Tronox Reports Second Quarter 2016 Financial Results

TiO₂ segment operating income of $6 million improved from an operating loss of $41 million in the year-ago quarter and an operating loss of $36 million in the prior quarter.  With cash provided by operating activities of $67 million and capital expenditures of $18 million, TiO₂ delivered free cash flow of $49 million in the second quarter.

Despite lower selling prices in all major products in the segment, TiO₂ segment adjusted EBITDA of $59 million increased 64 percent from $36 million in the year-ago quarter, driven by significant cost reductions resulting from the Operational Excellence program and the favorable impact of foreign exchange on production costs, partially offset by the impact of feedstock production curtailments.

Compared sequentially, adjusted EBITDA of $59 million improved by 168 percent from $22 million in the first quarter, driven by significant pigment price increases and production cost reductions, higher sales volumes across the segment and the benefit of higher pigment production efficiency and plant utilization.

TiO₂ successfully negotiated a new two-year labor agreement for its South Africa operations.  The new agreement, which expires on June 30, 2018, was negotiated and ratified without any work stoppages.

Tronox Alkali

Alkali segment revenue of $204 million was 2 percent lower than $208 million in the year-ago quarter, as sales volumes and selling prices were both 1 percent lower.  In the domestic market, sales volumes increased 5 percent, driven by continued strong demand growth, particularly in flat glass and chemicals markets.  Domestic selling prices were level, as price increases in the low single-digit percent range implemented in annual contracts at the beginning of the year were offset by customer mix in the quarter.  In export markets, sales volumes were 6 percent lower, as a higher portion of production volumes was allocated to domestic markets to meet strong demand growth.  Selling prices in export markets declined 6 percent primarily due to lower prices in Asia.  Chinese soda ash producers lowered domestic and export prices in the fourth quarter last year as raw material, shipping and energy cost deflation and currency devaluation lowered their costs. 

Compared sequentially, Alkali revenue of $204 million increased 7 percent from $190 million in the first quarter.  Sales volumes increased 10 percent driven by broad-based domestic and export demand growth.  Domestic sales volumes increased 8 percent and export sales volumes increased 12 percent.  Selling prices were 2 percent lower, as domestic selling prices declined 2 percent due to customer mix while export selling prices were level to the prior quarter.

Alkali segment operating income of $11 million declined from $25 million in the year-ago quarter and $20 million in the prior quarter.  With cash provided by operating activities of $21 million and capital expenditures of $4 million, Alkali delivered free cash flow of $17 million in the second quarter. 

Alkali segment adjusted EBITDA of $28 million declined from a record $50 million in the year-ago quarter, driven primarily by items in the current quarter totaling approximately $9 million that did not occur in the year-ago quarter, as well as by lower export sales, higher inflation-driven operating costs and unplanned maintenance.  These items were the move of our longwall mining machine, the transition from a shared services agreement with the business' prior owner to a Tronox system and labor agreement supply reliability planning costs.  Compared sequentially, Alkali adjusted EBITDA of $28 million declined from $35 million, as higher sales volumes were more than offset by the same items totaling approximately $9 million that also did not occur in the prior quarter. 

Alkali successfully negotiated a new three-year labor agreement with employees at its Green River, Wyo. production facility.  The new agreement, which expires June 30, 2019, was negotiated and ratified without work stoppage.   

Corporate

Corporate loss from operations was $9 million in the second quarter compared to a loss from operations of $34 million in the year-ago quarter, which included $21 million of professional fees incurred for the Alkali acquisition, and a loss from operations of $13 million in the prior quarter.  Corporate adjusted EBITDA was ($16) million compared to adjusted EBITDA of ($19) million in the year-ago quarter and adjusted EBITDA of ($17) million in the prior quarter.  Corporate cash used in operations was $20 million in the quarter.

Consolidated

Selling, general and administrative expenses in the second quarter were $50 million, compared to $72 million in the year-ago quarter, which included $21 million of professional fees incurred for the Alkali acquisition, and $47 million in the prior quarter.  Interest and debt expense of $46 million compares to $52 million in the year-ago quarter, which included an $8 million bridge financing fee related to the Alkali acquisition, and $46 million in the prior quarter.  On June 30, 2016, gross consolidated debt was $3,055 million, and debt, net of cash and cash equivalents, was $2,867 million.  Liquidity was $460 million including cash and cash equivalents on the balance sheet of $188 million as of June 30, 2016.  Capital expenditures were $22 million and depreciation, depletion and amortization was $60 million.

Second Quarter 2016 Webcast Conference Call

Webcast Conference Call: Thursday, August 4, 2016, at 8:30 a.m. ET (New York).  The live call is open to the public via Internet broadcast and telephone

Internet Broadcast:  http://www.tronox.com/
Dial-in telephone numbers:
U.S. / Canada: +1.877.831.3840
International: +1.253.237.1184
Conference ID: 46571956

Conference Call Presentation Slides will be used during the conference call and are available on our website at http://www.tronox.com/

Webcast Conference Call Replay: Available via the Internet and telephone beginning on Thursday, August 4, 2016 at 11:30 a.m. ET (New York) until 11:30 p.m. ET (New York) on Tuesday, August 9, 2016

Internet Replay: www.tronox.com
Replay dial-in telephone numbers:
U.S. / Canada: +1.855.859.2056
International: +1.404.537.3406
Conference ID: : 46571956

Upcoming Conferences

During the third quarter 2016 a member of management is scheduled to present at the following conferences:

• UBS Global Chemicals Conference, New York, September 7, 2016
• RBC Global Industrials Conference, Las Vegas, September 8, 2016
• Credit Suisse Basic Materials Conference, New York, September 13, 2016
• Credit Suisse Global Credit Products Conference, Miami, September 22-23, 2016
• Deutsche Bank Leveraged Finance Conference, Phoenix, September 27-28, 2016

Accompanying conference materials will be available at http://investor.tronox.com

About Tronox

Tronox Limited operates two vertically integrated mining and inorganic chemical businesses. Tronox TiO₂ mines and processes titanium ore, zircon and other minerals, and manufactures titanium dioxide pigments that add brightness and durability to paints, plastics, paper, and other everyday products. Tronox Alkali mines trona ore and manufactures natural soda ash, sodium bicarbonate, caustic soda, and other compounds which are used in the production of glass, detergents, baked goods, animal nutrition supplements, pharmaceuticals, and other essential products.  For more information, visit www.tronox.com

Forward Looking Statements

Statements in this release that are not historical are forward-looking statements within the meaning of the U.S. Private Securities Litigation Reform Act of 1995. These forward-looking statements, which are subject to known and unknown risks, uncertainties and assumptions about us, may include projections of our future financial performance based on our growth strategies and anticipated trends in our business. These statements are only predictions based on our current expectations and projections about future events. There are important factors that could cause our actual results, level of activity, performance or achievements to differ materially from the results, level of activity, performance or achievements expressed or implied by the forward-looking statements. These and other risk factors are discussed in the company's filings with the Securities and Exchange Commission (SEC), including those under the heading entitled "Risk Factors" in our Annual Report on Form 10-K for the year ended December 31, 2015 and our Quarterly Report on Form 10-Q for the quarter ended March 31, 2016.

Moreover, we operate in a very competitive and rapidly changing environment. New risks and uncertainties emerge from time to time, and it is not possible for our management to predict all risks and uncertainties, nor can management assess the impact of all factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements. Although we believe the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, level of activity, performance or achievements. Neither we nor any other person assumes responsibility for the accuracy or completeness of any of these forward-looking statements. You should not rely upon forward-looking statements as predictions of future events. Unless otherwise required by applicable laws, we undertake no obligation to update or revise any forward-looking statements, whether as a result of new information or future developments.

Use of Non-U.S. GAAP Financial Information

To provide investors and others with additional information regarding Tronox Limited's operating results, we have disclosed in this press release certain non-U.S. GAAP financial measures, including EBITDA, Adjusted EBITDA, free cash flow and adjusted net loss attributable to Tronox.  These non-U.S. GAAP financial measures are a supplement to and not a substitute for or superior to, the company's results presented in accordance with U.S. GAAP.  The non-U.S. GAAP financial measures presented by the company may be different than non-U.S. GAAP financial measures presented by other companies.  The non-U.S. GAAP financial measures are provided to enhance the user's overall understanding of the company's operating performance. Specifically, the company believes the non-U.S. GAAP information provides useful measures to investors regarding the company's financial performance by excluding certain costs and expenses that the company believes are not indicative of its core operating results.  The presentation of these non-U.S. GAAP financial measures are not meant to be considered in isolation or as a substitute for results or guidance prepared and presented in accordance with U.S. GAAP.  A reconciliation of the non-U.S. GAAP financial measures to U.S. GAAP results is included herein.

Management believes these non-U.S. GAAP financial measures:

• Reflect Tronox Limited's ongoing business in a manner that allows for meaningful period-to-period comparison and analysis of trends in its business, as they exclude income and expense that are not reflective of ongoing operating results;
• Provide useful information to investors and others in understanding and evaluating Tronox Limited's operating results and future prospects in the same manner as management and in comparing financial results across accounting periods;
• Provide additional view of the operating performance of the company by adding interest expenses, taxes, depreciation, depletion and amortization to the net income. Further adjustments due to purchase accounting and stock-based compensation charges attempt to exclude items that are either non-cash or unusual in nature;
• Assist investors to assess the company's compliance with financial covenants under its debt instruments;
• Adjusted EBITDA is one of the primary measures management uses for planning and budgeting processes and to monitor and evaluate financial and operating results. Adjusted EBITDA is not a recognized term under U.S. GAAP and does not purport to be an alternative to measures of our financial performance as determined in accordance with U.S. GAAP, such as net income (loss). Because other companies may calculate EBITDA and Adjusted EBITDA differently than Tronox, EBITDA may not be, and Adjusted EBITDA as presented in this release is not, comparable to similarly titled measures reported by other companies, and
• We believe that the non-U.S. GAAP financial measure "Adjusted net loss attributable to Tronox Limited" and its presentation on a per share basis provide useful information about our operating results to investors and securities analysts. We also believe that excluding the effects of these items from operating results allows management and investors to compare more easily the financial performance of our underlying businesses from period to period.

Media Contact: Bud Grebey
Direct: +1.203.705.3721

Investor Contact: Brennen Arndt
Direct: +1.203.705.3722

TRONOX LIMITED
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (US GAAP)
(UNAUDITED)
(Millions of U.S. dollars, except share and per share data)
		Three Months Ended June 30,				Six Months Ended June 30,
		2016		2015		2016		2015
Net sales		$     537		$     617		$  1,012		$  1,002
	Cost of goods sold	480		593		935		943
Gross profit		57		24		77		59
	Selling, general, and administrative expenses	(50)		(72)		(97)		(116)
	Restructuring income (expense)	1		(2)		(1)		(2)
Income (loss) from operations		8		(50)		(21)		(59)
	Interest and debt expense, net	(46)		(52)		(92)		(86)
	Gain on extinguishment of debt	-		-		4		-
	Other income (expense), net	-		(5)		(9)		(1)
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