, I'm assuming in Europe. So this reads positively, but I'm just wondering if this could potentially signal that we've seen a pickup in the absolute level of illegal imports. So just naturally, there are some more seizures being associated with those. So I guess, are there more legal imports coming into the region than there were maybe 3, 6, 9 months ago? Or is it just purely that enforcement is improving? Mark Vergnano: Yes. I'll let Mark answer that. And because I think that's really important for everyone to understand what we're seeing in Europe. But maybe just to give a little bit of context from that standpoint, we're very positive about what we're seeing with Opteon right now all across the world. And with the EPA coming out, their initial draft rules just yesterday, I think you see built into that, that they're going to move forward. We applaud the Biden administration for being as aggressive as they are getting back into the Kigali kind of level here. But at the same time, I think the U.S. has learned a lot from Europe in terms of how they're putting in protections against the illegal imports as well. But Mark, why don't you explain what we're seeing in Europe at the same time. Mark Newman: Yes. Thanks, Mark. Overall, I'd say we're very encouraged by the tone of the market in Europe in refrigerants, especially stationary refrigerants, both legacy and HFO blends. It's a combination of continued improvement on the enforcement side. You'll recall earlier this year, we had a step down in the quota. And of course, we're starting to see some early stages of recovery in terms of commercial buildings needing refrigerants as we come into the cooling season, and we come out of COVID-19 as we start to emerge from that in Europe. So overall, I'd say we're encouraged, and I think it's all three factors. But seizures, the level of seizures and the level of what we call Internet takedowns, which is product being marketed on the Internet have improved year-over-year, and we're encouraged by what we're seeing in Europe. And we're also encouraged, as Mark said, by the recent action by the EPA to form regs on the AIM Act. So overall, this is the next stage of Opteon growth on the stationary side, both in Europe and the USA and the team's ready to service that demand. Operator: Your next question comes from Hassan Ahmed from Alembic Global Advisors. Hassan Ahmed: A question around titanium dioxide volumes. Obviously, your volumes were quite strong on a year-over-year basis, but sequentially up around 2%. So when I sort of sit there and sort of compare and contrast to other large competitors, sequentially, they seem to have had a larger bump up in volumes. So I'm just trying to sort of reconcile the sequential sort of uptick in your volumes relative to the commentary that you gave about sort of still being able to regain lost market share through the course of the year. Mark Vergnano: Right. No, it's a good question, Hassan. I'd say, you got to remember, last year -- so if you look at quarter-to-quarter -- year-on-year, if you will. Year-on-year, we had a very strong first quarter last year with things really starting to ramp up. In our opinion, things were significantly starting to ramp up from a standpoint of the TiO2 industry. And then obviously, we saw COVID hit us, which made a big difference. But from the standpoint of comparison, I think you got to think of it from that standpoint. But also, as we talked about, we had some disruptions from the winter storm from that standpoint. I think you're going to see us continually gain in volume through the rest of the year as well as we anticipate gaining share for the rest of the year going forward. But you just had a, I'd say, a strong year-on-year -- or not as strong a year-on-year comparison because of our quarter last year. But I think as going forward now, going into the second quarter and beyond, you're going to see a lot more strength from the volume perspective. Hassan Ahmed: Understood. Understood. And now switching gears to the feedstock side. Again sticking to Titanium Technologies, it seems that ore availability was tight. Last quarter seems to have only gotten tighter. This quarter, particularly from what I'm hearing out in China. And then you have companies like Iluka coming out and reporting sort of production declines. So a two part question. One, what are you guys seeing in terms of ore cost inflation? And how are you handling that? And part and parcel with that, what are you guys seeing in terms of cost curves? Where do you see the high end of the cost curve currently with the sort of ore price inflation that we've seen? Mark Vergnano: Yes. I'd start with -- we have long-term contracts in our ore. So we are not seeing ore inflation at this time from that standpoint. We have plenty of supply of ore from that perspective as well. So from an ore side, we feel very comfortable where we are throughout the rest of the year. I think you are seeing some issues in sulfate ilmenite in China, which is a little bit tighter. Obviously, that's not us. Our big play is, as everyone knows, is chloride ilmenite, where we have ample supply to be able to support us going forward from that standpoint. So from the standpoint of pricing, obviously, we don't talk about pricing directly. But our whole concept of bringing TVS to our customers was