- Revenue of $418 million; adjusted EBITDA of $77 million excluding a $13 million net LCM charge

- Pigment revenue of $291 million up 5 percent versus prior quarter as sales volumes increased 5 percent and selling prices remained level

- Pigment adjusted EBITDA of $17 million improved from $9 million in prior quarter marking the fifth consecutive quarter of sequential improvement

- Mineral Sands revenue of $178 million down 28 percent versus prior quarter as sales volumes down 23 percent and selling prices down 7 percent; intercompany sales of $76 million; third-party sales of $102 million including $11 million from CP titanium slag and $72 million from zircon and pig iron

- Mineral Sands adjusted EBITDA of $60 million excluding a $23 million LCM charge related to feedstock market price declines

- Potential $5.15 billion of U.S. federal tax deductions resulting from April 2014 settlement in litigation commenced in 2009 by Tronox Inc.; added to existing $4.65 billion of tax attributes and future deductions for a total of $9.8 billion

- Board declared quarterly dividend of $0.25 per share payable on June 2, 2014 to shareholders of record of company's Class A and Class B ordinary shares at close of business on May 19, 2014 

 

May 7, 2014  -- Tronox Limited (NYSE:TROX) today reported first quarter 2014 revenue of $418 million compared to $470 million in the first quarter 2013 and $436 million in the fourth quarter 2013.  Adjusted EBITDA was $77 million in the first quarter excluding a $13 million net lower of cost or market (LCM) charge versus $73 million in the prior-year quarter and $96 million in the prior quarter. Adjusted net loss attributable to Tronox Limited in the first quarter was $58 million, or $0.51 per diluted share, versus an adjusted net loss of $51 million, or $0.45 per diluted share, in the year-ago quarter and an adjusted net loss of $48 million, or $0.42 per diluted share, in the prior quarter.

 

Tom Casey, chairman and CEO of Tronox, said: "Our first quarter results reaffirmed our view that the pigment market has stabilized.  Pigment sales volumes increased 5 percent and selling prices remained level compared to the fourth quarter 2013.  Pigment adjusted EBITDA of $17 million improved relative to the prior quarter, marking the fifth consecutive quarter of sequential improvement.  Mineral Sands' performance reflected weaker market conditions as sales volumes and selling prices declined compared to prior quarters.  As a result of our vertical integration, this decline in feedstock selling prices will contribute to greater margins in our Pigment business that will be realized when the pigment made from that feedstock is sold, which is typically five to six months later.  We expect feedstock market conditions to gradually improve as pigment markets strengthen.  We continue to work aggressively to implement operational excellence initiatives across the company to lower our costs and further strengthen the company's operating and financial position."

 

Casey continued: "Based on this strong financial position and disciplined approach to growth, our Board declared a quarterly dividend currently yielding more than 4 percent while at the same time we continue to pursue strategic opportunities both in the U.S. and internationally.  We are uniquely tax-advantaged with a portfolio of what we calculate to be approximately $9.8 billion of tax attributes and future deductions.  This portfolio is comprised of approximately $2.3 billion of tax loss carryforwards for U.S. federal and state, and foreign net operating losses; $2 billion of interest expense deductions over ten years resulting from our internal financing structure; and $5.5 billion of expected U.S. federal tax deductions resulting from the $5.15 billion settlement reached on April 3, 2014 in litigation commenced in 2009 by our predecessor company, Tronox Incorporated, combined with $350 million that Tronox previously contributed to the tort and environmental trusts involved in the litigation.  We believe we bring a strong set of operating and financial attributes to the table in either an acquisition or a business combination and will continue to seek opportunities to unlock superior value from these attributes, whether in the form of a single transaction or a series of transactions to expand our portfolio."

