Q1 2020 Earnings Call
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Ladies and gentlemen, this is the operator today's conference is scheduled to begin momentarily until that time your lines will again be placed on music hold thank you for your patience.
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Ladies and gentlemen, thank you for standing by and welcome to be Tronox Holdings plc first quarter earnings call. At this time, all participants are in a listen only mode.
After the speakers presentation, there will be a question and answer session.
Good question during the session you will need to press star one on your telephone. Please be advised that today's conference is being recorded I would now like to hand, the conference over to your speaker today, Jennifer Gunther. Please go ahead.
Thank you and welcome to our first quarter 2020 conference call and webcast on our call today, our Jacquin, Chairman and Chief Executive Officer, John Friends Water Young Chief operating Officer, John Romano, Chief commercial in strategy Officer, and can Carlson Chief Financial Officer.
Adjusted E.P.S. of 29 cents, a share was well above our previously anticipated range of 20, there 26 cents a share primarily driven by purchase accounting adjustments and an estimate of tax suspense, which proved to be conservative.
Last month, we pass the one year anniversary of the closing of <unk> and it has been everything we hoped I believe we would be.
During the quarter, we continued to deliver ahead of target synergies achieving total synergies a 45 million with 38 million of that <unk>, <unk> and 7 million reflected in packs and other synergies Jean Francois will cover the synergies in more detail later in the presentation.
We remain on target too.
Cheating are anticipated synergy targets for the year, despite the economic impact of the global pandemic.
Are strong operating performance and a quarter was driven not only by delivering synergies, but also by increased T.O. two volumes coupled with the continued optimization of our global vertically integrated footprint and the prudent management of our call structure.
Our financial position as strong as Tim we'll discuss later, we recently completed the offering five of our 500 million dollar 6.5 per cent senior and secured knows doing 2025, which provides us with enhanced optionality in these uncertain times we intensive.
Using the proceeds Virginia corporate purposes, including the potential repayment of existing indebtedness capital expenditures strategic investments working capital and other business opportunities.
We already used a portion of the proceeds to repeat the $200 million drawn on R.A.B.L. and credit and revolving credit facilities at the end of March.
During these uncertain times, we are deriving great benefit from our continued focus on execution operational excellence synergy capture from the crystal transaction and enhancing our vertical integration strategy.
Situation of the strategy has created and will continue to optimize and enterprise with greater stability in financial performance and cast generation, even under the current environment.
And this time of great uncertainty one thing that is for certain is that the company created by the merger Crystal.
Far more resilient, which substantially more flexibility and strengthen either one of the legacy companies would've been on their own.
Now like to turn decide for to discuss our cope with 19 response.
Our focus has been on the prioritization of three things first and foremost the safety health and wellbeing of our employees and their families secondly, preserving our ability to operate safely and run our business and finally, our role as an essential enterprise.
With our plant in China impacted early on we were well prepared as the pandemic spread across the globe and we're able to rapidly respond to the dynamic conditions.
All sites around the World are currently operating.
Implemented increased safety protocols and facility access protocols that the sites limiting non essential visitors and effectively eliminating business travel. We've also established additional cleaning P.P.E. and disinfection protocols at all locations.
Our operations had been designated as essential given the applications of T.O., two zircons and other co products in the continued manufacturing of critical products, such as food and medical packaging.
Medical equipment pharmaceuticals, and personal protective gear.
We continued to work diligently to ensure business continuity in order to meet our customers needs. Thanks to the efforts on my colleagues around the world, we've managed to limit the spread of the virus at our facilities.
I am extremely grateful for the Swift action and dedication of my nearly 7000 global colleagues. We have shown continued determination in resilience throughout the pandemic adapting to significant change virtually overnight align our operations to quickly meet the new challenges in which we.
Find ourselves on almost daily basis.
The efforts and results have been extraordinary.
I've never been more proud of our organization.
I would now like to turn the call over to John Romano, Our Chief Commercial Officer, who will report or commercial performance and the trends were seen in the global markets, including an update on the near term view for the remaining remainder of the second quarter John.
Thanks, Jeff living slight ties personal take it to the year on year comparison with Jennifer said focuses on pro forma numbers for the year ago quarter for comparison purposes.
Revenue of $722 million was in line with sales at $720 million for the year ago quarter, T.O., two pigment sales or $580 million were 2% higher.
Two sales volumes increase 6%, while selling prices were 3% lower on local currency basis, and lower by only 1% with when adjusted for currency.
