The Chemours Company Q2 FY2025 earnings call

Management Statement and Operational Highlights

• Settlement with New Jersey: Resolved all environmental claims including PFAS, with ~$250M NPV over 25 years. Funded by $150M insurance proceeds from DuPont and Corteva and $50M released from escrow, covering obligations through 2030.
• TSS: Strong growth driven by regulatory transition for Opteon, with capacity expansion ahead of target.
• TT: Executed well in weak demand but faced operational issues; actions taken to rectify, though Q3 impact expected.
• APM: Shift to higher value applications, but impacted by Washington Works outage.
• Operational Excellence: Focus on manufacturing COE, with phases including realigning resources, solidifying capabilities, and building advanced operational capabilities.

Segment Performance

• TSS: Delivered impressive quarter with Opteon Refrigerants net sales up 65% YOY, contributing to a 35% adjusted EBITDA margin. Opteon now makes up 75% of total refrigerants revenues. The Opteon YF capacity expansion at Corpus Christi site is ahead of target.
• TT: Sequential net sales up 10% with 9% volume increase, but had discrete operational issues like rail line interruption; some impact on Q3 results anticipated.
• APM: Despite cyclical weakness, saw 14% sequential sales increase in Performance Solutions, adjusted EBITDA margin rose to 14%. Impacted by a power outage at Washington Works affecting Q3.

Guidance

• Third Quarter: TSS net sales expected to decrease mid-single digits sequentially; TT net sales down low single digits; APM net sales down mid-teens. Consolidated net sales seen down 4-6%, adjusted EBITDA $175M-$195M.
• Full Year 2025: Expected adjusted EBITDA $775M-$825M, CapEx ~$250M, free cash flow conversion 60%-80% in second half, with net leverage ratio improving.

Risks

• Operational: Discrete operational issues in TT (rail line, operational discipline) and APM (Washington Works power outage) affecting results.
• Regulatory/Competitive: Potential competitive responses in TiO2 market, uncertainties in PFAS settlement implementation.

Question and Answer

Q: Outlook for full year and seasonal pattern A: Third quarter has operational items, fourth quarter expected to have seasonal decline but TSS strength offsets Q: TSS drivers A: Regulatory shift, aftermarket improvement, and ramp-up of Opteon YF capacity Q: Insurance proceeds for liquidity A: $150M related to past New Jersey claims, realized over 5 years to offset settlement payments Q: TiO2 strategy A: Focus on lowest cost manufacturing, gaining share in fair trade markets Q: PFAS settlement timeline A: New Jersey settled, North Carolina and West Virginia next, ongoing settlement discussions for personal injury