Kronos Worldwide Reports Fourth Quarter 2020 Results

Rhea-AI Summary

Kronos Worldwide (NYSE: KRO) reported a net income of $10.2 million, or $0.09 per share, for Q4 2020, up from $9.4 million, or $0.08 per share, in Q4 2019. Full-year net income fell to $63.9 million, or $0.55 per share, compared to $87.1 million, or $0.75 per share, in 2019. Q4 net sales were $414.9 million, an 11% increase year-over-year, while full-year sales decreased 5% to $1.6 billion. The company cited improved demand in Q4 but noted ongoing challenges from lower sales volumes and selling prices throughout 2020 due to the COVID-19 pandemic.

Positive

• Q4 net income increased to $10.2 million from $9.4 million YoY.
• Q4 net sales rose to $414.9 million, 11% higher than Q4 2019.
• TiO2 sales volumes were 12% higher in Q4 2020 compared to Q4 2019.
• Q4 TiO2 segment profit improved to $23.4 million from $21.1 million YoY.

Negative

• Full-year net income dropped to $63.9 million from $87.1 million in 2019.
• Full-year net sales declined by $92.3 million, or 5%, compared to 2019.
• Average TiO2 selling prices decreased 2% for the full year.
• Production volumes were 5% lower for the full year 2020 compared to 2019.

Dallas, March 10, 2021 (GLOBE NEWSWIRE) -- Kronos Worldwide, Inc. (NYSE:KRO) today reported net income of $10.2 million, or $.09 per share, in the fourth quarter of 2020 compared to net income of $9.4 million, or $.08 per share, in the fourth quarter of 2019.  For the full year of 2020, Kronos Worldwide reported net income of $63.9 million, or $.55 per share, compared to net income of $87.1 million, or $.75 per share for the full year of 2019.  We reported higher net income in the fourth quarter of 2020 as compared to the fourth quarter of 2019 primarily due to higher income from operations resulting from higher sales volumes and lower production costs, partially offset by lower average TiO₂ selling prices.  We reported lower net income for the full year of 2020 compared to the full year of 2019 primarily due to lower income from operations resulting from the effects of lower sales volumes, lower average TiO₂ selling prices and higher raw materials and other production costs, as discussed below. Our results of operations for the full year of 2020 were significantly impacted by the COVID-19 pandemic, specifically through sharply reduced demand for certain of our products resulting from the rapid contraction across the global economy occurring in the second quarter, with demand continuing to strengthen throughout the second half of 2020.  

Net sales of $414.9 million in the fourth quarter of 2020 were $42.2 million, or 11%, higher than in the fourth quarter of 2019.  Net sales of $1.6 billion in the full year of 2020 were $92.3 million, or 5%, lower than in the full year of 2019.  Net sales increased in the fourth quarter of 2020 compared to the same period in 2019 primarily due to higher sales volumes partially offset by lower average TiO₂ selling prices.  Net sales decreased in the full year of 2020 compared to the full year of 2019 primarily due to lower sales volumes and lower average TiO₂ selling prices.  TiO₂ sales volumes were 12% higher in the fourth quarter of 2020 as compared to the fourth quarter of 2019 primarily due to higher demand in our European and North American markets. TiO₂ sales volumes were 6% lower in the full year of 2020 as compared to the full year of 2019 due to lower sales volumes in all major markets, primarily resulting from demand contraction related to the COVID-19 pandemic. Our average TiO₂ selling prices were 3% lower in the fourth quarter of 2020 as compared to the fourth quarter of 2019 and 2% lower in the full year of 2020 as compared to the full year of 2019.  Our average TiO₂ selling prices at the end of 2020 were comparable to our average TiO₂ selling prices at the end of the third quarter of 2020 and 3% lower than the beginning of the year.  Fluctuations in currency exchange rates (primarily the euro) also affected net sales comparisons, increasing net sales by approximately $13 million in the fourth quarter of 2020 and increasing net sales by approximately $9 million in the full year of 2020 as compared to the same periods in 2019.  The table at the end of this press release shows how each of these items impacted net sales.

