Chemours, a leading global provider of performance chemicals, has demonstrated its ability to navigate through a challenging market environment. With a diverse portfolio spanning Titanium Technologies, Thermal & Specialized Solutions, and Advanced Performance Materials, the company has reported mixed financial results for the fiscal year 2023.
Financials
For the full year 2023, Chemours reported annual net income of -$238 million, annual revenue of $6,027 million, annual operating cash flow of $556 million, and annual free cash flow of $186 million. While the company's top-line performance remained relatively stable, the bottom-line was impacted by various headwinds.
In the first quarter of 2024, Chemours reported net sales of $1.4 billion, a 12% decrease compared to the same period in the prior year. This decline was primarily attributable to a 6% decrease in volume and a 5% decrease in price across the company's segments. Consolidated adjusted EBITDA for the quarter was $193 million, a 37% year-over-year decrease.
Segment Performance
The Titanium Technologies (TT) segment, which is a leading global provider of TiO2 pigment, reported net sales of $588 million in the first quarter of 2024, a 7% decrease compared to the same period in 2023. The segment's adjusted EBITDA was flat at $70 million, with the adjusted EBITDA margin improving by 100 basis points to 12%. The company's actions to allocate TiO2 volumes to higher-yielding regions, the timing of lower-cost ore consumption, and the continued benefits of the TT transformation plan contributed to the segment's resilient performance.
The Thermal & Specialized Solutions (TSS) segment, a leading provider of refrigerants, thermal management solutions, and specialty solvents, reported net sales of $449 million in the first quarter of 2024, an 8% decrease compared to the same period in 2023. Adjusted EBITDA for the segment decreased by 18% to $151 million, with the adjusted EBITDA margin declining by 400 basis points to 34%. The volume decrease, primarily in the foam, propellants, and other product portfolio, as well as ongoing investments in immersion cooling and next-generation refrigerants, contributed to the segment's performance.
The Advanced Performance Materials (APM) segment, a leading provider of high-end polymers and advanced materials, reported net sales of $299 million in the first quarter of 2024, a 23% decrease compared to the same period in 2023. Adjusted EBITDA for the segment decreased by 64% to $30 million, with the adjusted EBITDA margin declining by 1,200 basis points to 10%. The volume decrease, primarily due to weaker demand in more economically sensitive and non-strategic end markets, as well as the impact of a previously disclosed extended maintenance outage, contributed to the segment's performance.
Corporate Expenses
Chemours' corporate expenses increased by $10 million (or 22%) to $55 million in the first quarter of 2024, primarily due to costs associated with the Audit Committee's internal review and the company's remediation of material weaknesses. However, these costs were lower than expected, and the company anticipates higher corporate expenses in the second quarter of 2024 as it continues to address the material weaknesses.
Outlook
Looking ahead, Chemours provided guidance for the second quarter of 2024, expecting consolidated net sales to increase by approximately 15% sequentially and consolidated adjusted EBITDA to grow in line with the increase in net sales. The company anticipates TT to achieve sequential net sales growth in the range of 15%, supported by the strength in its order book, while TSS and APM are expected to grow in the mid-teens and low-teens, respectively, on a sequential basis.
Liquidity
Chemours' liquidity position remains strong, with $746 million in unrestricted cash and cash equivalents and $853 million in revolver capacity as of March 31, 2024. The company's net leverage ratio increased to 3.7x during the first quarter, and it expects to maintain its leverage around 3x over the longer term.
The company's capital allocation strategy focuses on selectively investing in organic and inorganic growth, resolving contingent or accrued liabilities, maintaining appropriate leverage, and returning cash to shareholders through dividends and share repurchases. Chemours continues to work on the remediation of the material weaknesses identified in its internal control over financial reporting, devoting substantial resources to enhance its procedures and controls.
Conclusion
Chemours' diversified portfolio, cost-saving initiatives, and strategic investments in growth opportunities, such as the expansion of its Opteon product line and the development of its 2-phase emergent cooling technology, position the company to navigate the current market challenges and capitalize on long-term growth prospects. As the company continues to execute its strategic priorities, investors will closely monitor its ability to deliver sustainable financial performance and create value for its stakeholders.