Sales volume increased reflected continued strength in North America and strong demand in Europe. Prior to the onset of covert 19, partially offset by slight demand reductions in South American Asia Pacific.
The reason for the lower year on your T.O. two average selling price as we stated previously is primarily a prior year issue due to the Crystal commercial approach in 2018, and Q1 or 2019. This is the final quarter in which we will see this effect as price harmonization was achieved and Q2 shortly after we close the acquisition.
You will see in the sequential comparison, our global average selling price. Once again have remained stable as they did in each sequential comparison in 2019.
<unk> sales of $65 million were 21% lower than a year ago.
Work on sales volumes were 7% lower when compared to Q1 or 2019, driven largely by softer market conditions, primarily in China early in the quarter and southern Europe later in the quarter.
Selling prices were 16% lower due to the rollforward of the trend from the fourth quarter carrying into the early part of the first quarter before stabilizing.
Our sales of standard degrades or come products versus premium grade continue to run at a higher rate and Q1, which had a negative impact on our average selling price.
And then feed talking to other products sales of $77 million increase 13% largely due to higher titanium touch a chloride sales out again blue and the addition of the mandated C.P. slacks sales associated with the remedy for the Crystal transaction.
Moving to the sequential comparison versus the fourth quarter of 2019.
Revenue of 722 million was up 4% from the prior quarter on higher T.O., two sales, partially offset by lowers work on volumes.
In in packs from revenue exchange rates, primarily the euro tier two pigments sales 580 million, where 7% compared to 544 million.
Sales volumes were 7% higher and selling prices were level on a local currency basis any U.S. dollar basis, moving dessert gun sales of $65 million decreased 8% from the <unk> previous quarter sales volumes were level with volumes from the previous quarter, while selling prices declined 8%, which was influenced by now.
Increase in standard grade versus premium grades are <unk>.
And finally feedstock another product sales of $77 million were relatively in line with acute with Q. for 2019.
Well this completes the review of the previous quarters is the results for commercial perspective.
We know that the focus is going to be on what we're currently seeing and anticipate for the second quarter.
We released two updates to the market since the onset of the global pandemic in an effort to continue to communicate early and transparently, what we're seeing as conditions changed based on information available to us at the time and I read through on our in markets.
We continue to monitor.
Changing market conditions, which indeed evolved every day as we stayed in previously and as you've seen in our results we benefit from our balanced geographic sales are vertical integration and are favorable in market exposure.
<unk> three fourths of R.T.O. two sales volumes are sold into paints encoding and the majority of those sales are in architectural markets.
Brazilian from the D.I.Y. market, coupled with our minimal automotive and aerospace exposure has benefit us to this point.
We've also benefited from the 20% or so of our volumes that are typically sold into plastic applications and those in markets have been strong driven by food medical another packaging applications.
Our sales are essentially balanced across the major regions of the world, which has meant we've seen changing geographic demand profile since the onset of covert 19.
China was the first region to see a slowdown in February whereas since March we've seen improving demand in that region.
North America has proven to be the most resilient.
Region has not been immune to the impacts of the pandemic, but has seen the least impact relative to our expectations.
Yup has remained mixed with southern Europe seeing the most severe impacts while other regions less so.
Brazil in India are currently facing challenging conditions and are the two areas, where we recently have seen the most demand reduction relative to our expectations.
From the onset of the global pandemic, we developed economic scenarios to evaluate the potential impact on demand, which included a mild case, a medium case and a more extreme case on a daily basis, we're evaluating and adjusting our perspectives as to what is the most likely case by region, which then rose into a global forecast and are integrated business.
Planning model that also takes into content consideration potential operational and supply chain constraints.
The mild impact case assumed approximate 10% decline in T.O. two volume sequentially, while the worst case scenario assumed as much as 30 per cent sequential decline.
Based upon you evolving status of social restrictions the uncertain plans for reopening economies around the world and our most recent conversations with and public statements from our customers are current expectation is per second quarter T.O. two volumes to decline in the high teens to low twenties per cent range versus cute the first quarter of 2000.
<unk>.
This reflects a change from our previous outlook and is largely due to recent reductions in demand outlook by our customers do the slower than anticipated reopening of certain geography, such as Italy, Spain, and France and extended shut downs in countries, such as India in Brazil, and the recent reduction of feed her vessel availability up out of Australia into the age.
Pacific region.
We do not anticipate any significant movement in our global T.O., two selling price in the quarter, given our commercial approach and our margins stability initiatives.