Our TiO₂ segment profit (see description of non-GAAP information below) in the fourth quarter of 2020 was $23.4 million as compared to $21.1 million in the fourth quarter of 2019. For the full year of 2020, our segment profit was $130.3 million as compared to $162.3 million in 2019.   Segment profit increased in the fourth quarter of 2020 as compared to the fourth quarter of 2019 primarily due to higher income from operations resulting from higher sales volumes and lower production costs, partially offset by lower average TiO₂ selling prices.  Segment profit decreased for the full year of 2020 compared to the full year of 2019 primarily due to lower income from operations resulting from the effects of lower sales volumes, lower average TiO₂ selling prices and higher raw materials and other production costs.  Kronos’ TiO₂ production volumes were 8% lower in the fourth quarter of 2020 and 5% lower in the full year of 2020 as compared to the same periods in 2019.  We operated our production facilities at overall average capacity utilization rates of 92% in the full year of 2020 (95%, 96%, 86% and 92% in the first, second, third, and fourth quarters of 2020, respectively) compared to 98% in 2019 (97% in each of the first, second and third quarters and at full practical capacity in the fourth quarter of 2019).  Early in the third quarter of 2020, we decreased production levels to correspond with a temporary decline in market demand, then increased production levels later in the third quarter and into the fourth quarter to align with improved demand and our market expectations for the near term.  Fluctuations in currency exchange rates increased segment profit by approximately $6 million in the full year of 2020 as compared to the full year of 2019, while fluctuations in currency exchange rates had only a nominal effect on the fourth quarter segment profit comparison.  

Our net income before interest expense, income taxes and depreciation and amortization expense (EBITDA) (see description of non-GAAP information below) in the fourth quarter of 2020 was $30.7 million compared to EBITDA of $31.3 million in the fourth quarter of 2019.  For the full year of 2020, the Company’s EBITDA was $157.1 million compared to $187.9 million for the full year of 2019.

Other income (expense) in 2020 includes a pre-tax insurance settlement gain of $1.5 million ($1.2 million, or $.01 per share, net of income tax expense) related to a property damage claim recognized in the first quarter.  Other income (expense) in 2019 includes a pre-tax insurance settlement gain of $2.6 million ($2.0 million, or $.02 per share, net of income tax expense) related to a property damage claim recognized in the fourth quarter.

The Company’s income tax expense in 2019 includes a fourth quarter non-cash deferred income tax expense of $5.5 million ($.05 per share) primarily related to the revaluation of our net deferred income tax asset in Germany resulting from a decrease in the German trade tax rate and a fourth quarter income tax benefit of $3.0 million ($.03 per share) related to the favorable settlement of a prior year tax matter in Germany.

Our results of operations for the full year of 2020 were significantly impacted by the COVID-19 pandemic, primarily in the second and third quarters.  The extent of the impact of the COVID-19 pandemic on our future operations will depend on the time period and degree to which the COVID-19 pandemic persists in the global economy, including the timing and extent to which our customers’ operations continue to be impacted, our customers’ perception as to when consumer demand for their products will return to pre-pandemic levels and on any future disruptions in our operations or our suppliers’ operations, all of which are difficult to predict.

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
• 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 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 such as COVID-19)
• 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
• Operating interruptions (including, but not limited to, labor disputes, leaks, natural disasters, fires, explosions, unscheduled or unplanned downtime, transportation interruptions, cyber-attacks and public health crises such as COVID-19)
• Our ability to renew or refinance credit facilities
• 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 regulations (such as those seeking to limit or classify TiO₂ or its use)
• Possible future litigation.

             
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 income before income taxes, interest expense and certain general corporate items.  Corporate items excluded from the determination of segment profit include corporate expense and interest income not attributable to the Company’s TiO₂ operations; 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.

