$CC The Chemours Company Q4 2025 Earnings Conference Call

Good morning. My name is Carmen and I'll be your conference operator today. I would like to welcome everyone to the Chemours Company fourth quarter 2025 results conference call. Currently all participants are in a listen-only mode. A question and answer session will follow the conclusion of the prepared remarks. I would like to remind everyone that this conference call is being recorded. I would now like to hand the conference over to Brandon Jones, Vice President, Head of Strategy and Investor Relations for Chemours. You may begin your conference.

Good morning everybody. Welcome to the Chemours Company's fourth quarter 2025 earnings conference call. I'm joined today by Denise Dignan, our President and Chief Executive Officer, and our Senior Vice President and Chief Financial Officer, Shane Hostetter. Before we start, I would like to remind you that comments made on this call as well as in the supplemental information provided on our website contain forward-looking statements that involve risks and uncertainties as described in Chemours' SEC filings. These forward-looking statements are not guarantees of future performance and are based on certain assumptions and expectations of future events that may not be realized. Actual results may differ and Chemours undertakes no duty to update any forward-looking statements as a result of future developments or new information. During the course of this call, we'll refer to certain non-GAAP financial measures that we believe are useful to investors evaluating the company's performance. A reconciliation of non-GAAP terms and adjustments is included in our press release issued yesterday evening. Additionally, we posted our earnings presentation on our website yesterday evening as well. With that, I will turn the call over to Denise Dignan.

