Tronox Holdings Reports Q2 2026 Results: Full Earnings Call Transcript

On Thursday, Tronox Holdings (NYSE: TROX ) discussed second-quarter financial results during its earnings call. The full transcript is provided below. APIs provide real-time access to earnings call transcripts and financial data. Visit to learn more.

The full earnings call is available at Summary Tronox Holdings reported a 19% year-over-year increase in revenue to $868 million, driven by higher TiO2 and zircon volumes, despite a net loss of $171 million due to a $103 million valuation allowance on certain tax assets. The company successfully implemented price increases for TiO2 and zircon, contributing to sequential pricing improvements and expects further pricing actions to aid margin improvement in Q3 2026. Operationally, Tronox completed significant planned outages and is focusing on cost improvements, targeting the high end of a $125 to $175 million run-rate by the end of 2026.

Tronox is strategically navigating anti-dumping measures in India, the UK, and Australia, while also advancing its rare earth initiative, with a feasibility study expected by Q3 2027. The company's outlook for Q3 2026 includes a moderate decline in TiO2 volumes due to seasonal patterns, but expects pricing improvements to drive adjusted EBITDA between $95 million and $115 million. Full Transcript OPERATOR Good morning and welcome to the Tronox Holdings second quarter 2026 earnings call. All lines have been placed on mute to prevent any background noise.

After the speakers' remarks, there will be a question-and-answer session. If you would like to ask a question during that time, simply press star then the number one on your telephone keypad. I would now like to turn the call over to Jennifer Guenther, Chief Sustainability Officer, Head of Investor Relations and External Affairs. Jennifer, please go ahead.

Jennifer Guenther, Chief Sustainability Officer; Head of Investor Relations and External Affairs Thank you and welcome to our second quarter 2026 conference call and webcast. Turning to slide two, on our call today are John Romano, Chief Executive Officer, and D. John Srivisal, Senior Vice President, Chief Financial Officer. We will be using slides as we move through today's call.

com. Moving to slide three, a friendly reminder that comments made on this call and the information provided in our presentation and on our website include certain statements that are forward-looking and subject to various risks and uncertainties, including but not limited to the specific factors summarized in our SEC filings. This information represents our best judgment based on what we know today. However, actual results may vary based on these risks and uncertainties.

The company undertakes no obligation to update or revise any forward-looking statements. S. GAAP financial terms that we use in the management of our business and believe are useful to investors in evaluating the company's performance. S.

GAAP terms are provided in our earnings release and in the appendix of the accompanying presentation. Additionally, please note that all financial comparisons made during the call are on a year-over-year basis unless otherwise noted. It is now my pleasure to turn the call over to John Romano. John Romano, Chief Executive Officer John, thanks Jennifer, and good morning everyone.

We'll begin this morning on slide four. In the second quarter, we continued to build on the commercial momentum we saw in the first quarter. TiO2 volumes came in at the high end of our guidance and at the highest level since Q2 of 2022. Zircon volumes exceeded our expectations and surpassed the strong levels achieved in Q1 as supply remained constrained across the industry.

This performance reflects disciplined commercial execution, strong customer engagement, and the value of our global footprint, which continues to allow us to reliably serve customers. As supply dynamics shift across our markets, we also continue to see meaningful structural benefits from anti-dumping measures. In addition, customer shifts in certain markets, including India, where customers are increasingly prioritizing reliable supply and long-term supplier relationships, are driving strong volumes in the region, and as it relates to India, on August 3, the Indian Trade Defense Agency issued a recommendation that duties on Chinese-made TiO2 be reinstated.

The level of the duties recommended is unchanged from the original duties imposed in May of 2025. The recommendation now goes to the Ministry of Finance, which has 90 days to approve. We believe this represents another important step towards re-establishing a more level and competitive environment. Given the long lead times associated with global shipments, the impact is unlikely to be immediate, but over time we would expect these measures to impact Chinese exports into India and further support the structural changes already underway in the market.

We also remain encouraged by the progress of the anti-dumping investigations in Australia and the United Kingdom and will continue to evaluate additional appropriate actions, such as anti-absorption, in markets where duties have already been imposed to support fair competition. Additionally, broader supply dynamics continue to evolve. Capacity curtailments, logistics challenges, and trade defense measures are impacting supply and trade flows across a number of regions. On pricing, the previously announced increase took effect as planned during the second quarter, driving sequential pricing improvement of 5% for both TiO2 and zircon.

