Achieved Adjusted EBITDA at the high end of the guided range

Generated free cash flow above expectations

Tronox Holdings plc (NYSE:TROX) (“Tronox” or the “Company”), the world’s leading integrated manufacturer of titanium dioxide (“TiO₂“) pigment, today reported its financial results for the quarter ending June 30, 2023, as follows:

Second Quarter 2023 Financial Highlights:

• Produced revenue of $794 million, a 12% increase compared to the prior quarter, or a 16% decrease compared to the prior year
• Generated income from operations of $84 million, and a net loss of $269 million, inclusive of a valuation allowance of $293 million established against the deferred tax assets within our Australia jurisdiction; adjusted net income was $24 million (non-GAAP)
• GAAP diluted EPS was $(1.72); achieved adjusted diluted EPS of $0.16 (non-GAAP)
• Delivered Adjusted EBITDA of $168 million, at the high end of the guided range, and an Adjusted EBITDA margin of 21.2%
• Invested $55 million in capital expenditures in the quarter
• Generated $81 million in free cash flow in the quarter

Q3 2023 Outlook:

• TiO₂ volumes expected to be relatively flat to Q2 2023 levels
• Zircon volumes expected to decline by 15 to 20 thousand tons versus Q2 2023
• Adjusted EBITDA expected to be $115-135 million

This outlook is based on Tronox’s views on current global economic activity and is subject to changes and impacts associated with the macroeconomic conditions, global supply chain, and inflation-related challenges, among others.Note: For the Company’s guidance with respect to third quarter 2023 non-GAAP measures, we are not able to provide without unreasonable effort the most directly comparable GAAP financial measure, or reconciliation to such GAAP financial measure, because certain items that impact such measures are uncertain, out of the Company’s control or cannot be reasonably predicted.Summary of Select Financial Results for the Quarter Ending June 30, 2023

($M unless otherwise noted)		Q2 2023	Q2 2022	Y-o-Y % ∆	Q1 2023	Q-o-Q % ∆
Revenue		$794	$945	(16) %	$708	12 %
TiO2		$611	$769	(21) %	$560	9 %
Zircon		$95	$111	(14) %	$72	32 %
Other products		$88	$65	35 %	$76	16 %
Income from operations		$84	$190	(56) %	$62	35 %
Net (Loss) Income		($269)	$375	(172) %	$25	n/m
Net (Loss) Income attributable to Tronox		($269)	$375	(172) %	$23	n/m
GAAP diluted (loss) earnings per share		($1.72)	$2.37	(173) %	$0.15	n/m
Adjusted diluted earnings per share		$0.16	$0.84	(81) %	$0.15	7 %
Adjusted EBITDA		$168	$275	(39) %	$146	15 %
Adjusted EBITDA Margin %		21.2 %	29.1 %	(790) bps	20.6 %	60 bps
Free cash flow		$81	($67)	n/m	($172)	n/m
	Y-o-Y % ∆			Q-o-Q % ∆
	Volume	Price	FX	Volume	Price	FX
TiO2	(22) %	1 %	1 %	9 %	(1) %	1 %
Zircon	(21) %	7 %	— %	33 %	(1) %	— %

Co-CEOs’ Remarks and Outlook“Our solid second quarter performance was a result of continued market recovery from the first quarter and our ongoing discipline around costs,” commented Jean-François Turgeon, co-chief executive officer. “The Company achieved an Adjusted EBITDA of $168 million, at the high end of our previously guided range of $160 to $170 million and an Adjusted EBITDA margin of 21.2%, above our expectations. We continue to deliver against our commercial strategy and realize relatively stable pricing trends despite volumes remaining well below seasonally normal levels – a reflection of Tronox’s differentiated offering. Tronox’s results continue to demonstrate the strength and advantage of vertical integration. These results would not be possible without the hard work and dedication of our global employees, and we thank the team for their commitment to Tronox.”Mr. Turgeon added, “We are continuing to run our operating sites at reduced rates as a result of lower demand levels in order to manage inventory and cash.

We generated $81 million in free cash flow, greater than previously anticipated, as a result of the team’s proactive approach to aligning the business with current market conditions. We remain very focused on managing working capital. We will continue to balance the medium- and long-term strategic needs of the business to position Tronox for future success while ensuring we are taking the right decisions to manage what is within our control in the short term against the current macroeconomic landscape.”John D. Romano, co-chief executive officer, commented, “Looking ahead, we expect pigment volumes to be relatively flat to the second quarter, as we expect demand to remain higher than the trough levels seen in Q4 2022.

