Q4 2023 The Chemours Co Earnings Call
I don't want to withdraw your question simply press Star one again.
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None: Sorry, ladies and gentlemen, one moment please.
None: Please.
None: By we've lost connection with the Speaker line and it will take a moment to reconnect our apologies for the delay.
Yeah.
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None: Yes.
None: Thank you.
None: [music].
None: Thank you for your patience, ladies and gentlemen, we have reconnected the host line.
None: Sure. Thank you and I apologize to everybody for the technical difficulty.
None: Just to make sure that my comments are fully.
None: We indicated I'm just going to go back and repeat the section.
None: From what I hand, it over from Denise.
None: Over the next few minutes I will discuss our fourth quarter and full year 2023 results.
None: First let me note that in a separate press release issued yesterday, we announced that our audit Committee has completed its planned procedures with respect to its internal review.
None: Additional information is available in that press release as well as in the Form 10-K filed with the SEC yesterday.
None: I'll focus on the call today is on results and future actions turning.
None: Turning now to our results.
None: Consolidated fourth quarter 2023, net sales increased 2% year over year to $1 4 billion.
None: This growth reflects the following TT segment sales increased 7% driven by improved titanium dioxide demand outside of North America.
None: TSS segment sales increased 17% due to increased demand for our low global warming potential refrigerants and APM segment sales declined 15% driven by softness in our economically sensitive advanced materials portfolio, partially offset by double digit growth in our performance solutions portfolio.
None: Okay.
None: Fourth quarter GAAP net loss was $18 million or <unk> 12 per diluted share <unk>.
None: Adjusting primarily for $62 million of after tax litigation settlement charges. Adjusted net income was $46 million, which compares to $480000 in the prior year quarter.
Adjusted net income per diluted share was 31, <unk> compared to breakeven in the prior year quarter.
None: Adjusted EBITDA in the fourth quarter increased to $176 million.
None: Compared to $120 million in the prior year quarter.
None: This increase was primarily driven by favorable demand in TSS lower input cost across our businesses and cost savings from the transformation plan.
None: Now turning to our consolidated annual results.
None: For the full year 2023, consolidated net sales were $6 six.
None: $6 billion down 11% from the prior year. This decline was driven by lower year over year volumes in <unk> and in our APM segments advanced materials portfolio.
None: Partially offset by stronger volumes and pricing in TSS.
None: For the full year GAAP net loss was $238 million or $1 60.
None: Diluted share.
None: Adjusting primarily for $639 million of after tax litigation settlement charges full year, adjusted net income was $425 million or $2 82 per diluted share.
None: Compared to $738 million or $4.66 per diluted share in the prior year.
None: Full year 2023, adjusted EBITDA was $1 billion down 25% from 2022 attributable to weaker results in TT and APM.
None: Okay.
Our full year consolidated adjusted EBITDA figure includes a $14 million charge.
None: Related to noncash inventory write offs for our one year facility closure I want to be clear about what this reflects.
None: And our third quarter results adjusted EBITDA excluded the impact of a $36 million charge for noncash inventory write offs associated with our <unk> facility closure.
None: As you may have seen in our comment letter filings with the SEC subsequent to the filing of the third quarter Form 10-Q, we agree that it would be appropriate to classify all noncash inventory write offs associated with our Columbian facility closure as cost of goods sold.
None: As such we have now included this 36 million dollar impact in consolidated adjusted EBITDA for the year ended December 31 2023.
None: For the full year noncash inventory write offs associated with the Colombian facility closure were $40 million all of which are reflected in cost of goods sold.
None: Now turning to our business segments and starting with TT.
None: In the fourth quarter <unk> net sales increased 7% year over year to $651 million.
None: This improvement was driven by 12% increase in volume on stronger demand in all regions, except for the North American market.
None: Prices overall were down 6% year over year prices declined for market exposed channels, which was partially offset by price increases for our contractual volumes.
None: Currency impact was a slight 1% tailwind for the quarter.
None: Fourth quarter adjusted EBITDA for <unk> was $64 million up 52% versus the prior year quarter, resulting in a 10% adjusted EBITDA margin or 300 basis points higher year over year.
None: These increases were primarily driven by the growth in volume and cost savings from our transformation plan.
