Q1 2025 The Chemours Co Earnings Call
Song Title I'm in My Break-up
Michelle: Good morning, my name is Michelle. I will be your conference operator today. I would like to welcome everyone to the Gamores Company First Quarter in full year 2025 results conference call. Currently, all participants are in the list and only mode. A question and answer session will follow the conclusion of the prepared remarks. I would like to remind everyone that this conference call is being recorded.
Speaker Change: I would now like to hand the conference over to Brandon Ontjes, Vice President, Head of Strategy and Invest Relations for Commores. You may begin your call.
Speaker Change: Good morning, everybody. Welcome to the Chemours Company's first quarter 2025 earnings conference call. I'm joined today by Denise Dignam, Chemours' President and Chief Executive Officer, and our Senior Vice President and Chief Financial Officer, Shane Hostetter.
Speaker Change: Before we start, I would like to remind you that comments made on this call as well as in the supplemental information provided on our website contained forward-looking statements that involve risks and uncertainties as described in Chemours' SEC filings.
Speaker Change: These forward-looking statements are not guarantees of future performance and are based on certain assumptions and expectations of future events that may not be realized. Actual results may differ and Chemours Undertakes no duty to update any forward-looking statements as result of future developments or new information. Thank you.
Speaker Change: During the course of this call, we refer to certain non-GAF financial measures that we believe are useful to investors evaluating the company's performance.
Speaker Change: A reconciliation of non-GAAP terms and adjustments is included in our press release issued yesterday evening. Also, we posted our earnings presentation to our website yesterday as well. With that, I will turn the call over to Denise Dignam.
Thank you, Brandon, and thank you everyone for joining us.
Speaker Change: In starting off our call today, I want to highlight an announcement that was released concurrent with our earnings release yesterday evening regarding our strategic agreement with Navine Flouring to produce our option two-phase emergent calling fluid.
Speaker Change: This manufacturing partnership leverages Navine's manufacturing expertise and commores innovation in the space to address the data cooling center needs created by AI and next-generation chips.
Speaker Change: We'll share more about the development of Pomer's participation in this market later in the call. But I want to highlight this exciting development with you as we remain focused on executing our path-warded drive enabling growth killer and serving the market.
Speaker Change: During today's call, I will begin by discussing our first quarter performance, followed by Shane, who will provide details around our financial results and outlook. Finally, I will address the positive progress we've made on our Path of the Thrive strategy before taking your questions.
Speaker Change: Beginning with our results for the quarter. For our TSS business, we exceeded our overall expectations, delivering another strong quarter with a 40% year-over-year net sales increase in opt-on refrigerants from increased demand for blends.
Speaker Change: Option's referred to implant demand has been even higher than expected as stationary OEMs build inventories and experience increased self-redemand in connection with the 2025 transition mandate under the USA Act.
Speaker Change: The stronger than anticipated demand is also putting pressure on various areas of the supply chain, noticeably around cylinders used to ship and transport, the R-454B blends for stationary aftermarket sales.
Speaker Change: While we understand that there is tightness in the supply of cylinders used, we are increasing our line fill capacity in order to quickly fill cylinders as they arrive from our sources.
Speaker Change: We believe this situation will correct itself quickly and will not be a long-term issue for commores ability to support the RF-454B market transition.
Speaker Change: While we did experience a brief full-site outage in January , this outage did not have an impact on our ability to serve the market. This outage was related to a third-party utility provider on-site that was outside of our control.
Speaker Change: Encouraging this unplanned outage in a very tight demand environment was not ideal. However, I want to highlight the impressive work from our team on site to quickly get our plant up and running, ensuring no disruption to filling our customer orders.
Speaker Change: Altogether, our strong contribution from op-hand sales and performance during the quarter enabled our ability to drive margins of 30 percent, positioning us well as we move into peak polling season for our TSS business over the next quarters.
Speaker Change: Stepping back from our recent performance, I also want to touch on a few other topics related to TSS.
Speaker Change: In our last earnings call, I referenced broader cost inflation anticipated around R32, which is an important feedstock for our Option refrigerant blend and efforts underway to pass these
Speaker Change: Since our last update, we've been working closely with our customers to better align our agreements to address these headwinds' inclusive, a terrific exposure.
Speaker Change: As a result, we will be able to successfully offset these elevated input costs through our pricing going forward.
Speaker Change: Although we are relying on third-party production of R32, we have limited pair of exposure considering that we are able to source product directly in the U.S. where needed, with most of our shipments going to Mexico, where they can then sell directly to our customers.
Speaker Change: While having the highest care exposure for camores, it is this supply chain flexibility which allows us to be able to mitigate the exposure of tariffs on the TSS referred to in Portfolio of our business.
Speaker Change: As an asset-like business, TSS has been engaged with the flexibility to serve our customers using third-party products around the world and leverage different points of storage or blending to reduce tariff exposure.
Moving over to T.J.
Titi: In TT, our team remains focused on executing against our strategic priorities and delivering for our customers amid an evolving TO2 landscape in an uncertain macroeconomic and regulatory environment.
Titi: For the broader TIO2 market, what has become apparent is the clear differentiation between those markets with fair trade regulations announced or in place versus those who are actions against Chinese TIO2 dumping has not yet been pursued.
Titi: For Commores, North America, Europe , and Brazil, which we categorize as our western markets, reflect those markets with a more robust set of their trade regulations in place or are evaluating final implementation after a trial period.
Titi: Over time, these Western markets provide an added opportunity for CMORS with North America and Europe making up nearly 70% of global TI2 sales.
