Good morning, ladies and gentlemen, and welcome to the Tronox Holdings Plc Q3 2024 Earnings Call. At this time all lines are in listen-only mode. Following the presentation, we will conduct a question-and-answer session. This call is being recorded on Friday, October 25, 2024. I would now like to turn the conference over to Jennifer Guenther, Chief Sustainability Officer, Head of Investor Relations and External Communications. Please go ahead.

Thank you and welcome to our third quarter 2024 conference call and webcast. Turning to Slide 2, on our call today are John Romano, Chief Executive Officer; 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. 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 near 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. Tronox's third quarter results demonstrated continued demand recovery compared to the prior year, though ultimately we came in below our expectations as a result of softer-than-anticipated market conditions as the pace of the recovery slowed late in the quarter. Orders in North America and Latin America met our expectations, while demand in Europe and Asia Pacific was softer than forecasted in the last month of the quarter. Our TiO2 volumes declined 7% sequentially compared to Q2, outside our guidance of a 2% to 4% decrease. The lower demand, which was more pronounced in September, was influenced by short-term impacts from antidumping and a shift in competitive behaviors. Zircon volumes declined 12% sequentially, below our guidance of relatively flat volume versus the second quarter due to orders that rolled into Q4 and weaker-than-expected demand in China. On the operations side, we successfully achieved our targeted average pigment utilization rate of approximately 80% in the quarter. However, we have not yet begun to see the benefit of lower cost inventory flowing through to the bottom line due to the weaker-than-forecasted demand in the quarter. This weaker demand environment resulted in an adjusted EBITDA of $143 million, slightly below our previously guided range of $145 million to $165 million, and a margin of approximately 18%. If market demand had been in line with our guidance, we would have delivered an adjusted EBITDA well within our range. We have seen a continuation in demand recovery from the 2023 trough levels. TiO2 volumes are up 16% on a year-to-date basis. Zircon volumes are up 42% on a year-to-date basis, but we are now seeing a slowdown in the recovery. There are various tailwinds, including interest rate cuts in the U.S., stimulus in China, and antidumping investigations in the EU, Brazil, India, and most recently, in Saudi Arabia. We firmly believe these will be a net positive in the mid to long term. In the short term, we'll need to continue to navigate the moderation we are seeing in demand. We will discuss these macros in further detail a little bit later in the call, but I'd like to now turn the call over to John to review some of the financials for the quarter in more detail. John?

