The Chemours Company (CC) Q4 2015 Earnings Report, Transcript and Summary

Good morning. My name is Keith, and I will be your conference operator today. At this time I'd like to welcome everyone to the Chemours Company Fourth Quarter 2015 Earnings Call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks we will have a question-and-answer session. [Operator Instructions]. Thank you. Alisha Bellezza, Director of Investor Relations, you may begin your conference.

Thank you, Keith, and good morning, everyone. I'd like to welcome you to the Chemours Company 2015 fourth quarter earnings conference call. I'm joined today by Mark Vergnano, President and Chief Executive Officer; and Mark Newman, Senior Vice President and Chief Financial Officer. Before we begin, let me remind you that comments on this call, as well as the supplemental information provided in our presentation and on our website, will contain forward-looking statements that involve risks and uncertainties, including those described in our documents Chemours has filed with the SEC. 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 management will refer to certain non-GAAP financial measures that we believe are useful to investors evaluating the company's performance. Historical results prior to July 1, 2015 are presented on a standalone basis from DuPont's historical results and are subject to certain adjustments and assumptions as indicated and may not be an indicator of future performance. A reconciliation of non-GAAP terms and adjustments are included in our release and at the end of this presentation that accompanies our remarks. This includes an updated segment sales and EBITDA schedule reflecting our current allocations and definitions. I will now turn the call over to Mark Vergnano.

Thanks, Alisha, and good morning, everyone. Thank you all for joining us today. I'd like to start with some highlights then turn the call over to Mark Newman who will review company performance for the fourth quarter and full year 2015 as well as provide a brief litigation and liquidity update. After that I will conclude the call with additional details on each segment providing updates of our transformation plan and discuss our 2016 outlook. Within weeks of becoming an independent company, we rolled out our five point transformation plan, which has become our road map to drive significant improvement in our company's performance. I'm pleased to say that we are making significant progress on all fronts of this plan as we stay focused on the things that are within our control. Within six months we were able to reduce over $100 million of controllable costs. We made several portfolio decisions as a result of our Chemical Solutions strategic review and are on track to complete that work by mid-2016. We reached mechanical completion of our Altamira TiO2 facility. We delivered the expected working capital unwind of nearly $400 million, and as we start 2016 we have gained additional liquidity and flexibility in our capital structure through an agreement with DuPont and amended -- and an amended credit facility with our lenders. In short in spite of continued headwinds from unfavorable currency movements and a weak TiO2 pricing environment we continue to follow our transformation road map. We believe this steadfast focus will deliver our target improvements and adjusted EBITDA through 2017 and allow us to delever the company as we have planned. I will now turn the call over to Mark Newman to cover our financial results.