None: Moving now to our TSS segment.
None: For the fourth quarter GSS delivered a 17% year over year increase in net sales to $374 million.
None: This result was driven by broad based 10% growth in volumes across portfolios with the exception of legacy refrigerant products and.
None: And a 6% increase in price driven by pricing actions across legacy Hfcs and enough phone propellants and other products portfolio.
None: Currency impact also provided a 1% tailwind to growth.
None: Fourth quarter adjusted EBITDA for TSS reached $124 million.
None: Up from $54 million in the prior year quarter.
None: Adjusted EBITDA margin was 33% 16 percentage points higher year over year.
None: Now turning to APM.
None: For fourth quarter 2023, net sales for APM with $325 million.
None: 15% lower versus the prior year.
None: This result was attributable to 18% lower volume, partially offset by a 2% increase in price and a 1% currency tailwind.
None: Softness was driven by a 27% net sales decline in our advanced materials portfolio, which covers more economically sensitive end markets.
None: This was partially offset by an 11% increase in net sales for our performance solutions portfolio.
None: For the quarter adjusted EBITDA for APM was $40 million down compared to $61 million in the prior year quarter.
None: Adjusted EBITDA margin was 12% 400 basis points lower year over year.
None: The declines were attributable to lower fixed cost absorption given lower volume.
None: And in an extended outage for maintenance and improvements during the quarter at one of our manufacturing sites, which is now back online.
None: Moving on now to our cash flow and balance sheet statements.
None: In the fourth quarter 2023, we generated $482 million in GAAP operating cash flows an increase of $321 million compared to the prior year quarter.
None: Fourth quarter, Capex totaled $135 million up from $67 million in the prior quarter prior year quarter.
None: This increase in Capex was driven by increased growth capital investments in our performance solutions portfolio in APM.
None: Okay.
None: For full year 2023, GAAP operating cash flows were $556 million.
<unk> to $755 million in the prior year.
None: The year over year change was driven primarily by lower earnings and $66 million of outflows for PFS litigation settlements, partially offset by working capital.
None: Capex was $370 million compared to three $307 million in the prior year. This was lower than originally projected due to project timing.
None: Okay.
None: As of December 31, 2023, <unk> had an unrestricted cash and cash equivalents balance of $1 $2 billion.
None: We also maintained $604 million in restricted cash and restricted cash equivalents held in escrow primarily related to the <unk> comprehensive settlement of PFS related drinking water claims.
None: <unk> in June of 2023.
None: As we have previously disclosed <unk> share of this settlement is $592 million.
None: And is already reflected in our restricted cash and cash restricted cash equivalents balance on the balance sheet as of December 31, 2023.
None: Disbursement of the restricted cash and restricted cash equivalents from escrow is pending the approval for this settlement becoming final in accordance with the terms of the settlement agreement.
None: We also settled <unk> related claims with the state of Ohio in November 28, with our share of the settlement under the related Mou totaling $55 million.
None: We expect this amount to be paid this year.
None: Our total liquidity was $2 1 billion at year end.
None: This includes the $852 million available under our Undrawn revolving credit facility net of outstanding letters of credit.
None: But it excludes restricted cash and restricted cash equivalents.
None: Okay.
None: Turning to our capital profile.
None: As of December 31, 2023, consolidated gross debt was $4 1 billion.
None: Debt net of our $1 2 billion of unrestricted cash and cash equivalents was $2 9 billion.
This resulted in a net leverage ratio of approximately two eight times on a trailing 12 month adjusted EBITDA basis at the end of the year.
None: In 2023, we increased our aggregate borrowings by $400 million.
None: By amending and extending our U S dollar and euro denominated term loans, providing additional flexibility to our capital structure.
None: In terms of capital return to shareholders in 2023, we returned $218 million to shareholders in the form of $149 million of dividends and $69 million of share repurchases.
As we look forward. We currently expect our unrestricted cash and cash equivalents balance to decrease by approximately 600 million in the first half of 2024 with a majority of the decrease occurring in the first quarter of 2024 as.
None: As the 2023 net working capital management actions unwind and we invest in the business.
None: Strict cash and restricted cash equivalents will decrease when we pay out the PFS settlement disbursement.