The improvement in Q2 was driven primarily by higher base pricing rather than temporary surcharge mechanisms. We also announced additional pricing actions for both products that have gone into effect in the third quarter. While we continue to use targeted surcharges where appropriate, our focus has shifted towards more sustainable pricing actions that reflect the current market conditions, higher input costs, and the value of our reliable supply. We will discuss our outlook in more detail later in the call, but the continued realization of these pricing actions remains an important driver of our expected margin improvement in the third quarter.

From a cost perspective, we continue to realize the benefits from our cost improvement program, which remains on track to deliver at the higher end of our $125 to $175 million run-rate target at the end of 2026. These efforts contributed to sales of lower-cost inventory during the quarter and helped offset a number of headwinds. As expected, our second quarter cost profile reflected the impact of the planned outages. We successfully completed both the regulatory outage in Stallingborough and our extended SR kiln outage.

These were significant planned events for the year and I want to recognize our teams for executing both safely and efficiently. Importantly, those outages are now behind us and position us for improved operating performance moving forward. While we see elevated costs stemming from the conflict in the Middle East and unfavorable foreign exchange movement, we delivered adjusted EBITDA within our expected range for the quarter. We also made strong progress on cash generation and working capital.

Free cash flow was positive in the second quarter and we reduced inventory by approximately $120 million from the first quarter level, bringing inventory to its lowest level since June of 2024. We remain focused on strengthening liquidity, improving working capital efficiency, and continuing to optimize our capital structure to enhance financial flexibility. At the same time, we're making targeted operational decisions to support demand and product availability.

This includes the restart of a furnace and advancing plans to bring production back online at our West Mine, both at Namaqua, to support inventory levels, including zircon, to meet demand as we continue to ramp up East Ops to full production. While the situation in the Middle East remains dynamic, our approach remains focused on factors we can control and influence. We are actively evaluating market conditions, customer demand, supply chain impacts, and input costs, and taking targeted commercial and operational actions where appropriate.

As conditions evolve, we'll remain disciplined and adaptable, focused on maintaining reliable supply to our customers while protecting earnings and cash flow. I'll speak to our expectations for the third quarter and the full year in more detail later in the call, but for now I'll turn the call over to John to review our financials from the second quarter in more detail. D. John Srivisal, Senior Vice President, Chief Financial Officer John, thank you.

Turning to slide five, we generated revenue of 868 million, an increase of 19% versus the second quarter of 2025, driven by higher TiO2 and zircon volumes, partly offset by lower average selling prices of zircon, including mix. Loss from operations was 21 million. S. 4%.

Capital expenditures were 45 million and free cash flow was a source of 60 million for the quarter. Now let's move to the next slide for a review of our commercial performance. As John mentioned, TiO2 volumes came in at the high end of our range and zircon came in better than expected. Pricing for both TiO2 and zircon were in line with our expectations.

Sequentially, TiO2 revenues increased 14%, driven by a 9% increase in volumes and a 5% increase in average selling prices, including mix. Volumes came in as expected, driven by stronger demand on the back of the structural shift that John mentioned earlier. Zircon revenues increased 9% sequentially, driven by a 4% increase in volumes and a 5% increase in average selling prices, including mix. Volume remains strong following a solid first quarter, reflecting continued customer realignment in a capacity-constrained environment.

Zircon pricing reflected increases that were announced in the first quarter and took effect in the second quarter as we referenced on our last earnings call, and revenue from other products decreased 7% compared to the prior year, which represented a 29% increase sequentially driven by pig iron volumes. Turning to the next slide, I will now review our operating performance for the quarter. Our adjusted EBITDA of 73 million represented a 22% decline year on year as a result of exchange rate headwinds, unfavorable pricing including mix, and higher production costs, freight, and other expenses.

This was partially offset by the increase in sales volume that we discussed on the previous slide. The year-over-year production cost increase of 10 million included the impact of the planned regulatory-driven outages as well as the continued effect of actions taken over the last year to enhance cash generation by slowing select mining operating rates. Partially offsetting these impacts were sales of lower-cost inventory and savings associated with our cost improvement program and plant closures. Sequentially, adjusted EBITDA increased 18%.

Favorable pricing including mix and higher sales volume were partially offset by higher production costs, exchange rate headwinds, and higher freight and other costs. 2 billion and net debt of 3 billion. Our weighted average interest rate in Q2 was approximately 6%, and we maintain swaps; approximately 75% of our interest rates are fixed through 2028. Importantly, our next significant debt maturity is not until 2029.