Thanks, Mark. Turning to Slide 3 in the fourth quarter we generated nearly $1.4 billion of revenue and $132 million in adjusted EBITDA and reported a GAAP net loss of $86 million after recording $88 million of restructuring and impairment charges in the quarter. In the quarter we were pleased with cash generation that resulted in $175 million of free cash flow primarily as a result of a net working capital release. The impact of unfavorable currency movements and lower TiO2 prices overshadowed almost all other items contributing to lower sales and adjusted EBITDA versus the previous year and sequentially. The strong U.S. dollar not only depressed our top line performance but added challenges to markets in which some of our largest competitors are benefiting from lower costs due to a stronger dollar. This was particularly true in our Fluoroproducts segment this quarter. Our corporate and other segment experienced higher sequential costs and resulted in negative $26 million of adjusted EBITDA. If you recall our third quarter expenses were unusually low. We believe that this quarter is a closer representation of a run rate adjusted EBITDA for this segment, but we continue to anticipate some variability from quarter to quarter. Finally, in the quarter we generated a $12 million sequential benefit from technology and licensing activities. These are periodic activities that the businesses occasionally undertake with particular success this quarter. Now turning to the full year review on Slide 4. First recall that this fiscal year is a combination of two quarters on a standalone basis from DuPont's historical results and two quarters as an independent public company. We generated $5.7 billion of revenue and $573 million of adjusted EBITDA, reported a GAAP net loss of $90 million after approximately $358 million of restructuring and impairment charges and interest expense of $132 million. The majority of the restructuring impairment charges that we recorded were associated with the portfolio actions and decisions related to the Chemical Solutions strategic review. Currency and lower pricing were the biggest challenges in 2015, representing nearly $580 million in headwinds versus 2014 results. Despite this our EBITDA margin remained double digits, supported by our transformation cost reduction efforts. In the fourth quarter we began to see the benefit of company-wide working capital initiatives helping to deliver the unwinds, which we expect will provide permanent working capital improvements in 2016. 2015 was another year of high capital spending across the company at $519 million. Approximately $70 million was associated with separation related spending and about $150 million related to the construction of our new TiO2 line at our Altamira facility in Mexico. With mechanical completion done, most of the spending for the project is now behind us. Let me now take a step back and provide some additional perspective on the fourth quarter. Turning to Slide 5, on a year-over-year basis adjusted EBITDA declined by $73 million to $132 million. Currency headwinds reduced adjusted EBITDA by approximately $66 million with more than half of that on the Titanium Technology segment. Lower selling prices across the Company reduced adjusted EBITDA by $100 million, almost $90 million of this impact was attributable to the decline in TiO2 pricing across all regions. Additionally the impact of pass-through pricing of lower raw materials in Chemical Solutions was a significant factor in the quarter. Despite the higher year-over-year volumes of TiO2, we saw lower demand for certain fluoropolymers especially for consumer electronics applications. Additionally, as regulated, we experienced lower quarter mandated volumes of base refrigerants versus the previous year. We did realize lower material -- raw material prices year-over-year, but the reduction was notably lower and selling price declined. While Mark will go through more details of our cost reduction efforts in a few more minutes, I would like to point out that we continue to see momentum gaining to realize our targeted fixed cost reductions with over $50 million realized in the fourth quarter. In total we saw over $100 million of lower fixed cost versus last year. And finally as I mentioned earlier, we benefited $11 million year-over-year from licensing activity that took place in the quarter. Turning to Slide 6, on a sequential basis adjusted EBITDA was $37 million below that of the third quarter. Currency headwinds reduced adjusted EBITDA by approximately $7 million mostly related to movements in emerging market currencies. Price continues to be a headwind in all segments during the fourth quarter. In Titanium Technologies excluding currency we saw global average TiO2 pricing declines by another 3% translating into a $23 million decline. As we mentioned in December, our Fluoroproducts segment was unfavorably impacted by increased competition driven in large part by a strong U.S. dollar. This translated into lower -- approximately 5% lower prices sequentially or about $28 million. Finally, Chemical Solutions saw lower selling prices as a result of lower pass-through raw material costs. Fourth and first quarters are typically seasonally lower for both TiO2 