None: Also corporate expenses for the first quarter of 2024 are expected to be higher by approximately $30 million primary.
Not result in any material misstatements of our financial statements or disclosures.
They did result in some immaterial revisions to prior period financial statements and you can find more details in the footnotes to our Form 10-K.
None: We are already in the process of implementing enhancements to our internal controls.
None: These actions will take time to implement but we are already moving forward to address the material weaknesses.
None: We are fully committed to actions that will not only address those weaknesses, but also strengthen our control environment going forward.
None: Denise back over to you.
Denise: Thank you Matt for your incredible partnership at this important moment for <unk> I am So lucky to have you by my side.
Denise: Now, let's turn to our plans for guidance and our outlook.
Paul.
None: There are a lot of moving parts to our first quarter, so let's get into it.
None: We expect about a 10% sequential decline in <unk> net sales for the first quarter of 2024 due to weaker demand driven by some regional seasonality and a discrete now resolved production challenge, resulting in an <unk> and an expected sequential decline in <unk> adjusted EBITDA of them.
None: Approximately 15%.
None: As we exit the first quarter, we are seeing positive trends in our order book up from current levels.
Okay.
Denise: For TSS, we anticipate about a 20% sequential growth in both net sales and adjusted EBITDA for the first quarter of 2024.
Denise: Driven by seasonality and demand for ASEAN products.
Denise: This is related to the regulatory transition and continued growth in low global warming potential solutions.
None: This is expected to be partially offset by higher input costs from non corpus Christi source materials.
None: We.
None: <unk> continued growth in our TSS segment. However, the EPA has one year extend it sell through date has slowed the transition to <unk> products for stationary applications.
None: For APM, we are projecting a sequential decline of about 10% in net sales for the first quarter 2024, driven.
None: Driven by softness in economically sensitive end markets and the tail impact of previously mentioned fourth quarter extended outage at one of our large manufacturing sites.
Again. This site is now back online and back to full production.
None: We expect APM adjusted EBITDA for the first quarter 2024 to be down.
None: Bout, 20% sequentially.
None: Absent the manufacturing issues that are now resolved.
None: P M would have been relatively flat with the fourth quarter of 2023.
None: APM is nearing cyclical lows.
None: Given where the advanced materials portfolio sits in the value chain, we see the business lagging overall market recovery by about six to nine months.
None: Our performance solutions portfolio is our growth engine for APM and I'm very confident in its future.
None: However in the near term, we're seeing some temporary headwinds in our growth path driven by two primary factors.
None: First we're currently sold out and are working to add PFA capacity, but we require a permit to do so.
None: We have been working diligently with the relative.
None: Parties to advance this process and have been doing all the right things, including implementing state of the art emission control technology.
None: We look forward to serving our customers with the essential technology for the semiconductor industry, which is a major policy priority around the world and especially for the U S.
None: The second reason for the near term weakness is slower than expected development of the hydrogen market.
None: Anyone following the hydrogen story knows government funding is not flowing as quickly as anticipated into the market, which is delaying projects.
None: Hydrogen as a global energy and de Carbonization policy focus.
None: Therefore, we believe that this remains a growth opportunity and acceleration is a matter of timing.
None: For the first quarter of 'twenty four we expect consolidated net sales to be flat to slightly down sequentially with consolidated adjusted EBITDA down 10% compared with the fourth quarter 2023 results.
None: Yeah.
None: So I'd like to finish with a short list of things I'm going to do.
None: Change has already begun.
None: We have fundamentally change how we operate at the top of this organization.
None: We are now business wed rather than corporate lab.
None: This means more decision, making at the business level and it means lowering corporate costs and embedding resources in the businesses closer to our bottom line and closer to our customers.
None: As I mentioned earlier, we are implementing our cost reduction plans and we are confident that there is more that we can do.
None: At the same time, we are funding high return projects for the benefit of our customers and shareholders.
None: I'm working with the organization to reinforce our values our values are why people choose <unk> <unk>.
None: Recent events will only make us stronger.
None: Finally, I am looking forward to meeting with you. So let's start right now Sarah can you. Please open the line for questions.
None: Okay.
