CC - The Chemours Company Announces Third Quarter 2023 Results

Continued actions through the Titanium Technologies Transformation Plan to drive improved margins

FY 2023 Adjusted EBITDA guidance lowered 8% at the midpoint

The Chemours Company (“Chemours” or “the Company”) (NYSE: CC), a global chemistry company with leading market positions in Titanium Technologies (“TT”), Thermal & Specialized Solutions (“TSS”), and Advanced Performance Materials (“APM”), today announced its financial results for the third quarter 2023, and Titanium Technologies Transformation Plan.

Third Quarter 2023 Results & Highlights

• Net Sales of $1.5 billion
• Net Income of $20 million with EPS ¹ of $0.13
• Adjusted Net Income ² of $96 million with Adjusted EPS ² of $0.63
• Adjusted EBITDA ² of $247 million and Adjusted Free Cash Flow ³ of $81 million
• Launched TT Transformation Plan, to drive approximately $100 million in run-rate cost savings starting in 2024
• Announced development of Opteon™ 2P50, a new specialty fluid for two-phase immersion cooling, including applications in data centers
• Completed sale of the Glycolic Acid business to PureTech Scientific Inc., generating net cash proceeds of $138 million
• ARCH2 hydrogen hub, in which Chemours is a project development partner, selected by the U.S. Department of Energy for grant award
• On October 26, 2023, the Company's Board of Directors approved a third quarter dividend of $0.25 per share
• Given weaker demand outlook, we now anticipate full year Adjusted EBITDA to be between $1.025 billion and $1.075 billion; with Adjusted Free Cash Flow guidance greater than $225 million ^3,4

"Our third quarter results reflect the weaker global macroeconomic environment primarily impacting our TT segment and the Advanced Materials portfolio in APM,” said Mark Newman, Chemours President and CEO. “We have stepped up our efforts to improve the TT segment’s earnings with the launch of our TT Transformation Plan, which commenced with the recent Kuan Yin facility closure, and has been augmented by incremental efforts to streamline our workforce and other measures to drive cost savings and long-term margin improvement. While experiencing macro-driven weakness in our Advanced Materials APM portfolio, we remain committed to sustainability-led growth in our Performance Solutions APM portfolio, achieving double-digit year-to-date top-line growth over the previous year. Our TSS business continues to deliver top line growth and strong Adjusted EBITDA Margins, and remains well positioned for continued growth in low GWP Opteon™ refrigerants, with the planned US AIM Act quota stepdown in 2024.”

Third quarter 2023 Net Sales of $1.5 billion, were (16)% lower than the prior-year quarter, driven by lower Net Sales in TT and APM’s Advanced Materials portfolio. Price was down slightly (1)%, while volumes were down (15)%, and currency was flat, on a year-over-year basis.

Third quarter Net Income was $20 million, resulting in EPS of $0.13, down $(1.39) vs. the prior-year quarter. Adjusted Net Income was $96 million resulting in Adjusted EPS of $0.63, down $(0.61), or approximately (49)% vs. the prior-year quarter. Adjusted EBITDA for the third quarter of 2023 declined (32)% to $247 million in comparison to $363 million in the prior-year third quarter, driven primarily by lower volumes in TT and the Advanced Materials portfolio in APM. In the third quarter, price declines were more than offset by lower cost. Reduced sales volume primarily drove lower Adjusted EBITDA vs. the prior-year quarter, while currency, portfolio adjustments, and other income were slightly unfavorable.

Segment Results

Titanium Technologies
Delivering high-quality Ti-Pure™ pigment through customer-centered innovation and sustainability leadership

In the third quarter, TT reported Net Sales of $690 million, down $(187) million, or (21)%, from $877 million in the prior-year quarter. Compared with the prior-year quarter, prices decreased by (3)%, and volume declined (18)%, with currency flat. Price declines compared to the prior period, primarily reflect declines in market exposed channels partially offset by contractual price increases. Overall volumes decreased due to softer demand in all regions. Segment Adjusted EBITDA was $69 million, down (50)% compared to the prior-year quarter, resulting in Adjusted EBITDA Margin of 10%. The decreases in TT Adjusted EBITDA and Adjusted EBITDA Margin over the prior-year quarter were primarily due to the decrease in sales volume and price.

On a sequential basis, Net Sales saw a (2)% decrease, driven by a (3)% decline in price, primarily in market-exposed channels. In contrast, volume increased by 1%, while currency remained relatively flat compared to the prior quarter.

Fourth quarter demand is expected to be down sequentially, consistent with normal seasonal patterns. Costs are expected to improve inclusive of the benefits of the Kuan Yin plant closure.