Zurich on volumes are expected to remain largely largely in line with the first quarter volumes as we continue to see improving demanded China offset by lower demand in southern Europe in India selling prices are anticipated to remain relatively stable from the first quarter.
These estimates remain subject to change due due to a number of factors, but represent our best views at this time, while the macro economic conditions remain uncertain, we firmly believe that with our global network of assets and our vertically integrated business model, we will remain well positioned to respond to the changing market conditions as they develop and with that.
I think you and I'll now turn the call over to J.F. for review of our operating performance and profitability in the quarter J.F.
Thanks, John and good morning, everyone.
Moving to slide six let's first reviewed the year on year adjust it bit duck comparison.
I, just <unk> 174 million dollar was 23% higher than pro forma adjust it did of the year ago quarter.
Has John discussed increase T.I.U. to demand largely upset by lower zero and volume and selling price were the primary commercial driver.
We benefit this quarter versus the year ago quarter from save or both foreign exchange rate, primarily the South African Iran, and the Australian dollar.
The appearance of the differ margin built which occur in Q1 2019.
And 38 million dollar a synergy all of which.
Partly upset by I or production costs, and lower or grade in our Australian mines, which has a result in increased manufacturing costs per ton.
I will forward are discussed or strong synergy achievements on the next slide in a moment.
Looking at the sequential comparison adjust it 174 million dollar increase 12% from 156 million dollar.
<unk>, primarily by increase T.I.O., two sales volume and incremental synergy US 9 million dollar achieve in Q1 versus queue for 2019.
See horrible, forcing exchange rate again, primarily the South African Iran, and the Australian dollar given their significant no end a quarter also contribute to the game.
Factor were slightly upset by lowered work on pricing as expected.
[noise] turning to slide seven.
As I mentioned on the previous slide we achieve 38 million dollar I'll synergies reflected in it but.
We also achieved 7 million dollar from tax and order synergy not reflected in a bit for a thought though 45 million dollar in synergy achieve in the first quarter.
The increase target for 2020 set during our fourth quarter earnings call was hundred and 90 million dollar in total synergy and we remain on track to achieve this target.
My team has done a good job finding additional value creating opportunities in the new tronox and delivering on the targeted synergies each quarter.
As with mentioned before.
A majority of the target that synergy are coming from true cost saving.
Including opportunities to reduce spending across our supply chain.
The sharing of best practice across or Hari your site and what we call that you and you.
Or the opportunity to use our feet stuck across online Sigmund plan to generate real cost saving.
Arsenault G. are not significantly tied to the anticipated volume.
We therefore remain confident in our ability to achieve the previously communicate to target.
By the stuff to the men condition due to the pandemic.
However, as I said before.
Synergy are only one part of our operational excellence program.
We have identify all other costs reduction opportunity off up 200 million dollar, which can be implemented based on how the situation <unk>.
Additionally, or glow the team continue to deliver on our target of producing safe quality low cost on for our customer.
We remain committed to improving our safety performance on our journey to zero initiative.
Which is our goal of achieving an injury free workplace.
The highest priority of our operation.
In fact recently then you try nucs achieve the best safety performance record in D.S. story history of both legacy company.
Has just mention.
Operation are running due to the effort or employee and their commitment to our organization customer and community.
Even in South Africa, or smelter continue to run through out the 21, they locked down.
Are vertical integration gave us the flexibility to reorganize the use of feed stuck in our global portfolio to delivered the best value in you, which demonstrate the strength for business model.
I want to take a moment to state how extremely proud I am a four employees and their ability to steam Leslie at that operation to the demand for customer and managed to the ongoing covet 19 pandemic.
As an example, we made the decision to slow down the young Blue Plaid in April two adjust production to be in line with our customer demand.
But the increase costs due to on that thought fixed costs will be partly offset by reduce maintenance costs and lower energy usage.
This is only one example of the benefit of asset base.
Thank you to my team and everyone at Toronto for your continue commitment.
Before concluding.
I'd like to provide the latest update on the <unk> smelter.
Which remain a key steps inferred arraigned or vertical integrated strategy.
Oh, just then continue to advance don't work it's next milestone.
<unk> as increase the amount of technical and managerial resource that it will devoted to the project true an amendment to the existing technical service agreement.
On third the amend agreement, we will provide comprehensive consulting and advisory service to act as the project manager true. The next four face of the Japan smelter project.
