Good morning, everyone, and welcome to the Tronox Holdings Q4 2023 Earnings Call. All lines are currently in listen-only mode. After the presentation, we will have a question-and-answer session. I would now like to hand over the call to Jennifer Guenther, Chief Sustainability Officer and Head of Investor Relations. Please proceed.

Thank you, and welcome to our fourth quarter and full year 2023 conference call and webcast. Turning to slide 2. On our call today are John Romano and Jean-Francois Turgeon, Co-Chief Executive Officers; and John Srivisal, Senior Vice President and Chief Financial Officer. We will be using slides as we move through today's call. You can access the presentation on our website at investor.tronox.com. Moving to slide 3. A friendly reminder that comments made on this call and the information provided in our presentation and on our website include certain statements that are forward-looking and subject to various risks and uncertainties, including, but not limited to, the specific factors summarized in our SEC filings. This information represents our best judgment based on what we know today. However, actual results may vary based on these risks and uncertainties. The company undertakes no obligation to update or revise any forward-looking statements. During the conference call, we will refer to certain non-U.S. GAAP financial terms that we use in the management of our business and believe are useful to investors in evaluating the company's performance. Reconciliations to their nearest U.S. GAAP terms are provided in our earnings release and in the appendix of the accompanying presentation. Additionally, please note that all financial comparisons made during the call are on a year-over-year basis unless otherwise noted. It is now my pleasure to turn the call over to John Romano. John?

Thanks, Jennifer, and good morning, everyone. We'll begin this morning on slide 5 with some key messages from the quarter. We delivered fourth quarter top line performance in line with expectations. TiO2 sales volume declined approximately 4% in the quarter compared to the third quarter. Volumes were slightly lower than expected due to more seasonality in North America than anticipated, and we also experienced some shipment delays as a result of congestion in the Red Sea that delayed some stock transfers to cover our Botlek outage in Europe. Our TiO2 pricing was only down 1% compared to the third quarter, which was better than our previous guide. Our zircon volumes increased 82% versus the third quarter, higher than expected and communicated on our last earnings call. However, we did experience some unfavorable product and regional mix, which negatively impacted our marginal quarter. Zircon pricing was down 9% compared to the third quarter, due to product mix and some regional pricing adjustments, primarily in Asia Pacific. Revenue was also higher from other products due to additional sales of pig iron, as well as opportunistic sales of ilmenite and a portion of our rare earths tailing deposit in South Africa, which is a key part of our funding strategy for our rare earths business. Our adjusted EBITDA for the fourth quarter came in $11 million below our guided range. This was primarily driven by a delayed restart of our steam supplier at Botlek and higher costs from unanticipated downtime stemming from running at lower rates, while the Botlek situation is now under control, and our supplier is back up and running, we saw approximately $10 million more in cost than forecasted, due to the longer downtime. Importantly, our supplier outage did not disrupt our ability to fulfill customer demand as we were able to reposition inventory from our other global assets to meet customer demand in Europe. We expect to recover at least $15 million in insurance proceeds in 2024, as a result of the downtime at Botlek in the second half of 2023. This amount represents the cost incurred to continue to provide uninterrupted service to our customers while working around the supplier outage. The operating challenges we experienced in the last six months are indicative of the standard we hold ourselves to at Tronox, and we're addressing these challenges head on in 2024. In 2023, we ran at the lowest utilization rates on record in order to manage inventories and free cash flow in light of the lower market demand. As we look into 2024, we're adjusting our operating rates to support the recovery currently underway. This will set Tronox up to realize a step change in our earnings power after we work through the remaining high-cost inventory on the balance sheet. Our free cash flow for the quarter came in higher than expected at $51 million despite the lower than forecasted earnings owing to our cash management initiatives. We saw a positive inflow of nearly $60 million from working capital in the quarter. I'll let John run through more of the year end numbers from the balance sheet, but we're very comfortable with where we are from a liquidity and debt perspective. Despite the lower market demand, we took action at the right time in 2023 to bolster the balance sheet and ensure we had sufficient liquidity. I'm proud of how our team has proactively prepared for varied scenarios, and Tronox is very well-positioned as we stand today, especially considering the key capital projects we planned for 2024 which we'll discuss a little bit later on the call. Turning to slide 6, I'll now review a few updates on some of the key sustainability initiatives. We are nearing the conversion of 40% of our power in South Africa to power from the significant solar project we helped develop in partnership with the SOLA Group. This project is one of South Africa's largest solar installations. We expect to receive power in the coming months, which will significantly reduce our carbon emissions globally and mark the first significant step on our journey to net zero in 2050. Renewable power and energy efficiency projects are key to achieving our 2030 greenhouse gas emission reduction target of 50%. So we're excited to mark such a significant milestone. We have another renewable project development in South Africa that we hope to provide more details on soon. Also underway are various initiatives to achieve our stated targets towards reducing our waste to external landfills. This includes exploring alternative uses for waste in a number of opportunities including cement, road base, bricks and water treatment chemicals. We are also continuing to evaluate opportunities to extract valuable minerals and metals from waste including rare earths, scandium, and vanadium. We're excited about the progress we've made and look forward to continuing to update you on our journey. I'll now turn the call over to John to use some of our financials for the quarter in more detail. John?