TT Transformation Plan

The TT Transformation Plan was launched with the recent Kuan Yin facility closure and has been expanded to include further measures to streamline our workforce, drive cost improvements and long-term margin improvement.

We expect the TT Transformation Plan to provide approximately $100 million of run-rate savings in 2024, with additional cost-saving opportunities as we progress with the plan in the years ahead. Of these total projected savings, the closure of the Kuan Yin site is projected to provide for run-rate savings of $50 million in 2024, with $15 million in 2023.

Under the TT Transformation Plan, for the period ended September 30, 2023, we recorded charges of $147 million, comprised primarily of non-cash charges of $78 million related to asset-related impairments, $28 million related to the write-off of certain raw materials inventory, with $10 million in other charges and cash charges of $31 million related to severance, contract termination and decommissioning charges. In addition, the Company anticipates additional cash charges in the range of $20 million to $30 million for decommissioning, dismantling and removal costs in the next couple years.

Thermal & Specialized Solutions
Driving innovation in low GWP thermal management solutions to support customer transitions to more sustainable products

TSS reported record third quarter Net Sales of $436 million, up $19 million, from $417 million in the prior-year quarter. Compared with the prior-year quarter, price declined (1)%, volume increased by 5%, with currency a 1% tailwind. Price declines in automotive end-markets were partially offset by value-based pricing growth within our Refrigerants and Foam, Propellants, and Other Products portfolios when compared to the prior period. Volumes increased due to continued adoption of Opteon ^™ products in stationary and automotive original equipment manufacturers. Versus the prior-year quarter, segment Adjusted EBITDA remained unchanged at $162 million, primarily driven by the increase in sales volume and lower raw material costs, offset by lower earnings from our equity affiliates and other income, higher production-related fixed costs, and continued investment in R&D growth initiatives, resulting in Adjusted EBITDA Margin of 37%.

On a sequential basis, Net Sales decreased by (17)%. Price and volume decreased (5)% and (12)%, respectively, reflecting seasonal refrigerant demand trends.

Our outlook anticipates continued Opteon ^™ adoption in mobile and stationary applications ahead of the next EU and US HFC step-downs in 2024, paired with uncertainty in the rate of automotive and construction end-market demand recovery. We expect typical seasonality in customer demand trends throughout the remainder of the year.

Advanced Performance Materials
Creating a clean energy and advanced electronics powerhouse

In the third quarter, APM reported Net Sales of $343 million, down $(107) million, or (24)%, from $450 million in the prior-year quarter. Within the underlying APM business, the Performance Solutions portfolio reported a decrease in Net Sales of $(4) million, or (3)%, whereas Advanced Materials portfolio reported Net Sales decrease of $(103) million, or (32)% from the prior-year quarter. Compared with the prior-year quarter, APM’s price increased 2%, volume declined (26)%, and currency remained relatively flat. Prices increased due to increasing sales in high-value end-markets, including advanced electronics and clean energy, in the Performance Solutions portfolio, as well as pricing actions to offset higher raw material costs in our Advanced Materials portfolio. Volumes decreased primarily due to demand softening in the Advanced Materials portfolio which serves more economically sensitive end-markets. Versus the prior-year quarter, Adjusted EBITDA was down $(44) million, or (39)%, to $68 million resulting in Adjusted EBITDA Margin of 20%. The decreases in segment Adjusted EBITDA and Adjusted EBITDA Margin for the quarter were primarily attributable to the aforementioned decrease in sales volume driving lower fixed cost absorption, impact of higher raw material costs, and the continued effects of inflation on other costs.

On a sequential basis, Net Sales decreased by (11)%. Price decreased by (1)% and volume declined (10)%, with currency flat. On the same basis, Performance Solutions portfolio Net Sales declined (8)%, while the Advanced Materials portfolio declined (13)%. These declines were primarily driven by ongoing demand softness in more economically sensitive end-markets in the Advanced Materials portfolio and, to a lesser extent, specific product lines within the Performance Solutions portfolio.

Our outlook anticipates continued demand weakness throughout the year for products in the Advanced Materials portfolio serving economically sensitive end-markets, paired with continued elevated input costs, partially offset by improved customer demand for high-value, differentiated products in the Performance Solutions portfolio.

Other Segment

The Performance Chemicals and Intermediates business in Other Segment had Net Sales and Adjusted EBITDA in the third quarter 2023 of $18 million and $2 million, respectively. The sale of the Glycolic Acid Business, which was within the Other Segment, was successfully completed on August 1, 2023.

Corporate and Other Activities

Corporate and Other was an offset to third quarter Adjusted EBITDA of $(54) million vs. $(51) million in the prior-year third quarter. The increase was primarily related to legacy related legal spend.