to give them predictable pricing and to give them predictable supply. And I think the past several months have proven the value of that strategy, not just for us but for our customers, which is the reason we installed it. So I think that right things are happening for our customers in the marketplace. They know where they can get product. They know they can get it from us. They know what their price is going to be going forward. They know the mechanisms, how that's going to change. And because of that, I think, for the first time in a long time, you're not seeing the spikes that normally occur in, I'd say, hording, if you will, where people are bringing in lots of inventory because they just don't need to do that. So I think you're seeing a very different dynamic in this TiO2 market, which I would say is going to be more of a steady growth versus driving to a peak that then crashes. I think you're going to see steady growth here that's going to benefit everyone. And Mark, I don't know if you want to add anything to that, but I think it's a different dynamic than what we've seen before in this marketplace. Mark Newman: Yes, Mark, I'd just maybe make 3 points to Hassan. One is we're well supplied on ore. We continue to focus on -- in our plans on being able to run more ilmenite and reduce our dependency on high-grade ore but remain well supplied. Obviously, in Q1, given the strength of the market and some of the disruption we had with Uri, we didn't optimize our ore blend in order to meet customer demand. And then the other point I'd make, which goes back to where you started. Sequentially, we had a much stronger Q4 than some of our competitors. So the sequential comparison doesn't look as good. It's impacted by Uri, but it's also impacted by a relatively strong Q4. So overall, as we look forward, which I think is where you should be focused is our ability to supply based on our nameplate capacity and how well our plants is running is good, and we're taking advantage of the strong market conditions despite some of the disruption we had in Q1. Operator: Your next question comes from Duffy Fischer from Barclays. Patrick Fischer: Question on TiO2, what's possible from a volume side? So if demand continues and we use Q1 as the baseline, obviously, you had some issues and disruptions, but my guess is you probably also sold a little bit out of inventory that you carried over. So when we think about that sales level from Q1, going forward, the rest of this year, if demand is there, can that volume move up 5%, 10%? How much more room on a quarterly basis do you have to grow off Q1? And then when we get into 2022, when do those debottlenecks go through that we can see even more potential volume? Jonathan Lock: Yes. So maybe I'll start off and let Mark go into any more detail. But we have -- we expect demand will continue to strengthen throughout the year. We have the capacity to be able to meet that going forward. And we have a variety of ways to increase our capacity even before we do all the debottlenecking work. As you know, ends one aspect of that, but we're operating our facilities now. These facilities take a little bit of time to ramp up to full capacity. We're in the midst of that right now. But we feel very, very confident that we can supply the needs for this year. And we do anticipate the demand to continue to be strong for the rest of the year going forward. And Mark, I don't know if you want to add anything to that? Mark Newman: Mark, the only thing I'd emphasize for Duffy is you need to separate the -- our ability to supply in a ramp-up mode with pretty strong demand coming out of Q4 into Q1, and Winter Storm Uri versus our nameplate and our ability to supply going forward. So certainly, I wouldn't want you to gear our Q1 ability to -- our ability to supply based on our Q1 volumes because of Winter Storm Uri, and our continued focus on running all of our plants at their capability. Patrick Fischer: Great. And then maybe just a follow-up on Mark's earlier point with the EPA rule that came out yesterday. Obviously, a lot of the headlines were pretty forced. It's a big step. Relative to what you've been working with over the next several years, where does this fall? And when we think of Europe as a template, there was kind of 1 year that ended up being a big step change for HFO driving -- drove up HFC pricing actually that first year, you had a step down. The way you read the text of what came out yesterday, what year is going to be the big move in the U.S. market if this gets implemented as they wrote it yesterday? Mark Vergnano: Yes. So like I said, Duffy, we are very supportive of the aggressiveness with the administration on trying to get this out and trying to get a final rule in September, which we think is going to be very helpful. Obviously, this is the first draft rule. So we'll have our comments that we'll be working with them on. The baseline that's being set up of 21 to -- 2011 to 2013, we think is a solid baseline. How they now figure out the quota off of that, I think is going to be interesting, but they pretty much are aligning this up with Kigali. So the big step down based on Kigali would occur 40% step down, which is huge in 2024. So I think you're going to see 2022 and 2023 be positively affected to get in front of that. From a standpoint of -- remember, we're