Thank you, John. Turning to slide 7. Revenue of $686 million increased 6% compared to the prior year, primarily from TiO2 and other product sales. This represented an increase of 4% relative to the prior quarter due to higher zircon and other product sales. Income from operations was $8 million in the quarter. We reported a net loss of $56 million. Our effective tax rate in the quarter was 75%. Despite generating a loss before income taxes, we paid $24 million in taxes in the quarter as the majority of our taxes are paid in South Africa where we had higher earnings than expected owing to higher zircon sales in the sale of a portion of our rare earth tailing deposit. In the majority of our other jurisdictions, we either realized a net loss or FNOL positions. As a result, our adjusted diluted earnings per share was a loss of $0.38. As previously discussed, our adjusted EBITDA in the quarter was $94 million and our adjusted EBITDA margin was 13.7%. Free cash flow generated in the quarter was $51 million. Now let's move to slide 8 for a review of our commercial performance. TiO2 revenues increased 9% versus the year-ago quarter driven by a 16% increase in sales volume, a 6% decrease in average selling prices and unfavorable product mix impact of 2%. We saw a favorable impact from FX of 1%. Zircon volumes decreased 26% compared to the year-ago quarter and zircon pricing was lower by 11%. Revenue from other products was $110 million, an increase of 38% compared to the prior year driven by higher sales of pig iron, ilmenite, and rare earth tailings that John previously mentioned. Turning to slide 9. I will now review our operating performance for the quarter. Our adjusted EBITDA of $94 million represents a 17% decline year-on-year, driven by lower average selling prices and higher operating costs due to lower production rates. This was partially offset by improved sales volume and product mix, favorable exchange rate tailwinds, and lower freight costs. Sequentially, adjusted EBITDA decreased 9% driven by higher operating costs due to lower production rates and lower product pricing. This was partially offset by improvement in sales volume and product mix, exchange rate tailwinds, and lower freight costs. As we mentioned previously, we brought down our operating rates in order to manage inventory and cash, which had an unfavorable impact on our costs in the fourth quarter and across the year. Quarter-over-quarter production cost increases of $40 million included $16 million of higher costs associated with lower absorption and higher input costs, $12 million of lower cost or market and idle facility charges due to lower production rates, and $9 million of higher mining costs. Turning to slide 10. I'll now review our financial position. We ended the quarter with total debt of $2.8 billion and net debt of $2.6 billion. Our net leverage at the end of December was 4.9 times on a trailing 12-month basis. While we ended the year with higher debt than the prior year, the incremental term loan of $350 million raised in the third quarter reinforced the strength of our balance sheet and bolstered available liquidity ahead of anticipated critical vertical integration-related capital expenditures. Our nearest term significant maturity remains 2028 and we have no financial covenants on our term loans or bonds. Our weighted average interest rate in Q4 was 6.17%. We maintain interest rate swaps such that approximately 73% of our interest rates are fixed through 2024 and approximately 64% are fixed from 2024 through 2028, aligning with the maturity of our term loan. As a result, we do not expect to see our average interest rate increase significantly in the year. Total available liquidity as of December 31st was $761 million, including $273 million in cash and cash equivalents, an improvement from our Q3 levels and owing to positive cash generated in the quarter. Capital expenditures totaled $59 million in the quarter. Approximately 65% of this was for maintenance and safety and 35% was for strategic growth projects. DD&A expense was $69 million for the quarter. We've returned $20 million to shareholders in the form of dividends in the quarter. We'll now turn the call back over to John Romano for some comments on the year ahead and our outlook. John?

