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KRONOS WORLDWIDE, INC. REPORTS SECOND QUARTER 2024 RESULTS

Dallas, TX, Aug. 07, 2024 (GLOBE NEWSWIRE) — Kronos Worldwide, Inc. (NYSE:KRO) today reported net income of $19.5 million, or $.17 per share, in the second quarter of 2024 compared to a net loss of $8.2 million, or $.07 per share, in the second quarter of 2023. For the first six months of 2024, Kronos Worldwide reported net income of $27.6 million, or $.24 per share, compared to a net loss of $23.4 million, or $.20 per share, in the first six months of 2023. Net income increased in the 2024 periods as compared to the same periods in 2023 primarily due to higher income from operations as a result of the effects of higher sales and production volumes, lower production costs (primarily energy and raw materials), partially offset by lower average TiO2 selling prices. Our results of operations in the first six months of 2023 were significantly impacted by reduced demand for certain of our products occurring in all major markets and unabsorbed fixed production and other costs due to reduced production volumes. Demand has improved in all of our major markets in the first and second quarters of 2024 and production volumes have increased, contributing to our improved profitability. Comparability of our results was also impacted by the effects of changes in currency exchange rates.

Net sales of $500.5 million in the second quarter of 2024 were $57.3 million, or 13%, higher than in the second quarter of 2023. Net sales of $979.3 million in the first six months of 2024 were $109.8 million, or 13%, higher than in the first six months of 2023. Net sales increased in the 2024 periods compared to the same periods in 2023 due to the effects of higher sales volumes due to strengthening demand for TiO2 in all our major markets, partially offset by lower average TiO2 selling prices. TiO2 sales volumes were 29% higher in the second quarter of 2024 as compared to the second quarter of 2023 and 28% higher in the first six months of 2024 as compared to the first six months of 2023. We started 2024 with average TiO2 selling prices 13% lower than at the beginning of 2023 and our average TiO2 selling prices remained stable during the first six months of 2024. Average TiO2 selling prices were 8% lower in the second quarter of 2024 as compared to the second quarter of 2023 and 9% lower in the first six months of 2024 as compared to the first six months of 2023. We estimate that changes in currency exchange rates (primarily the euro) increased our net sales by approximately $2 million in the second quarter of 2024 as compared to the second quarter of 2023, and approximately $6 million in the first six months of 2024 as compared to the first six months of 2023. The table at the end of this press release shows how each of these items impacted net sales.

Our TiO2 segment profit (see description of non-GAAP information below) in the second quarter of 2024 was $41.1 million as compared to our TiO2 segment loss of $2.3 million in the second quarter of 2023. For the first six months of 2024, our segment profit was $64.5 million as compared to a segment loss of $17.1 million in the first six months of 2023. Segment profit increased in the 2024 periods compared to the same periods in 2023 primarily due to higher income from operations due to the net effects of higher sales and production volumes, lower production costs (primarily energy and raw material costs) and lower average TiO2 selling prices. TiO2 production volumes were 54% higher in the second quarter of 2024 compared to the second quarter of 2023 and 33% higher in the first six months of 2024 compared to the same period of 2023. Due to improved overall demand and a more favorable production cost environment, we increased our production rates to 93% of practical capacity utilization in the first six months of 2024 (87% and 99% in the first and second quarters of 2024, respectively) compared to 70% in the first six months of 2023 (76% and 64% in the first and second quarters of 2023, respectively). As a result, our unabsorbed fixed production costs in the first six months of 2024 were $12 million (incurred in the first quarter) compared to $54 million in the first six months of 2023 related to curtailments in 2023 and continuing into the first quarter of 2024. Our segment profit in both the second quarter and first six months of 2024 includes a charge of approximately $2 million related to workforce reductions and approximately $10 million in non-cash charges primarily related to accelerated depreciation in connection with the closure of our sulfate process line in Canada. We estimate that changes in currency exchange rates decreased our segment profit by approximately $3 million in both the second quarters of 2024 and 2023 comparisons, and the first six months of 2024 and 2023 comparisons.