one of only 2 players who have the HFO technology that's going to be able to drive the new adoptions. And as the big OEMs move quickly to be able to get their equipment in place that's going to play well. So you have the benefit, as you said, of the quota and the HFC prices that should move in accordance with that. But we have the bigger advantage, which is, we get HFOs to the marketplace as well, which we think is going to be even a bigger advantage for us going forward. So I'd say the -- we're still early days with us looking at it. We just looked at it last night because it just came out. But I'd say the framework is there, and we'll give our comments to the EPA from their draft rule to make sure that they understand that the 2 big players here are U.S. manufacturers who invented this technology, and we believe that we should have some advantage because of that. Operator: Your next question comes from Arun Viswanathan from RBC Capital Markets. Arun Viswanathan: Just wanted to ask a question, I guess, on Titanium Technologies. So could you just describe the inflationary environment there? I know that you've gone through some supply chain disruptions. But obviously, you may also not be as exposed to raw material inflation, just given your flexibility, but what are you seeing there? And if there is inflation that your competitors face, you view that as a slight positive? Mark Vergnano: Yes. And I'll let Mark give you a little bit more color here. But as I said, we have long-term contracts in place with both our ore and other raw materials like chlorine. So we feel very confident from a standpoint of supply around those for the remainder of the year, and in a lot of those cases, those are multiyear contracts from a standpoint as well. So we're very, very solid in terms of -- from that standpoint. And again, we -- the whole concept of our AVA contracts in TVS are really about making sure that we're giving predictable pricing to our customers going through this. And so lining up our supply situation in a way that allows us to be able to have our solid margins and not have to pass all that on to our AVA contract holders is very important. But Mark, I don't know if you want to add any more to that? Mark Newman: Mark, the only thing I'd add is, clearly, we're protected with our multiyear contracts, and we're very careful in terms of how we layer our contracts in to avoid significant duration exposure. I'd also remind everyone that -- Arun, that we, with our ability to run chloride ilmenite and lower grades of ore were advantage versus our competition in an environment if there would be or inflation going forward. And then the third point is, clearly, in Q1, to meet customer demand with Winter Storm Uri, we didn't optimize our ore blend, but that is something we'll continue to focus on as we go forward, which would improve our variable cost structure as we move out several quarters. Arun Viswanathan: Great. And as a quick follow-up, it seems like the recovery started in China. Maybe there's been a little bit of moderation there recently. Is that accurate, I guess? And then, I guess I'm referring to TiO2. And then similarly, do you expect kind of North America and Europe to kind of follow in the next, say, year or so and pick up some of that slack if China is stabilizing? Or how would you kind of characterize the regional dynamics? Mark Vergnano: Mark, do you want to... Mark Newman: Yes. No, I'd say our business in China is very strong. And in fact, where we participate in the market in the high-grade ore space. As we said in the call, our volumes are up across the board in every region, in every product line. So we certainly see this as being in the very early innings of a good recovery. And we believe the strength that we're seeing from consumer demand around the world is going to last certainly for some time to come. And then the strength that we see coming behind that with infrastructure spending could extend that significantly. So we certainly believe we're in the early innings of a very good recovery. And as Mark alluded to earlier, structurally, we like some of the things that we're doing in terms of our participation in the TiO2 market, which should give us a good run here. Operator: Our next question comes from P.J. Juvekar from Citi. Eric Petrie: This is Eric Petrie on for P.J. You noted sales opportunities from hydrogen membranes of $2 billion to $3 billion by 2030. How much share could you capture? And then did your Nafion volumes increase this quarter? Mark Vergnano: Yes. So I would say we continue to see improvement in our Nafion business. It goes in a variety of places, obviously, fuel cells as well. So yes, we continue to see strength in the Nafion business from ourselves. And we are the membrane, if you will, for this going forward. So I think our share is going to be really dependent on the developments that we can do to make this membrane -- continue this membrane to be the standard in the industry. I'm convinced that the membrane is going to be the driver of efficiency and cost reduction for hydrogen, which is why it's going to be successful going but we're -- as Mark alluded to in his comments, we're going to do a deep dive on the segment for all of you because we get a lot of questions on that. So hopefully, in the next few months, we'll get that on the calendar