Thank you, Denise, and good morning everyone. As was shared in the earnings materials available on our investor website, I now would like to discuss our expectations for the first quarter and factors that will drive our business as we look ahead. Beginning with TSS, for the first quarter, we project net sales to rise sequentially in the mid-20s to 30% range, primarily attributable to favorable seasonal trends and continued growth in Opteon refrigerants, where we are also forecasting a sequential increase of 30 to 40% in the first quarter. This sustained double-digit Opteon refrigerant expansion is expected to be driven by the continued regulatory adoption associated with government mandates under the US AIM Act. Adjusted EBITDA for TSS is also anticipated to grow sequentially, ranging from $170 million to $185 million, also driven by seasonality and the continued transition to our Opteon stationary refrigerants. As we look beyond the first quarter, we expect year-over-year double-digit growth for Opteon refrigerants to continue into the second quarter of 2026, but we'll then begin to normalize to more typical seasonal patterns in the second half of the year as year-over-year comparison points will reflect the regulatory-driven market demand we saw in late 2025. Additionally, we believe that pricing strength stemming from favorable pricing mix for Opteon blends and opportunistic pricing in Freon refrigerants will continue into 2026. Also, we expect benefits from cost-out efforts throughout 2026, including our recent Corpus Christi capacity expansion, which will be partially offset by increased raw material costs, primarily due to R32, a key component of our stationary refrigerants. Overall, we anticipate that the confluence of these factors will underpin strong sales and earnings growth for TSS in 2026 with consistent overall margins compared to that of 2025. For our TT business, we expect sequential net sales to decrease in the low to mid single digits percentage range in the first quarter. In our recent reporting, we split out our mineral sales from our TiO2 pigment sales to provide greater visibility in line with recent strategic decisions. In the first quarter, we anticipate that our mineral sales will be down 60% sequentially driven by sales timing and the impacts from the recent changes in mining efforts, while our TiO2 pigment sales are expected to be down in the low single digits. The slight anticipated decline in TiO2 pigment sales during the first quarter is due to weaker seasonal volumes in non-Western markets, which will offset the volume increases we expect in Western markets, supported by our global pricing efforts as highlighted in the previous quarter across all of our regions. Our global pricing improvement is driven by our pricing announcement in December of last year, which we have seen signs of strong adoption globally as we continue to demonstrate our value-based commercial strategy within our TT segment. It is our expectation that overall average global pricing for TiO2 pigment should be generally in line with the prior year quarter. For the first quarter, we expect TT's adjusted EBITDA to be between breakeven and $5 million. This low level of EBITDA is due to the timing of mineral sales paired with an additional approximately $17 million of net costs we expect in the quarter tied to inventory and ore mix, as well as overall impacts from low plant utilization. The combined force of these near-term impacts is expected to result in higher net cost for the quarter. However, TT is positioned to grow earnings and cash flow during the year. Beyond the first quarter, we see a year where our top line will be driven by positive TiO2 pricing trends across regions and stabilized volumes in Western markets, followed by non-Western markets as the year progresses. For pricing, we've already seen expected increases start to take form through stabilized Q4 pricing, which has reflected growth into 2026. Our portfolio and operational initiatives will continue to drive improved earnings as the year progresses with a clearer realization of important cost savings efforts becoming more visible, further underpinned by improved cash generation. Now for our APM business, in the first quarter, we expect net sales to decrease in the high teens percentage range sequentially due to sustained market weakness combined with customer timing and constraints from the Washington Works outage. Adjusted EBITDA is projected to range from breakeven to $5 million primarily due to the previously referenced outage at the Washington Works facility. This outage is expected to result in a negative impact of $20 to $25 million for the quarter with most of this effect attributable to restricted sales associated with the facility's interruption. As Denise noted earlier, the plant has returned to normal operations and will be a key contributor to the improved earnings we anticipate in APM throughout the rest of 2026. Specifically, we see a return to more profitable quarters for APM after the first quarter of 2026 with progressively improved sales and earnings as we move further into the year. While the overall top line will include lower net sales due to the closure of the advanced materials SPS capstone line in 2025, we plan to replace those lost sales with an increase of specialty-focused performance solutions products with higher bottom-line contributions. Although we are facing constraints from our outage, demand remains strong in the semiconductor and data center markets which are driving current and anticipated sales growth of our performance solutions products. These are sectors where we see tremendous inroads for APM's chemistry to help enable the growth and adoption of artificial intelligence across global economies. While we expect some negative cost effects to carry over slightly into our second quarter, we plan to counter these through increased operations at our Washington Works site and the increased realization of existing and continued cost reduction efforts as production improves. While the year did not begin as we had planned, we are confident that APM will finish strong in 2026 as we work to recover lost volume, run our plant circuit at elevated levels, and continue to drive commercial and operational excellence. Through these initiatives, we anticipate adjusted EBITDA to be slightly higher than 2025 levels while cash generation will see meaningful improvement. On a consolidated basis, we anticipate our first quarter net sales to increase in the range of 3 to 5% sequentially with consolidated adjusted EBITDA expected to range between $120 to $150 million. Also, we anticipate corporate expenses to range between $45 million and $50 million. Our capital expenditures for the first quarter are expected to be in the range of $50 million with free cash flow reflecting a use of cash not to exceed $100 million. For the full year 2026 at a consolidated level, we anticipate overall net sales growth to be between 3 and 5% and adjusted EBITDA to range from $800 million to $900 million, primarily driven by increased TSS and APM performance solutions demand, expected pricing strength in TT, and further benefits of more pronounced cost realizations in TT and APM throughout the year. Additionally, we expect capital expenditures to be between $275 and $325 million with free cash flow conversion to be above 25%. Supported by improved earnings and working capital improvements that we expect to realize as the year progresses. As we advance into 2026, we remain committed to executing our Pathway to Thrive strategy and are focused on prioritizing a platform of robust cash flow generations annually going forward via various initiatives across all areas of the company. We view these cash flow efforts to be based in driving clear performance goals across our cash conversion cycle, which we are already seeing take form. These initiatives will take time to fully implement, but we believe improved cash generation in 2026 serves as a starting point where we anticipate further free cash flow expansion in the future. Through these efforts, coupled with approximately $300 million in net proceeds from the sale of our Quan facility, which will be used to reduce our debt, we anticipate our net leverage ratio to be below four times adjusted EBITDA by the end of 2026. This is a key milestone that further positions us to achieve our long-term objective of a net leverage ratio below three times adjusted EBITDA across economic cycles. Given these perspectives on the first quarter and full year 2026, I'd like to now hand the call back over to Denise to share her thoughts and perspectives on our strategic execution under Pathway to Thrive.

Thank you so much. And as a reminder, to ask a question, press star one on your telephone and wait for your name to be announced. To remove yourself, press star one again. One moment while we compile the Q&A roster. Our first question comes from Pete Austerland with Truist Securities. Please proceed.

Hey, good morning. Thanks for taking the questions. I just wanted to start on the TT segment. Could you share some more detail on the assumptions for TiO2 volume growth that are embedded in your 2026 guidance? What do you expect the global industry to grow volumes at this year and how would you expect your volume growth to compare to the industry average?

Great. Thanks. And then just switching gears, I just wanted to follow up on your comments on your legacy liabilities. Do you have line of sight for meaningful progress towards resolving what you have left during 2026? Any key items or dates to be watching out for this year that you could share?

Great. Thanks very much.

Thank you. Our next question comes from the line of John Roberts with Mizuho. Please proceed.

Thank you. It seems like there are a lot of mix effects running through the APM segment. Maybe you could peel apart some of the different end markets there to let us know how much some are down and where some of the strength is.

And it's my understanding there's still some more maintenance to be done in 2027 on Washington Works. Why not pull all of the 2027 maintenance into whatever downtime you've got here in the March quarter of 2026?

Thank you.

One moment for our next question. It comes from Arun Viswanathan with RBC Capital Markets. Please proceed.

