Chemours Co Q1 FY2025 earnings call

Management Statement and Operational Highlights

• Strategic Partnership: Announced a strategic agreement with Navin Fluorine to produce Opteon 2-phase emergent cooling fluid, leveraging Navin's manufacturing expertise and Chemours' innovation for data cooling centers related to AI and next-generation chips.
• TSS Performance: Exceeded expectations with a 40% year-over-year net sales increase in Opteon refrigerants. Overcame a January full site outage at the Corpus Christi site. Worked with customers to pass through elevated input costs related to R32.
• TT Market Dynamics: Western markets with fair trade regulations drove sequential sales growth, but other markets faced Chinese TiO2 dumping. Focused on maintaining a low-cost TiO2 position and cost-out efforts despite cold weather downtime impacts.
• APM Initiatives: Continued to face cyclical market weakness but improved adjusted EBITDA margin through lower costs. Advanced portfolio management initiatives.
• Pathway to Thrive: Made progress in operational excellence, enabling growth, portfolio management, and strengthening long-term, including legacy liability resolution and advocacy efforts

Segment Performance

• TSS: In the first quarter, TSS achieved net sales of $466 million, a 3% increase from the prior year. This growth was primarily driven by a 10% volume increase in Opteon refrigerants, partially offset by a 6% price decline and a 1% currency headwind. First quarter adjusted EBITDA for TSS decreased by 6% to $141 million, with an adjusted EBITDA margin of 30% (down 3 percentage points). Sequentially, TSS' net sales increased by 19%, driven by a volume increase of 19% and a price increase of 1%, with a slight 1% currency headwind.
• TT: TT's net sales increased 1% year-over-year to $597 million in the first quarter, primarily due to a 6% increase in volume, partially offset by a 4% decrease in price and a 1% currency headwind. TT's first quarter adjusted EBITDA decreased 28% to $50 million, with the adjusted EBITDA margin declining 4 percentage points to 8%. Sequentially, TT's first quarter net sales decreased by 6%, driven by a 3% decline in volume and a 3% decrease in price.
• APM: In the first quarter of 2025, APM reported net sales of $294 million, a 3% decrease compared to the prior year, primarily due to weakness in cyclical end markets and products serving the hydrogen market. APM's first quarter adjusted EBITDA increased 7% to $32 million, with the adjusted EBITDA margin increasing by 1 percentage point. Sequentially, net sales decreased by 9%, mainly due to a 9% volume decrease and a slight 1% currency headwind, partially offset by a 1% increase in price

Guidance

• Second Quarter: TSS net sales expected to increase in the low 20% range sequentially; TT net sales expected to increase in the high-single digits sequentially; APM net sales expected to increase in the low teens sequentially. Consolidated net sales anticipated to increase in the low to mid-teens sequentially, and consolidated adjusted EBITDA expected to increase between 40% to 45% sequentially.
• Full Year 2025: Adjusted EBITDA expected to be in the range of $825 million to $950 million. TSS to see strong Opteon sales growth throughout the year; TT expected to be slightly better than 2024; APM impacted by cyclical markets but aided by cost-out efforts. Free cash flow expected to be solidly positive for the full year, with the second half of the year expected to have a cash flow conversion range of 60% to 80%. Full year capital expenditures anticipated to be in the range of $225 million to $275 million

Risks

• Supply Chain Tightness: Tightness in the supply of cylinders used to ship and transport R454B blends for stationary aftermarket sales, though expected to correct quickly.
• Tariffs: Potential impact on margins, but mitigation plans in place, such as surcharges in APM and efforts to protect U.S. TiO2 production in TT.
• Market Volatility: Fluctuations in TiO2 pricing in non-regulated markets and cyclical market weakness impacting APM

Question and Answer

Q: About the strategic venture with Navin Fluorine, how much capacity can they provide and orders in 2026?

A: Navin can provide 2 to 5 tons for field trials, and there are opportunities to add additional volume after field trials as customer commitments are secured post-field trials Q: On TiO2 EBITDA in 2025 and ore savings phasing?

A: 2025 EBITDA for TT is expected to be up versus 2024. Ore savings of $100 million to $150 million, with the savings phasing as two contracts expire in 2026 and 2027, respectively Q: Timing of dividend cut and reason?

A: The Board declared a reduced second quarter dividend of $0.0875 per share, aligning the dividend with balance sheet flexibility to drive long-term shareholder returns Q: TiO2 pricing in regulated markets?

A: Stabilization in fair trade markets with volume increases, and no sequential price decline in those markets Q: Impact of weather-related outages on TT?

A: One-time costs from cold weather downtime in Q1, with tailwinds in Q2 contributing to earnings growth, and no lingering impacts from other operational issues Q: TiO2 capacity shutdowns in Asia?

A: Anticipate hundreds of thousands of tons coming out of the market, with China pulling back on capacity due to overcapacity and other factors Q: TSS supply tightness and R32 supply?

A: Cylinder shortage not a Chemours issue, with measures like adding shifts and third-party operations to alleviate, normalizing in the next couple of months; R32 supply managed through flexible supply chain and blending in Mexico Q: Capital allocation for growth initiatives?

A: Focus on next-generation refrigerants and immersion cooling under the enabling growth pillar, aligned with Pathway to Thrive strategy Q: Cash flow conversion range in back half?

A: Influence from EBITDA dynamics and working capital unwind, with lower investments in the second half aligned with critical and essential spending Q: Back integration into ore operations?

A: Focus on innovating to process cheaper ore rather than back integrating more, with current 15% backward integration