Titi: Speaking to the first quarter, these combined regions and countries actually drew a 12% sales increase sequentially from continued efforts to regain share and reflect the highest first quarter combined regional sales since 2022.
Titi: Alternatively, in those markets not yet possessing or pursuing a fair trade regulatory framework, primarily in other parts of Asia and Latin America, we're experiencing a high level of Chinese CO2 product being dumped, driving lower pricing.
Titi: In India, more specifically, we know that while fair trade regulations are being considered, there's a large amount of Chinese-based AIO2 product being exported to this region, driving near-term market dislocation.
Titi: A first quarter results reflected this impact with clear commercial volume strength in those Western markets and with weaker sales in China, India, and other parts of Asia and Latin America.
Titi: The context around the view of the global market and where opportunities may develop as more countries adopt fair trade provisions, we also believe that Chinese capacity, while publicly announced, will not fully materialize in years ahead.
Titi: This belief is based on Chinese producer awareness around the over-capacity and the challenges as to where these producers can sell products with key markets pursuing more paid fair-trade
Titi: This is further supported by a combination of other factors such as plant idling and shutdowns of persisting week domestic market along with impacts from higher sulfate pracing
Titi: To this, we are anticipating Chinese lower production levels in 2025, breaking a 10-year trend of increasing output.
Titi: As we continue to pursue opportunities in this transitioning global TIO2 landscape, it brings back the importance of driving our low-cost TIO2 position globally.
Titi: In the first quarter, while we did continue to derive cost reductions, our cost savings realized were offset by the cold weather downtime we experienced earlier in the quarter.
Titi: Well, this preserves the approximately $40 million that took out in first quarter of 2024. We have to be even more aggressive in our cost-out and operational efforts to offset any potential near-term pricing volatility as we move through this transition and to protect our margins.
Titi: Our work to drive incremental volumes across targeted markets and our laser focus on cost out efforts will be evident in our margins as the market gains more certainty.
Titi: Turning now to APM, as anticipated, we continue to see weakness in cyclical M markets and products serving the hydrogen market, which impacted our net sales for the quarter.
Titi: Despite continued softness in the market, we increased our adjusted EBITDA margin by 1% to 11% driven by lower cost.
Titi: As a further part of our strategy, execution, we also advanced our portfolio management initiatives in APN, which I'll discuss in more detail later in today's call.
Titi: At the corporate level, while we continue to remain focused on reducing costs, we did incur additional costs associated with legal preparation efforts in connection with upcoming litigation matters, aligned with our strength and the long term strategic pillar.
Titi: Before handing it off to Shane, I'd like to address some of the geopolitical and macroeconomic dynamics we are watching.
Shane Hostetter: As it pertains to recent tariff announcements, we've determined that provided there is not a material impact to consumer confidence, these regulatory actions are not expected to have a significant impact on our current outlook due to the mitigation plans we had in place.
Shane Hostetter: Previously, I referenced our mitigation plan for TSS, but in other parts of our business, notably in APM, we have implemented surcharges and are pursuing opportunities to sell product in place of Chinese source products in the US.
Shane Hostetter: In TT, we don't expect much impact from tariffs considering that TR2 is excluded, but continue to pursue efforts to protect USTR2 production and the markets we sell into.
Shane Hostetter: We also do not see any significant impact to TT raw material pricing due to tariffs.
Shane Hostetter: Across our portfolio, we are regularly monitoring the regulatory environment, ensuring the reliability of our supply and continuing ongoing advocacy efforts to highlight the importance of offering across two markets.
Shane Hostetter: We are confident in the steps we are taking today as well as our ability to be agile and adapt to these dynamic market conditions.
Shane Hostetter: We'll continue to evaluate further mitigation efforts as needed and are confident in our strong competitive position across our key markets. With that, I'll turn it over to Shane to walk through our financial results.
Thank you, Denise, and good morning, everyone.
Shane Hostetter: Before I get into the details of our results, I want to highlight that we have made certain revisions to our previously issued annual 2023 financials, as well as our quarterly and annual 2024 financials.
Shane Hostetter: These updates are included in our earnings disclosures, and reconciliations of such can be found in our Form 10Q.
Shane Hostetter: We will use these revised financials as points of comparison for our discussions today and going forward.
Shane Hostetter: Now, let's take a closer look at our financial results, beginning with our quarterly performance.
Shane Hostetter: Our Consolidated Net Sales for the first quarter were approximately 1.4 billion, which were consistent with the prior year. As a 5% increase in volume was partially offset by a 4% price decline and a slight 1% currency edwin.
Shane Hostetter: For the first quarter, adjusted EBITDA was 166 million, down from 191 million in the prior year.
Shane Hostetter: This decrease was primarily driven by lower pricing across all businesses, primarily due to free-on-weekness in TSS and regional pricing dynamics in TT, as well as unfavorable currency movements and lower volumes in APN.
Shane Hostetter: These headwinds were partially offset by higher TSS volumes in our opt-on refrigerant blends, as well as lower costs in APM.
Shane Hostetter: For the first quarter, Chemours reported a net loss of 4 million or 3 cents per deluded share, compared to net income of 54 million or 36 cents per deluded share in the prior year.
Shane Hostetter: The current quarter net loss and lower earnings were driven by the performance headwinds I just mentioned, as well as restructuring charges associated with the announced shutdown of APM's FBS capstone business.
Shane Hostetter: Without these restructuring and other charges, our consolidated adjusted net income was 19 million this quarter, or 13 cents per deluded share, which was down from 47 million of adjusted net income or 31 cents per deluded share in the prior year.
Shane Hostetter: Now, let's turn to our business segment performance, starting with TSS.
