Executive Summary / Key Takeaways

• Legacy Liability Overhang Dramatically Reduced: The August 2025 New Jersey PFAS settlement, funded through 2030 by $150 million in insurance proceeds and $50 million from the 2021 MOU escrow, transforms a multi-decade uncertainty into a manageable payment stream, removing the single largest risk to Chemours' equity value.

• Opteon Refrigerant Surge Drives Margin Explosion: Thermal Specialized Solutions delivered 80% year-over-year Opteon growth in Q3 2025, with segment EBITDA margins hitting 35%—a 500 basis point expansion—demonstrating the earnings power of Chemours' regulatory-driven portfolio shift toward low-GWP fluorochemicals.

• TiO2 Cyclicality Masks Underlying Value: Titanium Technologies' EBITDA collapsed 68% in Q3 due to macro weakness and destocking, but management views this as short-term, with restocking anticipated in Q1 2026; production cuts and the $140 million TT Transformation Plan create a leaner cost structure for the eventual recovery.

• Financial Flexibility Secured: The October 2025 extension of the $1.05 billion term loan to 2032, combined with the Q1 2025 dividend cut preserving $63 million annually, provides Chemours with runway to execute its "Pathway to Thrive" strategy without balance sheet stress.

• Valuation Reflects Skepticism, Not Inflection: At $12.70 per share, Chemours trades at 0.32x sales and 8.66x EV/EBITDA—multiples that embed minimal probability of TSS margin durability or TT recovery, creating potential upside if the regulatory tailwind and operational improvements persist.

Setting the Scene: From Liability Spin-Off to Fluorochemical Specialist

The Chemours Company, incorporated in 2014 and headquartered in Wilmington, Delaware, began life as a classic corporate orphan—spun off from DuPont (DD) on July 1, 2015 with a portfolio of valuable fluorochemical and titanium dioxide assets burdened by decades of legacy environmental liabilities. This birth story explains today's investment case: Chemours inherited both the crown jewels of DuPont's chemistry franchise and the litigation docket that came with them. The separation transferred ownership of key manufacturing sites like Fayetteville Works and Washington Works while assigning PFOA, asbestos, and PFAS dockets to the newly independent entity.

For nearly a decade, investors treated Chemours as a litigation proxy first and a chemicals company second. That perception began shifting in June 2023 when Chemours, DuPont, and Corteva (CTVA) agreed to a $1.185 billion U.S. public water system settlement, followed by the January 2021 Memorandum of Understanding to share pre-2015 PFAS liabilities up to $4 billion. The capstone arrived in August 2025: a comprehensive New Jersey settlement resolving all statewide PFAS claims for $875 million over 25 years, funded through 2030 by insurance proceeds and escrow releases. This transforms an existential risk into a predictable payment schedule, fundamentally altering the equity risk premium.

Chemours operates three core segments that tell divergent stories. Thermal Specialized Solutions (TSS) produces Opteon and Freon refrigerants, propellants, and solvents—products riding a powerful regulatory tailwind. Titanium Technologies (TT) manufactures Ti-Pure TiO₂ pigment, a cyclical commodity tied to construction and automotive demand. Advanced Performance Materials (APM) delivers high-end fluoropolymers like Nafion membranes and Teflon coatings for specialized industrial applications. The strategic imperative is clear: maximize the value of the fluorochemical franchise while managing the TiO₂ cycle and containing legacy costs.

Technology, Products, and Strategic Differentiation: The Regulatory Moat

Chemours' competitive advantage rests on proprietary fluorotechnology that turns environmental regulation into a profit engine. The AIM Act's phase-down of high-GWP HFC refrigerants created a forced obsolescence cycle that Opteon—Chemours' low-GWP alternative—was designed to capture. In Q3 2025, Opteon sales grew 80% year-over-year, accounting for 80% of total refrigerant sales versus 58% in the prior year. This isn't incremental share gain; it's a product substitution wave that management describes as "exceeding expectations" and delivering "diligent commercial execution" during the 2025 U.S. stationary equipment transition.

The economic impact is stark: TSS segment EBITDA margins expanded 500 basis points to 35% while sales grew 20%. The price/volume mix reveals pricing power—11% price increase combined with 8% volume growth—suggesting customers accept premium pricing for regulatory compliance. The Corpus Christi capacity expansion, ahead of schedule with half the project available in 2025, ensures supply can meet demand during the transition peak. This creates a multi-year earnings runway: management expects continued double-digit Opteon growth into 2026 as the OEM transition accelerates.

In TiO₂, Chemours pursues a value-based strategy that rejects commodity competition. The Ti-Pure brand commands premium pricing for whiteness, brightness, and durability attributes, but the current macro environment punishes differentiation. Q3 2025 sales fell 9% on 8% price decline and 2% volume drop, with EBITDA margins compressing 800 basis points to 4%. The $11 million operational disruption cost from cold weather and rail service interruptions amplified the cyclical pain. Yet the strategic response demonstrates discipline: management cut production volumes to align with muted demand, accepting a $25 million Q4 EBITDA hit from fixed cost absorption to prevent inventory build and preserve cash.

