Bay Street News

KRONOS WORLDWIDE, INC. REPORTS FOURTH QUARTER 2023 RESULTS

Dallas, Texas, March 06, 2024 (GLOBE NEWSWIRE) — Kronos Worldwide, Inc. (NYSE:KRO) today reported a net loss of $5.3 million, or $.05 per share, in the fourth quarter of 2023 compared to a net loss of $19.9 million, or $.18 per share, in the fourth quarter of 2022. For the full year of 2023, Kronos Worldwide reported a net loss of $49.1 million, or $.43 per share, compared to net income of $104.5 million, or $.90 per share for the full year of 2022. Net income increased in the fourth quarter of 2023 as compared to the fourth quarter of 2022 primarily due to higher income from operations as a result of the net effect of higher sales volumes, lower average TiO2 selling prices and lower production costs (primarily raw material costs). Net income decreased in the full year of 2023 as compared to the full year 2022 primarily due to lower income from operations as a result of lower sales volumes, lower average TiO2 selling prices and reduced production volumes. Beginning in the fourth quarter of 2022 and continuing through 2023, we implemented production curtailments in response to a sharp decline in demand for TiO2 products occurring in all major markets. In addition, throughout 2023 we implemented cost reduction initiatives and other strategies designed to improve our long-term cost structure and preserve liquidity. Through these actions we successfully reduced our finished goods inventory levels and maintained significant liquidity, although our results of operations were negatively impacted by certain cost reduction initiatives and the significant unabsorbed fixed production costs incurred due to the curtailments, as discussed further below. Comparability of our results was also impacted by the effects of changes in currency exchange rates.

Net sales of $400.1 million in the fourth quarter of 2023 were $57.7 million, or 17%, higher than in the fourth quarter of 2022. Net sales of $1.7 billion in the full year of 2023 were $263.7 million, or 14%, lower than in the full year of 2022. Net sales increased in the fourth quarter of 2023 compared to the fourth quarter of 2022 due to the net effects of higher sales volumes due to strengthening demand for TiO2 in our primary markets of Europe and North America and lower average TiO2 selling prices. Net sales decreased in the full year of 2023 compared to the full year of 2022 due to the effects of lower sales volumes in all our major markets and lower average TiO2 selling prices. TiO2 sales volumes were 29% higher in the fourth quarter of 2023 as compared to the fourth quarter of 2022 and 13% lower in the full year of 2023 as compared to the full year of 2022. Average TiO2 selling prices were 11% lower in the fourth quarter of 2023 as compared to the fourth quarter of 2022 and 4% lower in the full year of 2023 as compared to the full year of 2022. Average TiO2 selling prices at the end of 2023 were 13% lower than at the end of 2022. Changes in product mix positively contributed to net sales, primarily due to higher average selling prices and sales volumes in our complementary businesses which somewhat offset declines in TiO2 sales volumes in the full year of 2023. Fluctuations in currency exchange rates (primarily the euro) also affected net sales comparisons, increasing net sales by approximately $10 million in both the fourth quarter and full year of 2023 as compared to the same periods in 2022. The table at the end of this press release shows how each of these items impacted net sales.

Our TiO2 segment loss (see description of non-GAAP information below) in the fourth quarter of 2023 was $1.3 million as compared to our TiO2 segment loss of $15.0 million in the fourth quarter of 2022. For the full year of 2023, the Company’s segment loss was $39.8 million as compared to segment profit of $175.9 million in the full year of 2022. Segment loss decreased in the fourth quarter of 2023 compared to the same period in 2022 primarily due to a lower loss from operations due to the net effects of higher sales volumes and lower average TiO2 selling prices. Segment profit decreased in the full year of 2023 as compared to the full year of 2022 primarily due to lower income from operations as a result of the combination of lower sales volumes, higher production costs and lower average TiO2 selling prices. In addition, cost of sales in the fourth quarter and full year of 2023 includes $22 million and $96 million, respectively, of unabsorbed fixed production and other manufacturing costs associated with production curtailments at our facilities during the full year of 2023 as we adjusted our TiO2 production volumes to align inventory levels with lower demand. TiO2 production volumes were 15% higher in the fourth quarter of 2023 compared to the fourth quarter of 2022 but 19% lower in the full year of 2023 compared to the full year of 2022. As a result of reduced demand and scheduled maintenance activities, we operated our production facilities at 72% of practical capacity utilization in the full year of 2023 (76%, 64%, 73% and 75% in the first, second, third and fourth quarters of 2023, respectively) compared to 89% in the full year of 2022 (100%, 95%, 93% and 65% in the first, second, third and fourth quarters of 2022, respectively). Fluctuations in currency exchange rates (primarily the euro) decreased our loss from operations by approximately $5 million in the fourth quarter of 2023 and by approximately $16 million in the full year of 2023 as compared to the same prior year periods.

Our net income (loss) before interest expense, income taxes and depreciation and amortization expense (EBITDA) (see description of non-GAAP information below) in the fourth quarter of 2023 was $6.9 million compared to EBITDA of $(8.2) million in the fourth quarter of 2022. For the full year of 2023, the Company’s EBITDA was $(7.2) million compared to EBITDA of $202.5 million in the full year of 2022.