Shane Hostetter: In the first quarter, TSS achieved net sales of 466 million, a 3% increase from the prior year.
Shane Hostetter: This growth in sales was primarily driven by a 10% volume increase, partially offset by a 6% price decline, and a 1% currency hint.
Shane Hostetter: The increase in TSS volumes were driven by 40% year-rear sales growth in our Optium refrigerants.
which reflects a continued strength in our blends.
Shane Hostetter: driven by the transition of OEM stationary air conditioning equipment under the U.S. Amact paired with increased demand for our FPNO products largely due to time.
Shane Hostetter: Parsley Offset by volume decrease in our three-round refrigerants portfolio in connection with the U.S. AIM Act transition.
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Shane Hostetter: The decrease in pricing year-to-year was primarily driven by lower free-on refrigerant pricing caused by the elevated HFC inventory levels in the US market.
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Shane Hostetter: First quarter in Justice EBITDA for TSS decreased by 6% to 141 million compared to the prior year.
I adjusted even a margin of 30 percent, also decreased 3 percentage points [inaudible]
Shane Hostetter: This decrease was driven primarily by the reference to free on pricing weakness, partially all set by the increased demand for our opium refrigerant blitz.
Shane Hostetter: So, quetchley, TSS's net sales increased by 19%, which was driven by a volume increase of 19% and a price increase of 1%, with currency being a slight 1% headwind.
Shane Hostetter: Overall, volume and price increases were primarily related to typical seasonal trends across refrigerant portfolios, amid the stationary transition under the U.S.A. Matt.
Now, let's move to our TT segment.
Shane Hostetter: In the first quarter, TT's net sales increased 1% year-over-year to $597 million. Primarily due to a 6% increase in volume, partially upset by a 4% decrease in price and a 1% currency headwind.
Shane Hostetter: The increase in volume was primarily concentrated in Western markets where we've seen progress caused by the newly established fair trade regulations, whereas the decrease in price was across all markets.
Shane Hostetter: TT's first quarter adjusted EBITDA decreased 28% to 50 million compared to the prior year with adjusted EBITDA margins declining 4% points to 8%.
Shane Hostetter: The decline in EBITF was primarily driven by lower price. Also, we saw additional costs from plant downtime primarily driven by cold weather at our US sites early in the quarter, which were all set by year-over-year cost savings and T.T.
Shane Hostetter: Sequentially, TT's first quarter net sales decreased by 6%, driven by a 3% decline of volume and a 3% decrease in price.
Shane Hostetter: While we did experience stronger volumes in our primary markets of North America, Europe , and Brazil, where fair trade regulations have been established, this was more than all set by weaker volumes in the rest of the world.
Shane Hostetter: 32-hour APM segment. In the first quarter of 2025, APM reported net sales of 294 million, a 3% decrease compared to the prior year.
Shane Hostetter: This decrease was primarily driven by a 2% currency headwind from the Euro, and a 1% decrease in both, while pricing remained flat [inaudible]
Shane Hostetter: The volume decrease was primarily driven by weakness in cyclical end markets and products serving the hydrogen market.
Shane Hostetter: APM's first quarter adjusted even an increased 7% to 32 million compared to the prior year, with a just even margin increasing by 1% of the output.
Shane Hostetter: The increase was primarily due to lower costs, partially offset by unfavorable currency and lower volumes.
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Shane Hostetter: Sequentially, net sales decreased by 9%, mainly due to a 9% volume decrease in a slight 1% currency headwind. Parsley Offset by 1% increase in price
Shane Hostetter: I also wanted to briefly touch on an announcement we previously discussed on our Q4 earnings call regarding the decision to exit our SPS capstone business.
Shane Hostetter: In connection with this decision in early January , the company recorded charges of $27 million, 13 of which are cash-related and will be paid over the next couple quarters.
Shane Hostetter: We remain on track to exit the SPS business by the end of the second quarter pending regulatory approval.
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Shane Hostetter: Moving to our other segment, we recorded net sales of $11 million and adjusted EBITDA 1 million in the first quarter.
Shane Hostetter: And lastly, our corporate expenses, as we all set to our adjusted EBITDA, totaled 57 million in the first quarter, a slight increase compared to the prior year, and higher than we had anticipated.
Shane Hostetter: The increase in corporate expense in the quarter was primarily due to higher legal costs which were not contemplated in our guidance
Shane Hostetter: These were partially offset by Laurence associated with the Audit Committee's internal review and material weakness remediation, completed in 2024.
Shane Hostetter: Turn it into our liquidity and an update I'd like to highlight on our capital allocation approach.
Shane Hostetter: As of March 31st, 2025, our consolidated gross debt stood at 4.1 billion, with approximately 1.1 billion in total liquidity.
Shane Hostetter: This includes 464 million in unrestricted cash and cash equivalence, along with approximately 623 million available under our Revolving Credit Facility.
Shane Hostetter: Additionally, the company retained 50 million in restricted cash and cash equivalence, all of which is held in escrow under the terms of the memorandum of understanding related to potential future legacy liabilities.
Shane Hostetter: On a trip in 12 month basis, our net leverage was five times adjusted EBITDA, reflecting an increase sequentially compared to 4.5 times at year end.
Shane Hostetter: We're guarding our cash flow of the first quarter. We had operating cash outflows of 112 million compared to outflows of 290 million in the same quarter last year.
Shane Hostetter: The improvement in the operating cash outflows was primarily due to the prior year unwinding of year end 2023 net working capital actions during the first quarter of 2024.
Shane Hostetter: Capital expenditures for the first quarter totaled 84 million, a decrease of 18% compared to the prior year.