Great. Thanks for taking my question. Hope you guys are well. I guess my first question is just on the Q1 and the full year guide. The midpoint for Q1's 135. Looks like the full year midpoint's 850. Maybe you can just talk a little bit about what are some of the bridge items as you move into Q2. I imagine obviously there's seasonality for both TSS and TiO2 that's pretty pronounced in Q2 and Q3, but I'm just curious what else we should think about. There were some disruptions that you had last year in the middle of the year as well. Obviously, is it your assumption that those don't repeat? Maybe just understand how you plan to see that uplift from the 135 to maybe a 200 number or so for the middle of the year. Thanks.

Hey everyone. Yeah, specific to what you got the midpoints right in Q1 and year-end guides. As we looked at Q2, just thinking through what happened in Q1, we are looking at low ranges of 0 to 5 in TT and APM. That is inclusive of some unusual items. Specific to APM, we had the Washington Works outage of roughly $20 to $25 million of an impact. For TT, we had roughly $17 million of inventory and mix areas around the ore. So as you think about that with the midpoint of the guide in the first quarter, the $40 million in addition to those one-time items going into the second quarter, it's a good start off. Then, as you pointed out, it's really seasonality. It's strength in our refrigerants and Opteon business. It's getting the price in the fact that Denise earlier talked about in TT and continuing that momentum as well as pricing over TSS. We're going to continue to control what we can control across each one of our businesses and getting cost out across that side, which is going to progress as the year goes on as well.

Okay, great. Thanks for that. And then, as a follow-up just on the free cash flow, you noted that obviously your teams did a lot of good work in Q4 to harvest some of that, especially in APM. Could you walk us through? Denise, you may have mentioned that $92 million is more reflective of the quarterly run rate of cash flow generation. So is it also the implication that you feel comfortable that free cash flow could eclipse $300 or $350 million as you go through the year? Thanks.

Yeah, why don't I take that one? First of all, very proud of the team and what we've done at the ending the year driving free cash flow over our high end of our range. As we look ahead, Denise talked about the normalization. Thinking through what the cash generation capabilities of this business are, thinking that as reflective of a full year, as you would know, we are seasonal as it relates to working capital. I mentioned in my script that in Q1 we don't anticipate over $100 million of outflow, but we do anticipate an outflow in Q1 given working capital seasonality. But for the full year, we wholeheartedly stand by the above 25% free cash flow guide and we feel comfortable attaining that. So really excited for the capabilities of the team and really driving through cash conversion by unlocking further working capital and really hitting the mark on earnings to generate that cash flow in 2026.

Thanks a lot.

Thank you. Our next question comes from the line of Duffy Fischer with Goldman Sachs. Please proceed.

Yeah, good morning guys. First question is just on TT. Can you walk through the three geographies that have some anti-dumping activities going on: India, Brazil and Europe? What have you seen in those areas already from those anti-dumping actions and what do you think is still left to come for the Western players?

Fair enough. And then jumping to TSS, can you walk us through what impact has the bringing online of Corpus Christi been, either increased costs as it's ramping and then what's left as far as benefit as that plant fully fills out?

Great. Thank you guys.

Thank you so much. Our next question comes from the line of Josh Spector with UBS. Please proceed.

Hey guys, we have James Cannon on for Josh. I wanted to touch back on the ore-mix impact that's flowing through in TT this quarter. I know there's some noise around legacy purchase contracts and I think the last one of those continues to run through this year or next year. Is any of that something that we should be modeling continuing or is it something that should be contained in the first quarter?

Okay, got it. And then on the Freon side, it seemed like you called out some opportunistic sales that drove a pretty solid sequential in the quarter. My math gets me to a first quarter guide that has continued growth there. Can you just talk through what you expect on that side of the business without the transition happening this year and no step-downs as far as I'm aware?

Yeah, thanks for the question. Pretty happy with some of the tailwinds we saw in the fourth quarter related to Freon business. As we look ahead, in my script, I mentioned the tailwinds of pricing around both Opteon and Freon. We can look at 2026 and see that continuing. So we're really proud of both the execution on the Opteon side and Freon side in 2025. And we'll continue to execute and grow in both next year.

Great. Thank you.

Thank you. Our next question comes from the line of Hassan Ahmed with Olympic Global Advisors. Please proceed.

Morning, Denise and Shane. Just wanted to revisit some of the questions asked earlier on TT, particularly as it pertains to your volumes. You obviously reported volume declines in Q4 and the volumes aren't looking that great for Q1 as well. I'm just trying to think through the anti-dumping duty side of things. The four countries/regions where those measures have been announced. If I think about the volume that is up for grabs, it's around 800,000 tons. What is baked into that $800 to $900 million EBITDA guidance that you guys have given in terms of any potential anti-dumping related market share gain for you?

But any guidance in terms of the market typically grows at 2 to 3%. Will you be in line with the market or better than the market in terms of volume growth?

