NL REPORTS FOURTH QUARTER 2023 RESULTS
- NL Industries reported a net income of $7.6 million in Q4 2023 compared to a net loss in Q4 2022.
- Net sales were $43.2 million in Q4 2023, higher than $40.0 million in Q4 2022.
- Kronos' net sales decreased by 14% in 2023 compared to 2022.
- Kronos' TiO2 sales volumes were 29% higher in Q4 2023 but 13% lower for the full year of 2023 compared to 2022.
- NL recognized equity in losses of Kronos of $15.0 million in 2023 compared to equity in earnings of $31.9 million in 2022.
- Kronos' loss from operations in 2023 was $56.0 million compared to income from operations of $159.6 million in 2022.
- NL reported a net loss of $2.3 million for the full year of 2023.
- Kronos' net sales decreased due to lower sales volumes and TiO2 selling prices in 2023.
- Kronos' loss from operations increased in 2023 compared to 2022.
- NL recognized equity in losses of Kronos in 2023.
Insights
The reported net income of NL Industries for Q4 2023, in contrast to the net loss in the same period of the previous year, indicates a significant turnaround in profitability. The swing from a net loss to net income is a critical indicator of the company's operational performance and could influence investor sentiment. Highlighting the unrealized gains in marketable equity securities in Q4 2023 versus the unrealized losses in Q4 2022, it's essential to recognize the volatility these instruments can introduce into reported earnings. Unrealized gains or losses are paper values that reflect the current market valuation of securities not yet sold, which can reverse if the market conditions change.
One should note that while the Q4 results are positive, the full year reflects a net loss for 2023, which could be a cause for concern. This suggests that despite a strong end to the year, there were underlying challenges throughout the year that impacted the overall financial health of the company. Furthermore, the decrease in net sales year-over-year could signal a potential red flag regarding the company's market position and demand for its products, particularly in the Marine Components sector.
The income from operations remaining consistent year-over-year, despite lower full-year sales, may imply effective cost management and improved operational efficiency. Investors might view this positively as it indicates the company's ability to maintain profitability margins in challenging conditions. However, the equity in losses of Kronos for the full year is a significant shift from the prior year's equity in earnings and warrants attention as it could affect NL Industries' valuation and future income from this investment.
The increase in Q4 net sales driven by the Security Products segment, particularly due to a pilot project for a government security customer, suggests a strategic pivot or diversification that could be beneficial if the company can secure additional contracts in this area. The decline in Marine Components sales, especially to the towboat market, raises questions about the competitiveness and future prospects of this segment. The company's ability to navigate these market shifts and capitalize on new opportunities will be critical for sustained growth.
Looking at Kronos, the subsidiary of NL Industries, the increase in TiO2 sales volumes in Q4 2023 indicates a recovering demand in its primary markets, which could be a positive sign for the industry. However, the decrease in average TiO2 selling prices and the overall net sales decline for the full year reflect the pricing pressures and market challenges faced by the industry. The fluctuations in currency exchange rates benefiting Kronos' net sales also highlight the impact of global economic factors on the company's financial performance.
The reported operational losses for Kronos, both quarterly and annually, underscore the importance of cost management in the face of production curtailments and lower demand. The capacity utilization figures provide insight into the operational efficiency and responsiveness to market demand. The restructuring costs and impairment charges also indicate ongoing adjustments to the business model, which could have long-term strategic implications.
The reported financials of NL Industries offer a mixed picture, reflective of broader economic trends. The pilot project in the government security market suggests that NL is potentially aligning with increased government spending in security, which could be a response to macroeconomic factors such as heightened focus on national security or infrastructure investment. This realignment could be a strategic move to tap into stable revenue streams amid economic uncertainties.
The decline in Marine Components sales could be indicative of sector-specific downturns or a general economic slowdown affecting discretionary spending. The towboat market's performance may be tied to broader trends in global trade and shipping, which have faced volatility in recent years due to geopolitical tensions and supply chain disruptions.
The currency exchange gains for Kronos highlight the role of international financial dynamics on company earnings. A weaker euro relative to the dollar can benefit U.S.-based companies with significant European operations when translating sales back into dollars. However, this benefit can quickly reverse with currency fluctuations, adding a layer of uncertainty to future earnings projections.
The overall decline in net sales and the shift from net income to net loss year-over-year for NL Industries may reflect underlying economic challenges such as inflationary pressures, changes in consumer demand and global supply chain issues. The company's financial performance must be contextualized within these broader economic conditions to fully understand its potential trajectory.