Our loss from operations in the full year of 2023 includes an insurance settlement gain related to a 2020 business interruption insurance claim of $2.5 million ($2.0 million, or $.02 per share, net of income tax expense), a fixed asset impairment related to the write-off of certain costs resulting from a capital project termination of $3.8 million ($2.8 million, or $.02 per share, net of income tax expense) and restructuring costs related to workforce reductions of $5.8 million ($4.3 million, or $.04 per share, net of income tax expense). Income from operations in the full year of 2022 includes a gain related to the 2020 business interruption insurance claim noted above of $2.7 million ($2.2 million, or $.02 per share, net of income tax expense).

Other components of net periodic pension and OPEB cost in the full year of 2023 includes a $1.3 million settlement loss incurred in the second quarter of 2023 related to the termination and buy-out of our UK pension plan ($.9 million, or $.01 per share, net of income tax expense).

The statements in this release relating to matters that are not historical facts are forward-looking statements that represent management’s beliefs and assumptions based on currently available information. Although we believe that the expectations reflected in such forward-looking statements are reasonable, we cannot give any assurances that these expectations will prove to be correct. Such statements by their nature involve substantial risks and uncertainties that could significantly impact expected results, and actual future results could differ materially from those described in such forward-looking statements. While it is not possible to identify all factors, we continue to face many risks and uncertainties. The factors that could cause actual future results to differ materially include, but are not limited to, the following:

Should one or more of these risks materialize (or the consequences of such a development worsen), or should the underlying assumptions prove incorrect, actual results could differ materially from those forecasted or expected. The Company disclaims any intention or obligation to update or revise any forward-looking statement whether as a result of changes in information, future events or otherwise.

In an effort to provide investors with additional information regarding the Company’s results of operations as determined by accounting principles generally accepted in the United States of America (GAAP), the Company has disclosed certain non-GAAP information which the Company believes provides useful information to investors:

Kronos Worldwide, Inc. is a major international producer of titanium dioxide products.

Investor Relations Contact:        
Bryan A. Hanley
Senior Vice President & Treasurer
Tel: (972) 233-1700

KRONOS WORLDWIDE, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
 (In millions, except per share and metric ton data)

                         
    Three months ended   Year ended
    December 31,    December 31, 
    2022   2023   2022   2023
    (unaudited)            
Net sales      $  342.4      $  400.1      $  1,930.2      $  1,666.5
Cost of sales      305.1      344.5      1,539.1      1,501.6
                         
Gross margin      37.3      55.6      391.1      164.9
                         
Selling, general and administrative expense      47.7      54.3      231.3      211.2
Other operating income (expense):                            
Currency transactions, net      (5.6)      (3.2)      11.5      1.4
Other income (expense), net      –      (.2)      3.4      3.3
Corporate expense      (3.7)      (3.6)      (15.1)      (14.4)
                         
Income (loss) from operations      (19.7)      (5.7)      159.6      (56.0)
                         
Other income (expense):                            
Trade interest income      1.0      .8      1.2      1.8
Other interest and dividend income      2.0      1.1      3.9      5.1
Marketable equity securities      (.5)      .3     (1.0)      (1.0)
Other components of net periodic pension
   and OPEB cost
     (3.7)      (1.6)      (12.9)      (5.7)
Interest expense      (3.9)      (4.3)      (16.9)      (17.1)
                         
Income (loss) before income taxes      (24.8)      (9.4)      133.9      (72.9)
                         
Income tax expense (benefit)      (4.9)      (4.1)      29.4      (23.8)
                         
Net income (loss)   $  (19.9)   $  (5.3)   $  104.5   $  (49.1)
                         
Net income (loss) per basic and diluted share   $  (.18)   $  (.05)   $ .90   $  (.43)
                         
Weighted average shares used in the
   calculation of net income per share
     115.4      115.0      115.5      115.1
                         
TiO2 data – metric tons in thousands:                            
Sales volumes      82      106      481      419
Production volumes      91      105      492      401

KRONOS WORLDWIDE, INC.
RECONCILIATION OF INCOME (LOSS) FROM
OPERATIONS TO SEGMENT PROFIT (LOSS)
(In millions)

                               
    Three months ended     Year ended
    December 31,      December 31, 
    2022     2023     2022     2023
    (unaudited)                
Income (loss) from operations   $  (19.7)     $  (5.7)     $  159.6     $  (56.0)
                               
Adjustments:                                  
Trade interest income      1.0        .8        1.2        1.8
Corporate expense      3.7        3.6        15.1        14.4
                               
Segment profit (loss)   $  (15.0)     $  (1.3)     $  175.9     $  (39.8)

RECONCILIATION OF NET INCOME (LOSS) TO EBITDA

(In millions)

                           
    Three months ended     Year ended
    December 31,      December 31, 
    2022   2023     2022   2023
    (unaudited)            
Net income (loss)   $  (19.9)   $  (5.3)     $  104.5   $  (49.1)
                           
Adjustments:                              
Depreciation expense      12.7      12.0        51.7      48.6
Interest expense      3.9      4.3        16.9      17.1
Income tax expense (benefit)      (4.9)      (4.1)        29.4      (23.8)
                           
EBITDA   $  (8.2)   $  6.9     $  202.5   $  (7.2)

IMPACT OF PERCENTAGE CHANGE IN NET SALES
(unaudited)

           
       Three months ended   Year ended  
    December 31,    December 31,   
    2023 vs. 2022   2023 vs. 2022  
           
Percentage change in net sales:            
TiO2 sales volume    29 %  (13) %
TiO2 product pricing    (11)    (4)  
TiO2 product mix/other    (4)    2  
Changes in currency exchange rates    3    1  
           
Total    17 %  (14) %


Bay Street News