Our net income (loss) before interest expense, income taxes and depreciation and amortization expense (EBITDA) (see description of non-GAAP information below) in the second quarter of 2024 was $56.2 million compared to EBITDA of $3.6 million in the second quarter of 2023. For the first six months of 2024, our EBITDA was $87.9 million compared to EBITDA of $1.4 million in the first six months of 2023.

Our income from operations in the first six months of 2024 includes an aggregate charge related to a write-off of deferred financing costs of $1.5 million ($1.1 million, or $.01 per share, net of income tax benefit).

Our loss from operations in the first six months of 2023 includes an insurance settlement gain related to a 2020 business interruption insurance claim of $2.2 million ($1.7 million, or $.01 per share, net of income tax expense), and a $1.3 million settlement loss in the second quarter of 2023 related to the termination and buy-out of our UK pension plan ($.9 million, or $0.1 per share, net of income tax expense).

As previously reported, effective July 16, 2024, we acquired the 50% joint venture interest in Louisiana Pigment Company, L.P. (“LPC”) previously held by Venator Investments, Ltd. Prior to the acquisition, we held a 50% joint venture interest in LPC. Following the acquisition, LPC is an indirect, wholly-owned subsidiary of ours. We acquired the 50% joint venture interest that we did not already own for an upfront cash payment of $185 million (subject to working capital adjustments) and a potential earn-out payment of up to $15 million based on Kronos’ aggregate consolidated EBITDA during a two-year period comprising calendar years 2025 and 2026. The acquisition was financed through a borrowing of $132 million under our global revolving credit facility (the “Global Revolver”) with the remainder paid with cash on hand.

We constructed LPC in 1992 using our technology and LPC is the newest TiO2 plant operating in the Western world. Regaining full control of LPC represents a substantial investment in the growth of our TiO2 business and strengthens our competitive footprint by increasing our capacity in the strategically important North American marketplace and enabling us to expand our product offerings to better serve our customers. In addition, we expect this acquisition will result in significant synergies including logistical cost optimization between our North American facilities and other commercial and overhead efficiencies. The LPC acquisition provides us the opportunity to implement process innovations using proven technology utilized at our other manufacturing facilities to increase LPC’s current estimated annual production capacity of 156,000 metric tons and improve efficiency and product quality. Beginning in the third quarter of 2024, we lowered our quarterly dividend to $.05 per share. The reduction of the dividend will give us added flexibility to absorb increased debt service costs, manage working capital needs, reduce leverage and support strategic capital investment opportunities.

Simultaneous with the acquisition of LPC and to support our general liquidity needs, we completed an amendment to the Global Revolver. Among other things, the amendment increases the maximum borrowing amount from $225 million to $300 million, extends the maturity date to 2029 and expands the Global Revolver to include LPC and LPC’s receivables and certain of its inventories in the borrowing base. On July 30, 2024, our wholly-owned subsidiary, KII, issued an additional €75 million principal amount of 9.50% Senior Secured Notes due 2029 (the “Additional New Notes”). The Additional New Notes were issued at a premium of 107.50% of their principal amount, plus accrued interest from February 12, 2024, resulting in net proceeds of approximately $90 million, after fees and estimated expenses. The proceeds from the Additional New Notes were used to pay down borrowings under the Global Revolver.

The statements in this release relating to matters that are not historical facts are forward-looking statements that represent management’s beliefs and assumptions based on currently available information. Although we believe that the expectations reflected in such forward-looking statements are reasonable, we cannot give any assurances that these expectations will prove to be correct. Such statements by their nature involve substantial risks and uncertainties that could significantly impact expected results, and actual future results could differ materially from those described in such forward-looking statements. While it is not possible to identify all factors, we continue to face many risks and uncertainties. The factors that could cause actual future results to differ materially include, but are not limited to, the following:

Should one or more of these risks materialize (or the consequences of such a development worsen), or should the underlying assumptions prove incorrect, actual results could differ materially from those forecasted or expected. The Company disclaims any intention or obligation to update or revise any forward-looking statement whether as a result of changes in information, future events or otherwise.

