VALHI REPORTS SECOND QUARTER 2021 RESULTS

Rhea-AI Summary

Valhi reported strong financial results for Q2 2021, with a net income of $21.4 million ($0.75 per share), a significant turnaround from a net loss of $9.1 million in Q2 2020. For the first half of 2021, net income reached $36.2 million ($1.27 per diluted share) compared to $15.3 million in H1 2020. Key growth drivers included improved operating results across segments, particularly the Chemicals Segment, which generated $478.6 million in Q2 sales, up from $386.0 million a year earlier. Fluctuations in currency exchange rates also positively impacted sales by approximately $22 million.

Positive

• Net income for Q2 2021 was $21.4 million vs. a loss of $9.1 million in Q2 2020.
• Chemicals Segment sales rose to $478.6 million in Q2 2021 from $386.0 million in Q2 2020.
• Average TiO2 selling prices increased by 3% in Q2 2021 compared to Q2 2020.
• Operating income for Chemicals Segment grew to $47.4 million in Q2 2021 versus $35.9 million in Q2 2020.

Negative

• Operating income decreased by approximately $17 million due to foreign currency fluctuations in H1 2021 compared to H1 2020.
• Higher production costs impacted margins in the Chemicals Segment.

Dallas, Texas, Aug. 05, 2021 (GLOBE NEWSWIRE) -- Valhi, Inc. (NYSE: VHI) reported net income attributable to Valhi stockholders of $21.4 million, or $.75 per share, in the second quarter of 2021 compared to a net loss of $9.1 million, or $.32 per share, in the second quarter of 2020.  For the first six months of 2021, Valhi reported net income attributable to Valhi stockholders of $36.2 million, or $1.27 per diluted share compared to net income of $15.3 million, or $.54 per diluted share in the first six months of 2020.  Net income attributable to Valhi stockholders increased in the second quarter of 2021 as compared to the second quarter of 2020 primarily due to higher operating results from all of our segments and a gain on the sale of land not used in our operations.  Net income attributable to Valhi stockholders increased in the first six months of 2021 as compared to the first six months of 2020 primarily due to the net effects of higher operating results from our Chemicals and Component Products Segments, lower income from tax increment infrastructure reimbursement from our Real Estate Management and Development Segment in 2021and a gain on the sale of land not used in our operations in the second quarter of 2021.

The Chemicals Segment’s net sales were $478.6 million in the second quarter of 2021 compared to $386.0 million in the second quarter of 2020 and $943.6 million in the first six months of 2021 compared to $807.0 million in the same period of 2020. The Chemicals Segment’s net sales increased in the 2021 periods primarily due to higher sales volumes and higher average TiO₂ selling prices. TiO₂ sales volumes were 16% higher in the second quarter of 2021 as compared to the second quarter of 2020 and 9% higher in the first six months of 2021 compared to the same period in 2020 primarily due to higher demand in all major markets resulting from overall improvements in global economic activity in the 2021 periods compared to the same periods in 2020 due to the negative economic effects from the COVID-19 pandemic in the second quarter of 2020. The Chemicals Segment’s average TiO₂ selling prices were 3% higher in the second quarter of 2021 as compared to the second quarter of 2020 and 1% higher in the first six months of 2021 as compared to the first six months of 2020.  The Chemicals Segment’s average TiO₂ selling prices at the end of the second quarter of 2021 were 4% higher than its average TiO₂ selling prices 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 $22 million in the second quarter of 2021 and approximately $42 million in the first six months of 2021 as compared to the second quarter and first six months 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 second quarter of 2021 was $47.4 million as compared to $35.9 million in the second quarter of 2020 and $85.1 million for the six months ended June 30, 2021 compared to $82.7 million for the same prior year period. The Chemicals Segment’s operating income increased in the 2021 periods primarily due to higher sales volumes and higher average TiO₂ selling prices, partially offset by higher manufacturing and other production costs, including higher costs for raw materials and energy. The Chemicals Segment’s TiO₂ production volumes were 2% higher in the second quarter of 2021 as compared to the second quarter of 2020 and 1% higher in the year-to-date period of 2021 due to adjustments to reduce production levels in 2020 as a result of the COVID-19 pandemic. The Chemicals Segment’s production facilities operated its production facilities at overall average capacity utilization rates of 99% in the first six months of 2021 (97% and 100% in the first and second quarters of 2021, respectively) compared to 95% in 2020 (95% and 96% in the first and second quarters of 2020, respectively).  Fluctuations in currency exchange rates also affected the year-to-date operating income comparison, which decreased operating income by approximately $17 million in the year-to-date 2021 period as compared to the same period of 2020.  Fluctuations in currency exchange rates had a nominal effect on the second quarter operating income comparison.

The Component Products Segment’s net sales were $36.3 million in the second quarter of 2021 compared to $23.8 million in the second quarter of 2020 and $72.2 million in the first six months of 2021 compared to $56.1 million in the same period of 2020.  The Component Products Segment’s net sales increased primarily due to higher sales volumes for both security products and marine components as many of our Component Products Segment’s customers were temporarily closed or reduced production during the second quarter of 2020 due to government ordered closures or reduced demand resulting from the COVID-19 pandemic. Operating income attributable to the Component Products Segment was $5.8 million in the second quarter of 2021 compared to $2.4 million in the second quarter of 2020 and $11.6 million for the six months ended June 30, 2021 compared to $7.4 million for the same prior year period. The Component Products Segment’s operating income increased for both comparative periods due to the favorable effect of higher sales volumes, partially offset by higher production costs including increased labor and shipping costs.

