The Chemours Company Q3 FY2025 earnings call

Management Statement and Operational Highlights

• Highlights: Exceeded adjusted EBITDA expectations despite macroeconomic weakness. TSS showed strong Opteon growth and margin expansion. APM had solid top line and operational progress. TT faced macro challenges but continued strategic pricing. Corporate made progress on cost structure.
• TSS: Opteon sales double-digit growth, 80% of refrigerant sales, 35% adjusted EBITDA margin; resolved earlier operational disruptions.
• APM: Washington Works site back to normal, SPS Capstone shutdown completed, agreement with SRF Limited for enhanced operational footprint.
• TT: Addressed macro weakness with global pricing increase; ongoing global capacity rationalization in TiO2 market.

Segment Performance

• TSS: Reported results exceeding earnings projections with Opteon sales up 80% Y/Y, marking a third quarter record. Opteon now accounts for 80% of total refrigerant sales, with a 35% adjusted EBITDA margin. Driven by commercial excellence in stationary aftermarket sales under the U.S. AIM Act, though there were onetime costs related to liquid cooling product commercialization.
• APM: Drove solid top line performance. Washington Works site back up by mid-August after utility disruption. Completed shutdown of SPS Capstone product line and announced agreement with SRF Limited in India.
• TT: Overall results below expectations due to macroeconomic weakness. Western markets had seasonal trends and near-term destocking, partially offset by pricing strength. Non-Western markets had volume strength but sequential pricing weakness. Continued global capacity rationalization, with recent global pricing increase in Q4.

Guidance

• Fourth Quarter:
  • TSS: Net sales expected to decrease high teens to low 20s % sequentially, adjusted EBITDA $125M-$140M. Continued double-digit Opteon growth, but seasonality impacts.
  • APM: Net sales expected to decrease low single-digit % sequentially, adjusted EBITDA $30M-$40M, driven by normal operations and cost reduction.
  • TT: Net sales expected to decrease high single digits to low teens % sequentially, adjusted EBITDA $15M-$20M, with $25M cost impact from production volume decrease.
  • Consolidated: Net sales expected to decrease 10%-15% sequentially, adjusted EBITDA $130M-$160M; corporate expenses $40M-$45M; CapEx $50M; free cash flow conversion 50%-70%.
• 2026: Anticipate sales and earnings growth, supported by cost-out efforts; continued progress on portfolio optimization and real estate review.

Risks

• Macroeconomic weakness affecting economically sensitive sectors.
• Operational disruptions previously anticipated but now resolved.
• Inventory issues in TiO2 market due to Chinese exports and Western producer liquidation, impacting short-term pricing and volume.

Question and Answer

• Q: John McNulty from BMO on TSS business and shareholder value return A: Denise Dignam notes TSS has a broad portfolio, expects double-digit growth into 2026, and emphasizes portfolio optimization for shareholder value.
• Q: Pete Osterland from Truist Securities on TT operational improvements A: Denise Dignam mentions resolved onetime operational issues, contingency plans, and standardized operating systems; Shane Hostetter discusses cost absorption and future optimization.
• Q: John Roberts from Mizuho on HFO replacement market A: Shane Hostetter states double-digit Opteon growth into early 2026 driven by HFO transition in OEM and aftermarket.
• Q: Arun Viswanathan from RBC Capital Markets on TT demand and TSS growth A: Denise Dignam and Shane Hostetter address TT demand challenges, TSS growth drivers (Corpus expansion, commercial execution), and operational excellence.
• Q: Josh Spector from UBS on TSS liquid cooling investment A: Shane Hostetter explains $22M liquid cooling costs as onetime, noncash item with future value potential.
• Q: Duffy Fischer from Goldman Sachs on TiO2 market opportunity A: Denise Dignam highlights TiO2 market opportunities from capacity rationalization and share growth in fair trade markets.
• Q: Hassan Ahmed from Alembic Global Advisors on TT guidance and China capacity A: Denise Dignam and Shane Hostetter discuss TT guidance, China capacity rationalization, and short-term destocking.
• Q: Laurence Alexander from Jefferies on TT destocking and architectural coatings A: Denise Dignam and Shane Hostetter address TT destocking balance, architectural coatings as 70% of TT business, and refrigerant innovation.
• Q: Jeffrey Zekauskas from JPMorgan on TiO2 pricing and India duties A: Denise Dignam states US TiO2 pricing stability in 2025 and expects India duty resolution by end of 2025.
• Q: Vincent Andrews from Morgan Stanley on Pathway to Thrive and real estate strategy A: Denise Dignam and Shane Hostetter discuss Pathway to Thrive pillars and real estate optimization for cash flow.
• Q: Roger Spitz from Bank of America on Venator inventory impact A: Shane Hostetter comments Venator inventory impact likely short-term, affecting Q3 but not several quarters.
• Q: Aaron Rosenthal from JPM on balance sheet and refinancing A: Shane Hostetter discusses term loan extension, opportunistic refinancing of expiring debt, and strategic refinancing plans for upcoming maturities