Thank you, John. Turning to Slide 6. We generated revenue of $804 million, an increase of 21% compared to the prior year, driven primarily by higher TiO2, zircon, and other product sales volumes. Income from operations was $54 million in the quarter, and we reported a net loss attributable to Tronox of $25 million. Our tax expense was $26 million in the quarter as we generated income in jurisdictions where we accrue taxes and are utilizing our existing deferred tax assets. As a result, our adjusted diluted loss per share was $0.13. As John previously mentioned, our adjusted EBITDA in the quarter was $143 million, and our adjusted EBITDA margin was 17.8%. CAPEX for the quarter was $101 million; free cash flow was a use of $14 million in the quarter. Now let's move to Slide 7 for a review of our commercial performance. Q3 continued to see recovery from the 2023 trough levels, but came in below our guided expectations. TiO2 revenues increased 10% versus the year-ago quarter as sales improved 12%, partially offset by a 2% decline due to price and product mix. On a sequential basis, TiO2 revenues decreased 6%, driven by a volume decline of 7% as demand in Europe and Asia Pacific were softer than anticipated. This was partially offset by a 1% improvement in price from regions where pricing had declined more in recent years. Zircon revenues increased 124% over the trough levels of Q3 2023 as sales volumes increased 134%, partially offset by a 10% headwind from price and product mix. Sequentially, zircon revenues declined 13%, driven by a 12% decrease in volumes and a 1% headwind from price and product mix. Revenue from other products increased 61% compared to the prior year, partially due to opportunistic sales of ilmenite and heavy mineral concentrate tailings. Sequentially, other product revenues increased 39%. FX was a tailwind for revenue for both year-on-year and sequential comparisons with favorable Euro movements. Turning to Slide 8, I will now review our operating performance for the quarter. Our adjusted EBITDA of $143 million represented a 23% improvement year-on-year, driven by higher TiO2, zircon, and other product volumes and lower production costs. Year-on-year production costs were an improvement of $3 million, driven by improved fixed cost absorption as we started to increase the utilization rates of our assets. These were partially offset by inflationary impacts. Additional headwinds versus prior year include exchange rates and other company costs, including labor inflation. Sequentially, adjusted EBITDA declined 11%. Favorable commercial impacts were more than offset by higher production costs, unfavorable FX, and higher freight costs. Production costs were $32 million higher quarter-over-quarter. This was driven by the $15 million of higher cost pigment tons manufactured in the second quarter that sold in the third quarter, as we had previously communicated. The remaining amount was related to the weaker market demand, which delayed the benefit of selling lower-cost tons produced in the third quarter, as well as higher maintenance costs. Freight costs also saw a slight increase as we strategically repositioned products ahead of the U.S. port strike. We also realized headwinds from the Aussie dollar and the South African Rand. Turning to Slide 9, I'll now review our balance sheet and cash position. We ended the quarter with a total debt of $2.8 billion and net debt of $2.7 billion. Our net leverage ratio at the end of September was 5.0x on a trailing 12-month basis. During the third quarter, we refinanced our existing term loan due March 2029 with a new seven-year term loan due September 2023. This transaction extended our debt maturity profile and further optimized our capital structure, following the successful repricing and extension of our other term loan tranche, which we completed in April. With the completion of our latest refinancing, our next significant debt maturity is not until 2029. Our balance sheet remains strong with ample liquidity ahead of continued critical vertical integration-related capital expenditures. Our weighted average interest rate in Q3 was 5.97%, and we maintained interest rate swaps, such that approximately 73% of our interest rates are fixed through 2028. Total available liquidity at the end of September was $668 million, including $167 million in cash and cash equivalents that are well distributed across the globe. CAPEX totaled $101 million in the quarter, approximately 41% of this was for maintenance and safety and 59% for strategic growth projects, heavily weighted on the mining side of the business, which we previously disclosed. Working capital was relatively neutral in Q3 with an expected market demand driving our finished good inventory balances higher. This was offset by lower AR and higher AP balances. We returned $21 million to the shareholders in the form of dividends in the quarter. I will now turn the call back over to John Romano for comments on the market and our outlook. John?