Sarah: Ladies and gentlemen, if you have a question. Please press star one we ask that you. Please limit yourself to one question and one follow up question. Please.
None: Your first question comes from the line of John Mcnulty with BMO capital markets. Your line line is open.
John Patrick McNulty: Yes, good morning, Jason Thanks for taking my question and congratulations on the new role I'm sure. It's not how you envision getting it but but glad to have a steady hand at the wheel.
None: So maybe the first question is just on that and the accounting issues and what it means for <unk> from a management perspective, So <unk> had a number of senior leaders leave over the last couple of years, even before the new CEO change and CFO departure as well so a lot of talent at the firm.
His left so I guess can you speak to the measures that you're going to be taking in the firm is going to be taking to strengthen the bench. So that <unk> can get the most out of kind of its industry leading platforms going forward.
None: Thanks for the question John really appreciate it.
None: I understand your question.
So first of all I want to just state that.
None: Our Q1 has a lot of moving parts and it's not indicative of the going forward performance. So I just want us to keep that in perspective as we continue the conversation.
None: I think theres different ways to think about your question.
None: First we do not have an attrition problem in the company.
None: There are leaders at many levels of the organization there is deep experience across the organization that leap day in and day out operations.
None: But we do want to bring a level of stability.
None: With the leadership at the leadership at the executive team, but I want to assure you that I have confidence with where we are.
None: There is confidence in our customer base and there's confidence with our employees with the business leadership.
None: The three business leaders, we all understand that these businesses, we've had a long history in the businesses.
None: And because of succession planning that had been done at the company, we've been able to backfill many of the key roles quickly internally and it actually it's resulted in stability in the in the organization just as a quick anecdote.
None: We we run a pulse survey in our in our TT organization with our transformation work and over the last month confidence has gone up.
None: Oh.
None: I know, it's hard for you to see this but theres a great stability in the in the organization.
None: But we do want to have diversity of thinking on the executive team.
None: And so part of our plan is to do comprehensive searches.
None: For the CFO position and for the T T president role so.
None: So that those things are underway right now and.
None: Just maybe I'll just add as well I do believe you don't.
None: Turbulence, but I do believe change is good and I think that there's going to be benefit that come out of these changes.
None: Got it thanks very much for the color and very helpful. Helpful answer.
None: Maybe we can dig into is just to follow up with the second question just dig into one of the core businesses. So.
None: And let's talk about the <unk> segment.
None: T O two normally seasonally pickup picks up now it looks like a lot of the industry Destocking is done and you guys actually have your own restructuring that looks like its bearing some fruit. So I guess I'm a bit surprised to see the weak start in terms of EBITDA for the first quarter. So can you help us to think about the dynamics of your it sounds like there was a plant issue. So.
None: Maybe that's a large part of it but how we should be thinking about that and how are you thinking about the <unk> business as it pushes higher throughout 2024.
None: Absolutely. So as you know I've spent the last year in the TT business.
None: We have great customer relationships, we have strong assets highly capable people and the fundamentals of this business are solid.
None: You know this is a cyclical business and more at a cyclical low and when you get at the cycle low things can get a little noisy.
None: In Q1, we made some strategic decisions we made some choices.
None: One of those choices was that we decided to pull up a planned maintenance activity from Q2 to Q1.
None: This was up a piece of equipment. This is something that we change we have a change out every year to two years and we were seeing.
None: Equipment wearing faster and we wanted to be ready when the market came back. So we made the decision to pull that into the first quarter. Even though we were we had some low finished product inventory it was a choice.
None: And.
None: I think it was the right choice for the business.
None: We're seeing the second quarter coming in stronger our order velocity is improving and right now we're looking at a 15% increase in volume going into into Q2.
None: And I just wanted to make sure.
None: When you talked about I talked about the cost transformation in <unk>, we are well positioned and with the work that we've done there. It gives us enormous flexibility to go after the volume we want when we want.
None: Okay.
None: Great. Thanks, very much for the color.
None: Your next question comes from the line of Mike <unk> with Barclays. Your line is open.
Great. Thanks, Good morning, and again, congrats on the new role and look forward to working with you going forward.