Shane Hostetter: This decrease was driven by lower capital expenditures across each of our businesses, as the company continues to narrow spend on only focused, strategic and essential areas.
Shane Hostetter: Additionally, the company paid 37 million dividends to shareholders during the quarter. Related to this, I'll discuss our go-forward capital allocation strategy in more detail momentarily.
Shane Hostetter: As part of our continued focus on our balance sheet and liquidity, we are pleased to announce an amendment and extension to our credit agreement, which further strengthens our liquidity profile and our financial flexibility.
Shane Hostetter: The amended credit facility extends revolver commitments to 2030, but they capacity of up to 1 billion until October
Shane Hostetter: Following the completion of this amendment on May 2nd, the company's capacity under the Revolving Credit Facility was increased 300 million to a total of 948 million. So, this combines with the cash a quarter end with equal 1.4 billion of accessible liquidity.
Shane Hostetter: This amendment to our credit agreement allows added liquidity flexibility, along with our free cash flow, to fund working capital and other focus areas, like strategic growth projects, while also balancing our efforts to get to target event leverage of below three times at mid-circle.
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Shane Hostetter: Since I started with Chemours last year and we developed Pathway to drive, a focus of mine was to ensure we maintained a balance and discipline's capital allocation policy to drive shareholder value.
Shane Hostetter: We have evaluated our dividend, its payout level, and other key metrics over a wide dispersion of financial and cash flow performance scenarios, including potential impacts from current uncertain macroeconomic conditions to volatile capital markets against the landscape of strategic priorities under pathway to thrive.
Shane Hostetter: As a result of this review, the company believes a change in the balance between capital return to its shareholders, and the flexibility of our balance sheet is critical to creating
Shane Hostetter: Therefore, earlier this week, the Board of Directors declared a dividend for the second quarter at a reduced rate of 8 and 3-4 cents per share, reflecting a 65% reduction to our previous
Shane Hostetter: This action is not reflective of concerns or changes for the regard to management expectations of mid-cycle earnings or long-term cash generation.
Shane Hostetter: Rather, this aligns our dividend with the right balance sheet flexibility to drive long term
Shane Hostetter: Also, this dividend level ensures Chemours continues its long-term practice of returning cash to its shareholders through dividends as part of our capital allocation strategy.
Shane Hostetter: With these first quarter results in mind, I would now like to discuss our expectations for the second quarter of 2025, followed by our outlook for the full year.
Shane Hostetter: Beginning with TSS, for the second quarter, we expect overall TSS' net sales to increase sequentially in the low 20% range, driven by double-digit growth expected in both our op-ion and free on refrigerants, reflecting traditional season Alan.
Shane Hostetter: TSS has adjusted EBDA is expected to increase approximately 30 percent sequentially, primarily driven by strong volume increases and favorable pricing impacts.
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Shane Hostetter: Looking ahead to the full year, we continue to anticipate strong 2025 results for TSS and Improvement over 2004.
Shane Hostetter: The pattern of Euroyear double digit net sales growth and opt-out refrigerants will persist throughout the year, driven by volume expansion in our opt-out and refrigerant plants. Whereas, our freelance sales will continue to decline as we continue to balance quote allocations towards our low GWP offerings.
Shane Hostetter: Now highlight this transition. Our free-owned sales in the US are projected to decrease by half in 2025 compared with the prior year with no recovery in HFC pricing anticipated.
Shane Hostetter: With the mixed shift to a higher concentration of opion, we continue to anticipate that adjusted even in margins will continue to be around 30% for the remainder of 2025.
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Shane Hostetter: For TT Business, we expect TT's net sales to increase sequentially by high single digits, driven by seasonal increase in volumes, primarily in our Western markets.
Shane Hostetter: Adjusted EBITDA is also expected to increase in the low 40% range, sequentially due to the anticipated seasonal volume increase, as well as operating tailwinds following the first quarter-polled weather downtime at our US subs, which we don't anticipate to occur.
Shane Hostetter: For the full year, we continue to expect 2025 results to be slightly better than 2024.
Shane Hostetter: While we navigated a very dynamic global landscape and continued to focus on executing our growth strategy across fair trade markets. Also, we remained focused on executing our TT transformation plan, with anticipated cost reductions becoming more pronounced in the second half.
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Speaker Change: For our APM business, we expect APM's net sales to increase in the low teens sequentially, with volumes across the segment expected to be seasonally higher in customer demand.
Joseph Ybidah is anticipated to remain consistent sequentially
Speaker Change: For the full year, we expect the reference to weakness in cyclical end markets and products serving our hydrogen end markets to continue to impact APM's results. However, we expect tailwinds from our ongoing caulked out efforts and portfolio management initiatives to help alleviate some of these headwinds.
Speaker Change: On a consolidating basis, we anticipate our second quarter net sales to increase in the low to mid-teens sequentially, and are consolidated adjusted even to increase between 40 to 45 percent sequentially.
Speaker Change: Also, we anticipate corporate expenses to decrease in the low single digits sequentially.
Speaker Change: For our anticipated cashflow, we expect free cashflow to be slightly positive in the second quarter, with capital expenditures in the range of approximately 50 million.
Speaker Change: Turn it to the full year 2025. We expect adjusted even to it to be in the range of 825 million to 950 million.
Speaker Change: This is compared to our previous guidance of 825 million to 975 million.
Speaker Change: We refine the top end of our Adjustment Event range as we consider the dynamic TT market landscape and its historical volatility, which was part of the initial factors that drove the broad range.
Thank you.