Face being construction and mechanical completion of D. agreed modification to the furnace.
Cold commissioning.
Commissioning and renting up to sustainable operation.
Based on our latest expectation, which accommodate the delay due to covet 19, we anticipate the start up of just than to take place in the first quarter of 2021.
We will complete our funding <unk> of 36 million dollar, which will occur in three trench of 12 million dollar over the next three quarter.
As a reminder, deep earliest date Tronox would acquired yes that would be when the <unk> achieve sustainable operation as the fine in our option agreement, which we anticipate would be no sooner than mid 2021.
But more likely in early 2022.
I look forward to reporting on our synergy and operational excellence progress on the next quarter call.
I will now turn to call over to Tim coffin for a review of our financial position Tim.
Thanks J.F.
Gliding, we've outlined your liquidity <unk> working as of March 31st 20, <unk> on or pro forma basis include the 500 million net roasting just from the senior your note upbringing that we close.
As well as the repayment of it's 200 million draw on her H.P.L. in your credit facility at the end of March in <unk>.
We have over a billion in total available.
720 million of cats asked equivalent.
We have no traps cash in our cast is appropriately distributed across our global operation.
Our cash liquidity balances remain relatively unchanged as of today remains very comfortable with our current liquidity, which provides enhanced optionality for our business.
Turning to the next slide.
On slide nine we highlight strength of our balance.
A recent senior secured note offerings, which meet successfully upside the 500 million provides additional flexibility.
Interest rate only slightly above are weighted average cost debt.
While eating ample additional your debt capacity.
Including the offering and the repayment of the amounts drawn on R.A.B.L. in credit facilities are current total debt is 3.5 billion in our net debt is 2.8.
Our current trailing 12 month, let leverage 3.9 times on a pro forma basis.
We have no near term maturity on our term loan or bonds and they'll 2024.
You May also have no financial covenant on her term loan bonds.
I only have one springing financial covenant on R.A.B.L. facility, which we do not expect to trigger under any scenario <unk>.
Especially since there are no current funds drawn again facility.
Our capital allocation policy remains unchanged.
We continue to prioritize when capital spending on high return project leveraging.
Targeted net leverage 83 times growth that level of 2.5 billion.
We've announced a seven cents quarterly dividend first share remain fit into the remaining our dividend.
Capital expenditures in the first quarter, we're 38 million in our appreciation depletion in amortization expense.
<unk> 1 million.
Are free cash flow for the quarter was a cash to use of $66 million.
And by a very strong month of revenue in March in a reduction in table.
Given the timing and mixing or capital expenditure payments payment.
We're monitoring our accounts receivable balances weekly currently do not see any impact on our aging that causes is concerned.
We've identified only $16 million receivables, where payments are delayed because of bank closures in India, Malaysia, Vietnam in Tunisia.
We anticipate making up 66 million three Castillo burn Q1.
During few too despite Lord sales volume.
Continued management have accounts receivable accounts payable an inventory.
Turning to the next slide I'll discuss our outlook.
As John mentioned, we anticipate second quarter T.O. two volumes to decline in the high seems a little 2020 per cent range versus first quarter 2020.
Zurich on volume Darns dissipated to remain largely in line with 120 20.
As J.F. mentioned, we remain committed to our previously issued synergy targets, including 190 million targeted this year and subtle synergies.
In 140 million of that be reflected and even though.
Before moving to anticipated tasks uses for the year.
I wanted to provide an update on our foreign exchange exposures, given the significant movement and rates we've seen this year.
And the third quarter of last year took out positions to hedge approximately 50 per cent of our 2020 cash flows in South Africa in Australia.
Hedged at 16.1.
Six eight respectively.
Given the positions taken over the next three quarters will only see 50 per cent of the benefit of the effects sensitivities previously communicated <unk>.
In other words, one movement in the Czar will result in approximately 4 million quarterly impact.
In a 0.01 movement in the Australian dollars results in approximately a $1 million quarterly impact and even though.
Moving on well global macro economic conditions remain uncertain.
Remain confident in our ability to manage our cash flow.
For the full years 2020.
Facts are uses the cassidy that interest expense.
Of 165 to 170 million.
Cash taxes of 20 to 30 million.
Working capital of 40 to 50 million reduced from 75 do $100 million.
And capital expenditures of 225 million reduced from $275 million.
Lastly, pension expense and the $15 million to $20 million.
These represent our estimates based upon our current market outlook.
We have ample levers to maintain flexibility and manage cast generation.
