Tronox action symptom of TiO2 business - buyers

15 May 2008 21:27  [Source: ICIS news]

HOUSTON (ICIS news)--US pigment maker Tronox's stock value fell by 10 cents/share on Thursday on news that the company had indefinitely suspended its quarterly dividend.

The world's third largest maker of titanium dioxide (TiO2), a white pigment used in paints, coatings plastics and paper products, said the action was necessary to improve its financial flexibility and would continue until market conditions improve.

However, buyers of TiO2 expressed little surprise over the news.

"I'd be more concerned if they were announcing production cutbacks or a bankruptcy," one buyer said. "I don't see it as a big issue yet."

Another buyer viewed it almost as a non-issue. "To me, it just seems like they're doing the obvious. I don't think it will get them any more margin or price increases."

The company's stock price was $3.40/share on early Thursday, down 2.9% from Wednesday's $3.50/share close. In late-day trading, the per-share price had recovered slightly to $3.43.

On 30 April, Tronox reported preliminary first-quarter losses of $1.4m (€910,000), compared with losses of $9m in the 2007 first quarter.

A Tronox spokesperson said the company had no comment on what would constitute enough market improvement for Tronox to reinstate dividends.

The company went public in November 2005, she said, and has paid dividends since the 2006 first quarter.

TiO2 producers have lamented margin-thinning increases in raw materials and transportation costs since the third quarter of  2007, both exacerbated by sluggish demand from the US housing industry and a failure to achieve North American price increases.

Global demand, they say, is keeping major market players from going out of business, but the industry is not earning at reinvestment levels, sellers said.

US TiO2 prices have held in the range of 98 cents-$1.08/lb ($2,161-2,381/tonne) since mid first-quarter when smaller-volume buyers took 3 cent/lb hikes, according to global chemical market intelligence service ICIS pricing 

Larger buyers, particularly those in architectural coatings markets, have taken no increases for the past year, despite 17 cents/lb in price initiatives since mid- 2007.

($1 = €0.65)

For more on Tronox, visit ICIS plants and projects
For more on TiO2, visit ICIS chemical intelligence
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By: Larry Terry
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