Chemours' TiO2 volumes falling faster than expected

04:59' PM - Wednesday, 07/11/2018

Chemours’ titanium dioxide (TiO2) volumes are declining faster than expected in the second half of 2018, due to destocking throughout the whole TiO2 chain across global regions, the CEO of the US-based producer said in an update on Friday.

Full-year 2018 volumes for Chemours’ Ti-Purebrand pigment are expected to be down in the mid-single digits, compared with “a very robust 2017”, Mark Vergnano told analysts during the company’s Q3 earnings call.

As a result, Chemours now expects total full-year 2018 adjusted earnings before interest, tax, depreciation and amortisation (EBITDA) to come in at the lower end of its $1.70bn-$1.85bn guidance, the CEO said.

In Q3 alone TiO2 volume fell 10% year on year.

However, net sales in Chemours’ titanium technologies segment fell only 1% to $791m as a 9% increase in pricing nearly offset the volume decline, and the segment adjusted EBITDA margin rose to 33.9% from 31.2% in Q3 2017.

Volume in Q3 was affected by customer inventory destocking across all of Chemours’ TiO2 end markets and regions, Vergnano said.

“We expect the trend of softer demand will persist through the next quarter,” he said, adding that forecasting the timing of destocking at customers “can be challenging”.

In its original planning Chemours had expected destocking to take hold in the early part of 2019, rather than in the second half of 2018, Vergnano said.

“[Destocking] is happening a little bit faster than we thought,” he said.

But with destocking occurring sooner, it should also “flush out” sooner, he added.

“Right now, we are anticipating this will probably play out through the beginning of next year,” he said.

TiO2 pricing will not change

He added that at this time, the slowdown was a “destocking phenomenon”, rather than an indication of a decline in the economy. TiO2 is seen as a bellwether for the broader economy.

Importantly, there will be no change in Chemours’ local pricing, “price will hold”, Vergnano said, adding that there would be no drop in margin attributable to price.

“I am completely confident, we are not going to waver on local price,” the CEO assured an analyst on the call who noted that given the destocking it was surprising that Chemours’ pricing would remain unchanged.

“The only variable will be volume, and that volume will be based on how we operate our facilities,” with Chemours having the capability to move production within its network of plants, Vergnano said.

In addition to TiO2, Chemours make fluoroproducts and mining chemicals. - ICIS -

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