for everyone. And we'll go through a lot more detail on why we have so much confidence in this space, why we believe this membrane is really the standard in the industry, especially for heavy-duty diesel as well as for electrolysis going forward in fuel cells in general. So again, we feel that we should be able to capture a significant portion of that market, if we can continue to drive the developments that we're driving right now. Eric Petrie: Helpful. And then secondly, you noted the recovery in your end markets. So a question on free cash flow to buybacks potentially later this year into 2022. Mark Vergnano: Yes. So Sameer, why don't you talk a little bit about how we're thinking about our use of cash right now. Sameer Ralhan: Yes. Thanks, Mark. Eric, if you look at this, Mark highlighted some of the interesting sort of growth opportunities, be it the investments in the PFA side. So we're pretty excited about some of the things that we see from an organic growth perspective, and we are going to continue to support that. We can do that well within the CapEx guide that we have given this year, and those kind of levels moving forward. But overall, we have optimization from our forwards with respect to share buybacks, so we'll be looking at that. And overall, the other thing I would say is from a leverage perspective, Eric, we are looking at gross leverage kind of reduction over the next 3 years as well, try to get the debt down to $3 billion, $3.5 billion type of range. So you're going to see us using some of the free cash flow to reduce the gross debt as well. So it's going to be pretty balanced as you're going to move forward. Operator: Your next question comes from Vincent Andrews from Morgan Stanley. Steven Haynes: This is Steve Haynes on for Vincent. Just on -- coming back to TiO2 margin pretty quick. I think last quarter, you made a comment that for the full year, you're expecting margins to be in the kind of mid-20% range. Is that kind of still what you're looking for, given that there's some incremental costs? Or should it be a little bit lower now? Mark Vergnano: You mean on the TiO2 side? Steven Haynes: Correct. Mark Vergnano: Yes. I'd say, as we look forward, mid- to high 20s is where we should be aiming the margin. So we don't see a negative effect on margin going forward, I'd say we see a positive effect. As Mark said, we had a first quarter that we didn't operate the way we normally would because we had to ramp up production pretty quickly. We had to get product out because of the downtime from the storm. So we didn't optimize our ore blend. So as we go forward, I think you'll see us optimizing our ore blends. There's going to be a little bit of a positive price impact as well. So I would say margins should go up from the first quarter and should be in that mid- to upper 20s range. Steven Haynes: Okay. And then really quick on cash flow. I think in receivables, you had a big build this quarter. Is that kind of expected to reverse? And what are your general working capital assumptions in the free cash flow guidance through 25? Mark Vergnano: Yes. I'll let Sameer give you the detail there. But do remember that we had a big revenue quarter. So there's a reason for receivables to go up in a big revenue quarter. But Sameer, do you want to add anything? Sameer Ralhan: No. I think Mark, you said it. It's a pickup in the revenue and also the timing, given where it happened in the quarter. So I wouldn't read too much into it. The DSO levels are pretty consistent with what we would see toward the seasonality in the business, right? I mean this is the time when we start seeing the pickup in the sales in our coatings and cool -- the refrigerants market. So this DSO is pretty consistent with what we would typically have at this time of the season. Mark Newman: Yes. Maybe the only thing I'd remind everyone is whenever you have sales back-end loaded in the quarter because of Winter Storm Uri in February, it tends to drive a slightly higher receivables than you might otherwise see. So nothing unusual there. Operator: There are no further questions. I will now turn the call over to Mark Vergnano for closing remarks. Mark Vergnano: Thanks, Jacqueline. And listen, I just want to reiterate how I close my remarks. We feel very, very positive about where we are right now as a company, but really about the future as well. So you probably heard it in our tone, but as we go through the year, we hope to give you a little bit more insight into why we feel really good about the segments that we have and how we're growing them going forward. So again, thank you, as always, for your interest in the company, and thanks for your support. Operator: This concludes today's conference call. Thank you for participating. You may now disconnect.CC Ratings Summary
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Chemours Company (NYSE:CC) Quarterly Earnings Preview
- Chemours is expected to report earnings per share of $0.10 and revenue of $1.37 billion for the fourth quarter of 2024.
- The company faces a potential decline in both earnings and revenue year-over-year, which could impact its stock price.
- Financial metrics reveal a P/E ratio of 36.51, a debt-to-equity ratio of 6.53, and challenges in generating cash flow with a negative enterprise value to operating cash flow ratio of -21.63.