Thanks, John. We expect 2024 to see a reversal of several of the trends from the last 18 months in the market. We've already begun to see a pickup in demand for TiO2 that is more positive than we typically see at this time of year. January sales were strong and we're seeing continued strengthening in the market for February and March order books. We expect TiO2 pricing to reverse its downward trend and improve as we move through 2024. Zircon volumes are also continuing to improve from the trough levels realized in July of 2023. The magnitude of the recovery will be somewhat dependent on China as it makes up 50% of the total zircon market. However, even without that significant shift in China, we're seeing demand recover. On the operational side, as I've mentioned previously, we incurred significant costs in 2023 from running our assets at low utilization rates due to soft market demand. We incurred between $25 million and $35 million in fixed cost absorption headwinds in each quarter of last year. In 2024, we're already beginning to increase our operating rates in line with demand, which will have a positive impact on our manufacturing cost. We still have high-cost inventory to move through the business, which we anticipate will carry partially into the second quarter. But by the second half of the year, we should see margins revert to our more normalized levels. We continue to deploy technology at our sites to reduce costs and improve efficiencies, which will also improve our cost position as we ramp up. We are investing in key capital projects to sustain our vertical integration as well. From a growth perspective, R&D efforts remain focused on product and process innovation to enhance profitability. Additionally, we're continuing to explore opportunities in the rare earth space. As rare earths are already present in the heavy mineral sands we mine in South Africa and Australia, we are continuing to explore opportunities to increase value from these heavy minerals. We are also continuing to drive our sustainability initiatives, which not only are critical to preserving our privilege to operate but also support Tronox's value proposition. We'll continue to challenge ourselves to be a leader in this regard. Moving to slide 12, I'd like to spend some time reviewing two of our key capital projects for 2024. This year we'll be investing $130 million in two key mining projects in South Africa to replace our existing mines, which are reaching the end of their lives. The investment in these projects was delayed in 2023 to preserve cash given the lower market demand. These investments will maintain our more than $300 a ton advantage relative to market pricing for feedstock. Each project is expected to generate IRRs in excess of 30%. These are critical projects to maintain Tronox's vertically integrated strategy that will continue to enhance our position as a leading TiO2 producer and the industry's leading financial performance. Turning to slide 13, I'll review our outlook for the quarter and the year ahead in more detail. In the first quarter of 2024, we expect TiO2 volumes to increase 12% to 16% and zircon volumes to increase 15% to 30%, both compared to the fourth quarter. We expect both TiO2 and zircon pricing to remain relatively flat in the quarter. While we expect a headwind from non-repeating sales in other products, this will be offset by some improvement on fixed costs due to our higher operating rates. As a result, we're expecting Q1 2024 adjusted EBITDA to be $100 million to $120 million and adjusted EBITDA margins to be in the mid-teens. While we're not providing full year EBITDA guidance, we did want to provide a view on our expectations for our 2024 cash uses. Our capital expenditures are expected to be approximately $395 million for the year. Our net cash taxes are expected to be less than $10 million as the significant capital expenditures in South Africa are deductible. Our net cash interest expense is expected to be $145 million, and we're expecting working capital to be a tailwind, and the magnitude of that tailwind will depend on how significant the market recovery is this year. Our strategy remains largely unchanged. We're prioritizing investments in the business that are critical to furthering our strategy and driving value from our vertically integrated portfolio. Even at this investment level, we expect to generate positive free cash flow for the year. We will also be focused on bolstering our liquidity and as the market recovers, we'll look to resume debt paydown. We will continue to evaluate strategic high-growth opportunities as they arise. Currently, we're focusing on the rare earth space and we will keep the market updated on any key developments. That will conclude our prepared remarks, and we'll now move to the Q&A portion of the call. So, I'll hand the call back over to the operator to facilitate.

Thank you. Ladies and gentlemen, we will now begin the question-and-answer session. Your first question comes from John McNulty with BMO Capital Markets. Please go ahead.

Good morning. Thank you for taking my question. My first inquiry is regarding your positive outlook on TiO2 volumes for the first quarter. Are you noticing any geographic differences in demand, or is it fairly widespread? How should we interpret this?