None: Maybe two questions on APM just around some of the hydrogen comments you made I guess first is the weakness largely a function of electrolyzed or orders being slower than you thought is that sort of the right.
None: External metrics sort of grade the businesses volume on for US and then second can you just remind us how big hydrogen currently is for that business right now.
None: Okay.
None: Okay.
None: Okay. Thanks.
None: Thanks, Mike and I look forward to working with you as well.
None: Looking at the APN, the hydrogen comments youre spot on it's related to.
None: <unk> <unk> and <unk>.
None: Maybe a bit of color there as well is that.
None: The supply chain isn't isn't full there so.
None: When that funding happens, we fully expect that.
None: The orders are going to are going to follow accordingly.
None: Yeah.
None: The relative to how how big the size of the business I don't really want to say, how big the size of the businesses, but what I will say is we we have double digit growth and we are sold out for the year.
None: Great.
None: Helpful and maybe just one more circling back to <unk>.
None: Just given some of the volatility of the past 12 to 18 months as Youre sort of kind of re looking at everything or thinking about <unk> going forward do you think there needs to be any change to your go to market or value stabilization strategy.
None: <unk> transformation.
None: Largely one focused on cost as you see it today.
None: Yeah.
None: For that question.
None: I'm, just going to say that.
None: I said in my talk I'd like to speak simple language. So I don't really liked it they kind of the branding because I think its confusing.
None: The TV as it really is a pricing and contract strategy and it is core to our strategy. We feel really good about that work. It is it is something that we're going to continue but it's not that in and of itself is not a strategy. It's part of the strategy.
None: We also have to continue our work on.
None: Where.
None: Our supply reliability and quality is second to none.
None: Our commercial relationships are critically important as another part of this strategy.
None: And then the TT.
None: The transformation is also a key to our strategy as well we want to be ready to have the lowest cost. So the weekend as I said earlier.
None: To be ready to do what we need to do and do that we need to stay lowest cost.
None: Great. Thank you so much.
None: Your next question comes from the line of Josh Spector with UBS. Your line is open.
None: Yeah.
Joshua David Spector: Yes, hi, good morning, and welcome Denise and Matt.
Joshua David Spector:
Joshua David Spector: I wanted to ask on TSS I mean, you made some comments about some of the EPA delays I think it's been pretty well publicized about some refrigerant inventory in the chain.
Joshua David Spector: Curious how you see 2024, playing out with all the moving pieces and I guess, specifically starting on the first quarter sequentially, you're up but your sales are down 10% year on year. So trying to think about how that plays between price and volume and again to how the industry develops over this year.
None: Okay. Yeah, I mean for for Q1, you are correct that with the decline quarter over year over year, but first I just want to say the opt in the ASEAN transition is happening.
None: It's just that with this.
None: The sell through transition date being delayed a year.
None: It's not at its maybe say it wasn't it's not as robust as it would have been.
None: The other piece of it though is that if you look year on year on auto builds.
None: IHS is predicting a 2% decline and that's what we're seeing so that's really our market.
None: The nominal that's happening relative to the OEM demand.
None: You are correct I mean, what we're seeing is access HFC inventories.
None: Pending on what happens if there's a.
None: Our hot spring, we get an extra turn of inventory that certainly will have.
None: A positive impact on the on the.
None: On the quarter, if you kind of think about I'm not going to give guidance for the full year I guess, what I'll say is our long term growth expectations are unchanged for TSS huge confidence in this in this business.
None: We are investing for growth this year and as we have them, but we're especially we're adding a 40% expansion to corpus Christi and we're also investing in R&D in our next generation refrigeration as well as our emerging cooling so.
None: Good growth prospects for continued growth prospects for for TSS.
None: Yeah.
None: Thanks, that's helpful I guess.
None: If I could maybe ask about margins and I guess it is a little bit tricky without guidance I guess, but you look at your first quarter. Your margins are about 33% is what's your guide is roughly similar to fourth quarter. I guess typically there is a much stronger first half versus second half. So I don't know if theres a way to think about.
None: Should we expect margins up into Q or is this now reflective of.
None: Higher costs in some of those other discrete items this year, where second half has a normal lower margin phasing I guess any way to think about those moving parts and kind of what you would consider maybe the normal margin for this business over the course of a year today.