and refrigerant volumes. In the fourth quarter TiO2 volumes were just slightly below that of the third quarter as higher volume in Latin America offset lower volumes in the Northern Hemisphere markets. Refrigerants were lower as expected. We also saw weakness in some industrial fluoropolymer demand particularly for consumer electronics. Sequentially we saw over $50 million of cost savings related to the Edgemoor closure as well as some additional PFA related fixed costs consistent with our transformation plan target. However these lower expenses were partially offset by a $16 million increase in corporate and other expenses. This was primarily related to the timing of certain legacy liabilities and other payments. As we go forward we will incur between $20 million and $30 million per quarter of expenses that will flow through this segment. Finally as previously mentioned, we benefited from technology and licensing activity in the quarter. Before I turn to our balance sheet, let me provide a brief update on some litigation matters. In November 2015, we described our legacy litigation matters. Recently a few rulings were made on some of those matters. First, we were granted a summary judgment on the Valspar case, and the judge dismissed the case. As expected, Valspar filed an appeal to the Third Circuit. We think the opinion granted on summary judgment is very strong, and we feel confident that it will be upheld on appeal. Regarding PFOA personal injury claims as anticipated the trial court denied our motion for a new trial on the Bartlett case. We will now proceed with our appeal to the Sixth Circuit Court of Appeals. We expect this process will take about 12 months. So as we have said it will likely take until sometime in 2017 to determine a conclusion for this first case. As previously disclosed by DuPont, who remains a named defendant, a second Bellwether case was settled in January for an amount significantly below the incremental cost of preparing for this trial. We settled [without] admission of liability and believe this is the most effective use of our resources to support the overall strategy and continue defending the MDL cases. These additional Bellwether cases are scheduled to take place this year in May, August and November. The court has recently ordered that after April 2017, 40 individual cases will be tried per year. This initial timing is intended to allow the Bartlett appeal process to conclude prior to the beginning of any trials outside the initial Bellwethers. It is important to note that these 40 trials will be of individual plaintiffs with each required to prove his or her own case. We continue to expect this PFOA litigation will take place over multiple years. Given the indemnity to DuPont, we will continue to defend against this litigation. In the meantime, we are focused on our transformation plan to deliver earnings improvement and over time reduce the leverage on our balance sheet. On Slide 7 you will -- you see that we began the quarter with $215 million in cash balance. During the quarter we generated $302 million in cash from operations, including nearly $400 million of reduced working capital needs, driven by $186 million of lower accounts receivable, $48 million of lower inventory and $165 million in higher account payable balances. The operating cash flow supported $127 million of capital expenditures in the quarter and resulted in $175 million of free cash flow. As we have previously discussed, several of the restructuring charges that we took in the quarter result in additional deferred tax benefits. We expect that these will translate into lower cash tax rates in 2016 and 2017 as those benefits are realized for cash tax purposes. On Slide 8, we have summarized the key terms of the liquidity agreement with DuPont and our recent credit facility amendment for our revolver facility. In January we entered into an agreement with DuPont, which extinguished the cash and working capital true-ups originally contemplated in the separation agreement. Additionally DuPont prepaid $190 million in February to Chemours for certain goods and services, expected to be delivered over the next 12 to 15 months. In total these components provide additional liquidity in the first half of the year, a time that we generally see seasonally driven working capital usage. Leveraging the liquidity support from DuPont, we worked with our lenders to amend our revolving credit facility. A notable change in the terms is a shift to a leverage covenant calculation based solely on our senior secured net debt. The amendment also reduced the minimum levels of interest expense coverage ratio. We believe the amended covenant ratios provide adequate headroom for us to access our revolver going forward. Additionally, by extending the time horizon and the amount of allowable add backs through 2017, we have enhanced our ability to implement our transformation plans. Finally as part of the amendment we agreed to reduce the total revolving credit commitment to $750 million. We believe that the combination of these two agreements provides significant liquidity enhancements to support our businesses and allow us to drive the transformation plan forward. And now I will turn the call back to Mark.