Including the cost reduction measures D.F. mentions.
And the additional management of our working capital in capital expenditures should we see the neat.
We remain confident in our ability to generate free cash flows across all economic scenarios, we are evaluating.
With that I'd like to turn the call back to adapt.
Add additional colored or outlets provided to closing remarks for for return the fall over to <unk>.
Yeah.
Thanks.
The numbers that Tim just walk you through represent our current outlook.
Corporation global macro economic uncertainty.
With our current understanding of our end market demand and Kostroma outlook.
We continue to diligently monitored the situation, though it is a bit like trying to track or hurricanes and precisely predicting were make landfall we have a range of economics and you know as we continue to evaluate.
Much slots and potential pass for her routine, but the ultimate Papademos storm is determined by a number of factors, including how long it Hubbard.
<unk>.
In this case, while we're using a bottom up analysis deep dive hunk Scranton are in marketing and conversations with our customers to inform our latest <unk>. The outcome will all committed opinion on a variety of package, including how long the locked down remains in place an impact.
From the supply chain to name only a couple of examples which continued to change every day.
That being said into reader reiterate what we've stated before we believe we are differentiated in our market to our global network of assets.
Vertically Intergraded business model.
Positions us to respond quickly and as needed to changing market conditions as they developed.
We remain committed to what we said at the beginning of the year.
We believe we will deliver industry, leading financial performance.
We are prudently managed to present situation.
But we are not turning a blind eye to the future.
We continue to focus on our vertical integration strategy.
In a multitude of ways to better serve our customer base.
<unk> committed who safety and sustainable development.
While the current environment presents and <unk> unprecedented showers.
I have to talk when it's in my colleagues around the world.
No that we will persevere.
Not only surviving depressing.
<unk> <unk> in the future.
That concludes our prepared remarks, and with that a little turned to open up or Q. and a and I do apologize I believe that we have some echoing feedback on the line.
So hopefully you can bear with us and Paul does for the destruction.
Operator can you open after questions. Please.
As a reminder to ask a question you really need to express our one on your telephone.
To withdraw your question press the pound key.
Please stand by we compiled became a day roster.
Yeah first question comes from the line of John Mcnulty B.M.O. capital market.
Thanks for taking my question.
The first one would be on the hundred million dollars of I guess, we're session related costs saves that J.F. had spoken to.
Are you targeting all of those at this point or those options for if things get worse and if it's the ladder.
How much should we be thinking you're actually targeting right now.
Those those are potential cost savings that we would no S.T.C. to pawn as we read the economic situation and that to develop.
There there are a number of things. In addition, you know two things were already currently doing.
So I I would I would do goes as additional above me being on cost reduction Adam that we've already take.
Got it and then this is the second question would be with all the supply disruptions that we saw in the first quarter around Cove it in China.
There seem to have been a little bit of a scramble from some customers in the industry.
Is that changing it.
Appetite for partnering with someone like Tronox with significant.
Number of assets geographically and I guess, how should we think about how that may have picked up throughout the quarter in terms of desire for longer term contracts.
I think certainly we believe that our global assets eight instead differentiator.
Rose both in the in in in times of lesser demand or global supply disruptions or even kinds of stronger man. The bills. We deliver from multiple sources. John Romano you wouldn't have made the comment on that as well though.
Yeah no. Thanks.
I I would agree with the comments that you just made and you know depends on the reason that we're supplying but the ones that typically have had significant imports from China I would say that we are getting some feedback in that area. It's a bit early to have locked down he would contracts, but there's no questions that when something like this happens it.
Does have a little bit of an impact with regards to reliance on that channel for raw materials.
Great. Thanks, a lot lot.
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We're having auto operating because you go to the next question. Please we're having trouble hearing Mr. Midgets.
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Operator, we're not getting any any feedback maybe is it is the alternative wind that we can go to.
Yes, one moment.
Ladies and gentlemen, if you have previously <unk>.
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Once again, if you have previously pressed on one <unk> one again on your telephone keypad now.
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<unk> providers as having a major issues on their end so we do apologize.
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If those of you <unk>, we're in the huge and ask the question could please send your question to myself Jennifer cancer. Please do so and I will welfare the questions while they work for that.
[noise], Jeff I have another question.
Go ahead operator.
We have a question from the line of find three niche <unk>.
Caroline.
Good morning can you hear me now yeah. Thank thank you.
All right all right I was going to say you guys Sandwell and I'm I'm glad you do.
