KRONOS WORLDWIDE, INC. REPORTS FOURTH QUARTER 2023 RESULTS
- None.
- Kronos Worldwide, Inc. reported a significant net loss for the full year of 2023 compared to the previous year.
- The company's TiO2 segment experienced losses in both Q4 2023 and full-year 2023, indicating operational challenges.
- Production curtailments and cost reduction initiatives negatively impacted the company's results of operations in 2023.
- Lower sales volumes and average TiO2 selling prices contributed to the decline in net income for the full year of 2023.
- The company operated its production facilities at reduced capacity in 2023 due to lower demand and maintenance activities.
Insights
The reported financials of Kronos Worldwide, Inc. indicate a significant swing from net income in the previous year to a net loss in the current year. This reversal from a profit of $104.5 million to a loss of $49.1 million warrants an examination of the underlying factors contributing to the volatility in earnings. The decline in net income for the full year is primarily attributed to reduced sales volumes and lower average selling prices for Titanium Dioxide (TiO2), alongside higher production costs. Such a trend could signal a challenging market environment for TiO2 products, potentially impacting the broader chemical sector, which relies on this compound for various applications including paint and coatings.
Furthermore, the strategic response by Kronos Worldwide to curtail production in light of decreased demand is a critical move that investors should assess for its long-term implications. While it has helped manage inventory levels and preserve liquidity, the unabsorbed fixed production costs present a concern. These costs could indicate inefficiencies that may need to be addressed to improve profitability. Additionally, the fluctuation in currency exchange rates, particularly the euro, has had a mixed impact on the company's financials, which is a factor that international investors should closely monitor.
From a financial perspective, the shift in EBITDA from a positive $202.5 million to a negative $7.2 million suggests that the company's operational performance has deteriorated significantly. This could potentially affect the company's stock price and investor sentiment. The detailed breakdown of operational challenges and cost management strategies provides insights into the company's adaptability in a fluctuating market, which is essential for stakeholders making informed decisions.
The reported increase in TiO2 sales volumes in the fourth quarter, despite a year-long decline, indicates a potential recovery in market demand, particularly in Europe and North America. This uptick could be a sign of a rebound in industries that are major consumers of TiO2, such as the automotive and construction sectors. However, the continued lower average TiO2 selling prices suggest that the market may still be experiencing pricing pressures, possibly due to oversupply or intensified competition. This could impact the profitability of companies within the TiO2 market and may lead to further strategic consolidations or shifts in the industry.
Additionally, the positive contribution of complementary business segments to net sales highlights the importance of diversification within the company's portfolio. This diversification can act as a buffer against volatility in the core TiO2 segment and is a strategic aspect that stakeholders should consider when evaluating the company's resilience in the face of sector-specific challenges.
The market dynamics of TiO2 and its derivatives are complex and influenced by global economic factors, environmental regulations and technological advancements. Understanding these intricacies is crucial for stakeholders to anticipate future trends and the potential for market recovery or further disruption.
The reported financials reflect broader economic trends, such as the impact of global demand fluctuations and currency exchange rate volatility on multinational corporations. The production curtailments in response to decreased demand for TiO2 products may be indicative of a cyclical downturn or structural changes within the industry. Economically, such adjustments in production capacity are vital for aligning supply with demand, yet they often come with short-term financial repercussions as seen in the unabsorbed fixed production costs.
The role of currency exchange rates, particularly the strengthening of the euro, has had a nuanced effect on the company's financials. While it has increased net sales, it has also decreased the loss from operations, which underscores the importance of currency risk management for companies operating in the international arena. The interplay between these rates and the company's financial performance offers a lesson in the complexities of international business and its susceptibility to currency market movements.
Long-term economic implications of the company's cost reduction initiatives and restructuring, including workforce reductions, could result in improved operational efficiency. However, these measures may also have adverse effects on the company's innovation capacity and employee morale. The balance between cost management and investment in growth is a delicate one that can significantly influence the company's future trajectory in the context of global economic conditions.