We do not have any financial covenants in our term loans or bonds. Liquidity as of June 30 was 527 million, including 194 million in cash and cash equivalents. Over the last year, we've demonstrated the numerous levers at our disposal to proactively manage our balance sheet and enhance our liquidity position. Towards that end, in the second quarter we replaced the expired short-term Emirates revolver with a new 75 million long-term financing arrangement that provides us with greater financial flexibility.

Working capital was a source of approximately 101 million in the second quarter excluding 10 million of restructuring payments. This was driven by better-than-planned inventory reductions from targeted working capital initiatives, partially offset by higher AR and lower AP. Capital expenditures of 45 million in the quarter were primarily related to maintenance and safety, and we returned 8 million to shareholders in the form of dividends during the quarter. And with that, I'll hand it back to John to review our capital allocation priorities.

Turning to slide 9, our capital allocation priorities remain unchanged. We continue investing to maintain our assets, preserve our vertical integration advantage, and advance projects that support our long-term strategy, including rare earths. As earnings and cash generation recover, we'll resume debt paydown, targeting a long-term net leverage of less than three times. With that, I'd like to turn to our outlook and walk through some of the assumptions that will drive our performance in the third quarter.

So turning to slide 10, following a strong first half of the year, we expect TiO2 volumes to be down moderately in the third quarter, in the mid-single-digit percentage range, consistent with normal seasonal patterns. We expect zircon volumes to moderate slightly following a very strong first half, primarily due to inventory availability. On pricing for both TiO2 and zircon, the announced increases during the second quarter have taken effect and are positively impacting our margins in the third quarter.

As a result, we expect TiO2 pricing to increase sequentially in the mid-single-digit percentage range and zircon pricing to increase in the mid- to high-single-digit percentage range. It's worth noting that we are transitioning away from some of the temporary surcharge mechanisms and focusing more on base price improvements. We continue to utilize targeted surcharges where appropriate, now largely limited to sulfur-related costs in Brazil and, from an operational perspective, the planned extended outage activity that impacted the second quarter is now behind us.

In the third quarter, we anticipate improved performance driven by higher operating rates and the continued sale of lower-cost inventory. These benefits are expected to be partially offset by elevated sulfuric acid, diesel, utilities, and other inputs such as tungsten, resulting from the ongoing volatility in the Middle East. We remain focused on recovering these higher costs through pricing and other commercial initiatives over time. As a result, we expect third quarter adjusted EBITDA to be in the range of $95 million to $115 million and expect margins to improve sequentially in the third quarter.

We expect free cash flow to be relatively neutral in the third quarter as it includes the semiannual interest payments. We made significant progress on pricing, inventory reduction, and liquidity during the first half, ensuring a position of strength as we move into the second half. Based on our outlook today, we continue to expect meaningful positive free cash flow for the full year 2026.

Incorporated into our guide are the following assumptions on cash for the year: net cash interest of approximately $190 million, net cash taxes of less than $10 million, capital expenditures of less than $260 million, and we expect working capital to be a source of cash well in excess of $100 million. Turning to slide 11, as we discussed throughout the call, the operating environment continues to evolve, particularly as the ongoing conflict in the Middle East impacts supply chains, trade flows, and input costs. Against that backdrop, we've taken deliberate actions within our control to strengthen the business and position ourselves for the opportunities ahead.

Commercially, we continue to execute on pricing, maintaining disciplined customer engagement, and leverage the strength of our global footprint and reliable supply position. Trade defense remains an important component of that strategy. We continue to see the benefits of measures already in place and remain focused on supporting a fair and competitive market environment. We also continue to closely monitor global trade flows and support additional actions where appropriate.

Operationally, our focus remains on strengthening the advantage of a vertically integrated business model, improving our cost profile, and enhancing operational efficiencies. We continue to evaluate production plans across our asset base to ensure we're balancing customer demand, inventory levels, cash generation, and operating efficiency. As a result, we're beginning to see an improvement in a number of factors that weighed on earnings during the first half. Operating rates are improving, utilization levels are increasing, and the impact of unfavorable absorption should continue to moderate as we move through the balance of the year.

That said, not every factor is within our control. Input and logistics costs remain elevated, broader inflationary pressures persist, and economic conditions remain volatile. We cannot control the macro environment, but we can control how we run the business. The actions we've taken over the last several quarters have strengthened our cost structure, improved our financial flexibility, and enhanced the long-term earnings potential of the business.