I thought it was really interesting looking at the euro per year price progression for the T.I.O. two.
Industry among the four major western players.
Three are showing steady improvement in the year over year price over the past several horrors, but one has a then blowing out in the other direction. So.
I was wondering if you could comment the competitive landscape in terms of in terms of price on T.I.M., two and are you and and what can you <unk>. What can you tell us with respect to what you're seeing in April and May on that front runner.
<unk>.
<unk>. So you know as as we communicated on the last call. We were working through a price initiatives as we were the first quarter actually.
Recovering as we anticipated it.
And as cope with 19 started so I guess impact the second quarter more significantly those.
The progress we were having on raising the price things slowed a bit bit, but when I mentioned that we didn't expect any significant moved in pricing too too. It was largely due to the fact that we have seen some improvement it's not to the extent that we would have to forecast previously due to some of the <unk> 19 goings.
We're also seeing you know a bit of commit competitive activity in China, where we are seeing a little bit of price reduction there. So on average globally prices have been stable for us they've been stable for basically the the last five quarters. So you know and we're projecting stability.
Moving through the balance of cute too.
So I don't know if that answers your question completely there we can't speak too much to what our competitors are doing.
We believe we're maintaining our share globally, there's a variety of initiatives that we have in place now to make sure we're showing up volume in a very difficult situation. That's Cobra 19 related but we're doing that in line with our customer approach and our margins stability initiatives.
Very helpful, John and a and perhaps if you can offer a commoner too with respect to what I. You know obviously you guys are are are more vertical he integrated but what are you seeing in terms of feedstock or pricing as we progress here in a in a in the second quarter and and what the outlook is for the balance of the year on a feat.
Doc or side of things.
Yeah, you know maybe J.F. do you want to respond to that one.
Look as you know we started Q1 with a very tight highgrade feedstock Marquette being vertically integrated obviously gave us the advantage of having flexibility to feed our planet with the different option that we.
Have as I mentioned in my comment even during the 21, they locked down in South Africa, we were able to operate our smelter and it had no significant impact on US look obviously with the supply demand situation going forward.
Word AD I expect that the the feet stuck Marquette will remain.
Balance, but that's that test as far as we see at the moment, what I can see if we are in a good <unk> itself to meet all our need this.
Very helpful. Thanks, so much much.
Yep.
Oh, we we are not a participant.
Commercial seen spot market, we don't sell stock into the market, we buy a bit but we run our food stocks assets and server big money, which has for body.
We think a source of flexibility and advantage in situations like <unk>.
Got it on it.
Thanks. Thanks.
Operated another question.
Jeff I don't hear the operator, so let me know some questions that I haven't <unk> now Rodgers said Fine Bank of America has a question like D.C.Q.T. 2020, working capital inflow, our outer shell and also.
All up one is driving a working capital out of $40 million to $50 million in this environment.
[noise], Tim would you like to take that please.
Yeah I'd be happy to are are significant working capital burning Q1, as I mentioned was primarily a result of the a very strong revenue Mark a month in March we've seen significant collections in the month of April us, we actually see some positive impact from working capital in Q. too.
Bite the the lower volumes, we also continue to Matt manage our our payables a an inventory levels are appropriately.
We do see somewhat of a burn up for the the remainder of the year, probably more of a conservative assumption and we can further <unk> or for their manage that down should the out in the market continue to deteriorate.
<unk>.
Thanks <unk>.
From him why I'm that you Don Logger 2012 dollar told me dollar quarter per quarter payment that's above the outflow shown on the outlook on life. Okay.
10, do you want to address that as well.
Yeah, the $36 million or the 12 million a quarter for the next three quarters is in addition to.
We have summarized in slide 10, correct.
And how much that do you know that's all you assume <unk> when you acquire design.
The amount of debt I'm as it relates to design is unchanged 300, and and and a total of 325 340 million, but that's only assuming that we assume ownership and as G.F. mentioned that would be mid mid to late 2021.
And in terms of the even I, we expect from the furnace does that remain in line with what we communicated an investor name, what you're looking around $50 million to $80 million program.
Correct.
I just back there from the and you're even average comments you talk about a negative impact as well or or green at your Australian operation and you just expand on that in terms of what's going on there and it's not an ongoing had one that we should consider.
<unk>.
Or caffeine number.
Thank you.
Can you hear me now.
Yeah. So yeah on mine in South Africa, especially the legacy Crystal mine.