Thanks for the question. In the first quarter, we're seeing broad demand across all sectors. We experienced slightly more seasonality in the North American market during the fourth quarter, but now we're noticing an uptick in that market. Typically, Q1 and Q4 sales are similar, so this increase in Q1 sales is notable. Based on observations from our customers, we believe that destocking has mostly concluded, and customers are beginning to restock and revert to more standard buying patterns. Historically, our business tends to lead through economic transitions, and we feel we are at the beginning of a recovery, positively influencing our outlook for the entire year.

Got it. Okay. Fair enough. Regarding the fixed cost absorption this year, you mentioned in one of the slides a hit of $25 million to $35 million per quarter. That translates to about $100 million to $150 million for the year, which is significant. Is there a way to determine the volume levels needed in 2024 to completely offset that? Or is there a general guideline we should consider as the fixed cost absorption challenges diminish?

That's a great question. I'll start and John maybe you can add on to it. So historically, wind the clock back four quarters, we were I think 18 months in a row consistently above 20% EBITDA margins. And we quoted something just below 14%. So running at the rates that we've been running at which, again, we made the point that it's lower than what we've ever historically run, we believe that where we're ramping up right now, and we're not at full capacity. We're ramping up the assets that as we move through the first quarter we'll start to get to volumes. And I'd say, capacity utilization, which should get us back to, I would say, mid to normal run rates on EBITDA margin, but we also have to think about the inventory that we've got to work through. So, I made the reference on the call that we've got inventory on the balance sheet. We're going to have to work through that. It's probably going to work its way probably halfway through the second quarter. But by the second half of the year, you should start to think about those normal low to mid-20 kind of run rates on EBITDA margin. And that's without a lot of movement on price.

And John, I would add that on the mining side of our business, remember last year we mentioned that the drop was so significant that we had to slow down our mine. Our mine and smelter operations are high fixed cost operations, and we're back to running those assets at full capacity in 2024.

Got it. Okay. No, that's very helpful. Thanks very much for the color.

Thank you. Good morning. John, you mentioned the prospects for higher pricing in H2 this year. What do you think will manifest first in the region and by what end-markets and customers?

We usually don't provide a lot of regional insights on this, but I expect that in the first quarter, pricing will remain relatively flat for both zircon and TiO2. We did mostly see rollovers extending into the first quarter of 2024. As we move beyond the first quarter, we should start exploring pricing opportunities across all regions. There is a lot of activity, and we have received numerous inquiries regarding antidumping. What we're discussing now is separate from the antidumping issue. If it does occur and provisional duties are implemented, that could impact this situation. However, what we're currently seeing in the market shows signs that indicate pricing could begin to rise. It won't happen in the first quarter, but we are optimistic about some movement as we enter the second quarter.

John, regarding the antidumping situation, have you noticed any changes in negative behavior due to this investigation? Also, what do you think is the timeline for the European Commission to take action?

The formal investigation from the Commission started when the coalition was formed back in November 2023, coinciding with the filing of the dumping suit. We anticipate that the formal investigation will wrap up in the second quarter, but the final recommendation will not occur until the fourth quarter. There is a chance that provisional duties could be implemented as early as the second quarter, although that remains uncertain. In terms of significant buying changes, we are noticing a slight uptick, but it is not substantial. There is some export activity occurring that aligns with expectations following the filing of the dumping suit in the EU.

Yeah. Hey guys, this is James Cannon on for Josh. Thanks for taking my question. Just if we go back to kind of the comments you gave on the project of the mining projects you're doing in South Africa? Can you just give a little color as to the rationale behind moving forward with them now as opposed to once we've gotten back to kind of a more steady state? I mean it seems like with the mining rates having come down last year there would be additional capacity to kind of lift rates elsewhere in the system and maybe not require that CapEx at this stage?

Last year, we postponed our projects in South Africa, with one being further developed than the other. We need to approach our business with a long-term view, especially since mining projects necessitate a longer timeframe compared to clay earnings. We believe that the delay we implemented last year was justified. We focused on strengthening our liquidity to ensure we could invest in these projects, as they are intended to replace mines that are nearing the end of their operational lives. To maintain our zircon and ilmenite volumes for our smelters, these are essential long-term projects. We have a five-year plan for our TiO2 business and a 20-year plan for managing our mining operations. We feel that our current actions are not only appropriate but also essential for sustaining our long-term business.