Thanks, John. Although we have seen significant market demand improvement over 2023, we are not yet back to the normalized volume levels on either TiO2 or zircon. As previously mentioned, there are significant positive indicators in the market that we see in the mid to long-term opportunities for Tronox, such as antidumping investigations and provisional duties that have currently been announced, interest rate cuts in the U.S., and stimulus in China. To give an update on the antidumping. In addition to the EU provisional duties that are in place, Brazil trade authorities just approved provisional duties to be applied to imports of titanium dioxide from China. The provisional duties were effective as of October 21. Additionally, the investigation in India is still underway, and Saudi Arabia officially launched an antidumping investigation on October 9th. We have not yet seen the benefit of these trade defense measures; however, we should start to see the positive impacts as we roll into 2025. On the operational side, the headwinds we experienced during the previous two quarters related to ramping up our assets are now expected to be a tailwind as we enter Q4. The average utilization rates in Q3 were in the 80% range, and we expect to continue running at these rates, with a focus on reliability and operational efficiency, which will result in lower costs and a step-up in earnings momentum into 2025. We are continuing to invest in our assets with a significant portion of this year's expenditures dedicated to the extensions of two of our South African mining projects, the Fairbreeze expansion and the Namakwa East OFS, so that we can sustain our current vertical integration level. These investments will ensure that we maintain our $300 to $400 a ton advantage for feedstock sourced internally. From a growth perspective, our R&D efforts remain focused on product and process innovations to enhance profitability and sustainability-related products and process innovations, and we continue to explore opportunities in the rare space. Moving to Slide 11, I'll now review our outlook. Looking ahead into the fourth quarter, we anticipate North America, Europe, and China will experience higher seasonal demand declines based on current customer sentiment. And we, therefore, expect TiO2 volumes to decline 10% to 15% from the third quarter. We expect zircon demand to remain relatively flat compared to the third quarter. Additionally, our expectations for pricing improvement in the fourth quarter have moderated from our previous forecast, reflecting our current demand and competitive dynamics. We anticipate TiO2 pricing to be relatively flat, and zircon pricing to be slightly down. We expect our operating rates to remain in the range of 80%. This will drive an improvement in our cost structures, primarily from fixed cost absorption, and we will start to see the benefit of selling through the lower cost tons in the quarter. As a result of these market and operational assumptions, combined with the recent unfavorable exchange rate moves, we expect our fourth quarter adjusted EBITDA to be in the range of $120 million to $135 million, and our adjusted EBITDA margin to be in the high teens range. With regards to cash, we expect the following for the year; our net cash interest to remain unchanged at $140 million. Our net cash taxes are now expected to be less than $5 million, as significant capital expenditure for projects in South Africa are deductible. Our capital expenditures are now expected to be approximately $380 million for the year as we have seen some capital shift into early 2025. And we are expecting working capital to be a cash use of approximately $90 million to $100 million, driven by the weaker-than-expected market demand driving higher finished goods inventory levels in the fourth quarter. For the full year, we now expect free cash flow to be a slight use, owing to the shift in our market outlook. We do expect to see a tailwind from our inventory levels as the market recovers. Turning to Slide 12, I'd like to briefly remind investors of our capital allocation priorities before turning to questions. Our capital allocation strategy has not changed. We continue to prioritize investments in the business that are essential for advancing our strategy and maximizing our value from vertical integration. We also remain focused on strengthening our liquidity and resuming debt pay down as the market recovers, and our dividend remains a priority. And finally, we'll continue to assess strategic high-growth opportunities as they emerge, including the rare earth space, which is an active focus area of ours at the time. We will provide an update on any developments as they happen. And with that, 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. Operator?

Thank you. Your first question comes from John McNulty with BMO Capital Markets. Your line is now open.

Yeah, thanks for taking my questions and good morning. So I guess 2024 has had kind of a lot of puts and takes. I guess when you look to 2025, there are a couple of things that stand out on the cost side that start to reverse that you were alluding to, one is the high cost inventory that you had to work through in 2024 and the second would be there were some operational efficiency issues in 2024 and some downtime because you were running at lower utilization rates. Can you help to quantify how those bridge into 2025 in terms of a benefit, now that you're running at higher levels and you'll be through all that high-cost inventory?

Thank you, John. To start, I want to revisit some of the operational challenges we mentioned before. We have been experiencing operational issues that have resulted in about $25 million in costs each quarter, whether due to lower capacity utilization or idle resources. Additionally, I've been focusing on improving operational efficiency and reliability since taking on the CEO role about seven months ago. I've dedicated approximately 80% of my time collaborating with our operations team to explore ways to maximize our asset efficiency, even in the absence of increased volume. In our discussions about neutron technology, we highlighted its potential benefits, with some relying on volume increases. Now, our emphasis is on enhancing operational efficiency and reliability, which will contribute to better uptime and reduced costs. This improvement is supported by our work on neutron implementation, including automated process control and advanced predictive maintenance, aimed at improving our routine work management and ultimately decreasing costs. We are currently assessing the scope of these opportunities and have spent considerable time on it. While we are not yet ready to provide specific figures, we believe the improvements will be substantial, and we will share more details once our operational team and I can confirm the impact and establish a timeline for these initiatives.