We are toward the end of the life of some of those assets and has expected. The grade is going slightly down but we have plant. Then it's it is built in the r. and working capital to expand or replace those mine with.
Other assets that are obviously better so you'll see a couple of here where we'll maintain.
What we have deliver now and then you'll see a benefit from a a new area of the mind, where we'll be so like any mind you have period, where the grade is is higher and period where to go rate is lower so with what's going to run for the next two to three year.
Similar to what we have had in Q1.
Thank you Joe Yeah, <unk>, how quickly has American demanded dementia back toward the more premium product grade kind you want to take that.
Yes so.
The the shift from let's say lower grades premier standard grades to premium grades has been driven by a variety of factors and I would say you know we have the capability to adjust our production to meet that demand you know in prior cycles depends on how quickly recovers, but I would say anywhere from two to.
Three quarters and a lot of that will depend on the inventory and the supply demand situation you know as we noted in our remarks.
The volume in Q1 was basically flat with cute to a significant amount of our sales do go into China wouldn't and that's the majority of where the markets are at least for as far as consumption observe con at the beginning of the quarter, we were that softer in China and at the back end it strengthened.
So over the last three quarters, our sales have been relatively stable into the region and previously we were expecting demand to start to recover in the second half of the year.
Be determine now largely on one cope with 19 and how that impacts the second half and we're not at this particular sage prepared to really comment on second half.
Okay and another one from gosh in terms of them free Tassler brand you what are you expecting and 2020 in terms of restructuring cash and.
Yeah.
If very minimal no different than we've talked about in the last quarter. There are few actions that will be taken but a low single digit millions.
Okay Fine line from him in terms of synergy target. Other companies are reporting have been 20 challenges in achieving a patient plants energy given travel restrictions and other limitations in the near term when are you doing to keep the timeline on track.
Yeah.
As as we as J.F. said in his remarks, no. We we believe that even with the current situation. We store on track many of those synergies no. We're we're we're actions and already been taken and and just go through impact of those actions. So we're we're we are for.
And that no. This has occurred in a year into this if if this had occurred no in the early stages of our inner Grace engineer centered you capture we may have had a more difficult problem, but we're we're we're very competent of our ability to continued to deliver synergies at they target.
Their rates.
Okay great.
Question from soundtrack.
And then in an environment, where T.I.M. two volumes are falling sharply what factors can you point to that would support pricing stability into Q. and do you have any visibility on if you will be able to hold pricey stable beyond this corner.
[noise] with regards to queue to <unk> I'll take that one you know what we're seeing at this particular stages, we've already negotiated a price for the quarter. So a lot of what we're seeing and Q2 is already based on negotiated agreements clearly with where the market is right now and ads.
Volumes have reduced.
Price isn't really what's going to drive recovery at this particular stage. So based on what we're seeing in the market right now and as I mentioned with the exception of some movement in price in China, We continue to see stable pricing moving into cute too and you know, we're not really prepared to provide any.
Beyond what we provided.
As far as the second half a year.
Okay, and you know maybe if I left can you walk through the major region and give US an idea of approximately where you're operating range have been during T.Q.
Yeah.
J. and J.F. you know maybe address the operating radius rate question first and then John maybe you could comment.
On the market perspective by region.
Yeah sure.
Look it's clear that with the combination of legacy Crystal and legacy Tronox together, we have more capacity than the demand a for customer I mean, we always said that we did that deal. So we could grow with our customer and we would grow with what I call the hidden.
Factory, so to give you a field we were running at about 85%.
In in in Q1 hundred and if we work to run all our assets at name plate capacity would produce way more than the demand for customary not always been our strategy to adjust or operating rate to meet our customer demand.
Yeah.
<unk>, yeah as far as you know, where we're saying some adjustments from the market is that mentioned.
And the prepared comments, you know certain geography, such as Italy, and Spain, and France, you know the the out the downturn. There has been extended when you think about when it was three reasons, specifically lock down it was back in mid March.
Italy, and Spain, and France, our opening between you know starting this week up until maybe 11th.
And the pull through from the customer base is a bit slower than what we would've projected we'd get into Asia speaking, specifically to India. That's been a significant change with regards to our expectations. The locked down there has been I would say much more significant not only from the standpoint of.
Able to get product to customers from a transportation perspective, but the extended downtime in that area as well and again in the U.S. that is the one region that I would say is not immune to the pandemic, but it has been more in line with the expectations that we had outlined previously.
