US Tronox’s Q1 earnings higher than expected as TiO2, zircon sales shoot up

SAO PAULO (ICIS)–US titanium dioxide (TiO2) and zircon producer Tronox’s shares were up strongly on Monday after the company said its earnings in the first quarter had come between 9-31% higher than the analysts’ consensus.

Tronox earnings before interest, taxes, depreciation and amortization (EBITDA) stood at $131 million in Q1. Analyst consensus expected that figure to be between $100-120 million.

Tronox’s shares were up 5.87% in Monday afternoon’s trading at the New York Stock Exchange (NYSE), compared with the last close on 19 April.

EBITDA posted strong growth compared with the fourth quarter, although it fell year on year. EBITDA is the preferred metric to measure a company’s financial health as it strips out external factors out of the company’s control.

Sales rose in all metrics for titanium dioxide (TiO2) and zircon, a mineral that increases resistance on glass and metal. The company’s main end market is the paints and coatings sector, where TiO2 is the key feedstock.

In February, the company already gave a hint its performance was proving better than expected when it raised operating rates for TiO2, with the company confident at the time that pricing for that material had bottomed out and should start improving after Q1.

These are Tronox’s key products – TiO2 sales rose in Q1 by 8% year on year, and by 17% quarter on quarter.

Zircon posted even better metrics, although its weight within Tronox’s portfolio is much lower than TiO2’s. In Q1, zircon sales rose by 22% year on year, and by 54% quarter on quarter.

Tronox (in $/million)	Q1 2024	Q1 2023	Change	Q4 2023	Change Q4 2023 vs Q1 2024
Revenue	774	708	9%	686	13%
EBITDA	131	146	-10%	94	39%
EBITDA margin	16.9%	20.6%	-3.70%	13.7%	3.2%
Net income/loss	-9	25	N/A	-56	N/A

TIO2, ZIRCON AND OUTLOOK
“Costs continued to trend favorably as a result of improved absorption from higher production volumes and the absence of non-repeating charges in prior quarters,” said Tronox’s CEO, John D Romano.

The company added its priorities for the rest of 2024 would be prioritizing investments which “are critical to furthering our strategy” as well as bolstering its liquidity on the back of what it expects will be market recovery.

The Stamford, state of Connecticut-headquartered producer added it will also aim to resume debt payments as well as “evaluate strategic high-growth” opportunities for potential acquisitions but fell short of disclosing more details.

STOCK JUMP EXPECTED
“Management attributed the guidance raise [to Q1 financials] to demand outpacing expectations for both TiO2 and zircon,” said analysts at Alembic Chemical Advisors.

“Management also stated that in line with their year-end earnings call guidance, their costs continue to trend favorably as a result of improved absorption from higher production volume and the absence of non-repeating charges in prior quarters.”

Analysts at Alembic Chemical did forecast Monday’s sharp price increase, adding it would return to more normal trading patterns after the excitement subsided.

The chemical equity analysts at Alembic recommended selling Tronox’s stock to cash in gains while the rises on the positive Q1 preliminary results sentiment lasted.