Okay, I understand. Can you clarify what the advantage is of addressing the high-cost inventory? Was that related to the $25 million per quarter you mentioned?

$25 million on the low end, as John mentioned, and as we've previously stated, up to $35 million, indicating a range of $25 million to $35 million per quarter.

So when you think about those again, running at those lower rates, we talk about running at roughly 80% capacity utilization. So you can size that opportunity to $25 million to $35 million a quarter and multiply by four.

Got it. Yes. Okay. No, that's fair. And then I guess the second question would just be around tariffs. So you've had the EU ones put in place earlier this year. You've got Brazil now. I guess, can you help us to think about the playbook there for what the EU is maybe telling us about how Brazil will play out and then some of the changes in behavior, if you're seeing them yet around the EU tariffs and how that should play out in 2025?

Focusing on the EU first, we anticipate that in early November, the EU will announce its recommendations for the final duty. Following that, the member states will need to go through a voting process. We expect the final duty to be solidified in the first quarter of the year, likely in January or early February. This process will conclude the EU's work on recommending the final duty, but actual implementation of those duties has not yet occurred. Regarding China in the midterm, they are continuing to export to areas that may be affected by duties, absorbing some of those costs as they await clarity on the final duties before deciding whether to adjust their sales strategies or exit certain markets. As mentioned in my prepared statements, some of the trends we are observing in the fourth quarter relate to these duty implications. We had anticipated seeing more volume, but that hasn’t materialized. In fact, we are experiencing significant competitive activity, which we believe the Chinese are trying to manage by repositioning their volume. The situation in Europe is similar to Brazil, which recently announced its provisional duties in October. This process is still in its early stages, and those provisional duties typically remain for about six months before the final duties are determined. This is why I mentioned that the short-term outlook remains unstable regarding these duties. However, we are optimistic about the mid- to long-term prospects, and we expect to see improvement in volume as we move into 2025.

Got it, thanks very much for the color.

Your next question comes from Josh Spector with UBS. Your line is now open.

Yeah, hi, good morning. I kind of had a similar question on the cost side, but I wanted to ask specifically on fourth quarter. So as you do the bridge sequentially, I mean clearly, the volume is down, along with your guide, it makes sense, earnings to be down with that. But we're not really seeing some of that cost benefit come back. Can you just maybe bridge why that's the case or what's offsetting that as you look sequentially?

I'll begin and then let John add his thoughts. We're observing lower cost tons coming through, but our inventory isn't moving as quickly as anticipated. In our previous call, we provided guidance on what we expected for seasonality in the fourth quarter, projecting it to be between 5% and 10%. However, we are experiencing more seasonality than expected, and now we estimate it could be between 10% and 15%. This means it is taking longer to deplete some of our high-cost inventory. We should start seeing lower cost inventory contributing to our bottom line as we move into late November and December. John?

Yes. No, I think some of the gap as well that you're seeing in your analysis, Josh, is we do see some other higher costs here. So for example, we are seeing a headwind in currency. Additionally, freight rates are being much more significant in the quarter just due to some of the lanes being not as available here. And then you do have some of the other revenue that we mentioned in Q3.

And just maybe a little color that, that number on FX is somewhere between $7 million and $10 million.

Okay. That makes sense. I guess just to be specific on the operational side, so the $30 million sequential headwind, I mean it seems like it gets better, but it doesn't entirely go away. So you answered John's questions with $25 million, $35 million a quarter, there's still something like that $20 million range maybe in the fourth quarter. Is that fair or would you characterize it differently?

That's about the right range.

Okay, thanks. And if I could say one other follow-up again, maybe off of John's points around the competitive dynamics. I'm just trying to square what you said between repositioning in China. I assume that means some material staying home and maybe taking some additional share there and not seeing any share gain or movement in Europe. So does that mean that some of the buyers are buying more Chinese material or other Western producers maybe capturing more share versus what you expected?