Thanks for those anything on the phone. We appreciate your hanging on we're going to go a couple of minutes over until accommodate technology issues. We've had so I'm going to continue with another question here that I have but it's all up with me if you need to hop off and I'm happy to take additional question you know later today or tomorrow.
On your cutbacks reduction what project are you delaying or can't blame why do you estimate that your current maintenance level of Catholic and should you decide to look at additional cuts.
Yeah, the the projects that the the reduction really comes from a a slight delay in a couple of they're really long term projects that we have mine development project, some technology related projects, our our maintenance and sort of no yes.
Type capital is about 100 $125 million, obviously, no being first quarter already passed we wouldn't be able to get down to that level, but but certainly no with the 225 level there is.
Some some potential room, if we needed to to to readjust once again as we get a later in the year.
But but the the delay of those long term projects will not have a significant impact.
On or no <unk> no achieving our senator jeeze our call structure. They they are truly longer term projects, which we would reap the benefits that no for a number of years to calm.
Great I have questions from Morgan Stanley from eating hey, thanks.
Can you give us an understanding of where customer and encourage we're entering second quarter.
Yeah, John you want to address advocate certainly damage worry levels. We're we're in a good place getting the color you want to address that kind of compared to store context.
Yes, thanks, Jeff So looked at these stocking we've been talking about for the last two to three quarters again by the end of the year it happened and our customers inventories in our entries I think as an industry at least tronox is we're at or below what we would deem to be seasonal norms and as the first quarter kicked and we.
Started to see the mantle forward our sales in the first quarter were higher than our expectations. So from our perspective to plan. We actually were lower an inventory then we planned as far as or budgeting process, because the first quarter was stronger than we expected and we do believe.
That our customers inventory probably towards the end of March may have picked up a bit but again, we don't really appeal to the quarter that there was any significant build on inventory for some of the reasons that we outlined earlier.
Thanks. Another question some hand, some companies have talked about social distancing measures preventing them from getting into factory working with consultant et cetera gets cold in our social networking measures change. The makeup of this energy socket.
No. They really they really don't again no. We're fortunate in that many of the actions that were derived with synergies up already occurred the the things like no best sharing of practices and the value of news beats dogs and all that continue.
We've had to change how we interact obviously, we've had to change how we interact no amongst our colleagues within the company and outside providers, but but but that really nice.
Important thing about you know the transfer best practices and allowed that that's an <unk> within the company. It's no. It's not like we're bringing in no hordes of outside consultants didn't necessarily help us there. That's that's our internal expertise being able to take those things and and.
Really no really move bored with it so we feel good about that and we've adopted and we'll continue to move forward.
Thanks, and I, I think and managing any non backed here. So I think a final question that I have is from <unk>. He said he's not to hear about industry Doc availability keeping in mind, some nine destruction in South Africa, and how do you think about me seven.
100 to 800 million dollar earlier guide in light of the mild medium and extreme scenarios me have rung.
Yeah, I I think I'll I'll address the latter part for so now maybe ask junk that's Walter to address the feedstock availability. Obviously you know the the the the guidance that we gave it to begin to the year is is you know within a different different difference or under different circumstances.
Different place we know we no longer believed that that is you know relevant to look looking at sort of full year performance. We we do believe though that will continue to play the cards that are dealt very well and as I said in my prepared remarks, we believe that we will.
You know out you know have industry, leading financial performance as we go through the year under any circumstances no. We're we're gonna have tried to be very open and transparent and communicate early and often as to what we're seeing in the markets, but at this point you know.
There is not tremendous disability ended the backup the year.
So with that and Jennifer Thank you for a modern taking the the q. in a.
I want to just say thank you you know for.
To all of my colleagues around the world for their continued dedication.
Two delivering save quality low cost tonnes for our customers. During this <unk> this period of great uncertainty.
We were main focus on the execution operating excellence, delivering this energies and enhancing or vertical integration strategy.
Which has created name will continue to create a company that has greater stability in natural performance and cash generation.
I I want to think everyone of join yours on the phone today no. We look forward to continue your dialog with you about the changing landscape, including the probably the the very laclede change in a conference call provider, we really apologize for the technical difficulties at <unk>.
Said.
As if you have questions that you didn't get to ask because of the snappy on the technology. Please reach out to Jennifer the date Tomorrow and we'll we'll make sure we try to provide the best answers to your questions that we can thanks, very very much and and <unk> have a good day.
<unk> Today's conference call you may now get kinetic.
[laughter] Oh.
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