Thanks, Mark. On Slide 9 you can see that in the fourth quarter, we generated $589 million in revenue and $62 million in adjusted EBITDA from the Titanium Technology segment. We maintained a double-digit margin in spite of continued challenging TiO2 market conditions and currency movements. We have this margin profile, primarily, because of our industry-leading low cost operating position, enhanced by the benefits of our planned cost reductions. We were able to increase our volumes year-over-year, and the sequential seasonal decline was minimal. With the mechanical completion of Altamira reached last December, we remain on track to begin commercial operations in the middle of this year. As stated previously we will operate the new line at Altamira to its full capacity to take advantage of the cost benefits. However, we will dial back production at our other sites to offset the new Altamira production, until customer demand and overall market conditions improve. At the end of December, we announced a modest price increase across all of our TiO2 product lines, effective January 1st or as contracts [last]. We see this increase as a step to reset prices back to levels from the fall of last year on a path towards more sustainable margins that allow us to continue investing in our business and supporting our customer needs. We are working with customers worldwide to implement this increase, the full impact of which will be apparent in the second quarter as many first quarter prices were agreed prior to our announcement. Moving to Slide 10, during the fourth quarter our Fluoroproducts segment generated $515 million in revenue and $80 million in adjusted EBITDA. The year-over-year profitability improvement was driven primarily by the benefits from transformation cost savings. Sequentially, these savings help to mitigate weaker market conditions driven by seasonality, currency, and soft end market demand for consumer electronics and the oil and gas applications. We sold a small breakeven business in Sweden during the quarter. Although inconsequential, it does reinforce our drive to simplify Chemours and focus our attention on our core investable businesses. Based on our signed use contracts with key OEMs we have excellent visibility into the ramp up of Opteon refrigerant sales as we look into 2016. We know the needs of our OEM customers will grow significantly in the second half of 2016 to meet the regulatory requirements in Europe. For stationery refrigerants we will continue to position our existing product lines to maximize value opportunities as these mature technologies are phased out and supply is limited by government issued quotas. In addition, we continue to work on developing new Opteon based blends that provide our customers with low global warming potential differentiating products. Fluoroproducts' financial performance will also be bolstered by our ongoing cost reduction initiatives that we expect to be a driver of this segment's 2016 performance. Let me now review the Chemical Solutions segment on Slide 11. In the quarter we saw volume gains in cyanides and sulfur on a year-over-year basis. As Mark mentioned, licensing activity was a benefit in the quarter with about half of that from the Chemical Solutions segment. Improved operating costs in our methylamines business were favorable in the quarter. Combined, these more than offset the pricing impacts and delivered sequentially and year-over-year stronger EBITDA performance in the quarter. Our strategic review of this segment led us to several decisions in the quarter. First, we are pleased to announce the sale of our Beaumont aniline facility to Dow for $140 million of gross proceeds. We expect this transaction to be completed by the end of the first quarter. We also announced our decision to retain and improve the cost position of our methylamines business in Bell, West Virginia and we believe that with the progress demonstrated this quarter we continue to move closer to a breakeven condition. Finally we also described our planned closure of our reactive metals business located in Niagara, New York. Activities to prepare the exit of the site are just beginning, but we expect to complete the process by year end. Ultimately we believe this will enhance our adjusted EBITDA by approximately $20 million per year beginning in 2017. In the past quarter, we continued the progress in transforming Chemours into a higher value chemistry company, by taking strategic portfolio actions as I just described and further reducing costs as you can see on Slide 12. This slide outlines the activities that we expect will reduce costs by $350 million through 2017 versus 2015. As you can see our goal is not dependent on any one bucket but rather a broad set of opportunities. Last December we described the initiatives that will deliver $165 million of lower costs in 2016. With our recent actions we have taken measures to achieve and will deliver our $200 million cost target for 2016. In fact as of today we believe there is less than $100 million of activities yet to announce to achieve the 2017 target as well. Let me quickly touch on the progress of the other aspects of our transformation plan. In addition to portfolio actions that I already covered, we are pursuing our $150 million of EBITDA improvements from growth. We expect to see a meaningful ramp up in Opteon sales during the middle and latter part of 2016 and into 2017 contributing $100 million of the growth by the end of 2017. Altamira will provide us annual benefits based on the low cost process technology and our ability to optimize ore grades across our entire production network. We expect to deliver the remaining $50 million of EBITDA from this and our planned cyanide expansion. Overall, we remain confident in our five point transformation plan and are very pleased with our progress thus far. Now let me discuss our 2016 outlook and the variables that could influence our performance. We expect full year EBITDA to be greater than what we achieved in 2015. Based on our success in 2015 of reducing costs, we are confident that our cost savings initiatives are on track for 2016. In addition to adjusted EBITDA performance we are working to drive a notable improvement in working capital productivity and are on a path to reduce our capital spending to $350 million in 2017. Combined with our lower cash tax rate, we expect to generate modestly positive free cash flow for the year. We are starting with an excellent base of businesses that have leading market positions in the industries in which we participate. We will build from that base and remain focused on delivering the initiatives that are within our control, while acknowledging those that are not. We will continue to pursue our TiO2 price increase announced in December 2015, but acknowledge it takes some time to implement these changes across our customer contracts around the world. Again we believe this increase moves pricing in the right direction to help improve margins and support maintenance and reinvestment for this business. We expect to see the impact beginning with our second quarter results. Currency is expected to be a headwind in 2016. Besides currency and TiO2 pricing, we continue to see competitive pressures on some of our fluoropolymer product lines and will have reduced quotas per existing regulations in place, lowering our volume of base refrigerants versus 2015. On the positive side we are confident on the growth aspects of our plan. We have excellent visibility on the ramp up of Opteon's EBITDA contribution in 2016 and 2017 based on our order book. And given our extensive process technology know-how, we expect Altamira to quickly demonstrate its benefits. In summary, we continue to focus on what we can control, namely cost reductions, reduced capital expenditures, divestitures, and our focus growth initiatives. We remain confident in our five point transformation plan and have made significant progress thus far. We will continue to work hard on transforming Chemours into the higher value chemistry company we expect it to be. Now we will open up the call for your questions. Question-and-Answer Session

