US Tronox targets strong Q2 earnings growth as TiO2 cycle continues to recover – execs

HOUSTON (ICIS)–Integrated titanium dioxide (TiO2) producer Tronox expects to achieve a sharp year-on-year increase in Q2 adjusted earnings before interest, tax, depreciation and amortisation (EBITDA) – coming on top of a strong Q1 as the TiO2 cycle continues to recover.

During Tronox’s Q1 earnings call on Thursday, co-CEOs John Romano and Jean-François Turgeon guided to Q2 adjusted EBITDA of $225m-240m, which would be up from the $142m Tronox reported for Q2 2020.

The guidance factors in headwinds from planned maintenance at a synthetic rutile production facility in Australia, cost inflation, especially electricity costs in South Africa, as well as unfavourable foreign exchange impacts due to the South African rand and the Australian dollar, they said.

Driving Q2 earnings will be:
– TiO2 sales volumes, expected to increase in the low- to mid-single digit range, over record first quarter levels;
– Zircon sales volumes, expected to remain elevated above 2019 and 2020 quarterly volume levels, though off a Q1 peak;
– TiO2 and zircon prices, “expected to increase as we make progress with our regional price initiatives”, Romano said.

Zircon is a co-product of Tronox’s integrated TiO2 production.

“We continue to see very strong demand”, and given lower than typical inventory levels, Tronox’s TiO2 sales volume would further increase in Q2, “setting us up for another strong quarter on volume”, Romano said.

Regarding coronavirus-related stimulus measures put in place by governments, Romano and Turgeon said that this has created “a very strong demand worldwide”.

However, in Europe, Tronox is also seeing demand-pull, on top of the stimulus, they added.

Turgeon noted that the change in people’s lifestyles in the wake of the pandemic created demand for TiO2.

“We call it a different economy, people are not travelling, and they are not entertaining the way they used to, because of COVID-19, but that has created demand for basic products like ours,” he said.

As for pricing, the executives declined to disclose details about regional pricing initiatives, but just reiterated they expected additional price improvements for both TiO2 and zircon in Q2.

However, Romano noted that Tronox’s TiO2 pricing has been relatively stable over the past three years – quite unlike prices for some petrochemicals which saw steep declines, followed by sharp increases as economies recover from the pandemic.

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Thumbnail photo: Tronox co-CEO Jean-François Turgeon