Speaker Change: For the high end of a range, we would anticipate a more favorable demand environment for TT and APM, along with successful TSS pricing actions, input cost moderation, and some free-owned pricing
Speaker Change: Alternatively, for the low end of our range, we would anticipate continued delay in TIO2 demand recovery, higher input cost pressures in TSS, and the impact of a weaker macroeconomic environment on the APM business.
Speaker Change: As we highlighted earlier, due to mitigating actions taken by the team, announced tariffs are not anticipated to have a significant direct impact.
Speaker Change: And while we are not currently seeing evidence of more recessionary trends from indirect tariff impacts, should a recession develop in the second half of 2025, the company anticipates that's 2025 that just the ebit of guidance range could be reduced.
Speaker Change: Regarding cashflow for the full year 2025, we expect free cashflow conversion to be solidly positive for the full year, with free cashflow conversion for the second half of the year expected to be in the range of 60-80%.
Speaker Change: Our cashflow expectations reflect some working capital unwind and lower investments in the second half of the year, consistent with the typical seasonality of our business.
Speaker Change: Also, we expect full-year capital expenditures to be in the range of 225 million to 275 million.
Speaker Change: With that, I'll hand it back over to Denise to highlight the initial cash topic before she discusses our progress against pathway to thrive.
Denise Dignam: Thank you, Shane. Continuing from Shane's update on cash, I wanted to take a moment to highlight an additional topic which will provide a benefit for our cash flows in the coming years.
Denise Dignam: With our new leadership team in place, we have been relentless in going through every single contractual commitment and point of spend across the enterprise. Nothing has been left untouched, and I appreciate our team's patience as we rigorously exhaust every aspect of key spend.
Denise Dignam: More specifically, two high-grade war feet-stock contracts were signed prior to the Kwanyi enclosure and have represented a significant spend over that time, approaching 200 million per year.
Denise Dignam: A primary purpose of purchasing those four-feet stock was for usage at our Coignan site up until its closure in Q3, 2023.
Denise Dignam: Now, to our innovation and operational capabilities, we are materially less reliant on this type of pizza of pizza.
Denise Dignam: As War represents one of the highest input costs at our company, the reduction of high grade war as part of our feedstock is a significant opportunity for more.
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Denise Dignam: Looking ahead, over the next two years, these contracts are set to expire, one at the beginning of 26 and the second at the beginning of 2027.
As these contracts roll off, we derive significant longer-term benefits.
Denise Dignam: The first providing us with the ability to purchase high grade war at our discretion, and the second providing us with an opportunity to consume excess of tips in inventory today.
Denise Dignam: Based on this adjustment to our contractual commitment, with the opportunity to shift our purchases to more cost-effective or great, we anticipate that this net cash flow benefit will approximate 100 to 150 million considering existing market conditions.
Denise Dignam: Our efforts here, paired with Shane's leadership, are indicative of the continued diligence our team is conducting, relying on our core expertise in innovation and challenging historical processes to drive prudent capital allocation.
Denise Dignam: To this point, I would like to highlight a few important updates around our execution progress.
Denise Dignam: Under our operational excellence pillar, we continue to build on our cost-out efforts from previous years and are progressing well towards our 125 million of run-mate savings achievement in 2025 in view of our longer-term 250 million savings by 2027.
Denise Dignam: We continue to see the successful ramp-up of our PSS Corpus facility to produce our key op-theon feeds dock to support the low GWP transition underway in the U.S. and Europe .
Denise Dignam: More recently, we've added two new great additions to our team in a new business president for TT, Donnie and Gumball
and a new VP of Operations, Anna Clement.
Denise Dignam: To oversee our centralized manufacturing center of excellence, where we will drive efficient and consistent operational performance across our businesses.
Denise Dignam: Turning to our second pillar, enabling growth, we remain committed to sharply investing in high-return low-risk initiatives across our portfolio while driving commercial effectiveness.
Denise Dignam: Our efforts to drive Optian Crohe as reference are key part of this strategic pillar.
Denise Dignam: Another critical development in our enabling flow of color has been around all the good polling announcements, which include the Navine-Foring Manufacturing Agreement for two phase emerging polling fluid which I referenced earlier.
Denise Dignam: This partnership will be foundational to our participation in this exciting liquid coin space, enabling us the ability to expand our footprint over time.
Denise Dignam: While technology in this cooling space continues to quickly develop, closely tied to the advancements in AI, we would like to clarify our growth expectations.
Denise Dignam: As we shared in the past, we believe that while our participation in this space will develop in the near term, it will have a more concentrated expansion later in the decade.
Denise Dignam: The six-pansion will align with the increased power needs, heat emits, and server rack density associated with next generation GPU and CPU chip advancements.
Denise Dignam: More specifically, as the next generation of CHIP's advance, new liquid coin technologies will be essential to optimize CHIP performance and provide the lowest total cost of ownership compared to alternative.
Denise Dignam: To participate in the liquid cooling market as it develops, we have expanded our offering to include two phase direct to chip fluid.
Denise Dignam: This additional direct-to-chip product will serve as the bridging technology from single-phase direct-to-chip to full immersion cooling.
Denise Dignam: To highlight this, we've included a slide in our presentation to display the adoption timing of immersion calling as AI developed in the years ahead.
Denise Dignam: Over time, we believe two-phase emergent cooling will become more pronounced with the market adoption of the third and fourth generation of chip.
Denise Dignam: Ultimately, as these chip technologies advance, Tuesday's emerging polling becomes the most effective polling solution.
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Denise Dignam: To briefly touch on our two-phase direct-to-chip offering, this product will enable the use of higher efficiency fluids that can be retrofitted into existing single-phase direct-to-chip applications.
