Executive Summary / Key Takeaways

• Vertical Integration as a Core Moat: Tronox's deep vertical integration, from mining to pigment production, is its fundamental competitive advantage, enabling cost leadership and supply reliability, crucial in a volatile market.
• Strategic Cost Optimization & Asset Rationalization: The company is aggressively executing a $125-$175 million cost improvement program and has idled its Botlek plant, demonstrating decisive action to enhance structural efficiencies and optimize its global footprint.
• Anti-Dumping Duties Reshaping Global Markets: Emerging anti-dumping duties in key regions like Europe, India, and Brazil are creating significant market share opportunities for Tronox, offsetting broader macroeconomic demand weakness.
• Financial Discipline Amidst Headwinds: Despite a challenging Q2 2025 with lower volumes and a revised 2025 outlook for revenue ($3.0-$3.1B) and Adjusted EBITDA ($410-$460M), Tronox is bolstering liquidity through dividend reduction and inventory financing, prioritizing cash generation.
• Long-Term Growth Drivers: Ongoing investments in high-grade mining extensions and exploration of rare earth co-product opportunities position Tronox for improved cost profiles and diversified earnings as market conditions normalize.

The Unyielding Core: Vertical Integration and Technological Edge

Tronox Holdings plc is a global titan in the titanium dioxide (TiO2) pigment industry, a critical component in paints, coatings, plastics, and paper. Established in 2018, the company's foundational strategy revolves around its deep vertical integration. This unique model encompasses titanium-bearing mineral sand mines and beneficiation operations, primarily in Australia and South Africa, feeding its eight TiO2 pigment facilities across the globe. This end-to-end control is not merely a business model; it is Tronox's strategic moat, designed to ensure a low-cost, high-quality pigment supply and insulate it from raw material price volatility.

Beyond TiO2, Tronox's mining activities yield valuable co-products, including zircon, pig iron, and the rare-earth-bearing mineral monazite. These additional revenue streams diversify its earnings profile and enhance the overall profitability of its mining operations. The company's historical journey, marked by strategic acquisitions like Cristal's TiO2 business in 2019 and MGT assets in 2020, has consistently reinforced this vertical integration, expanding its global footprint and product capabilities.

Tronox's commitment to operational excellence is deeply intertwined with its technological differentiation. The company actively deploys advanced process control (APC) and predictive maintenance technologies across its facilities. For instance, the implementation of APC in its Hamilton plant's spin flash dryers yielded a 6% improvement in productivity and an 8% reduction in energy consumption. This tangible, quantifiable benefit underscores how technology directly translates into lower operating costs and enhanced efficiency. The company's ongoing IT-enabled transformation program, including upgrades to financial systems, aims to further automate operational and financial processes, driving structural efficiencies. These technological advancements are not just about incremental gains; they are foundational to Tronox's competitive moat, contributing to its cost leadership and long-term growth strategy by maximizing asset uptime and minimizing variability.

A Challenging Macro Landscape and Strategic Response

The global TiO2 market has faced a prolonged and challenging macroeconomic environment, characterized by elevated interest rates, inflationary pressures, and geopolitical uncertainties. These factors have dampened customer discretionary spending, particularly impacting housing and construction activities, leading to softer-than-anticipated demand for coatings and other TiO2-reliant products. This extended downturn, described by management as "longer than any other one that I've experienced," has necessitated decisive strategic actions from Tronox.

In response, Tronox launched a comprehensive cost improvement program in the second half of 2024, targeting $125 million to $175 million in sustainable run-rate savings by the end of 2026. This initiative is broad-based, focusing on operational excellence, leveraging technology, optimizing the supply chain, and aligning selling, general, and administrative (SG&A) expenses. The company is "well ahead of our sustained – our sustainable cost improvement program, and we expect to exit the year with nearly double the cost savings than previously targeted," signaling strong execution.

A pivotal strategic move in March 2025 was the decision to indefinitely idle its 90,000 metric ton per year TiO2 plant in Botlek, Netherlands. This difficult but necessary action aims to optimize Tronox's global production footprint and improve capacity utilization amidst a persistent global supply imbalance, particularly driven by Chinese competition. This rationalization is expected to improve the company's cost structure, as Botlek was its highest-cost plant.

Competitive Dynamics and the Anti-Dumping Tailwinds

The global TiO2 market is intensely competitive, with Tronox vying against major players like Chemours Company (CC), Kronos Worldwide Inc. (KRO), and Venator Materials plc (VNTR). Tronox's vertical integration provides a significant cost advantage, historically estimated at $300-$400 per ton compared to buying feedstock on the open market. This allows Tronox to maintain a more resilient cost structure than its peers, many of whom rely on external ore suppliers.

However, the market has seen heightened competitive dynamics, particularly from Chinese producers. These producers have historically exerted pressure on pricing and market share, sometimes exploiting gaps in trade defense measures. For instance, delays in Brazil's anti-dumping investigation allowed Chinese producers to increase exports between the expiration of provisional duties in April 2025 and the anticipated final duties by early Q4 2025.

