Tronox reports Q4 adjusted EPS (38c), consensus 0c

Reports Q4 revenue $686M, consensus $668.95M. “Tronox delivered Q4 top-line performance largely in-line with expectations,” commented John Romano, co-CEO. “We generated $686M in revenue in 4Q23, an increase of 6% compared to the prior year. This included a 38% increase in other products due to additional sales of pig iron, as well as opportunistic sales of ilmenite and a portion of a rare earths tailings deposit in South Africa, which is a key part of our funding strategy for our rare earths business. Tronox delivered an Adjusted EBITDA of $94M in the quarter, $11M below the bottom end of the previously guided range of $105M-$125M, and an Adjusted EBITDA margin of 13.7%. The lower than expected performance was primarily a result of a delayed restart by our steam supplier at Botlek and higher costs from unanticipated downtime stemming from running at lower rates. We expect to recover at least $15M in insurance proceeds in 2024 from the downtime at Botlek to cover the costs incurred to continue providing uninterrupted service to our customers while working around the supplier outage. To mitigate operational cost pressures, we continued to proactively manage expenses and cash. Free cash flow was $51M for Q4, an improvement of $88M over 3Q23.” Mr. Romano added, “The operating challenges we experienced in the last six months are not indicative of the standard we hold ourselves to at Tronox. We are addressing these challenges head-on in 2024. In 2023, we ran at the lowest utilization rates on record in order to manage inventories and free cash flow in light of lower market demand. As we look ahead into 2024, we are adjusting our operating rates to support the market recovery currently underway. This will set Tronox up to realize a step change in our earnings power after working through the remaining higher cost inventory on the balance sheet. For the first quarter of 2024, we are expecting TiO2 volumes to increase 12-16% and zircon volumes to increase 15-30%, both compared to the fourth quarter, and we expect TiO2 pricing to remain relatively flat to the prior quarter. While we expect a headwind from non-repeating sales in other products and higher cost inventory moving off the balance sheet, this will be offset by lower operating costs due to higher utilization rates. As a result, we are expecting first quarter adjusted EBITDA to be $100-120 million and adjusted EBITDA margins to be in the mid-teens range.”