Denise Dignam: Our participation in this market does not require any new capital investment, leveraging an existing product portfolio and R&D expertise.
Denise Dignam: Well, an important incremental offering for the market. The portion of our anticipated sales in this space will serve as a small portion of our overall liquid polling opportunity.
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Denise Dignam: Based on our latest understanding of the market development over time and the TAMF for liquid cooling, we now anticipate that the market will achieve a $3 billion liquid cooling fluid market TAMF by 2035 and $1.5 billion by 2030.
Denise Dignam: Distributing TAN is reflected of the expected market for the fluid itself and exclude additional equipment which was included in our earlier estimates
Denise Dignam: Considering our positioning in the market as the only provider of next-generation emerging-calling fluids, we anticipate being a key participant.
Denise Dignam: This could vary as AI and the underlying chip market develop.
Denise Dignam: We remain very optimistic about our participation in this exciting market and look forward to sharing more with you as we grow in this space in future periods.
Denise Dignam: Under our portfolio management pillar, we continue to make notable progress under our previously announced European assets reviews through the exit of our SBS business and continue to review the remaining assets under consideration.
Denise Dignam: Outside of our ongoing portfolio efforts, we also continue to focus on planning our product to hire value applications which would clear an APM's improved performance solutions results more than off-studing declines in APM advanced materials.
Denise Dignam: Lastly, in our fourth pillar strengthening the long term, we remain focused on advocating for the criticality of our chemistries ensuring that we make measurable progress on addressing legacy liabilities and use the best science analytical methods and data to support our responsible manufacturing practices.
Denise Dignam: In the first quarter, we engaged with policy makers and advanced advocacy efforts to highlight the importance of Chemours' essential chemistry amid the evolving U.S. trade policy landscape and EU regulatory landscape.
Denise Dignam: In parallel, we continue our ongoing commitment to responsible manufacturing practices.
Denise Dignam: We also remain focused on actively resolving legacy liabilities, including ongoing preparations for upcoming litigation matters, including those related to the New Jersey DEP.
Denise Dignam: In our supplemental debt, we've included a slide highlighting the progress we've made to resolve legacy litigation since our inception as commores.
Denise Dignam: We believe that this summary reflects the substantial progress we've made over time and in the summary of what remains.
Denise Dignam: We have this as a strategic pillar, as we see it as a key area to resolve in order to drive shareholder value, we will seek to resolve these matters as prudently as possible.
Denise Dignam: I'm proud of the significant progress we've made to date in executing our pathway to thrive strategy. We believe our notable progress against each of these strategic pillars is essential to driving long-term success, and value creation for commores across our three businesses.
Denise Dignam: To add, I would like to briefly address a question I often receive around the current Chemours portfolio that there's a quicker way to return shareholder value considering our
Denise Dignam: I can assure you that management and the board have assessed all the possibilities with our business and we believe it is essential to drive execution of our transformation strategy.
Denise Dignam: More specifically, resolving legacy litigation, improving our operational performance, and stabilizing our balance sheet to enable such flexibility as Shane can be our essential components for these returns.
Denise Dignam: I would like to thank all our employees for their continued dedication and efforts that have made our progress this quarter possible, and enabled us to continue advancing our Pathor to Thrive strategy.
Denise Dignam: I look forward to providing future updates on our operational and financial performance and delivery against our pathway to thrive.
We can now open the line up for questions.
Speaker Change: Thank you. To ask a question, please press star 11 on your telephone and wait for your name to be announced.
Speaker Change: and to withdraw your question, please press star 1-1 again. And our first question comes from John McNulty with BMO. Your line is open.
John Mcnulty: Good morning, and thanks for taking my question. So I guess I had a question on the strategic venture that you announced yesterday on the nav in flooring. I think that's how you pronounce it.
John Mcnulty: Can you help us to think about how much capacity they can provide you? I also know you were targeting commercialization and being able to deliver some product in 2026, I guess.
John Mcnulty: Can you help us to kind of frame that and how this fits into that as well as if you have any orders at this point or expect to have any orders starting in 2026.
Speaker Change: Hey John , thanks for the question. Yeah, we're super excited about the work we're doing with Naveen. This is really a critical step in our commercialization. As you saw in the deck, we kind of laid out the different steps for the commercialization as we move into more field trials, this is going to be really important.
Speaker Change: We're investing about $14 million in the asset and we've aligned the size of the asset really in two components. One is the stage of commercialization we're in, but also, you know, understanding that we want to refine the process technology for future scale-up.
Speaker Change: When you think about a field trial, you know, think about, you know, two to five tons would be needed. We've announced a field trial with NTT, so we have the opportunity to do dozens of field trials and more position to add additional volume as we get those customer commitments after the field trials.
Thank you.
Speaker Change: Got it. Okay. And then on T.I. I guess a couple of questions on that. One, did I hear right that you guys are expecting
Speaker Change: 2025 EBITDA to be up, verse 2024. I thought that was what Shane said, but just wanted to clarify. And then
Speaker Change: Maybe more importantly, on the, on the or savings that you're talking about, I think you said a hundred to a hundred and fifty million. Is that working capital savings or is that actual cost that will hit the bottom line? And I guess in terms of the phasing in of that, it sounds like there are two contracts that you're, that you're dealing with one comes to an end in 26, one in 27. Do they, does that saving phase in evenly or is it, is it lumpy from one year to the next? I guess how should we think about that? Yeah, that's a lot of money. I don't know. I don't know. I don't know. I don't know.
