Tronox (TROX) Q2 2024 earnings summary

Executive summary

• Q2 2024 revenue was $820 million, up 6% sequentially and 3% year-over-year, driven by a 16% increase in TiO2 volumes despite lower prices; zircon volumes were flat sequentially but up year-over-year.

• Net income attributable to shareholders was $16 million, reversing a $269 million loss in Q2 2023, aided by a one-time $28 million royalty sale; adjusted EBITDA was $161 million with a 19.6% margin.

• Free cash flow for the quarter was $84 million, and $41 million was returned to shareholders via dividends; capital expenditures totaled $76 million, with 60% for strategic growth.

• Operational challenges during asset ramp-up led to higher costs and lower pigment plant utilization, but these were resolved with July utilization rates at 80%.

• Published the 2023 sustainability report, reaffirming carbon emissions reduction and diversity goals, and advanced renewable energy initiatives in South Africa.

Financial highlights

• TiO2 revenue rose 7% year-over-year on 16% higher volumes, offset by an 8% decline in average selling prices; zircon revenue fell 11% due to lower prices but volumes increased 4%.

• Adjusted diluted EPS was $0.07, down from $0.16 in Q2 2023; adjusted EBITDA margin was 19.6%, down 160 bps year-over-year but up 270 bps sequentially.

• Gross profit for Q2 2024 was $150 million, down from $157 million in Q2 2023, with margin decline due to lower selling prices, partially offset by improved production costs.

• Interest expense increased $4 million year-over-year in Q2 2024 due to higher rates and average debt balances.

• Total available liquidity was $680 million, including $201 million in cash.

Outlook and guidance

• Q3 2024 TiO2 volumes expected to decline 2-4% sequentially but remain up high teens percent year-over-year; zircon volumes projected to be flat sequentially, up ~160% year-over-year.

• Q3 Adjusted EBITDA guidance is $145-$165 million, with margins in the high teens; second half Adjusted EBITDA anticipated to be stronger than the first half.

• Full-year CapEx expected at $395 million; net cash interest ~$140 million; working capital expected to be a tailwind.

• Management expects sufficient cash from operations to cover expenses, capex, interest, and debt repayments over the next 12 months, barring significant external shocks.

• Q3 profitability to be impacted by higher cost pigment inventory.