Okay. Thanks. And then just on timing with those – can you give some commentary on when you anticipate those to start producing and whether or not there will be any drag on OpEx or absorption as those do start up?

So in both of those mines, there will be basically a transition from the end of the mine of the previous one to a transition to the new one. So there shouldn't be a lot of lag or lead time moving in; it's all timing as we move out of one body of ore we'll be moving into another one. So there shouldn't be a lot of transition. Obviously, as we're bringing up some of the mining equipment, there could be a little bit of transition but we don't expect that to be a drag.

I think as we start new mines, obviously, there's the whole resource there, and we do optimize to bring out the higher value material earlier on, so we would expect and when those mines come online to see some positive benefit.

Hey, good morning, guys. If you could – your CapEx assumption for this year is $395 million. Your operating cash flow last year was $184 million. So to be free cash flow positive this year, that means you need to grow your operating cash flow a little over $200 million this year. Can you just walk through how you see those buckets coming through? How much of that would be an improvement in EBITDA? How much of that would be things like improvement in working capital? Anything else on the cash flow statement kind of before the operating activities that would get us at $200 million plus?

Yes. Duffy, thanks for that question. And we aren't guiding for the full year. So from an earnings perspective, we are optimistic obviously, expect an improvement year-over-year and ultimately our free cash flow, the scope and size of that positiveness, we expect will depend on market dynamics there. But from a working capital perspective, that's the earnings and working capital are the biggest drivers. Obviously, we guided on interest negative $145 million taxes less than $10 million. And as you mentioned, CapEx of $395 million, so we do expect both free cash flow and working capital to be positive. From a working capital perspective, we do see – obviously, sales are going up; the AR is going to be hurt but that obviously is a good working capital use there. And we do see inventory – we are building some inventory, and that plays with inventory and AR will all depend on top line sales growth. We do expect payables as well to be a source of cash as we are actively managing that throughout the year. So that's kind of where we are on free cash flow.

And just generically from the operating side again, we talked a couple of times about running at – I think we've even thrown numbers up, 70% capacity utilization for over a year. And as we started to ramp up those assets as early as December of last year into the first quarter, obviously a little teething as you start to move up from those lower rates. So, it wasn't super smooth to get to where we are today. But now those assets are running – so when you think about that $25 million to $35 million a quarter that we talked about as a negative due to fixed cost absorption, we'll start to see similar results. And some of these unplanned outages that we have will be added on to that. So there'll be a significant portion of that. So when we think about the growth, it's obviously price is an opportunity, but running our assets at rates that are at a more normalized level which are in line with what we've historically seen on EBITDA margins as I mentioned before, is going to be a big driver in our profitability.

Okay. Thank you. And then there have been several reports out of South Africa with two of their larger unions in the mining industry kind of fighting and there's I guess been some kidnapping and stuff like that. Do you have both of those unions in your operation? Or are you kind of a single union? And then again, so are you seeing any issues with your operations or any of the other TiO2 operations in South Africa?

Duffy, I mean, I can tell you we only have one union in our case, and we're lucky to be in an area where there is no rivalry and no issue between the union. Look, we have always stated that our approach in South Africa is to work with our community; our workers are not remote workers, they're local and they are members of the community where our mine and smelter are located, and that makes a huge difference with the dynamic. Often, all those issues that we heard about South Africa are related to where workers are like remote in mining, and we don't have that issue at our mine.

Great. Thank you, guys.

Thanks very much. I think your TiO2 volume for the past two years is down about 15% each year. How do you think the industry shrank over 2022 and 2023. How did you do compared to the overall industry?

Yes, thank you, Jeff. You're correct. Over the past two years, our volumes decreased by roughly 27%, translating to about 15% per year, which is an accurate reflection. China has obviously experienced growth, and I know you closely monitor exports from China. China has seen significant growth, particularly in the Asia Pacific region, with India also becoming a major importer of Chinese materials, affecting much of Asia Pacific and not just China. Over time, we've likely lost a bit of market share to Chinese companies, as we chose not to compete in certain areas where it was less viable. However, I believe other companies may have been impacted even more than we were. Our chloride capacity has allowed us to mitigate some of these challenges. We believe we can compete directly with the Chinese; there are many initiatives underway, particularly in managing our position in the European market. However, I expect the market will continue to grow, with China capturing a disproportionate share of that growth in recent years.