I believe it's a combination of factors, but primarily it's the situation in China. As long as they are absorbing many of the duties imposed, customers are inclined to purchase now, thinking this might not last. Regarding competitive activity, during our last call, we anticipated some price improvements moving into the fourth quarter. We did observe some price increases in the third quarter, although it varied by region and was somewhat inconsistent. However, we implemented price increases during that period. Three months ago, we assumed these trends would continue into the fourth quarter, but competitive activity has dampened the price increases we could apply. Therefore, as we consider demand, if customers expect prices to rise, they typically buy inventory in advance of that increase. Now, with prices not escalating and heightened competition, we're not experiencing the expected support from price improvements. I hope this clarifies the question.

Yes, that's helpful. Thank you.

Your next question comes from David Begleiter with Deutsche Bank. Your line is now open.

Thank you, good morning. John, on the efficiency initiatives, does this mean you're looking at the TiO2 assets working through direct indirect costs and that this could lead to, at some point, a more formal cost takeout plan related to these assets?

Yes, we will ultimately provide a specific target for that cost. I’m spending considerable time with our operational team to ensure we have a program that is identifiable, achievable, and has a timeline. We're close to finalizing that internally. The purpose of this is, as we discussed extensively about neutron, there was a component of neutron and technology enhancements that we believed would lead to better costs through volume. Now, we are considering how we can achieve similar benefits through improved reliability, efficiency, and automated process control, as well as enhanced maintenance. In summary, we will present a more specific target for the number and a timeline, but we aren't ready to share that information today.

Got it. And does that mean for 2025 in addition to the lower production cost is another layer of maybe neutron savings as well to help us with the bridge to 2025 EBITDA?

Yes. However, I want to clarify that it's not the same neutron number that it’s connected to. We mentioned $200 million in neutron, right? I’m not suggesting that this is an additional initiative on top of the neutron. I’m stating that the $200 million we associated with the advantages from neutron was expected to arise from volume. What we are indicating is that we aren't seeing that volume, and we're implementing a process that will enable us to utilize that same technology along with the reliability and efficiency improvements we are undertaking to capture some of that by operating our assets more efficiently. This will play a role in 2025. While we don't have a precise timeline, it will be included in 2025, and we'll share more details when we have a solid plan.

But I think it's also important to note that we don't expect significant capital in order to achieve those savings.

Yes, that's a very good point. This isn't going to be another big capital number that we're going to throw at you. It's a great point, John. This is what we think we can do with the implementation of what we've already put in place and a different strategy around how we're going to operate those assets.

Thank you, very helpful.

Your next question comes from Duffy Fischer with Goldman Sachs. Your line is now open.

Hey, good morning. Just a couple of questions on price. So first, where do you see the relative prices between the three geographies today, China, Europe and the U.S.? And then as we're going through the negotiations now for next year, where do you see those relative prices moving? And then just the third one on that, it's more indirect for you, but where do you see ore pricing going for next year?

Thank you for the question. We usually don't disclose regional pricing, but I can say that there is more competitive activity in China. Historically, prices in China have been low. We are also seeing competitive activity in Europe. Recently, we have received some inquiries regarding market share leading up to the quiet period. As we approach the end of the year, we maintain a win-loss board to track our volume gains and losses, given that we operate in a competitive landscape. There are areas where we have gained market share, as well as areas where we have lost share, and we have sometimes adjusted prices to protect our share. This price protection strategy is mainly occurring in the Middle East, parts of Europe, and some areas in Asia. The Middle East, in particular, is currently a very active market. We have mentioned the duty investigations initiated in Saudi Arabia. Although Saudi Arabia is a relatively small market in the Middle East, around 50,000 tons, it is significant for us because we have a plant there. Overall, we see mixed activity, and while there hasn't been a substantial change in our pricing profile regionally, there is definitely more competitive activity in Asia and Europe compared to the Americas.

And then views on ore?