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Shane Hostetter: John , thanks for that question. I'm going to kick it off, and I'll turn it over to Shane. But I think, you know, this is an example of the new management team and how we are leaving no stone unturned aligned with our operational excellence pillar. So I'm going to... Yeah, that's fine.
Speaker Change: Going into the hybrid or in this contract, I think I've been pretty transparent on optimizing cash diversion and really thinking through how to do such and this is really just an area we've honed in on as we continue to look at inventory spend.
Speaker Change: You know, as you think about phasing on such, it really is a cash flow oriented item. You know, as we think about the back end of 26 is where you'll see some of that come in. And really certainly as you enter into 27, given that's when the last contract's up. And the range of it's about 100 to 150 million in cash flow.
Got it. Thanks very much for the collar.
John Roberts: And our next question will come from John Roberts with Mizzouho. Your line is open.
John Roberts: Thank you. Could you discuss maybe the timing on the dividend cut why now? And why not just eliminate the dividend completely here?
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Sure. Thank you, John.
Speaker Change: I've been pretty transparent through the last nine months about having a balanced and disciplined capital allocation policy on that side, and in those priorities we really started with focused growth investments.
Speaker Change: and prioritizing improving liquidity as well as, you know, finally, physically and responsibly settling the abilities. We really believe the resizing of the dividend allows us, you know, the flexibility of the balance sheet, you know, to really execute on these priorities and really strategically grow the company through pathway to thrive.
Speaker Change: You know, notably, you know, I think this really aligns us with an appropriate payout that is still attractive to the Kim's and industrial space while providing us a decent amount for flexibility in the balance sheet.
Speaker Change: and then your Option competitor here in the U.S. has been asked to pretty hefty surcharge, related to the tariffs. What are your pricing expectations for Option here in your term?
Speaker Change: Thanks. We don't really talk about pricing, competitive pricing, but you can see the proof is in our results. We're a really strong performer with our franchise. We're really focused on the transition and supporting our customers.
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For more information visit www.FEMA.gov
Thank you.
Speaker Change: And the next question comes from Pete Osterland with Truist. Your line is open.
Hey, good morning. Thanks for taking the questions.
Pete Osterlin: First, just one of the ads on PIO2 pricing. How have PIO2 prices been trending in the more regulated markets where you're seeing stronger, volume growth? With any of the sequential decline for pricing in the first quarter in those markets, and what are you expecting from pricing in those markets in the second quarter and beyond?
[inaudible]
Pete Osterlin: Great, thanks. And then I just wanted to ask on segment margins in TT. Will there be any lingering impact from the weather-related outages that would roll into the second quarter? Do you have any higher-clothed inventories to work through and if so could you size the impact?
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Speaker Change: In fact, notably, we did have some one-time calls come through related to this, whether items in Q1, that we've talked about this being kind of a one-quarter item whereby we will see some tailwinds and that really contributes to the guide that we're seeing in growth and earnings from Q1 to Q2. You know, outside of that, we don't see impacts at this time related to any other operational issues.
Great. Thanks for the color.
Lawrence Alexander: And the next question comes from Laurence Alexander with Research Analyst. Your line is open.
Good morning. It's a two quick quick ones. First on the
Lawrence Alexander: What are you seeing in terms of effective capacity shutdowns in Asia? And can you just give a benchmark for how much?
Lawrence Alexander: You expect to come out of the market and how quickly, and then secondly, can you touch on deregulation and just regulatory trends and how you're thinking about positioning for the next iteration of the auction life cycle. Thank you very much.
Ignition by the industry in China themselves that there's an issue with.
Lawrence Alexander: with Supply, and just looking at trends with other markets where when you see this happening, you have seen China pullback on capacity increases as well as shuttering. So we see more to come in that area.
Lawrence Alexander: The AMAC, and we don't see any change there. Actually the Trump administration signed the first.
Lawrence Alexander: The First Amact, and as we move forward, we're continuing our innovation and continuing to work on next-generation refrigerants that are going to be driving down global warming potential even more.
Thank you.
Speaker Change: And the next question comes from Arun Viswanathan with RBC Capital, Your Line is Open.
Speaker Change: Great. Thanks for your question and congrats on the results there. Just on TSS, first of all, I just wanted to understand that your comments a little bit more on the supply tightness in both content and refrigerant content as well as cylinders.
Speaker Change: When do you expect some of this tightness to be alleviated and what measures are you taking to address that? It sounds like it's kind of short lived but why do you believe that and again on the
Speaker Change: Other cylinders, and then similarly on R32, what can you do there to maybe broaden your supply base? Thanks.
Speaker Change: Party Operations, and we see this normalizing in the next couple months.
and then just on the updated capital allocation approach. So, uh...
Speaker Change: You know, you thought that it would be better use of your capital than the dividend, maybe just quantify from a CapEx perspective and maybe some kind of returns metrics or anything like that, we could use to see how you came to that decision or how the board did at least Thanks.
Speaker Change: Thanks for the question. We're going to be spending our capital completely aligned with our pathway to thrive. We have high priority investments in our next generation, refrigerants, immersion cooling.
Speaker Change: Markets. You know, we don't get into specific return hurdles on these calls, but I just really want to make sure, you know, that we have obviously looking at such from a payback and IR perspective that is comfortably over our weighted average cost of capital.
Speaker Change: and also Arun, you had asked earlier about the dynamics of R32. I think it's important as we think about that supplied dynamics that we emphasized. We have a pretty good network outside of the US as related to the R32, as well as we do significant amount of blending in areas outside of the US, namely in Mexico. And finally, we're working very well with our customers to think through those
Thank you.
Thanks.