Thank you for that. Can you provide an update on Project Neutron? Specifically, how much more funding is needed, what savings have been realized, and what potential savings are anticipated? Where do we currently stand on this?

For 2024, we still have around $20 million available for spending. We're planning additional launches of S/4HANA in the Asia-Pacific region starting in July this year, and we're currently navigating that process. John, you may want to elaborate on some of the opportunities we're seeing. We are considering automated process control tools, which is Tronox's operational information system, to optimize our assets. Initially, we experienced a significant amount of additional value from volume, which we haven’t observed yet. I expect we will start to see that increase towards the end of this year and into next year. But John?

Yes, John, that's correct. We still believe in the benefits we anticipate from Neutron, which we have historically estimated at $150 to $200 per tonne. A significant part of that has already been realized through procurement savings, although it was somewhat obscured by the substantial increases we’ve experienced in recent years. From a volume standpoint, we mentioned that those are currently on hold, but we believe some of those advantages will increase as we ramp up our assets. We still expect to remain within that range. As John noted, we've deployed in the Asia-Pacific, but we need to address systems aspects. However, we have implemented some of the other operational enhancements across multiple sites, and we anticipate seeing the resulting benefits from a volume perspective.

And this is Jennifer. Just if I can add. We are seeing benefits at a site level from the deployment of some of the technologies like automated process control. So, for example, we're seeing reduced coke consumption in our chlorinators. When you look at a like-for-like comparison on the volumes produced, it's just a bit masked because of the low run rates that we're operating at. But for example, this did have a positive effect on our GHG emissions. It reduced our intensity because we're more efficient for the tonnes we're producing. So, we are capturing benefits, not all of them necessarily on the P&L. We're seeing them on the sustainability side of the business. But as we ramp our assets back up, we would expect to consume lower raw materials like coke in our chlorinators per ton of TiO2, and this should translate to benefits on the P&L.

The spending is nearly complete with only $20 million remaining, which is relatively small. As we increase our operations, we should begin to see the benefits. Is that the general understanding?

Yes, that's correct. And just to Jennifer's point, I mean, the whole idea about that one automated process control on our chlorinators, we have 24 across the system. Last year, I think we finalized the implementation of all of that across the entire system. So, again as we start to ramp up the assets, we'll start to get a lot more of that value as Jennifer noted.

Maybe if I can sneak in one question. Can you talk about what's going on with chlorine prices and what you expect for the year?

So, what I can say is that our chlorine prices have continued to move in a positive direction on the downside. So, chlorine is very different depending upon the region. In Saudi Arabia, we make our own chlorine. In Australia, we have a lot of purpose-built plants. But in North America, we buy merchant chlorine, and we've seen what I would say is a significant reduction in Q4 and in Q1 on chlorine prices, which is going to have a positive impact as well.

Thank you. Good morning, guys. First question, what are you expecting from a zircon pricing outlook?

I mentioned earlier that we saw a slight increase in pricing from the fourth quarter to the first quarter, but that change is largely due to the mix. In the first quarter, pricing has remained flat, and much of the future trend will depend on the market's evolution. July 2023 marked a low point that we've since moved past, and the market has been improving. Our sales in the fourth quarter were up 82%, and we expect a further increase of 15% to 30% in the first quarter, largely depending on whether a significant bulk shipment occurs this quarter. The growth is happening despite minimal growth in China's ceramic industry, which represents about 50% of the market. The market is recovering, and we believe that the phase of destocking is over as customers are returning to buy, leading to some restocking in China as well as in non-ceramic applications. This indicates that as we progress through the year, we should start to see positive movements in zircon pricing, though it's still early to provide a definitive forecast.

Great. Thank you. And then again, I apologize if I missed it, but what's the latest update on Jazan? Or are you still expecting to get the full repayment in kind? And was the technical service agreement extended again? Or do they roll off?

Yes, we are still working with Jazan. The debt is due in January 2025. We continue to receive slag, which is being used to pay down the debt, and there haven't been any significant changes to our agreement with them at this stage. We are still in collaboration with them, and the slag we are receiving is primarily directed towards reducing the debt.

Good morning, John and JF.

Good morning.