Yes, as the market improves, we would anticipate ore prices to begin to rise. Ore prices have remained relatively stable. Looking ahead to 2025, we noted a slowdown in recovery towards the end of this year. We expect that the stimulus measures in China, despite not yet generating significant changes in demand, will eventually be beneficial. Additionally, interest rate cuts and a struggling housing market, which was reported by the Wall Street Journal to be the worst since 1995, are factors to consider. The housing market significantly impacts our coatings business, so we expect to see an uptick there. As the market improves, our TiO2 producers will likely operate at higher capacities, leading to an increase in ore prices, which have been stable throughout a subdued market in 2024.

Fair enough. And then just one last one, if I could. On the inventory, you're running higher than you're selling this quarter. How much inventory will you build in TiO2 with your expectations in the guidance and then would you also build zircon volumes as well?

Let’s start with zircon volumes. In the third quarter, we indicated that we expected sales to be flat compared to the second quarter, but we actually experienced a 12% decline. This translates to about 4,000 to 5,000 tons. Roughly half of this decrease was due to orders that shifted from the third quarter to the fourth, and the other half resulted from weaker demand in China. We anticipate flat sales in the fourth quarter, which means there won't be much movement and we aren't accumulating significant inventory for zircon. Regarding TiO2, the increase in inventory is primarily due to the change in our seasonal demand outlook, which has shifted from a previous range of 5% to 10% to now between 10% and 15%. This results in an increase of about 5% to 7% over our earlier expectations, though it's not a substantial amount. Looking ahead to the first quarter of 2025, I don't expect a significant difference from the surge we experienced in the first quarter of 2024. Much of this situation is influenced by factors beyond our control, such as the economy and housing markets. However, we feel confident based on customer feedback that while the first quarter of 2025 may be a bit uneven, we should begin to see signs of recovery.

Terrific, thank you guys.

Your next question comes from John Roberts with Mizuho. Your line is now open.

Thank you. In anticipation of the tariffs and/or duties, do you think customers actually are building inventory at the customer level, it's just that they're buying Chinese so you're not seeing it?

I don't think our customers are significantly changing their buying behavior. If I were a buyer and aware of the duties, I would still purchase similar amounts to what I have historically. There is a limit to how much they can incorporate into their formulation. When considering the pricing in China compared to many Western suppliers, there is a notable difference in both price and quality. I do believe they are buying inventory ahead of time, but I don’t think they are purchasing large volumes that would substantially impact our sales as the duties are implemented, because a portion of that volume needs to come from higher quality producers.

Okay. And do you have a range yet for capital spending in 2025?

So we mentioned that our capital spend in 2024 was going to be down about $20 million, and that has nothing to do with the speed with which our projects are being implemented. We're on track, but some of the spending is just shifting into the first quarter and it's just a cash event. I think we gave some guidance on the last call that we'd be around $350 million because we've still got some projects that are coming, that we'll be working on. You've got capacity in Australia that's coming on, so say $350 million to $370 million, but that extra $20 million is only attached to a shift from the $400 million we were going to spend in 2024, now $380 million, $20 million of that's going into 2025. And as we get into 2026, we would expect that capital spending to start to tail off getting to the $300 million range, maybe even in the high 200s.

Okay, thank you.

Your next question comes from Vincent Andrews with Morgan Stanley. Your line is now open.

Vince?

Operator we are not hearing anything on our end.

Your next question comes from Jeff Zekauskas with J.P. Morgan. Your line is now open.

Thanks very much. If you look at European TiO2 prices in September and you compare them to where they were, say May, have they changed very much?

On average, prices have remained relatively stable, although there has been some shift in the mix. In the third quarter, we experienced some price improvement in one of the regions, despite the competitive activity. Regarding Europe, the Middle East, and Africa, we view this as a single region where competition has increased, but there hasn't been a significant decrease in prices. Our pricing remained mostly flat from the second to the third quarter, and we anticipate a similar trend as we move into the fourth quarter. That said, we are managing the competitive activity in that region to maintain our pricing while making necessary adjustments to protect what we consider strategic market share.

Thanks for that. How much TiO2 does China export to Brazil annually?