In an effort to provide investors with additional information regarding the Company’s results of operations as determined by accounting principles generally accepted in the United States of America (GAAP), the Company has disclosed certain non-GAAP information which the Company believes provides useful information to investors:

Kronos Worldwide, Inc. is a major international producer of titanium dioxide products.

Investor Relations Contact:        
Bryan A. Hanley
Senior Vice President & Treasurer

Tel: (972) 233-1700

KRONOS WORLDWIDE, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
 (In millions, except per share and metric ton data)

                         
    Three months ended   Six months ended
    June 30,    June 30, 
    2023   2024   2023   2024
    (unaudited)
Net sales      $  443.2      $  500.5      $  869.5      $  979.3
Cost of sales      399.1      400.3      794.6      807.6
                         
Gross margin      44.1      100.2      74.9      171.7
                         
Selling, general and administrative expense      50.1      57.9      103.3      112.1
Other operating income (expense):                            
Currency transactions, net      3.1      (3.8)      8.5      2.0
Other income, net     .2      1.1      2.1      1.0
Corporate expense      (4.0)      (3.7)      (7.2)      (7.2)
                         
Income (loss) from operations      (6.7)      35.9      (25.0)      55.4
                         
Other income (expense):                            
Trade interest income      .4      1.5      .7      1.9
Other interest and dividend income      1.1      .6      2.8      1.5
Marketable equity securities     (.6)      .1      (1.3)      .4
Other components of net periodic pension
   and OPEB cost
     (2.2)      (.3)      (3.1)      (.6)
Interest expense      (4.3)      (9.8)      (8.5)      (19.0)
                         
Income (loss) before income taxes      (12.3)      28.0      (34.4)      39.6
                         
Income tax expense (benefit)     (4.1)      8.5      (11.0)      12.0
                         
Net income (loss)   $  (8.2)   $  19.5   $  (23.4)   $  27.6
                         
Net income (loss) per basic and diluted share   $  (.07)   $  .17   $  (.20)   $  .24
                         
Weighted average shares used in the
   calculation of net income (loss) per share
     115.1      115.0      115.2      115.0
                         
TiO2 data – metric tons in thousands:                            
Sales volumes      104      134      206      264
Production volumes      89      137      194      258

KRONOS WORLDWIDE, INC.
RECONCILIATION OF INCOME (LOSS) FROM
OPERATIONS TO SEGMENT PROFIT (LOSS)
(In millions)

                               
    Three months ended     Six months ended
    June 30,      June 30, 
    2023     2024     2023     2024
    (unaudited)
Income (loss) from operations   $  (6.7)     $  35.9     $  (25.0)     $  55.4
                               
Adjustments:                                  
Trade interest income      .4        1.5        .7        1.9
Corporate expense      4.0        3.7        7.2        7.2
                               
Segment profit (loss)   $  (2.3)     $  41.1     $  (17.1)     $  64.5

 

RECONCILIATION OF NET INCOME (LOSS) TO EBITDA
(In millions)

                           
    Three months ended     Six months ended
    June 30,      June 30, 
    2023   2024     2023   2024
    (unaudited)
Net income (loss)   $  (8.2)   $  19.5     $  (23.4)   $  27.6
                           
Adjustments:                              
Depreciation expense      11.6      18.4        24.5      29.3
Interest expense      4.3      9.8        8.5      19.0
Income tax expense (benefit)      (4.1)      8.5        (11.0)      12.0
                           
EBITDA   $  3.6   $  56.2     $  (1.4)   $  87.9

 

IMPACT OF PERCENTAGE CHANGE IN NET SALES

           
       Three months ended   Six months ended  
    June 30,    June 30,   
    2024 vs. 2023   2024 vs. 2023  
    (unaudited)  
Percentage change in net sales:            
TiO2 sales volumes    29 %  28 %
TiO2 product pricing    (8)    (9)  
TiO2 product mix/other    (8)    (7)  
Changes in currency exchange rates    –    1  
           
Total    13 %  13 %


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