I have a quick question about the current global cost curves. Looking at the EBITDA margins you reported for Q4, which is around 13 percent, it's clear that this is down from over 17 percent in Q4 2022 and more than 17 percent in Q3. Given your level of integration, I believe you should experience a margin advantage compared to competitors globally. It seems that a significant portion of the industry might be hovering around breakeven or even experiencing negative EBITDA margins. Considering the guidance you provided for 2024, which suggests mid-teens EBITDA margins, if the industry trends in that direction, are you implying that the industry could start achieving positive EBITDA margins? I'm trying to understand the current state of the industry; are the breakeven to negative margins sustainable for it? And could it be that your margin guidance is somewhat conservative?

Thanks. The guidance we provided for mid-teens was intended for Q1. There was a question earlier regarding the direction of our business. If we consider that prices don't change, which we anticipate they will, our margins will still improve as our capacity increases. By mid-year, we expect that our EBITDA margins will return to the 20s. We previously maintained margins in the mid- to high 20s for 18 quarters. Focusing on our operations and vertical integration will help us achieve normalized EBITDA margins. As for our competitors, I won't comment specifically, but their information is publicly available. I agree with your observations and believe that companies in China are in a similar position, struggling with EBITDA margins. We think most are operating at a loss. Therefore, we expect our margins to improve, and 2024 is likely to be a better year. The current state of the industry is not sustainable; negative EBITDA margins cannot last long as most companies lack the balance sheets to support such a situation.

Fair enough. And as a follow-up, if I could revisit the whole sort of European Commission antidumping side of things. I mean, is it fair to assume whatever direction the final ruling takes. I mean, is it fair to assume that it's almost like 200,000 to 250,000 tons of sort of material that is up for grabs and that could potentially entirely go towards the Western producers?

Yes, it's a way to look at it that there are opportunities. For Chinese producers, one option could be to raise their prices. However, once the duty is implemented, it will likely change their behavior. It’s still early in the process; the formal investigation will conclude by the end of the first quarter, and typically it takes until the end of the year for everything to finalize. Provisional duties might be applied sooner. This situation was initiated by a group of suppliers, so we don’t have exact data on current developments, but we have a good understanding of the process. It’s too soon to confirm what the duty will be or if it will be enacted. If it is implemented, I believe we will see shifts in volume and potential pricing opportunities.

Your next question comes from Vincent Andrews with Morgan Stanley. Please go ahead.

Thank you, and good morning. Two questions. The first one is for 2024, in addition to EBITDA CapEx that you've identified when I refer to as other free cash flow items you identified a potential $50 million insurance recovery. Are there any other so-called other cash flow items for 2024 that we should think about whether restructuring or other items in your operating cash flow?

No, Roger, we don't have anything forecasted or expected at this point other than the insurance recovery that you mentioned.

Got it. And then second is, I know it's early days, but I just want to fill stuff in on the model. For 2025, how should we think about CapEx with relation to 2024? Same level or different? And perhaps the cash tax rate in 2024 you talked about South African mining operations. Does that repeat in 2025? Or is that more back to a normal cash tax rate?

Yes. So look, we don't have a complete forecast for 2025 capital yet, but it will probably be slightly lower than what we have. We still got some other mining projects going on. And John, you can comment on the tax. But to the extent we're still spending money in South Africa that would be deductible. So it's a little early to come up with what our tax is.

I agree with that, John. If this is not a one-year investment in South Africa, it will be for multiple years. Therefore, the capital expenses we incur in South Africa will be deductible in 2025.

Yeah. Hi guys. Sorry just one follow-up. So, when I look at your inventory and the hit that it's had on working capital over the last couple of years, it's about $400 million in the last two years. If you return to kind of more normal operating rates at the middle of this year, I guess, how long realistically will it take to reverse that inventory drag where you see a source of funds from inventory. Can you clean all that up in whatever two to three years? Is it hey look, this could take a very long time? I guess I'm just not sure with the mining side, how to think about how this all could work through and how quickly you could recapture some of that lost inventory?

Yes John it's a good point. As we mentioned, we have a long supply chain. So, while in the past 18 months or so, we did slow down our pigment sites and brought down that inventory. We were running our mines relatively flat out to build some feedstock inventory. If you take a look at 2024, we actually do see that reversing. Inventory, we do expect that's a bigger swing historically on what was driving the negative working capital change. And as we've guided, we do expect working capital to be positive and a lot of that is owing to inventory cashing out on that.

Yes. We would expect that we would recover that over time, not in '24.

Got it. Thanks very much for the color.

Thank you.

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