About 100,000 tons out of a market that's 180,000 tons.

Great. And then lastly, it seems that zircon prices are under pressure. Can you talk about what that's stemming from, is that Chinese production or Malaysian production or just overall…?

It's a combination of factors, but primarily it's due to demand for lower-grade zircon. We offer various grades of zircon, and there seems to be more demand for the lower grades compared to the higher ones. Additionally, there’s zircon from the pharma concentrate that gets exported to China and then returns to the market at lower prices, which contributes to competitive pricing. We are experiencing some price reductions in the fourth quarter, driven by demand. While China consumes a significant amount of zircon, it doesn’t represent a large portion of our sales. However, the decline in volume we noticed in the third quarter was partly due to issues related to China. Although there are discussions of stimulus in China, we haven’t observed a corresponding increase in demand in the fourth quarter so far. We remain hopeful that these initiatives will lead to positive outcomes as we head into next year. Overall, the mix of grades and demand dynamics are impacting the situation, leading to increased competition.

Well, thank you for that. And then lastly, do you think the TiO2 market is growing this year? And that coatings demand doesn't seem to be growing in the U.S., doesn't seem to be growing in Europe, it doesn't seem to be growing in China, but maybe there are other areas. Do you think overall TiO2 demand is down a few percent or flat or up, how do you see that?

I can provide insight on our numbers. For the fourth quarter, we expect EBITDA to be in the range of $120 million to $135 million. There's definitely a variation in volume we could discuss. Even at the lower end of that range, our volumes will increase by 11% to 12% compared to last year, which indicates improvement. Most of that growth occurred earlier in the year, but as we moved into Q3, we began to see a slowdown, which continued into Q4 with even softer results. But I mean global market demand, that is just the overall global TiO2 market growing in 2024? It's growing in India significantly. But on a global basis, I would say that it has not been very robust and slightly up to flattish.

Okay, great. Thank you so much.

Your next question comes from Hassan Ahmed with Alembic Global. Your line is now open.

Good morning, John. In the press release, you mentioned that in Q4, regions like North America, Europe, and China will see increased demand declines due to customer sentiment. The situation with TiO2 has been that the destocking was so extreme that customers were left with very low inventory levels. I would have expected that despite the seasonal factors, we wouldn't see such significant declines in demand. I'm trying to understand what this customer sentiment looks like now. Has it permanently changed? Will the industry continue to operate with very lean inventory levels? Should we anticipate a recovery, or is this indicative of a new norm in inventory management?

Thanks, Hassan, that's a great question. Earlier this year, we observed an 18% increase in the first quarter and an 8% increase in the second quarter, which indicated the early signs of recovery. However, as we moved into the latter half of the year, we noticed a slowdown. The housing market is presenting challenges, and our coatings companies, significant customers of ours, are expressing concerns that differ from our outlook. This recovery is slowing down, and interest rates have not had the positive impact we anticipated. Regarding North America and inventory, since we are heavily focused on coatings and much of our sales come in the form of slurry or pre-dispersed TiO2, there are limitations on how much we can inventory. I believe that many customers, as the year ends, are assessing their finances, managing working capital, and looking closely at their finished goods inventory rather than accumulating large amounts of TiO2 that would create a backlog into the next year. Therefore, we don't think there's been significant inventory buildup in finished goods. As for Europe and China, there is a sentiment of uncertainty. It's an unusual year, especially with 84 elections projected globally in 2024, which is influencing people's expectations about the economy. While I can't control these factors, I can manage what is within our influence. I don't see a fundamental shift in the market. I remain confident that recovery will occur. Although this cycle has undoubtedly taken longer than we expected, and we share the frustration of many investors regarding the delay in recovery, we believe it will still happen. I do not think there has been a fundamental shift, and I am optimistic about a market recovery.