Chemours Company (NYSE:CC) is set to release its quarterly earnings on February 18, 2025. Wall Street expects the earnings per share to be $0.10, with projected revenue around $1.37 billion. Chemours, a key player in the chemical industry, specializes in titanium technologies, fluoroproducts, and chemical solutions. It competes with companies like DuPont and 3M in the market.
The anticipated earnings report for the fourth quarter of 2024 suggests a decline in both earnings and revenue for Chemours. This outlook indicates a year-over-year decrease, which could impact the stock price based on how the actual results align with these estimates. If Chemours exceeds expectations, the stock might rise, but a miss could lead to a decline.
Chemours' financial metrics provide insight into its current market position. The company has a price-to-earnings (P/E) ratio of 36.51, showing how much investors are willing to pay per dollar of earnings. Its price-to-sales ratio is 0.44, indicating the market value relative to sales. The enterprise value to sales ratio is 1.08, reflecting the company's total value compared to its sales.
However, Chemours faces challenges in generating cash flow, as highlighted by a negative enterprise value to operating cash flow ratio of -21.63. This suggests difficulties in producing cash flow relative to its enterprise value. The earnings yield stands at 2.74%, offering insight into the earnings generated from each dollar invested in the stock.
The company's debt-to-equity ratio is notably high at 6.53, indicating a significant reliance on debt financing. This could pose risks if the company faces financial difficulties. On the other hand, the current ratio of 1.73 suggests Chemours can cover its short-term liabilities with its short-term assets, reflecting a stable liquidity position.
Chemours Company (NYSE:CC) Quarterly Earnings Preview
- Chemours is expected to report earnings per share of $0.10 and revenue of $1.37 billion for the fourth quarter of 2024.
- The company faces a potential decline in both earnings and revenue year-over-year, which could impact its stock price.
- Financial metrics reveal a P/E ratio of 36.51, a debt-to-equity ratio of 6.53, and challenges in generating cash flow with a negative enterprise value to operating cash flow ratio of -21.63.
Chemours Company (NYSE:CC) is set to release its quarterly earnings on February 18, 2025. Wall Street expects the earnings per share to be $0.10, with projected revenue around $1.37 billion. Chemours, a key player in the chemical industry, specializes in titanium technologies, fluoroproducts, and chemical solutions. It competes with companies like DuPont and 3M in the market.
The anticipated earnings report for the fourth quarter of 2024 suggests a decline in both earnings and revenue for Chemours. This outlook indicates a year-over-year decrease, which could impact the stock price based on how the actual results align with these estimates. If Chemours exceeds expectations, the stock might rise, but a miss could lead to a decline.
Chemours' financial metrics provide insight into its current market position. The company has a price-to-earnings (P/E) ratio of 36.51, showing how much investors are willing to pay per dollar of earnings. Its price-to-sales ratio is 0.44, indicating the market value relative to sales. The enterprise value to sales ratio is 1.08, reflecting the company's total value compared to its sales.
However, Chemours faces challenges in generating cash flow, as highlighted by a negative enterprise value to operating cash flow ratio of -21.63. This suggests difficulties in producing cash flow relative to its enterprise value. The earnings yield stands at 2.74%, offering insight into the earnings generated from each dollar invested in the stock.
The company's debt-to-equity ratio is notably high at 6.53, indicating a significant reliance on debt financing. This could pose risks if the company faces financial difficulties. On the other hand, the current ratio of 1.73 suggests Chemours can cover its short-term liabilities with its short-term assets, reflecting a stable liquidity position.
Chemours Company Hit by Securities Fraud Class Action Lawsuit
The Chemours Company Faces Class Action Securities Lawsuit
The Chemours Company (NYSE:CC) is currently in the spotlight due to a class action securities lawsuit spearheaded by Levi & Korsinsky, LLP. This lawsuit is significant as it addresses the concerns of shareholders who have suffered losses between February 10, 2023, and February 28, 2024, a period marked by alleged securities fraud. The core of the lawsuit revolves around accusations against senior executives at Chemours for allegedly manipulating Free Cash Flow targets to unjustly benefit from cash and stock incentive compensation. Furthermore, the lawsuit brings to light concerns regarding the company's accounting practices and procedures, particularly pointing out alleged deficiencies in its internal control over financial reporting. These accusations suggest that the company may have provided misleading statements about its business operations and financial prospects, raising serious questions about the integrity of its financial disclosures.