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Josh Spector: And our next question comes from Josh Spector with UBS. Your line is open.
Josh Spector: You can potentially get towing agreements to scale that up in a capital light way for comores or would you still require comores to make a larger owned facility investment to scale that up?
[inaudible]
Speaker Change: Hey Josh, thanks for the question. Your read of what's the purpose of this capacity and the size is right on. You know, as we move forward into commercialization, we're always looking at how to best use our capital, what's the most prudent way. And we haven't decided yet on what the structure is going to be, but certainly we'll be looking for partnerships with customers as we go forward.
Speaker Change: Okay, that makes sense. And just on TSS at a high level, if Paris stay where they are today.
Josh Spector: Is that a positive or a negative for Commores? Just considering your production base and purchases versus the market at large, how would you characterize it?
Josh Spector: I would say that it's really not a negative or a positive. I mean, we basically have over the years developed great flexibility in our supply team. We have lots of options, so it's really not something that stands out.
Josh Spector: Well, I guess what I'm trying to figure out is does the market ex-commours have more of a negative impact because there's more imports, maybe more of a U.S. base? Does that benefit it commours or would you say the same thing as the market at all?
Josh Spector: I think that I don't really have a strong opinion on that. I think our main focus is really around transitioning to Option and that portfolio. So, I guess I would say I don't think from a competitive standpoint, it's really, I think it's more neutral.
Okay. Thank you.
Josh Spector: And our next question comes from Duffy Fisher with Goldman Sachs. Your line is open.
Yeah, good morning. A couple of questions around TSS. So,
Josh Spector: First, on the pricing embedded in your free-on numbers from Q1, if you compare that to the Chinese pricing today just to say, you know, how much farther could you fall to a floor? What's the Delta between your realized pricing and let's say commodity pricing in China today and free on HFC products?
Shane Hostetter: Hey, Delta, this is Shane. As we think about the pricing, we talk about stability and pricing in the U.S. on that side. We really have not gotten into where the floor might be compared to China pricing, but the most important thing to think about as it relates to the dynamics here is we're really focusing on the HFO side with Option and transferring that. That's really where our photo allocation is being distributed. We're in the aftermarket.
Shane Hostetter: Bill on the HFCs, and we'll continue to be diligent around that side. But at the same point is we're really excited about the transition and really the profitability and margin analysis on the HFCs side under our town.
Okay.
and then can you explain?
Shane Hostetter: The dynamics, it seems like what you're doing is you're bringing product into Mexico that might be from countries with higher tariffs than Mexico would have, and then you're changing the product enough through blending that it would carry basically the Mexico equivalent coming into the US and not the origin country. Is that generally what the strategy is here with both HFO and HFC products?
Shane Hostetter: The answer to that is, yes, we are doing a lot of blending in areas like Mexico. I don't think the strategy is to bring Mexico to Belend and bring it over to the U.S., so as to, you know, do anything for the circumvention side or any of that side. It's really that our focus is the OEMs that are local to Mexico and other areas in that side and that's where those products are going.
Okay, thank you.
Shane Hostetter: And the next question comes from Vincent Andrews with Morgan Stanley . Your line is open.
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Shane Hostetter: Good morning, everybody. Thanks for taking the time. This is Justin on for Vincent. I was just hoping you could help us understand the assumptions within the low-end, 50% in the high-end, 80% cash flow conversion for two-h. How much of that range is just dependent on stronger weaker EBITDA in the back half, and are there any working capital assumptions that change from the low-end to the high-end of that guidance? Thank you. Thank you.
Shane Hostetter: Yes, thank you. Great question on that side. I think the influence to the range is two factors. One is obviously just the unwind of the working cap on our execution upon the initiatives that talked about to really generate and emphasize cash co-crumbs.
Shane Hostetter: The other side of that is dynamics between earnings on the lower versus higher range and the impacts to where working capital would go related to higher or lower sales on that side.
Shane Hostetter: Understood, thank you. And then you cited lower investments in 2-H within that cash flow framework. Is that incrementally lower investment or, you know, were those projects pushed out or canceled? Or is that kind of the same level that you are expecting going into the year? Thank you.
Brandon Hostetter, Brandon Ontjes, Denise Dignam
[inaudible]
Wonderful. Thank you for the time.
Mike Lighthead: And the next question comes from Mike Leithead with Barclays Your Line is open.
Mike Lighthead: Great. Thanks. Good morning, team. First, I just wanted to poke on the TIO2 or side of things. As you think, bigger picture about your strategy, given or seems to have been a headwind, how do you think about potentially back integrating more into the or operations going forward?
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Speaker Change: Hey Mike, thanks for the question. You know, as you know, we have we have mind. We are, you know, about 15% backward integrated today. We're very focused on, you know, the productivity of those minds. But really our strategy and our core strength is really the diversity of ours that we can that we can process. So our work and our investments are really more on innovating.
Mike Lighthead: being able to process even cheaper or so that's really our strategy versus more backward integration.
Mike Lighthead: Got it, that makes sense. And then second, on the liquid cooling front, if everything goes to plan from here today on your four-step pathway to serve the market, when would be the earliest adoption and sales we should see into data centers occur?
Mike Lighthead: Yeah, and what we said is that really it's really the back end of the decade where we would start to see sales.
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Mike Lighthead: We have reached the end of our question and answer session. Thank you for joining the Chemours Company First Quarter in full year 2025 results conference call. You may now disconnect.
Speaker Change: Katie Dillard is a singer, positional therapist, and director of the Rainbow Melody Club. It was her work ethic that allowed her to cultivate and develop her musical style at both high school, college and college levels.
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