The Real Estate Management and Development Segment had sales of $10.4 million in the second quarter of 2021, including $8.5 million in revenue on sales of land held for development, compared to sales of $5.2 million in the second quarter of 2020, including $2.7 million in revenue on sales of land held for development. For the first six months of 2021 the Real Estate Management and Development Segment had sales of $18.5 million, including $15.1 million in revenue on sales of land held for development, compared to sales of $11.2 million, including $6.2 million in sales of land held for development in the same period of 2020. 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 second quarter and first six months of 2021 as compared to the same periods in 2020 primarily due to an increase in the amount of acreage sold in 2021 as compared to 2020 and increased development activity in the second quarter of 2021 compared to the same period of 2020. During the second quarter of 2020 we slowed infrastructure spending within the residential/planned community due to the uncertainty associated with the COVID-19 pandemic. As a result of increased land sales revenues, operating income increased in both the second quarter and first six months of 2021 compared to the same periods of 2020, excluding 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) and $19.1 million ($9.9 million, or $.35 per share, net of income taxes and noncontrolling interest) in the first six months of 2021 and 2020, respectively.   

Corporate expenses in the second quarter and first six months of 2021 were comparable to the same periods of 2020. In the second quarter of 2021 we sold excess property not used in our operations for net proceeds of approximately $8.4 million and recognized a pre-tax gain of $5.6 million ($4.3 million, or $.15 per share, net of income taxes and noncontrolling interest). 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. 

We recognized income tax expense of $10.3 million in the second quarter of 2021 compared to income tax expense of $21.2 million in the second quarter of 2020 and $18.3 million in the first six months of 2021 compared to $32.6 million in the first six months of 2020.  The decrease in both periods is primarily due to higher amounts recognized for global intangible low-tax income (GILTI) in 2020 due to limitations on related deductions and tax credits and an increase in the valuation allowance in 2020 for the nondeductible amount of business interest expense carryforward not expected to be fully utilized under the more-likely-than-not recognition criteria.  For interim financial reporting purposes, we apply an estimated annual effective tax rate in determining our provision for income taxes and in 2020 our estimated annual effective tax rate was significantly impacted due to the effects of GILTI and the increase to the valuation allowance relative to our earnings.

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 development 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 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);
• 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 OPERATIONS
(In millions, except earnings per share)
	Three months ended								Six months ended
	June 30,								June 30,
	2020				2021				2020				2021
	(unaudited)
Net sales
Chemicals	$	386.0			$	478.6			$	807.0			$	943.6
Component products		23.8				36.3				56.1				72.2
Real estate management and development		5.2				10.4				11.2				18.5
Total net sales	$	415.0			$	525.3			$	874.3			$	1,034.3
Operating income
Chemicals	$	35.9			$	47.4			$	82.7			$	85.1
Component products		2.4				5.8				7.4				11.6
Real estate management and development		1.0				2.4				20.2				10.2
Total operating income		39.3				55.6				110.3				106.9
General corporate items:
Securities earnings		1.0				1.1				2.6				2.0
Insurance recoveries		-				-				1.6				-
Gain on land and related sales		-				5.6				.5				5.6
Changes in market value of Valhi common stock held   by subsidiaries		(.5	)			.9				(2.9	)			2.2
Other components of net periodic pension and   OPEB expense		(5.0	)			(4.6	)			(9.7	)			(8.9	)
General expenses, net		(9.0	)			(9.3	)			(17.6	)			(17.4	)
Interest expense		(8.8	)			(8.7	)			(18.5	)			(17.3	)
Income before income taxes		17.0				40.6				66.3				73.1
Income tax expense		21.2				10.3				32.6				18.3
Net income (loss)		(4.2	)			30.3				33.7				54.8
Noncontrolling interest in net income
of subsidiaries		4.9				8.9				18.4				18.6
Net income (loss) attributable to Valhi stockholders	$	(9.1	)		$	21.4			$	15.3			$	36.2
Amounts attributable to Valhi stockholders:
Basic and diluted net income (loss) per share	$	(.32	)		$	.75			$	.54			$	1.27
Basic and diluted weighted average shares outstanding		28.5				28.5				28.5				28.5

VALHI, INC. AND SUBSIDIARIES
IMPACT OF PERCENTAGE CHANGE IN CHEMICAL SEGMENT'S NET SALES
(unaudited)
	Three months ended						Six months ended
	June 30,						June 30,
	2021 vs. 2020						2021 vs. 2020
Percentage change in TiO2 net sales :
TiO2 sales volumes			16		%				9		%
TiO2 product pricing			3						1
TiO2 product mix/other			(1	)					2
Changes in currency exchange rates			6						5
Total			24		%				17		%

FAQ

What was Valhi's net income in Q2 2021?

Valhi reported a net income of $21.4 million in Q2 2021.

How much did Valhi earn per share in Q2 2021?

Valhi earned $0.75 per share in Q2 2021.

What were the net sales for Valhi's Chemicals Segment in Q2 2021?

The Chemicals Segment's net sales were $478.6 million in Q2 2021.

How did Valhi's net income for the first six months of 2021 compare to the same period in 2020?

For the first six months of 2021, Valhi's net income was $36.2 million, an increase from $15.3 million in the same period of 2020.

What factors contributed to Valhi's improved financial performance in Q2 2021?

Higher operating results across segments and a gain on the sale of land contributed to the improved financial performance.