Dallas, Texas, March 06, 2024 (GLOBE NEWSWIRE) -- Kronos Worldwide, Inc. (NYSE:KRO) today reported a net loss of
Net sales of
Our TiO2 segment loss (see description of non-GAAP information below) in the fourth quarter of 2023 was
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
Our loss from operations in the full year of 2023 includes an insurance settlement gain related to a 2020 business interruption insurance claim of
Other components of net periodic pension and OPEB cost in the full year of 2023 includes a
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:
- Future supply and demand for our products
- Our ability to realize expected cost savings from strategic and operational initiatives
- The extent of the dependence of certain of our businesses on certain market sectors
- The cyclicality of our business
- Customer and producer inventory levels
- Unexpected or earlier-than-expected industry capacity expansion
- Changes in raw material and other operating costs (such as energy and ore costs)
- Changes in the availability of raw materials (such as ore)
- General global economic and political conditions that harm the worldwide economy, disrupt our supply chain, increase material and energy costs or reduce demand or perceived demand for our TiO2 products or impair our ability to operate our facilities (including changes in the level of gross domestic product in various regions of the world, natural disasters, terrorist acts, global conflicts and public health crises)
- Operating interruptions (including, but not limited to, labor disputes, leaks, natural disasters, fires, explosions, unscheduled or unplanned downtime, transportation interruptions, certain regional and world events or economic conditions and public health crises)
- Technology related disruptions (including, but not limited to, cyber attacks; software implementation, upgrades or improvements; technology processing failures; or other events) related to our technology infrastructure that could impact our ability to continue operations, or at key vendors which could impact our supply chain, or at key customers which could impact their operations and cause them to curtail or pause orders
- Competitive products and substitute products
- Customer and competitor strategies
- Potential consolidation of our competitors
- Potential consolidation of our customers
- The impact of pricing and production decisions
- Competitive technology positions
- Potential difficulties in upgrading or implementing accounting and manufacturing software systems
- The introduction of trade barriers or trade disputes
- Fluctuations in currency exchange rates (such as changes in the exchange rate between the U.S. dollar and each of the euro, the Norwegian krone and the Canadian dollar and between the euro and the Norwegian krone), or possible disruptions to our business resulting from uncertainties associated with the euro or other currencies
- Our ability to renew or refinance credit facilities
- Changes in interest rates
- Our ability to maintain sufficient liquidity
- The ultimate outcome of income tax audits, tax settlement initiatives or other tax matters, including future tax reform
- Our ability to utilize income tax attributes, the benefits of which may or may not have been recognized under the more-likely-than-not recognition criteria
- Environmental matters (such as those requiring compliance with emission and discharge standards for existing and new facilities)
- Government laws and regulations and possible changes therein including new environmental health and safety, sustainability or other regulations (such as those seeking to limit or classify TiO2 or its use)
- Pending or possible future litigation or other actions.
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:
- The Company discloses segment profit, which is used by the Company’s management to assess the performance of the Company’s TiO2 operations. The Company believes disclosure of segment profit provides useful information to investors because it allows investors to analyze the performance of the Company’s TiO2 operations in the same way that the Company’s management assesses performance. The Company defines segment profit as net income before income tax expense and certain general corporate items. These general corporate items include corporate expense and the components of other income (expense) except for trade interest income; and
- The Company discloses EBITDA, which is also used by the Company’s management to assess the performance of the Company’s TiO2 operations. The Company believes disclosure of EBITDA provides useful information to investors because it allows investors to analyze the performance of the Company’s TiO2 operations in the same way that the Company’s management assesses performance. The Company defines EBITDA as net income before interest expense, income taxes and depreciation and amortization expense.
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) | % |
FAQ
What was Kronos Worldwide's net loss in Q4 2023?
How did Kronos Worldwide's net income change in 2023 compared to 2022?
What factors contributed to the increase in net income in Q4 2023?
Why did Kronos Worldwide implement production curtailments in 2023?
How did currency exchange rates impact Kronos Worldwide's results in 2023?
