VALHI REPORTS FIRST QUARTER 2021 RESULTS

Rhea-AI Summary

Valhi reported a net income of $14.8 million in Q1 2021, down from $24.4 million in Q1 2020, translating to $0.52 per share versus $0.86 per share last year. The decline was attributed to lower operating results in the Chemicals Segment and reduced tax increment income from Real Estate Management. Chemicals Segment net sales increased to $465 million from $421 million due to higher volumes, though average TiO2 prices fell 1%. Operating income in this segment dropped to $37.7 million from $46.8 million.

Positive

• Chemicals Segment net sales increased to $465 million in Q1 2021, up from $421 million in Q1 2020.
• TiO2 sales volumes rose by 3% due to higher demand in North America and Latin America.
• Component Products Segment sales increased to $35.9 million from $32.3 million, driven by higher marine component sales.

Negative

• Net income attributable to Valhi stockholders decreased to $14.8 million in Q1 2021 from $24.4 million in Q1 2020.
• Operating income in the Chemicals Segment fell to $37.7 million from $46.8 million, primarily due to currency fluctuation impacts.
• Real Estate Management's operating income significantly declined from $19.2 million in Q1 2020 to $7.8 million in Q1 2021.

Dallas, Texas, May 06, 2021 (GLOBE NEWSWIRE) -- Valhi, Inc. (NYSE: VHI) reported net income attributable to Valhi stockholders of $14.8 million, or $.52 per share, in the first quarter of 2021 compared to net income of $24.4 million, or $.86 per share, in the first quarter of 2020.  Net income attributable to Valhi stockholders decreased in the first quarter of 2021 as compared to the first quarter of 2020 primarily due to lower operating results from our Chemicals Segment and lower income from tax increment infrastructure reimbursement from our Real Estate Management and Development Segment in 2021. 

The Chemicals Segment’s net sales were $465.0 million in the first quarter of 2021 compared to $421.0 million in the first quarter of 2020. The Chemicals Segment’s net sales increased in the first quarter of 2021 primarily due to higher sales volumes partially offset by lower average TiO₂ selling prices.  TiO₂ sales volumes were 3% higher in the first quarter of 2021 as compared to the first quarter of 2020 primarily due to higher demand in North American and Latin American markets partially offset by lower sales volumes in the European market.  The Chemicals Segment’s average TiO₂ selling prices were 1% lower in the first quarter of 2021 as compared to the first quarter of 2020 and TiO₂ selling prices at the end of the first quarter of 2021 were 1% higher than at the end of 2020.  TiO₂ selling prices will increase or decrease generally as a result of competitive market pressures, changes in the relative level of supply and demand as well as changes in raw material and other manufacturing costs. Fluctuations in currency exchange rates (primarily the euro) also affected net sales comparisons, increasing our Chemicals Segment’s net sales by approximately $20 million in the first quarter of 2021 as compared to the first quarter of 2020. The table at the end of this press release shows how each of these items impacted net sales.

The Chemicals Segment’s operating income in the first quarter of 2021 was $37.7 million as compared to $46.8 million in the first quarter of 2020. The Chemicals Segment’s operating income decreased in the first quarter of 2021 as compared to the first quarter of 2020 primarily due to the net effects of fluctuations in currency exchange rates, which decreased operating income by approximately $16 million in the first quarter of 2021 as compared to the first quarter of 2020, lower average TiO₂ selling prices, higher sales volumes and lower production costs. Due to the phase-out of sulfate production at one of its facilities in the fourth quarter of 2020, the Chemicals Segment’s TiO₂ production volumes were 1% lower in the first quarter of 2021 as compared to the first quarter of 2020. The Chemicals Segment’s production facilities operated at overall average capacity utilization rates of 97% and 95% in the first quarters of 2021 and 2020, respectively.

The Component Products Segment’s net sales were $35.9 million in the first quarter of 2021 compared to $32.3 million in the first quarter of 2020.  The Component Products Segment’s net sales increased primarily due to higher marine components sales to the towboat market and to a lesser extent higher security products sales. The higher marine components sales reflect the overall increase in demand in the recreational marine market which began in late spring 2020.  Operating income attributable to the Component Products Segment was $5.8 million in the first quarter of 2021 compared to $5.0 million in the first quarter of 2020. The Component Products Segment’s operating income increased in the first quarter of 2021 compared to the first quarter of 2020 due to the higher marine components sales as well as lower overall employee medical expenses for both security products and marine components, partially offset by higher cost of sales for security products.

The Real Estate Management and Development Segment had sales of $8.1 million in the first quarter of 2021, including $6.6 million in revenue on sales of land held for development, compared to sales of $6.0 million in the first quarter of 2020, including $3.6 million in revenue on sales of land held for development. Land sales revenue is generally recognized over time based on cost inputs, and land sales revenues are dependent on spending for development activities as we balance development requirements with home builder output during the year.  Land sales revenues are also impacted by the relative timing of when new land parcel sales are closed.  Land sales revenues increased in the first quarter of 2021 as compared to the first quarter of 2020 primarily due to an increase in the amount of acreage sold in 2021 as compared to 2020. The Real Estate Management and Development Segment had operating income in the first quarter of 2021 of $7.8 million compared to operating income of $19.2 million in the first quarter of 2020.  Operating income in the first quarter of 2021 includes income related to the recognition of tax increment reimbursement note receivables of $6.2 million ($3.2 million, or $.11 per share, net of income taxes and noncontrolling interest) compared to $19.1 million ($9.9 million, or $.35 per share, net of income taxes and noncontrolling interest) of such income recognized in the first quarter of 2020.   