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

	Three months ended								Year ended
	December 31,								December 31,
	2019				2020				2019				2020
	(unaudited)
Net sales	$	372.7			$	414.9			$	1,731.1			$	1,638.8
Cost of sales		293.0				328.2				1,344.9				1,287.6
Gross margin		79.7				86.7				386.2				351.2
Selling, general and administrative expense		55.7				56.8				228.2				218.6
Other operating income (expense):
Currency transactions, net		(3.6	)			(7.2	)			2.0				(4.0	)
Other income, net		.3				.7				.9				1.4
Corporate expense		(3.5	)			(3.0	)			(15.1	)			(13.8	)
Income from operations		17.2				20.4				145.8				116.2
Other income (expense):
Trade interest income		.4				-				1.4				.3
Other interest and dividend income		1.1				.3				5.3				1.5
Insurance settlement gain		2.6				-				2.6				1.5
Marketable equity securities		-				.2				(.1	)			(1.1	)
Other components of net periodic pension         and OPEB cost		(3.8	)			(5.0	)			(15.2	)			(19.4	)
Interest expense		(4.6	)			(4.9	)			(18.7	)			(19.0	)
Income before income taxes		12.9				11.0				121.1				80.0
Income tax expense		3.5				.8				34.0				16.1
Net income	$	9.4			$	10.2			$	87.1			$	63.9
Net income per basic and diluted share	$	.08			$	.09			$	.75			$	.55
Weighted average shares used in the
calculation of net income per share		115.7			115.5					115.8			115.6
TiO2 data - metric tons in thousands:
Sales volumes		121			135					566			531
Production volumes		140			130					546			517

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

	Three months ended								Year ended
	December 31,								December 31,
	2019				2020				2019				2020
Income from operations	$	17.2			$	20.4			$	145.8			$	116.2
Adjustments:
Trade interest income		.4				-				1.4				.3
Corporate expense		3.5				3.0				15.1				13.8
Segment profit	$	21.1			$	23.4			$	162.3			$	130.3

RECONCILIATION OF NET INCOME TO EBITDA
(In millions)
 (unaudited)

	Three months ended								Year ended
	December 31,								December 31,
	2019				2020				2019				2020
Net income	$	9.4			$	10.2			$	87.1			$	63.9
Adjustments:
Depreciation expense		13.8				14.8				48.1				58.1
Interest expense		4.6				4.9				18.7				19.0
Income tax expense		3.5				.8				34.0				16.1
EBITDA	$	31.3			$	30.7			$	187.9			$	157.1

IMPACT OF PERCENTAGE CHANGE IN NET SALES
 (unaudited)

	Three months ended						Year ended
	December 31,						December 31,
	2020 vs. 2019						2020 vs. 2019
Percentage change in net sales:
TiO2 product pricing			(3	)%					(2	)%
TiO2 sales volumes			12						(6	)
TiO2 product mix/other			(2	)					2
Changes in currency exchange rates			4						1
Total			11	%					(5	)%

Source:   Kronos Worldwide, Inc.
Contact:  Janet Keckeisen, Vice President, Corporate Strategy and Investor Relations, (972)233-1700

FAQ

What was Kronos Worldwide's net income for Q4 2020?

Kronos Worldwide reported a net income of $10.2 million for Q4 2020.

How did Kronos Worldwide's full-year net income compare to 2019?

Full-year net income for Kronos Worldwide in 2020 was $63.9 million, down from $87.1 million in 2019.

What were Kronos Worldwide's Q4 net sales figures?

Q4 net sales for Kronos Worldwide were $414.9 million, an increase of 11% year-over-year.

How did the COVID-19 pandemic affect Kronos Worldwide's operations?

The COVID-19 pandemic significantly impacted Kronos Worldwide's operations in 2020, leading to reduced demand and lower sales volumes.

What was the change in TiO2 segment profit for Kronos Worldwide in Q4 2020?

TiO2 segment profit for Q4 2020 was $23.4 million, compared to $21.1 million in Q4 2019.