None: Sure so.
None: Just want to reemphasize our longer term growth expectations are unchanged.
<unk>.
None: One way to think about that is that we have we're out of capacity.
None: For <unk> and we're investing in a 40% increase in capacity, which will start to come online in 2025.
None: In the meantime, I mean, we.
None: We source.
Non corporate.
None: Product and so it comes at a lower a bit of a lower margin.
None: Our Corpus Christi facility is absolutely.
None: State of the art and proprietary technology for low cost. So anytime we're we're not using the corpus Christi material, we have a little bit of a hit on margin.
None: Through our our JV.
None: That's the way to think about the year is that we are investing we're investing more in R&D, because we see we see the potential in this business.
None: Okay.
None: Okay. Thank you.
None: Your next question comes from the line of Duffy Fischer with Goldman Sachs. Your line is open.
None: Yeah.
Patrick Duffy Fischer: Yes, good morning.
Patrick Duffy Fischer: You talked about leverage being two eight times now and talked about cash flow being negative $400 million in the quarter and your guide is below last year's EBITDA. So how high do you see that leverage number creeping up this year.
Patrick Duffy Fischer: Would you have a goal of paying down some debt once you get on the other side of this.
Patrick Duffy Fischer: Doug This is Matt. Thanks. Thanks for the question I think as you know, we typically try to target around three times net leverage as a target.
Matt: That's over the medium term.
Matt: Youre right that it could move around.
Matt: This year subject to the cash flows through the year on a near term basis. As I described we do expect a usage of cash in the first half of the 600. So it will be north of three as we go through the mid points of the year, but typically seasonality, we see cash coming the other way at the second half of the year.
Matt: Okay.
Matt: Great.
Matt: Then on titanium dioxide.
Matt: Can you what's your expectation for portal sales versus contract this year versus last year does that split change much and and I'm sure you've looked at pure numbers that are reported already your volumes look meaningfully different than theirs.
Are you structurally losing market share or do you think to them to keep pricing or what's the delta between you and peers on volume.
Yeah. Thanks, Thanks for the thanks for the question.
Matt: Really.
Matt: Maybe I just want to put a point on on where Matt and at first.
None: In that.
None: When we when we think about where we are in the cycle.
None: TTM is at a cyclical low.
None: As that business.
None: Rebounds, with the market recovery.
None: Huge cash generation capability in NTT.
None: Going to the the.
None: How were performing versus peers, I really don't want to get into.
None: <unk>.
None: What what peers are predicting and what where we're predicting what I'm going to say is I have super confident in our commercial strategy and the decisions that we made I as I said, we made decisions in the in the first quarter that were really for longer terms strategic Reis.
None: <unk> four for the year, so that we are going to be ready for that for the rebound.
None: Thank you guys.
None: Yeah.
None: Your next question comes from the line of Hassan Ahmed with Alembic Global Advisors. Your line is open.
Hassan Ijaz Ahmed: Good morning.
Hassan Ijaz Ahmed: Congratulations on the new role.
Hassan Ijaz Ahmed: A macro and a micro question right on the macro side of things just.
Hassan Ijaz Ahmed: Strategically as you sort of sit there and take a look at the portfolio as it sits I mean, clearly you guys on getting the multiple right and some people will sit there and think about maybe a cyclical thought of.
Hassan Ijaz Ahmed: Segment sitting there.
Hassan Ijaz Ahmed: Maybe holding back co portfolio right, maybe holding back your multiple.
Hassan Ijaz Ahmed: How would you strategically thinking differently from the past regime.
Hassan Ijaz Ahmed: And then I will get them from Microsoft.
Hassan Ijaz Ahmed: Okay.
Microsoft: Thanks, Thanks for the question.
None: From a strategic standpoint, I just want to be really simple about it there's two new priorities.
None: First is we have to reduce cost we have to get costs out.
None: We are well on our way in NTT, we're working on the next phase in APM and we're looking at our overall.
None: Cost structure at a corporate level, that's number one number two we're going to invest in the major.
None: Attractive growth opportunities, we have in the company. So they are really the two priorities I would say there is also a priority on we're going to execute we're going to be business led and I don't know if you say that's different but that's how we're going to behave.