Liquidity

As of September 30, 2023, consolidated gross debt was $4.0 billion. Total debt principal, net of $0.9 billion cash, was $3.2 billion, resulting in a net leverage ratio of approximately 3.2 times on a trailing twelve-month Adjusted EBITDA basis. Total liquidity was $1.7 billion, comprised of $0.9 billion cash, and $0.8 billion of revolving credit facility capacity, net of outstanding letters of credit.

Cash provided by operating activities for the third quarter of 2023 was $130 million vs. $301 million in the prior-year quarter. Capital expenditures for the third quarter of 2023 were $86 million vs. $72 million in the prior-year third quarter. In our Q3 results, we have now added Adjusted Free Cash Flow as a financial metric, which excludes the impact of recent PFAS-related litigation settlements. Adjusted Free Cash Flow for the third quarter of 2023 was $81 million vs. $229 million in the prior-year quarter which excludes certain PFAS-related litigation settlements of $37 million with no adjustments in the comparative period. In the quarter, we returned $55 million in cash to shareholders inclusive of $18 million of common stock repurchases and $37 million of dividends.

In August 2023, we completed the amendment and extension of both EUR and USD term loans, increasing aggregate borrowing by $400 million with an updated maturity in 2028, enhancing our overall liquidity profile.

Preliminary approval of a comprehensive PFAS settlement with a defined class of U.S. water systems was granted by the Court on August 22, 2023. Subsequently, on September 6, 2023, Chemours deposited its 50% share totaling $592 million into the water district settlement fund. This deposit was funded through a combination of sources, including net proceeds from the issuance of new term loans, available cash and funds available under the MOU escrow account. DuPont and Corteva jointly contributed the remaining 50%.

Guidance

The Company is updating its full year 2023 Adjusted EBITDA and Adjusted Free Cash Flow guidance. The Company now expects full year 2023 Adjusted EBITDA to be within the range of $1.025 to $1.075 billion and Adjusted Free Cash Flow of greater than $225 million, inclusive of approximately $400 million of capital expenditures which remains unchanged.

Mr. Newman continued, “We remain committed to our five strategic priorities with increased focus on cost reduction activities through the TT Transformation Plan. We've taken decisive steps to improve earnings in our TT segment, continue to invest in sustainability-driven growth for TSS and APM's Performance Solutions portfolio, and to ensure prudent capital allocation and liquidity management. Our entire leadership team is responding to the near-term demand challenges, while staying focused on our strategy to unlock shareholder value.”

Conference Call

As previously announced, Chemours will hold a conference call and webcast exclusively for Q&A on October 27, 2023, at 8:00 AM Eastern Daylight Time. A transcript of the prepared remarks and additional presentation materials can be accessed by visiting the Events & Presentations page of Chemours' investor website, investors.chemours.com . A webcast replay of the conference call will be available on Chemours’ investor website.

About The Chemours Company

The Chemours Company (NYSE: CC) is a global leader in Titanium Technologies, Thermal & Specialized Solutions, and Advanced Performance Materials providing its customers with solutions in a wide range of industries with market-defining products, application expertise and chemistry-based innovations. We deliver customized solutions with a wide range of industrial and specialty chemicals products for markets, including coatings, plastics, refrigeration and air conditioning, transportation, semiconductor and consumer electronics, general industrial, and oil and gas. Our flagship products include prominent brands such as Ti-Pure™, Opteon™, Freon™, Teflon™, Viton™, Nafion™, and Krytox™. The Company has approximately 6,600 employees and 29 manufacturing sites serving approximately 2,900 customers in approximately 120 countries. Chemours is headquartered in Wilmington, Delaware and is listed on the NYSE under the symbol CC.

For more information, we invite you to visit chemours.com or follow us on Twitter @Chemours or LinkedIn .

Non-GAAP Financial Measures

We prepare our financial statements in accordance with Generally Accepted Accounting Principles (GAAP). Within this press release, we may make reference to Adjusted Net Income, Adjusted EPS, Adjusted EBITDA, Adjusted EBITDA Margin, Free Cash Flow, Adjusted Free Cash Flow, Adjusted Effective Tax Rate, Return on Invested Capital and Net Leverage Ratio which are non-GAAP financial measures. The Company includes these non-GAAP financial measures because management believes they are useful to investors in that they provide for greater transparency with respect to supplemental information used by management in its financial and operational decision making.

Management uses Adjusted Net Income, Adjusted EPS, Adjusted EBITDA, Adjusted EBITDA Margin, Free Cash Flow, Adjusted Free Cash Flow, Adjusted Effective Tax Rate, Return on Invested Capital and Net Leverage Ratio to evaluate the Company's performance excluding the impact of certain noncash charges and other special items which we expect to be infrequent in occurrence in order to have comparable financial results to analyze changes in our underlying business from quarter to quarter.