Our commercial strategy and differentiated offering have enabled more stable pricing trends than during previous years of demand decline. On zircon, we expect a more challenging second half of 2023 than previously anticipated, driven by continued weak market dynamics in China. At this time, based on our current market outlook, we expect zircon volumes for the third quarter to decline by 15 to 20 thousand tons from second quarter 2023 levels.

As a result of these market dynamics, we anticipate Adjusted EBITDA for the third quarter 2023 to be $115-135 million. This range includes $35 million of impacts to EBITDA resulting from adjusting the production rates of both our pigment and mining sites to better align with the latest market demand levels and manage working capital and free cash flow.”Mr. Romano concluded, “We strongly believe in our strategy of being vertically integrated and the value that it provides to our customers. As a result of our unique portfolio, we are currently evaluating a range of options to leverage our expertise to further unlock the value of the rare earths generated from our operations. Our differentiated, integrated position sets us apart as a global leader in sustainable mining and upgrading solutions.”Second Quarter 2023 Results
(Comparisons are to prior year (Q2 2023 vs. Q2 2022) unless otherwise noted)The Company recorded second quarter revenue of $794 million, a decrease of 16%, primarily driven by lower sales volumes of TiO₂ and zircon and lower pig iron prices, partially offset by higher TiO₂ and zircon average selling prices and higher pig iron volumes.Revenue from TiO₂ sales was $611 million, a decline of 21% driven by a 22% decline in volumes, partially offset by a 1% increase in average selling prices and a 1% favorable exchange rate impact. Sequentially, TiO₂ sales increased 9%, driven by a 9% increase in sales volumes, with a 1% decline in average selling prices offset by a 1% favorable exchange rate impact.Zircon revenue decreased 14% to $95 million driven by a 21% decline in volumes, partially offset by a 7% increase in average selling prices. Sequentially, zircon revenue increased 32%, driven by a 33% increase in volumes partially offset by a 1% decrease in average selling prices.Revenue from other products was $88 million, an increase of 35% year-over-year, primarily due to both higher pig iron sales volumes and higher revenue from rare earths elements, partially offset by lower average selling prices of pig iron.

Rare earths elements sales increased 87% year-over-year.Net loss attributable to Tronox in the quarter of $269 million, or $1.72 per diluted share, compared to net income attributable to Tronox of $375 million, or $2.37 per diluted share in the year-ago period. Excluding a non-recurring adjustment of a valuation allowance in Australia relating to deferred tax assets totaling $293 million, adjusted net income attributable to Tronox (non-GAAP) was $24 million, or $0.16 per diluted share.

Adjusted EBITDA of $168 million represented a 39% decrease compared to the second quarter 2022, driven by unfavorable fixed cost absorption due to lower production rates, lower sales volumes and lower pig iron pricing, partially offset by favorable exchange rate tailwinds and lower freight costs. Adjusted EBITDA margin was 21.2% for the quarter.Sequentially, Adjusted EBITDA increased 15% due to higher product sales volumes and favorable exchange rate tailwinds, partially offset by lower average selling prices and higher freight costs associated with higher volumes.The Company’s selling, general and administrative expenses were unchanged at $73 million for the quarter compared to the year-ago quarter.

Tronox’s net interest expense in the quarter was $35 million. Depreciation, depletion and amortization expense was $68 million.Balance Sheet, Cash Flow and Capital AllocationTronox ended the quarter with $2.7 billion of total debt and a net leverage ratio of 3.8x on a trailing twelve-month basis. Available liquidity at the end of the quarter totaled $447 million, including $167 million in cash and cash equivalents and $280 million available under our revolving credit agreements. There are no significant debt maturities until 2028 and no financial covenants on the Company’s term loans or bonds.Free cash flow for the quarter was $81 million.

Capital expenditures were $55 million. The Company returned $50 million to shareholders in the form of dividends in the quarter, which included payments for both first and second quarter declared dividends.SustainabilityThe Company released its 2022 Sustainability Report in May, detailing the significant steps taken over the last year to advance its leadership role in sustainability and protecting the environment.

Key initiatives that Tronox took in 2022 included: reinforcing Scope 1 and 2 carbon intensity reduction targets of 35% by 2025 and 50% by 2030 against a 2019 baseline; creating regional decarbonization roadmaps that will be integral to meeting the Company’s net zero by 2050 goal; setting Scope 3 emissions targets to decrease emissions intensity by 9% by 2025 and 16% by 2030 against a 2021 baseline; and recommitting to reducing waste to external landfills by 10% on an absolute basis from the 2019 baseline, keeping on course to meet the 2025 and 2030 reduction targets of 15% and 25%, respectively. Please visit our website and download our 2022 Sustainability Report to learn more about these initiatives and more underway at Tronox.

Source: Tronox