 

First Quarter 2014 Results

 

Mineral Sands

 

Mineral Sands segment revenue of $178 million was 40 percent lower than $298 million in the year-ago quarter driven primarily by 12 percent lower sales volumes and 32 percent lower selling prices.  Compared to the fourth quarter 2013, sales volumes declined 23 percent and selling prices were 7 percent lower.  Revenue from intercompany sales was $76 million in the quarter.  Sales to third parties were $102 million, including $11 million from CP titanium slag and $72 million from zircon and pig iron.  As selling prices for high grade chloride feedstock currently produce inadequate returns, going forward, the company expects to sell CP titanium slag and natural rutile as feedstock solely to its Pigment business until slag market conditions sufficiently improve.  Mineral Sands continued to sell 100 percent of its synthetic rutile feedstock to Pigment on an intercompany basis.  Zircon sales volumes were 17 percent lower than the year-ago quarter and 10 percent lower than the prior quarter.  Zircon selling prices were 9 percent lower than both the year-ago quarter and the prior quarter.

 

Mineral Sands segment operating income of $6 million excluding a $23 million LCM charge relating to feedstock market price compares to operating income of $96 million in the prior-year quarter and operating income of $33 million in the fourth quarter 2013.  Adjusted EBITDA was $60 million excluding the $23 million LCM charge.  Mineral Sands segment adjusted EBITDA is calculated before the elimination of gross profit on sales to the Pigment segment that occurs in consolidation at the company level.  In the first quarter, $11 million of Mineral Sands gross profit was eliminated in consolidation, $30 million of previously eliminated gross profit was reversed and an additional $10 million was reversed to reflect the portion of the Mineral Sands lower of cost or market charge that relates to intercompany sales to our Pigment business, for a net adjusted EBITDA contribution in consolidation of $29 million.

 

Tronox continues construction at its KZN Sands Fairbreeze mine in South Africa.  The mine will serve as a replacement source of feedstock production for our Hillendale mine, which ceased mining operations in December 2013.  The Fairbreeze mine is expected to begin operations in the second half of 2015, be fully operational in 2016 and have a life expectancy of approximately 15 years.  Capital expenditures related to the Fairbreeze mine are estimated to be approximately $365 million, with approximately $85 million to be spent during 2014.

 

Pigment

 

Pigment segment revenue of $291 million increased 1 percent versus $288 million in the year-ago quarter, as sales volumes increased 5 percent and selling prices declined 4 percent.  Sales volume gains were realized in North America and EMEA while sales volumes in Asia-Pacific were level to the prior-year quarter.  Compared to the fourth quarter 2013, sales volumes increased 5 percent and selling prices remained level.  Similar to the prior quarter, sales volumes exceeded production volumes in the quarter and finished pigment inventories declined further.  Finished pigment inventory at the end of the first quarter was in the mid-50 day range, which is in the range of normal seasonal levels for this time of the year.

 

Pigment segment operating loss of $13 million improved compared to an operating loss of $68 million in the year-ago quarter.  Pigment adjusted EBITDA of $17 million improved significantly versus adjusted EBITDA of ($37) million in the year-ago quarter.  On a sequential basis, adjusted EBITDA of $17 million was up from $9 million in the prior quarter, which represents the fifth consecutive quarter of sequential improvement.  Average feedstock cost reflected in the Pigment segment income statement in the first quarter was $921 per metric ton, down from $1,048 per metric ton in the prior quarter.  During the first quarter, 100 percent of Pigment segment feedstock purchases were from the Mineral Sands segment at an average cost of $787 per metric ton.  The lag time between purchases of feedstock by Pigment to the time that feedstock is reflected in the Pigment segment income statement is typically in the range of 5 to 6 months.

 

Corporate and Other

 

Revenue in Corporate and Other, which includes our electrolytic operations, was $25 million as compared to $27 million in the year-ago quarter.  Adjusted EBITDA in Corporate and Other was ($19) million, which is principally related to corporate operations.  The Corporate and Other loss from operations was $20 million in the quarter compared to a $24 million loss from operations in the prior-year quarter.

 

Consolidated

 

Selling, general and administrative expenses for the company in the first quarter were $46 million versus $51 million in the first quarter 2013.  Interest and debt expense was $34 million versus $27 million in the year-ago quarter.  On March 31, 2014, gross consolidated debt was $2,409 million, and debt, net of cash, was $1,006 million.  For the quarter, capital expenditures were $31 million and depreciation, depletion and amortization was $73 million.