The TT Transformation Plan delivered $140 million in annual savings, exceeding the initial $125 million target. This operational excellence initiative, combined with the manufacturing center of excellence established after Q3 disruptions, creates a leaner cost structure for the eventual recovery. Management views Western market destocking as "short term" and expects "some restocking efforts" in Q1 2026. The global supply environment provides "longer-term opportunities" as Chinese capacity rationalization—at least 300 kilotons permanently shut—reduces oversupply.

APM's portfolio management tells a similar story of strategic pruning. The Q3 2025 exit of the SPS Capstone product line, while costing $4-48 million in restructuring charges and $80-90 million in annualized revenue, removes a regulatory-challenged business to focus resources on higher-value fluoropolymers. The Washington Works utility disruption, resolved by mid-August, created a $20 million EBITDA headwind that masks underlying progress. The SRF Limited (SRF) agreement in India provides flexible operational footprint without upfront capital, supporting essential applications without diluting returns.

Financial Performance: Evidence of Portfolio Transformation

Chemours' Q3 2025 consolidated results tell a tale of two businesses. Net sales decreased 1% to $1.5 billion, with a 3% volume decline partially offset by 1% price increase and 1% currency tailwind. The gross margin compression to 17.54% reflects TiO₂ price pressure and operational disruptions, but the segment mix shift toward TSS provides structural support. Adjusted EBITDA of $194 million in TSS versus $25 million in TT reveals where value is being created.

The nine-month operating cash flow of $127 million marks a dramatic improvement from the prior year's $771 million usage, driven by the $592 million release of restricted cash from the U.S. public water settlement fund. This one-time benefit masks underlying working capital efficiency, but the financing cash flow of -$89 million—comprising $63 million in dividends and $24 million in net debt repayments—shows disciplined capital allocation. The dividend cut preserved $63 million annually, a crucial decision management framed as "critical to maintaining financial flexibility" for the Pathway to Thrive strategy.

Balance sheet strength provides strategic optionality. At September 30, 2025, Chemours held $613 million in unrestricted cash, with $953 million available under its revolving credit facility.

The October 2025 extension of the $1.05 billion term loan to 2032, with pricing at adjusted Term SOFR +3.50%, pushes maturities beyond the PFAS payment horizon. This term structure alignment—debt maturities after the New Jersey settlement is fully funded through 2030—eliminates refinancing risk during the liability payment peak.

Capital expenditures of $250 million for 2025 represent a disciplined 4.3% of sales, focused on strategic growth initiatives like the Corpus Christi Opteon expansion and the DeLisle chlor-alkali facility. The PCC Group agreement to build a chlor-alkali plant by 2028 targets "lowest-cost production," creating vertical integration that mirrors the TiO₂ transformation. Real estate optimization efforts, including the $7 million gain on Kuan Yin land sale, demonstrate asset monetization without operational impact.

Outlook, Guidance, and Execution Risk

Management's full-year 2025 guidance—$5.7-5.8 billion in sales and $745-770 million in adjusted EBITDA—implies Q4 EBITDA of $130-155 million, a sequential decline from Q3's $194 million TSS performance due to seasonal patterns. The Q4 TSS outlook calls for high-teens to low-20s sequential sales decline with EBITDA between $125-140 million, reflecting normal refrigerant seasonality. Yet the 2026 preview is bullish: "continued double-digit Opteon growth" and product development costs dropping from $40 million to $20 million will expand margins.

The TT outlook remains cautious but constructive. Q4 sales are expected to decrease high-single to low-double digits sequentially, with EBITDA of $15-20 million including the $25 million production cut impact. Management explicitly states destocking is "short term" and anticipates "some restocking efforts in Q1 2026." The key variable is Chinese capacity discipline—if the 300+ kiloton permanent shutdowns hold and anti-dumping duties in Brazil, Saudi Arabia, and India reduce Chinese exports, pricing power could return faster than expected.

APM's Q4 guidance calls for low-single-digit sequential sales decline but EBITDA recovery to $30-40 million as Washington Works normalizes and cost reduction efforts progress. The segment's 10% EBITDA margin YTD, while below historical levels, reflects portfolio cleansing that positions APM for higher-value growth in data center cooling and hydrogen markets.

The consolidated 2026 outlook—"overall sales and earnings growth with improved cash flow performance"—hinges on three execution factors: TSS maintaining pricing power as Freon declines, TT destocking proving temporary, and the New Jersey settlement payments remaining funded by insurance. Management's "line of sight to greater than 5% sales growth starting in 2026" depends on commercial excellence across all segments, not just TSS tailwinds.