Understood. And as a follow-up, Denise, if you don't mind, just sticking to the TT side of things. You and others had talked about 1.1 million tons of capacity rationalizations since 2023. Are you guys still comfortable with that figure? And what are you seeing in terms of potential rationalizations in China on the back of anti-involution?

Thank you so much.

Thank you. One moment for our next question. It comes from the line of John McNulty with BMO Capital Markets. Please proceed.

Hey, good morning. This is Caleb on for John. I was just hoping you could provide a little bit more color on what would get you to the high end of your range and the low end of your range for the full year.

Sure, thanks Caleb. As I think about the range of possibilities here, I think it really depends upon a couple things. The high end depending upon market evolution, how the actual economic returns come. If there are further rate cuts that have impacts on the overall market. The other parts on the high end are overall cost out and thinking through where net inflation and cost improvements go. Then finally, continued execution on the pricing side and broader adoption across the businesses. On the low end of the range, thinking through the cost inputs and if there are additional costs we're not seeing right now. On the opposite side of what I just said, if there's less price receptivity. And if there's any volume depression on adaptation of that side.

Okay, that's helpful. And then for TSS in the past couple years, you've seen the benefit of the A2L and then the A2L transition. Going forward, how do you see the growth algorithm for that business playing out, especially relative to your previous commentary for mid to high single-digit sales growth over the longer term?

Okay. Thanks for the call.

Thank you. Our next question comes from the line of Vincent Andrews with Morgan Stanley. Please proceed.

Thank you and good morning. I just kind of want to follow up on that a little bit. Could you talk about what your residential HVAC customers are doing? It seems like they're reducing production for various reasons. Is that leading to a destock from you? And can you help us understand how much of your mix that is now versus other parts of the TSS business, whether it's data centers or aftermarket, and how much those are going to contribute this year volumetrically?

Okay. And Shane, if I could ask you on the cash flow, the target to do at least 25% conversion this year, what are the things that are inhibiting you in 2026 from doing better than that, from getting up to say 40 or 50% conversion? I noticed there was some line items for full year 2025, whether it was an inventory build or your payables went down a couple hundred million dollars and also a fair amount of movement in accrued liabilities and other liabilities, which is below the working capital line, but maybe you can just help us reconcile some of the important lines on the cash flow statement this year and what's going to help you year-over-year and what's going to inhibit you.

Thanks, Vincent. First, we put out that at least 25% and I really feel comfortable with that and we will obviously strive to be more than 25% as we go forward into 2026. Specific to the areas that I would keep in mind, the story a lot is around inventory and getting our DIOS improved. We do, earlier there was a question around contracts and TT that are going to wane through the year. Unfortunately that is a headwind coming into the year because that is mandated high-grade ore that we had to fight against, but we feel very confident even though we will have additional ore put on that throughout each one of the businesses we'll have inventory reductions outside of that. So I think the inventory is a big story. I think navigating other areas around cash conversion and driving up DPO as well as being efficient on the collections is certainly areas that we'll focus on. And then coming forward, I really feel that the capex in this company is going to increase year-over-year, but that's really around planned maintenance activities or turnarounds in the year. So that is going to impact our free cash flow in the given year compared to last year as well. All in all, the story here is we're controlling what we control. Really feel confident in that 25% number and we'll drive ahead to get even more into the year.

Thank you.

Thank you. One moment for our next question. It comes from Jeff Zekauskas with JP Morgan. Please proceed.

Thanks very much. In the titanium dioxide segment, your revenues in North America and in Europe were flat to up. The issue was in Asia where for the year your revenues went from roughly $660 to $465, down 30% in Asia. What happened in Asia and where is that business going?

Okay. So secondly, there's a focus on free cash flow generation. If you look at Chemours from 2019, your inventories used to be $1.1 billion and now they're $1.6 billion, and even this year they're up 7%. Your revenues from 2019 to 2025 are up about 5%. Inventories are up 50%. What's all that inventory? Is it titanium dioxide? Is it something else? Why do your inventories keep growing? And what can you do about it?

Thanks for the question, Jeff. I think certainly we are carrying more inventory than we need right now. We'll go into that. When you look back to 2019, you mentioned it, but we're a different business right now as we think about TSS with Corpus Christi up and running and other areas. So you can't really look at the past trends, but I own up to the fact that inventory is an area that we are concerned to reduce. Certainly, as I mentioned earlier on the call, we have take-or-pay contracts with high-grade ore that we don't necessarily need, but we can use. So some of that is put on there. But I would say across each one of the businesses, we're carrying too much inventory and we have stretch goals in 2026 and beyond to get it back to more normalized levels.

Great. Thanks very much.

Thank you.

So, we have reached the end of our Q&A session. Thank you for joining the Chemours fourth quarter 2025 results conference call. You may now disconnect.