None: Fair enough.
None: Sort of on the on the sort of micro side of things if I may ask a question around <unk>.
None: You know you guided to Q1 sort of revenues being down 10% right. One of your larger competitors was talking about volumes being up 12% to 16% sequentially and pricing being flat. So the first part of that question is.
None: Are you guys, losing maybe market share that warrants the sort of guidance that you gave.
None: Or are you seeing something that youre seeing a bit later on.
None: Since your large competitor sort of gave that guidance, maybe the market's weakening and strengthened their own after and part and parcel with that also part of your guidance was that $30 million.
None: Corporate sort of uptick.
None: In terms of sort of headwinds on the corporate side of things.
None: Yeah.
None: Okay, maybe I'll just the the more straightforward one.
None: That $30 million is the is the the cost estimate for the.
None: The internal investigation in the first quarter, so that they're talking.
None: Nevada, the onetime a onetime cost.
None: As you.
None: I don't want to comment on.
None: What our competitors are projecting I'll just tell you how we're thinking about things and.
And I mentioned, we made decisions in the first quarter around volume that will set us up.
None: Yeah.
None: Or for the year.
None:
None: We.
None: We.
None: We our transformation plan is to be we want to be the lowest lowest cost producer. So that we have the opportunity to play where we want to play.
None: So when you get into the bottom of the cycle as we said, it's noisy and and you may choose if you look, especially at our flax and distribution channels there.
None: Channels commercial strategy channels for a reason.
None: Because we want to be able to play have some level of flexibility whether you are in the <unk>.
None: Downside of the market the cycle or the upside of the cycle and we were still keeping with our.
None: Our strategy around our contracts.
None: Percent that we're targeting for our contract customers and as I said earlier that we are seeing.
None: Bump in volume.
None: <unk> into into the second quarter of the order of about 15%.
None: Very helpful. Thank you so much guys.
None: Your next question comes from the line of Arun Viswanathan with RBC capital markets. Your line is open.
None: Hi, Good morning. This is Adam on for Arun. Thanks for taking my question and congratulations on the new role to knees.
None: If we can look back at <unk> again for a moment.
Adam: I'm thinking about the 125 million cost savings you called out for 24.
Adam: I was wondering if you guys might be able to get.
Adam: Any kind of color around cadence for some of those benefits and how that might look through the rest of the year.
None: Yes. Thanks, Thanks, Adam for the question. The way you can think about that as just ratable through the year.
None: Yes.
None: Okay.
None: Great. Thank you.
None: Thinking of maybe timing of recovery I know you called out that second quarter order rates are looking really positive in <unk>.
None: Thinking about maybe further out the curve I know youre not giving full year guidance at this time, but how are you guys thinking about timing of potentially returning to mid cycle getting back to that $1 4 billion EBITA level do you see that it's feasible in the next couple of years.
None: Your thoughts around that.
Yeah.
None: The way I'm looking at it now is that they're restocking, we're restocking the supply chain.
None: It's very hard to predict exactly when we know the recovery is going to happen, it's hard to predict when.
None: One of them you can think about one of the key indicators is going to be about interest rate around interest rate changes.
None: That might happen.
None: Around the world and in particular in the U S.
None: That's going to be.
None: The TT business is very dependent on consumer consumer demand consumer buying and so that's going to be I would say a key indicator for.
None: A ramp up.
None: Okay.
None: Thank you very much.
None: Your next question comes from the line of Jeff Zekauskas with Jpmorgan. Your line is open.
None: Hum.
Jeffrey John Zekauskas: <unk> has added a few hundred thousand tons of chloride based tio to capacity.
Jeffrey John Zekauskas: Do you think that that's going to be overall Asian markets or will it stay in China or how do you. How do you see the industry being affected by a new chloride based tio two competitor any thoughts.
None: Thanks for the question.
None: Jeff.
It is true we see in the numbers the exports of the.
None: China exports are increasing the one other thing to note is the weakness of the domestic market and I think that gives our customers pause relative to long term reliability and stability of supply that is.
None: Still a very very key value proposition is is the trust and confidence of customers that that youre going to be able to service them day in day out reliably with high quality.