Risks and Asymmetries: What Could Break the Thesis

The investment thesis faces three material risks that could reverse the margin inflection. First, PFAS regulatory tightening beyond the New Jersey settlement could increase remediation costs. The EPA's ongoing actions at Fayetteville could require additional thermal oxidizer installations or exceed the 99.99% efficiency standard. Management acknowledges "considerable uncertainty exists with respect to environmental remediation costs," estimating potential liabilities up to $610 million above current accruals. While the New Jersey settlement covers four sites through 2030, future federal drinking water standards could trigger new claims not covered by the MOU.

Second, TiO₂ cyclicality could persist longer than management's "short term" view. If Chinese capacity rationalization proves incomplete—if the 300 kiloton shutdown estimate proves optimistic or if new capacity comes online—oversupply could extend through 2026. Venator (VNTR)'s inventory liquidation impacted Q3 and continues into Q4; if this liquidation extends for "several quarters" rather than months, Chemours' production cuts may need to deepen, turning the $25 million Q4 fixed cost absorption into a multi-quarter headwind.

Third, operational disruptions could recur. While Washington Works is "safely running" and the manufacturing center of excellence "enabled quicker response," the Q3 rail line interruption and cold weather downtime reveal infrastructure vulnerabilities. The DeLisle chlor-alkali project, targeting 2028 completion, adds execution risk to the lowest-cost production strategy.

The government shutdown risk, while temporary, highlights regulatory dependency. A prolonged shutdown would delay EPA approvals for the Fayetteville thermal oxidizer and hinder new PFAS program initiation, potentially pushing remediation timelines and increasing compliance costs. Tariff uncertainty adds margin pressure, though management notes the direct impact is "not significant."

On the positive side, two asymmetries could accelerate value creation. If Opteon growth exceeds the projected double-digit rate—driven by faster OEM adoption of R-454B or expanded international regulations—TSS margins could sustain above 35%, lifting consolidated EBITDA beyond the $770 million high-end guidance. Alternatively, if TiO₂ restocking in Q1 2026 combines with Chinese capacity discipline, TT margins could recover from 4% toward historical 12% levels, adding $100+ million in incremental EBITDA.

Valuation Context: Pricing for the Pivot

At $12.70 per share, Chemours trades at an enterprise value of $5.71 billion, representing 0.97x forward sales and 8.66x forward EBITDA based on the $745-770 million guidance range. These multiples embed significant skepticism about margin sustainability, reflecting the market's focus on TT's cyclical weakness rather than TSS's structural growth.

Peer comparisons reveal the valuation gap. Tronox (TROX), a pure-play TiO₂ competitor, trades at 10.97x EV/EBITDA despite 13% Q3 revenue decline and 10.6% EBITDA margins—premium multiples for inferior execution. Huntsman (HUN), with diversified chemicals exposure, trades at 11.86x EV/EBITDA with 6.4% margins and declining sales. Chemours' 8.66x multiple suggests the market prices it as a distressed cyclical, ignoring the TSS transformation.

The balance sheet metrics support strategic flexibility but highlight leverage concerns. Debt-to-equity of 14.73 appears alarming, but the extended 2032 maturities and $1.6 billion in available liquidity ($613M cash + $953M revolver) transform this into manageable term structure risk. The 2.79% dividend yield, post the 65% cut, reflects capital discipline rather than yield trap risk.

Key valuation drivers are the sustainability of TSS's 35% EBITDA margins and the timing of TT's recovery. If TSS maintains 30%+ margins on 5% segment growth while TT recovers to 8-10% margins by 2026, consolidated EBITDA could approach $850-900 million, making the 8.66x multiple look mispriced. Conversely, if TiO₂ weakness persists and TSS margins compress as Freon declines faster than Opteon grows, the $745 million EBITDA guidance could prove optimistic.

Conclusion: Liability Clarity Meets Earnings Power

Chemours stands at an inflection point where legacy risk containment and portfolio transformation converge. The New Jersey settlement, funded through insurance proceeds and escrow releases, removes the existential PFAS overhang that has depressed valuation multiples for years. Simultaneously, the AIM Act's regulatory mandate has created a multi-year Opteon growth cycle that TSS is executing flawlessly, delivering 35% EBITDA margins while expanding capacity.

The market's focus on TiO₂ cyclicality misses the strategic pivot. While TT's Q3 performance was disappointing, the $140 million transformation savings, production discipline, and anticipated Q1 2026 restocking position the segment for recovery. More importantly, TSS's earnings power—nearly 8x TT's Q3 EBITDA on less than half the sales—demonstrates the portfolio's direction.

The investment thesis hinges on two variables: whether TSS can sustain pricing power as Freon declines, and whether the New Jersey settlement funding mechanism remains intact. The 2032 debt extension and dividend cut provide financial flexibility, while the manufacturing center of excellence reduces operational risk. Trading at 8.66x EBITDA with a clear path to liability resolution and double-digit specialty growth, Chemours offers an asymmetric risk/reward profile where the downside is contained by settlement structure and the upside levered to regulatory tailwinds. For investors willing to look through TiO₂ cyclicality, the fluorochemical franchise is emerging as a durable, high-margin business that the market has yet to re-rate.