Chemours Co Q3 FY2024 earnings call

Management Statement and Operational Highlights

• Third Quarter Performance: Strong operational execution across businesses, with year-over-year volume increases. TSS hit a sales record with Opteon growth. TT achieved savings via the transformation plan. APM had weaker results but volume growth in Performance Solutions.
• Refreshed Strategy (Pathway to Thrive): Four pillars:
  • Operational Excellence: Aim for over $250M in incremental run-rate cost savings by 2027, with $100M from TT Transformation Plan and $150M across other businesses/corporate.
  • Enabling Growth: Strategically invest in high-growth areas like data centers, next-gen refrigerants, and semiconductor fabrication. Paused APM Nafion expansion and adjusted TSS foam expansion.
  • Portfolio Management: Optimize assets and shift focus to higher-growth, higher-margin applications.
  • Strengthening the Long Term: Resolve legacy PFAS liabilities, engage with regulators, and advocate for trusted chemistry.
• Balance Sheet and Liquidity: Gross debt $4.1B, liquidity $1.2B. Cash from operations $139M, CapEx $76M, dividends $38M paid.

Segment Performance

• TSS: Net sales reached approximately $460 million in Q3, a 6% year-over-year increase. Driven by an 8% volume rise, offset by a 2% pricing decline. Currency impacts were flat. Adjusted EBITDA fell 13% year-over-year to $141 million, with a margin of 31%. Opteon Refrigerants saw robust 21% y-o-y growth, accounting for nearly 60% of TSS sales.
• TT: Net sales were $679 million, a 2% y-o-y decline. Volumes increased 1%, while pricing decreased 2%. Adjusted EBITDA rose 23% y-o-y to $85 million, with a margin improving to 13%. The TT Transformation Plan achieved $130 million in savings in 2024, with $10-15M expected in Q4 and additional savings in 2025.
• APM: Net sales were $348 million, a 1% y-o-y increase. Volume grew 9%, but pricing declined 7% due to product mix. Adjusted EBITDA decreased 43% y-o-y to $39 million, with a margin of 11%. Performance Solutions had a 9% y-o-y net sales increase.
• Other: Net sales were $14 million, with adjusted EBITDA of $3 million.

Guidance

• Fourth Quarter: TSS net sales to decline sequentially in low teens, Opteon to have double-digit y-o-y growth but adjusted EBITDA down in low 20% range. TT net sales to decline mid to high single-digit, adjusted EBITDA down mid to high teens. APM net sales to decline low single-digit, adjusted EBITDA broadly flat.
• 2025: Anticipate double-digit growth in Opteon, TT volume stabilization and demand improvement, APM recovery depending on macro environment. Consolidated net sales to decline mid to high single-digit, adjusted EBITDA down high teens to low 20% range.

Risks

• Regulatory/Market: Impact of HFC inventory levels on Freon pricing, macroeconomic weakness affecting APM, uncertainties in legacy PFAS litigation.
• Operational: Seasonal trends, potential delays in Corpus Christi expansion, challenges in achieving cost savings targets.

Q: On TSS HFC inventories and pricing in 2025 A: Shane and Denise discussed HFC pricing to remain low into 2025 due to inventory dynamics, with Opteon growth driving TSS performance.

Q: TT utilization and demand in 2025 A: Denise mentioned TT plants running well, some share gains in Europe, and readiness to capitalize on market opportunities with continued transformation plan.

Q: APM goodwill impairment and strategy A: Shane explained impairment due to hydrogen investment deferral, Denise outlined APM's Pathway to Thrive initiatives to address challenges.

Q: On cost savings, market shifts, and business portfolio changes A: Various exchanges on cost savings targets, market strategies, asset returns, and business mix considerations