None: The other aspect that.
None: You have to consider and in mature product lines, such as such as titanium dioxide is that you need to be able to compete in all market scenarios and that we.
None: Really part of the TT transformation plan is continuing to drive to a lower cost.
None: Production being the lowest cost producer.
Okay Mike.
Mike: Follow up Chuck just so I understand your.
None: Got it.
Mike: Roughly are your tio to volumes for the first quarter going to be down 10% sequentially and then up 15% sequentially in the second quarter is that the meaning of your is that the meaning of your guide in very rough terms.
Chuck: Yes, it's specific Wayne I was talking about.
Chuck: Volume so volume.
Chuck: Increased first quarter to second quarter of on the order of 15%.
None: Okay. Thank you very much good luck.
None: Thank you.
None: Your next question comes from the line of Vincent Andrews with Morgan Stanley. Your line is open.
Vincent Stephen Andrews: Thank you and good morning, everyone I wanted to get a little more detail on the $125 million of cost out.
Vincent Stephen Andrews: Ask it two ways. One if you could just sort of help us understand the buckets of where that's coming from and then secondly.
Vincent Stephen Andrews: Beneath that you run the overall organization now.
Vincent Stephen Andrews: I've watched over the year of lots of chemical companies focus on taking costs out.
Vincent Stephen Andrews: And they're able to do it but one of the unfortunate collateral consequences, sometimes is that <unk>.
Vincent Stephen Andrews: Incremental focus within the organization on costs and kind of ultimately lead to maybe.
Vincent Stephen Andrews: Less topline performance than otherwise might have been the case, whether it's not getting as much growth or sort of distraction within the organization. So how are you managing this aggressive cost move.
Vincent Stephen Andrews: Within the TT segment in particular to make sure the organization really keep the data on the ball.
None: Well thanks for the question Vincent.
None: First of all as far as the buckets and it might get a little bit at your the second part of your question.
None: We.
None: Talking about the buckets for the transformation.
None: One obvious big one was the shutdown of the climb in facility because it really was a high cost plan and it really was not.
None: Not something that was that was adding value to the business.
None: Do you think about what are all the other.
None: Bucket. So we did do an organization redesign and we looked at what is our strategic intent and where do we need to have resources and we have to there was a.
A little leaning out of the of the organization, but when you go beyond that there's it's really about productivity and efficiency, which actually drive huge confidence in people.
None: So one big area that we focused on was in mining. So we have these mines we bought these mines.
None: And and we were not getting.
You know, what we should be getting out of those those mind actually we added.
None: Added some cost to get ultimately lower costs, we added more very focused leadership over mining and brought it more into the center of the TT strategy and we are from 2022.
None: To now we've increased the volume out of those mines by over 70%.
None: And we're still working on we're still working on more.
None: And it's really the other things that we've done is just and I really do think it is in our routes where we are.
None: We're technology people, where scientists where engineers and it's really getting back to process technology.
None: How do you have better yields how do you reduce energy costs.
There are the kind of things, where you want to be really Chris So to me that brings a lot of <unk>.
None: Energy to the team because they're just performing really well this would not be successful if it was burning the furniture. This has to be strategic and it has to be bottom. It has to be led throughout the whole organization. The frontline folks are critically important to the <unk>.
None: SaaS.
None: Of the TT transformation plan and it's why we run a very very.
None: Comprehensive change management program, we send out surveys every two weeks quick surveys to have people tell us how they are feeling do they have the capability do they have the capacity. So I am super confident in in where we are and that this is going to only make us stronger.
None: Thanks for that.
None: As a follow up I believe in the prepared remarks, you talked about tier two.
None: Through volume being down in the fourth quarter in North America, but up in the other region.
None: Well that same dynamic continue in the first quarter does that dynamic inflect into the second quarter. So any details on the north American market would be helpful.
None: Sure I would say the North America market is started up.
None: LOE in the first quarter, but we're seeing going into the second quarter improvement in our region.
None: Okay. Thank you very much.
None: We have reached the end of our question and answer session. Thank you for joining the <unk> fourth fourth quarter and year end 2023 results Conference call. You may now disconnect your lines.
None: Yeah.
None: Okay.
None:
None: Yeah.