Dallas, Texas, March 06, 2024 (GLOBE NEWSWIRE) -- NL Industries, Inc. (NYSE: NL) today reported net income attributable to NL stockholders of
Net sales were
NL recognized equity in losses of Kronos of
Kronos’ loss from operations in the fourth quarter of 2023 was
Kronos’ loss from operations in the full year of 2023 includes an insurance settlement gain related to a 2020 business interruption insurance claim of
Corporate expenses decreased $.4 million in the fourth quarter of 2023 as compared to the fourth quarter of 2022 primarily due to lower litigation fees and related costs. Corporate expenses decreased $.4 million for the full year of 2023 as compared to 2022 primarily due to lower administrative expenses and $.5 million of insurance recoveries received in 2023. Interest and dividend income in the fourth quarter and for the full year of 2023 increased
The net loss per share attributable to NL stockholders for the full year of 2023 includes a non-cash loss of
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 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. Factors that could cause actual future results to differ materially include, but are not limited to:
- 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 businesses (such as Kronos’ TiO2 operations);
- Customer and producer inventory levels;
- Unexpected or earlier-than-expected industry capacity expansion (such as the TiO2 industry);
- Changes in raw material and other operating costs (such as energy, ore, zinc, aluminum, steel and brass costs) and our ability to pass those costs on to our customers or offset them with reductions in other operating costs;
- Changes in the availability of raw material (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 Kronos’ TiO2 and our 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;
- Price and product competition from low-cost manufacturing sources (such as China);
- Customer and competitor strategies;
- Potential consolidation of Kronos’ competitors;
- Potential consolidation of Kronos’ customers;
- The impact of pricing and production decisions;
- Competitive technology positions;
- Our ability to protect or defend intellectual property rights;
- Potential difficulties in integrating future acquisitions;
- 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;
- Decisions to sell operating assets other than in the ordinary course of business;
- Kronos’ ability to renew or refinance credit facilities;
- Increases in interest rates;
- Our ability to maintain sufficient liquidity;
- The timing and amounts of insurance recoveries;
- The ability of our subsidiaries or affiliates to pay us dividends;
- Uncertainties associated with CompX’s development of new products and product features;
- 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 or changes in income tax rates related to such 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 or new developments regarding environmental remediation or decommissioning at sites related to our former operations);
- Government laws and regulations and possible changes therein (such as changes in government regulations which might impose various obligations on former manufacturers of lead pigment and lead-based paint, including us, with respect to asserted health concerns associated with the use of such products), including new environmental, health, safety, sustainability and or other regulations (such as those seeking to limit or classify TiO2 or its use);
- The ultimate resolution of pending litigation (such as our lead pigment and environmental matters); and
- 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 currently forecasted or expected. We disclaim any intention or obligation to update or revise any forward-looking statement whether as a result of changes in information, future events or otherwise.
NL Industries, Inc. is engaged in component products (security products and recreational marine components) and chemicals (TiO2) businesses.
Investor Relations Contact
Bryan A. Hanley
Senior Vice President and Treasurer
(972) 233-1700
NL INDUSTRIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In millions, except earnings per share)
| Three months ended | Year ended | |||||||||||
| December 31, | December 31, | |||||||||||
| 2022 | 2023 | 2022 | 2023 | |||||||||
| (unaudited) | ||||||||||||
| Net sales | $ | 40.0 | $ | 43.2 | $ | 166.6 | $ | 161.3 | ||||
| Cost of sales | 28.9 | 29.6 | 117.8 | 112.1 | ||||||||
| Gross margin | 11.1 | 13.6 | 48.8 | 49.2 | ||||||||
| Selling, general and administrative expense | 5.7 | 6.2 | 23.4 | 23.8 | ||||||||
| Corporate expense | 3.0 | 2.6 | 11.7 | 11.3 | ||||||||
| Income from operations | 2.4 | 4.8 | 13.7 | 14.1 | ||||||||
| Equity in earnings (losses) of Kronos Worldwide, Inc. | (6.0) | (1.6) | 31.9 | (15.0) | ||||||||
| Other income (expense): | ||||||||||||
| Interest and dividend income | 1.8 | 3.1 | 3.8 | 9.6 | ||||||||
| Marketable equity securities | (3.8) | 2.4 | (8.1) | (8.1) | ||||||||
| Loss on pension plan termination | — | — | — | (4.9) | ||||||||
| Other components of net periodic pension and OPEB cost | (.4) | (.3) | (1.1) | (1.4) | ||||||||
| Interest expense | (.3) | (.1) | (1.0) | (.7) | ||||||||
| Income (loss) before income taxes | (6.3) | 8.3 | 39.2 | (6.4) | ||||||||
| Income tax expense (benefit) | (.8) | (.2) | 2.8 | (7.0) | ||||||||
| Net income (loss) | (5.5) | 8.5 | 36.4 | .6 | ||||||||
| Noncontrolling interest in net income of subsidiary | .6 | .9 | 2.6 | 2.9 | ||||||||
| Net income (loss) attributable to NL stockholders | $ | (6.1) | $ | 7.6 | $ | 33.8 | $ | (2.3) | ||||
| Net income (loss) per share attributable to NL stockholders | $ | (.13) | $ | .16 | $ | .69 | $ | (.05) | ||||
| Weighted average shares used in the calculation of net income (loss) per share | 48.8 | 48.8 | 48.8 | 48.8 | ||||||||
NL INDUSTRIES, INC.
COMPONENTS OF INCOME FROM OPERATIONS
(In millions)
| Three months ended | Year ended | |||||||||||
| December 31, | December 31, | |||||||||||
| 2022 | 2023 | 2022 | 2023 | |||||||||
| (unaudited) | ||||||||||||
| CompX - component products | $ | 5.4 | $ | 7.4 | $ | 25.4 | $ | 25.4 | ||||
| Corporate expense | (3.0) | (2.6) | (11.7) | (11.3) | ||||||||
| Income from operations | $ | 2.4 | $ | 4.8 | $ | 13.7 | $ | 14.1 | ||||
CHANGE IN KRONOS’ 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 NL Industries' net income in Q4 2023?
How did Kronos' net sales change in 2023 compared to 2022?
What impacted Kronos' loss from operations in 2023?