The implications of these allegations are far-reaching, not only for the executives involved but also for the shareholders of Chemours. Shareholders, irrespective of whether they currently hold their shares or not, find themselves in a position where they may seek recovery for their losses. Levi & Korsinsky, the firm leading this legal battle, brings to the table a wealth of experience in securities litigation, having represented investors for over two decades. Their track record of securing substantial recoveries for shareholders places them in a pivotal role in this lawsuit, offering a glimmer of hope for those affected by the alleged fraudulent activities at Chemours.
The lawsuit against Chemours underscores the critical importance of transparency and accountability in corporate governance. It serves as a reminder to all publicly traded companies about the consequences of misleading investors and the legal repercussions that can follow. For Chemours, a company with a market capitalization of approximately $3.96 billion and a stock price that has seen significant fluctuations over the past year, ranging from a low of $15.1 to a high of $39.05, the lawsuit represents a challenging period. Despite these challenges, the stock price witnessed an increase of 1.61% to $26.57, as observed in a recent trading session, indicating a complex interplay between market perceptions and the underlying legal and financial issues facing the company.
Investors and market watchers are closely monitoring the developments of this lawsuit, as its outcome could have broader implications for corporate governance practices and investor confidence in the financial markets. The case against Chemours, with allegations of manipulated financial targets and misleading statements, highlights the ongoing challenges in ensuring corporate transparency and accountability. As the legal process unfolds, stakeholders are keenly awaiting the resolution of this case, which could potentially lead to significant changes in how companies are governed and how they communicate with their investors.
Chemours Stock Falls 2% on BofA’s Downgrade
Chemours (NYSE:CC) shares fell around 2% intra-day today after BofA Securities analysts downgraded the company to Neutral from Buy and reduced their price target on the stock to $37.00 from $41.00.
The analysts mentioned that titanium dioxide (TiO2) pigments have been underperforming base coatings demand since Q3/22, and the expected improvement in Q2 did not fully materialize. The lack of volumes hampers the impact of lower raw material costs.
Although a sequential pickup in pigment volumes and EBITDA is still anticipated, the analysts lowered the forecast due to ongoing destocking. Additionally, the Advanced Materials segment of the business is expected to face similar economic headwinds, leading to a downward adjustment in Advanced Performance Materials (APM) expectations.
Chemours Stock Falls 2% on BofA’s Downgrade
Chemours (NYSE:CC) shares fell around 2% intra-day today after BofA Securities analysts downgraded the company to Neutral from Buy and reduced their price target on the stock to $37.00 from $41.00.
The analysts mentioned that titanium dioxide (TiO2) pigments have been underperforming base coatings demand since Q3/22, and the expected improvement in Q2 did not fully materialize. The lack of volumes hampers the impact of lower raw material costs.
Although a sequential pickup in pigment volumes and EBITDA is still anticipated, the analysts lowered the forecast due to ongoing destocking. Additionally, the Advanced Materials segment of the business is expected to face similar economic headwinds, leading to a downward adjustment in Advanced Performance Materials (APM) expectations.
Chemours Reports Better Than Expected Q1 Results
Chemours (NYSE:CC) reported its Q1 earnings on Thursday, with EPS coming in at $0.98, better than the Street estimate of $0.54. Revenue was $1.6 billion, beating the Street estimate of $1.46 billion.
The company reaffirmed its 2023 EBITDA guidance of $1.2–1.3 billion, compared to the Street estimate of $1.24 billion. Adjusted EPS guidance is essentially unchanged at $3.78–4.28, compared to the prior guidance of $3.80-$4.29.
The company expects a weaker start to 2023, with conditions improving into the second half of the year, with continued secular growth in TSS and APM.
Chemours Reports Better Than Expected Q1 Results
Chemours (NYSE:CC) reported its Q1 earnings on Thursday, with EPS coming in at $0.98, better than the Street estimate of $0.54. Revenue was $1.6 billion, beating the Street estimate of $1.46 billion.
The company reaffirmed its 2023 EBITDA guidance of $1.2–1.3 billion, compared to the Street estimate of $1.24 billion. Adjusted EPS guidance is essentially unchanged at $3.78–4.28, compared to the prior guidance of $3.80-$4.29.
The company expects a weaker start to 2023, with conditions improving into the second half of the year, with continued secular growth in TSS and APM.