Fair enough. Very clear. I have a follow-up regarding the antidumping situation. Recently, it was the EU, Brazil, and India. If I remember correctly, the volume you mentioned was about 600,000 tons. If I understood you correctly on this call, the situation in Saudi Arabia adds another 50,000 tons, right? So, I'm trying to grasp how much of this 650,000 tons, assuming that all these measures take effect, Tronox could realistically capture.

It's a great question, and your calculations are accurate. The market in Saudi Arabia is 50,000 tons, while China has around 20,000 tons. If we estimate it at 600,000 tons, Brazil accounts for about 100,000 tons, India for about 50,000 tons, and the EU for roughly 250,000 tons. So, if all these duties are enacted, it could total 600,000 tons. Additionally, the Brazilian duties are quite significant, ranging from $600 to $650 per ton of finished pigment, up to $1,770 per ton. These duties are currently provisional and will remain so for six months while a final determination is made. Regarding the Americas, the Trump 3.01 tariffs are in effect, including a 6% duty on TiO2, with an additional 25% applied. The U.S. market ranges from 900,000 to 1 million tons, and China imports about 24,000 tons a year. You can expect that kind of impact.

Very helpful John, thank you so much.

Your next question comes from Mike Leithead with Barclays. Your line is now open.

Great, thank you, and good morning guys. Just one question on inventory. It seems like over the past few years, you've added about, say, $400 million of cash that's trapped in inventory. I guess what is the game plan or the timeframe to get that back to a normal level? And relatedly, I assume part of that dynamic is the ore inventory, right, because of the temporary mismatch in your mine activity and downstream pigment utilization. So is there any thought to selling some of that ore position to help harvest cash shorter term?

Thank you for the question, Mike. As you noted, we have accumulated a significant inventory over the past few years. Our situation is somewhat different from others due to our ore and the level of vertical integration we have. This was evident in Q2 when we increased our inventory, focusing on raw materials for our feedstock assets. In Q3, we utilized that feedstock, but we also increased our finished goods inventory. Although our volumes are rising, our cost per ton is decreasing, allowing us to build inventory at a better cost. The timing for when we can convert more of that inventory into cash will depend on market conditions. However, looking back a couple of years at our buildup, we anticipate being able to recover a significant portion of that investment.

I can provide a bit more detail on the inventory related to ore. We occasionally sell ilmenite, and in this quarter, we sold $6 million worth of it in another category. We also sold some heavy mineral concentrate. Many of these sales are done on a spot basis depending on availability, but we are not looking to develop a major strategy to become a significant seller of ore in the market. This is partly why we have vertical integration, which gives us a $300 to $400 advantage because we have our own ore supply and high-grade feedstock. We are not planning to change our strategy to become a supplier to the market since we already supply ore. We have experience in this area from before our acquisition of Cristal, and that acquisition has contributed positively to us.

Okay, fair enough. Thank you guys.

Your next question comes from Roger Spitz with Bank of America. Your line is now open.

Thanks very much and good morning. You said earlier to Jeff that your 2024 TiO2 volumes you expect to be up 11% to 12% versus 2023. Global industry up only flat to slightly up, if I heard that correctly. So two questions there, what is it that you're doing or you're just in the right place in the right markets to take that market share? And secondly, sort of who do you think is seeding the market share, is it the Chinese producers? Thank you.

It's a good question. I don't have complete visibility on global demand for TiO2, which is why we rely heavily on our consultants. I would estimate demand to be flat to slightly up. Our strategy focuses on aligning with customers who are growing faster than the market, and we've made significant progress in this area across all regions. Our commercial team has effectively identified and partnered with these growth-oriented customers, allowing us to gain market share without resorting to price reductions. We believe that the majority of our volume growth falls within the expected range of 11% to 12%. If we reach the higher end of that range at 135, there might be slight variations. We're also encountering some unexpected seasonal adjustments in the fourth quarter. At this point, I cannot provide a clear forecast for total global demand, but we expect to have better insights as we move into the first quarter of next year. This year's growth has been driven by the right customers in the right regions.

Got it, thank you very much.

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