Corporate expenses in the first quarter of 2021 were comparable to the first quarter of 2020. In the first quarter of 2020, Kronos recognized a $1.5 million insurance settlement gain ($.8 million, or $.03 per share, net of income taxes and noncontrolling interest) related to a property damage claim. 

The statements in this press 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 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 predicted. While it is not possible to identify all factors, we continue to face many risks and uncertainties.  Among the factors that could cause our 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 certain 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 ore, zinc, brass, aluminum, steel and energy 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, reduce demand or perceived demand for TiO_2, component products and land held for sale 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 difficulties in integrating future acquisitions;
• Potential difficulties in upgrading or implementing accounting and manufacturing software systems;
• Potential consolidation of our competitors;
• Potential consolidation of our customers;
• The impact of pricing and production decisions;
• Competitive technology positions;
• Our ability to protect or defend intellectual property rights;
• The introduction of trade barriers or trade disputes;
• The ability of our subsidiaries to pay us dividends;
• The impact of current or future government regulations (including employee healthcare benefit related regulations);

• Uncertainties associated with new product development and the development of new product features;
• 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) 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);
• Decisions to sell operating assets other than in the ordinary course of business;
• The timing and amounts of insurance recoveries;
• Our ability to renew, amend, refinance or establish 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, or new developments regarding environmental remediation 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 NL, with respect to asserted health concerns associated with the use of such products) including new environmental health and safety regulations such as those seeking to limit or classify TiO₂ or its use;
• The ultimate resolution of pending litigation (such as NL’s lead pigment and environmental matters);
• Our ability to comply with covenants contained in our revolving bank credit facilities;
• Our ability to complete and comply with the conditions of our licenses and permits;
• Changes in real estate values and construction costs in Henderson, Nevada;
• Water levels in Lake Mead; and
• Possible future litigation.

                Should one or more of these risks materialize (or the consequences of such 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.

Valhi, Inc. is engaged in the chemicals (TiO₂), component products (security products and recreational marine components) and real estate management and development industries.

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VALHI, INC. AND SUBSIDIARIES
CONDENSED SUMMARY OF INCOME
(In millions, except earnings per share)
	Three months ended
	March 31,
	2020				2021
	(unaudited)
Net sales
Chemicals	$	421.0			$	465.0
Component products		32.3				35.9
Real estate management and development		6.0				8.1
Total net sales	$	459.3			$	509.0
Operating income
Chemicals	$	46.8			$	37.7
Component products		5.0				5.8
Real estate management and development		19.2				7.8
Total operating income		71.0				51.3
General corporate items:
Securities earnings		1.6				.9
Insurance recoveries		1.6				-
Changes in market value of Valhi common stock held by subsidiaries		(2.4	)			1.3
Other components of net periodic pension and OPEB expense		(4.7	)			(4.3	)
General expenses, net		(8.1	)			(8.1	)
Interest expense		(9.7	)			(8.6	)
Income before income taxes		49.3				32.5
Income tax expense		11.4				8.0
Net income		37.9				24.5
Noncontrolling interest in net income of subsidiaries		13.5				9.7
Net income attributable to Valhi stockholders	$	24.4			$	14.8
Amounts attributable to Valhi stockholders:
Basic and diluted net income per share	$	.86			$	.52
Basic and diluted weighted average shares outstanding		28.5				28.5

VALHI, INC. AND SUBSIDIARIES
IMPACT OF PERCENTAGE CHANGE IN CHEMICALS SEGMENT'S NET SALES
(Unaudited)
	Three months ended
	March 31,
	2021 vs. 2020
Percentage change in TiO2 net sales :
TiO2 sales volumes			3		%
TiO2 product pricing			(1	)
TiO2 product mix/other			3
Changes in currency exchange rates			5
Total			10		%

FAQ

What were Valhi's earnings per share in Q1 2021?

Valhi reported earnings of $0.52 per share in Q1 2021.

How did Valhi's net income in Q1 2021 compare to Q1 2020?

Net income decreased to $14.8 million in Q1 2021 from $24.4 million in Q1 2020.

What factors affected the Chemicals Segment's performance in Q1 2021?

The Chemicals Segment's performance was impacted by lower TiO2 selling prices and currency fluctuations.

What were the net sales figures for the Component Products Segment in Q1 2021?

Net sales for the Component Products Segment were $35.9 million in Q1 2021.

Why did operating income decline in Valhi's Real Estate Management Segment?

Operating income fell due to decreased tax increment reimbursement income recognized compared to Q1 2020.