Accordingly, the Company believes the presentation of these non-GAAP financial measures, when used in conjunction with GAAP financial measures, is a useful financial analysis tool that can assist investors in assessing the Company's operating performance and underlying prospects. This analysis should not be considered in isolation or as a substitute for analysis of our results as reported under GAAP. This analysis, as well as the other information in this press release, should be read in conjunction with the Company's financial statements and footnotes contained in the documents that the Company files with the U.S. Securities and Exchange Commission. The non-GAAP financial measures used by the Company in this press release may be different from the methods used by other companies. For more information on the non-GAAP financial measures, please refer to the attached schedules or the table, "Reconciliation of GAAP Financial Measures to Non-GAAP Financial Measures (Unaudited)" and materials posted to the Company's website at investors.chemours.com.

Forward-Looking Statements

This press release contains forward-looking statements, within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934, which involve risks and uncertainties. Forward-looking statements provide current expectations of future events based on certain assumptions and include any statement that does not directly relate to a historical or current fact. The words "believe," "expect," "will," "anticipate," "plan," "estimate," "target," "project" and similar expressions, among others, generally identify "forward-looking statements," which speak only as of the date such statements were made. These forward-looking statements may address, among other things, the outcome or resolution of any pending or future environmental liabilities, the commencement, outcome or resolution of any regulatory inquiry, investigation or proceeding, the initiation, outcome or settlement of any litigation, changes in environmental regulations in the U.S. or other jurisdictions that affect demand for or adoption of our products, anticipated future operating and financial performance for our segments individually and our company as a whole, business plans, prospects, targets, goals and commitments, capital investments and projects and target capital expenditures, plans for dividends or share repurchases, sufficiency or longevity of intellectual property protection, cost reductions or savings targets, including those related to the closing of Chemours’ Kuan Yin manufacturing site located in Taiwan, plans to increase profitability and growth, our ability to make acquisitions, integrate acquired businesses or assets into our operations, and achieve anticipated synergies or cost savings, all of which are subject to substantial risks and uncertainties that could cause actual results to differ materially from those expressed or implied by such statements. Forward-looking statements are based on certain assumptions and expectations of future events that may not be accurate or realized, such as full year guidance relying on models based upon management assumptions regarding future events that are inherently uncertain. These statements are not guarantees of future performance. Forward-looking statements also involve risks and uncertainties that are beyond Chemours' control. Matters outside our control, including general economic conditions and the COVID-19 pandemic, have affected or may affect our business and operations and may or may continue to hinder our ability to provide goods and services to customers, cause disruptions in our supply chains such as through strikes, labor disruptions or other events, adversely affect our business partners, significantly reduce the demand for our products, adversely affect the health and welfare of our personnel or cause other unpredictable events. Additionally, there may be other risks and uncertainties that Chemours is unable to identify at this time or that Chemours does not currently expect to have a material impact on its business. Factors that could cause or contribute to these differences include the risks, uncertainties and other factors discussed in our filings with the U.S. Securities and Exchange Commission, including in our Quarterly Report on Form 10-Q for the quarter ended September 30, 2023 and in our Annual Report on Form 10-K for the year ended December 31, 2022. Chemours assumes no obligation to revise or update any forward-looking statement for any reason, except as required by law.

The Chemours Company
Consolidated Statements of Operations (Unaudited)
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The Chemours Company
Consolidated Balance Sheets (Unaudited)
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The Chemours Company
Consolidated Statements of Cash Flows (Unaudited)
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The Chemours Company
Segment Financial and Operating Data (Unaudited)
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The Chemours Company
Reconciliation of GAAP Financial Measures to Non-GAAP Financial Measures (Unaudited)
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GAAP Net Income (Loss) Attributable to Chemours to Adjusted Net Income and Adjusted EBITDA Reconciliation

Adjusted earnings before interest, taxes, depreciation, and amortization (“Adjusted EBITDA”) is defined as income (loss) before income taxes, excluding the following items: interest expense, depreciation, and amortization; non-operating pension and other post-retirement employee benefit costs, which represents the components of net periodic pension costs excluding the service cost component; exchange (gains) losses included in other income (expense), net; restructuring, asset-related, and other charges; (gains) losses on sales of businesses or assets; and, other items not considered indicative of the Company’s ongoing operational performance and expected to occur infrequently, including Qualified Spend reimbursable by DuPont and/or Corteva as part of the Company's cost-sharing agreement under the terms of the MOU that were previously excluded from Adjusted EBITDA. Adjusted Net Income is defined as net income (loss) attributable to Chemours, adjusted for items excluded from Adjusted EBITDA, except interest expense, depreciation, amortization, and certain provision for (benefit from) income tax amounts.