Despite these challenges, a significant shift in the competitive landscape is underway due to the implementation of anti-dumping duties. These measures are expected to be a net positive for Tronox in the mid to long term:

• Europe: Duties finalized in January 2025 have already led to a recovery in Tronox's sales volumes, reaching levels not seen since Q2 2021. Tronox is actively regaining market share previously lost to Chinese imports.
• India: Following the implementation of duties in May 2025, Tronox is experiencing strong early sales momentum. The Australia-India Free Trade Agreement provides Tronox with an advantaged position, making it a significant opportunity for volume growth in a fast-growing economy with low per capita TiO2 consumption.
• Brazil: While delays have occurred, final duties are anticipated by Q4 2025. Brazil is an 180,000-ton per year market, with approximately 100,000 tons historically supplied by China. Tronox, as the sole producer in Brazil, is well-positioned to capture this demand, supplementing local production from its Yanbu and North America facilities.
• Saudi Arabia: An anti-dumping investigation launched in October 2024 could further impact the 50,000-ton market, where China currently holds a notable share.

Collectively, these duty-affected regions represent approximately 600,000 tons of TiO2 volume that is now "in play" for non-Chinese producers. Tronox's strategic positioning and integrated supply chain make it a prime candidate to capture a significant portion of this shifting demand.

Financial Performance and Outlook

Tronox's financial performance in Q2 2025 reflected the challenging market conditions. Revenue for the quarter was $731 million, an 11% decrease year-over-year, primarily driven by lower TiO2 and zircon sales volumes and reduced zircon average selling prices. Gross profit declined to $79 million from $150 million in the prior year, impacted by lower volumes, higher production costs (including high-cost tons from Botlek), and increased freight expenses. The company reported a net loss of $85 million, including $39 million in restructuring charges related to the Botlek idling. Adjusted EBITDA for Q2 2025 was $93 million, with an adjusted EBITDA margin of 12.7%.

For the six months ended June 30, 2025, net sales were $1,469 million, down 8% from the prior year. TiO2 revenue decreased 7% to $1,171 million, mainly due to an $81 million drop in sales volumes. Zircon revenue fell 21% to $137 million, impacted by both lower volumes and prices. The company reported a net loss of $196 million for the first half of 2025, compared to a net income of $1 million in the same period of 2024.

Despite these headwinds, Tronox is actively managing its financial levers. As of June 30, 2025, total available liquidity stood at $397 million, supported by $132 million in cash and equivalents and $265 million from revolving credit facilities. The company's total debt was $3.1 billion, resulting in a net leverage ratio of 6.1x. To further bolster liquidity, Tronox secured an additional $50 million through an inventory financing program in July 2025.

In a move to enhance balance sheet flexibility, the Board of Directors reduced the quarterly cash dividend by 60% to $0.05 per share for Q3 2025. This adjustment aligns capital allocation with the current macro environment, allowing the company to preserve cash.

Tronox has updated its 2025 financial outlook to reflect the prolonged market weakness and revised customer expectations. The company now anticipates:

• Revenue: $3.0 billion to $3.1 billion
• Adjusted EBITDA: $410 million to $460 million
• Free Cash Flow: A use of $100 million to $170 million
• Capital Expenditures: Less than $330 million (a $65 million reduction from original guidance)
• Net Cash Interest: Approximately $150 million
• Net Cash Taxes: Less than $10 million
• Working Capital: A use of $70 million to $90 million

This revised outlook assumes lower pigment and zircon volumes but anticipates a slight improvement in pigment volumes in the second half, driven by targeted market share gains in India. The cost profile is expected to improve in the latter half of 2025, with a "step change" in costs in Q4 as the cost improvement program gains traction and new mining projects (Fairbreeze commissioned in July 2025, East OFS expected November 2025) begin to yield lower-cost feedstock. These mining investments are crucial for sustaining Tronox's integrated cost advantage, despite a temporary $50-$60 million headwind in 2025 from transitioning out of older, lower-grade ore bodies.

Conclusion

Tronox Holdings plc is a company in the midst of a challenging, yet transformative, period. Its core investment thesis remains firmly rooted in its unparalleled vertical integration, which provides a structural cost advantage and supply reliability in the cyclical TiO2 market. While the current macroeconomic headwinds and a prolonged industry downturn have impacted recent financial performance and necessitated a downward revision to 2025 guidance, Tronox is responding with decisive strategic actions.

The aggressive cost improvement program, the rationalization of its asset footprint through the Botlek idling, and disciplined capital allocation, including a dividend adjustment, underscore management's commitment to strengthening the balance sheet and optimizing operational efficiency. Furthermore, the evolving landscape of anti-dumping duties presents a significant opportunity for Tronox to reclaim market share and drive volume growth in key regions. As new, higher-grade mining assets come online and technological advancements like APC continue to enhance productivity, Tronox is strategically positioning itself for a stronger cost profile and improved cash generation. The company's active exploration of rare earth co-product opportunities also offers a potential avenue for future diversified earnings. While the timing of a full market recovery remains uncertain, Tronox's focus on controlling the controllables and leveraging its integrated model positions it to emerge as an even more formidable competitor, delivering sustained value for shareholders as the cycle turns.