[Operator Instructions]. Your first question comes from Bob Koort with Goldman Sachs. Your line is open.

Good morning, everyone. This is Chris Evans on for Bob. Just a quick question on the TiO2 volume growth. My understanding was Q4 2014 was a pretty strong comp from some pull forward from 1Q 2015, making the 6% may be even a little more impressive. Can you describe the dynamic here? Are you gaining market share? Is there a demand rebound? I mean what' -- how did you get those good volumes?

Hey, Chris. I would say we're trying to get ourselves to the capacity share that we deserve. So from that standpoint I would say our market share probably lagged in the beginning of the year, and as we went through the year we wanted to get to that capacity share that was rightfully ours. So we drove to that towards the end of the year.

Got you. I guess on pricing, I'm kind of curious to know how your TiO2 inventory levels are and for the industry and if you think those are supportive based on historical levels?

Yes, I would say our inventory levels right now are sort of normalized. We haven't done anything significantly different with our inventory levels. So we usually have somewhere around two months of inventory. That is normal for us, and that's probably where we are right now. So I don't see that having any influence on the market right now.

Got you. Thanks.

Your next question comes from the line of Duffy Fischer from Barclays. Your line is open.

A question on the TiO2 side of things. When you look back historically, 10, 20 years, how often have price increases been successful in this type of an operating rate environment?

I would say you have to look at this a little bit differently. Because if you were just purely looking at this as an operating rate situation, you might come to a different conclusion. But the industry right now is at a place -- and we are at a place that, we really need to drive this price increase, and we are dedicated to it, to be able to support our customers going forward. So if you look at the industry as a whole, I don't think anyone right now is making much money except ourselves. And if you look at our returns right now, we just are right at double digit, which is a little bit lower than our cost of capital. So for us to be able to invest in this industry, for us to be able to support our customers' growth, we believe the price increase makes sense. So that is what our driver is right now, Duffy, to be able to get behind this price increase and move it through the industry.

Okay. And then did I understand correctly that when Altamira comes up that 200 KT roughly speaking think you will turn down the rest of the asset base about equal to that 200 KT so that your volumes don't go up in the back half of the year?

Yes. And obviously we're not going to get to the 200 KT right off the bat with Altamira. You have to ramp up as we will bring it up. Now we feel very confident about it, because it is a second line at an existing facility with known technology and folks who know how to operate those lines. But we're not going to ramp up right to 200 KT. But your logic is exactly right. As we bring that up we will take down that same amount of capacity throughout the circuit until the market improves or our customer needs increase.

Okay. And then one just on the legal side of things. In the 8-K there was a snippet in there that you guys have indemnified the Officers and the Board against lawsuits. I was wondering, one, is that around the PFOA, or is that something different? And is that in response to a particular filed case already?

No, Duffy, that was -- it is very standard. In fact if you read those indemnifications, they are very normal, standard throughout the industry. We have a brand-new Board, so the Board had looked at the indemnifications that were in place that sort of came over from DuPont, and they just wanted it to be standard with the rest of the industry. So one, don't read anything into that; and, two, it had nothing to do with anything specific. It was very much just a general upgrade to get us to standard.

Great. Thanks, fellows.

Your next question comes from the line of Laurence Alexander with Jefferies. Your line is open.

This is Jeff Schnell on for Laurence. On Opteon can you talk about the market share dynamics? Is it reasonable to assume that you can get half the market share in the business? Are you going to be significant higher or lower? How do you think about the gives and takes there?

Yes, as I said further in the remarks we have really good visibility, because a lot of this was contracted with OEMs. So we will have at least 50% share going forward based on where we are right now with the contracts with customers.

And then what do you see the reasonable bogey for working capital as a use or source of cash in 2016 and then longer-term?

So as we look at 2016, and I will let Mark opine on this as well. As we look at 2016, we see an opportunity in front of us that could be as much as $200 million of working capital improvement based on all the work we've done over the last three to four months to really find opportunities primarily in inventory and accounts receivable. Now we want to get the lion's share of that in 2016. We're not to be able to get all of it. But that is what we're looking at as sort of our target. Mark, I don't know if you have anything else you want to add.

Thanks, Mark. I would say as we look at 2016 to get to being free cash flow positive, really there's three contributors. The first is obviously EBITDA improvement, the second as Mark mentioned is, working capital. And then on the third is, we're on a trajectory to reduce our CapEx down to the $350 million in 2017. And so if you think about it this year, if you exclude spin related CapEx, we are at $450 million, and so we're trying to get down to that $350 million level by next year. So all three factors contribute. I would just say inside the company there is a huge focus on working capital. You saw that. We delivered on the unwind in Q4. We've actually been free cash flow positive for the last two quarters, so we are really focused on not just having the seasonal unwind which we got in Q4 but in getting to free cash flow positive for the full year in 2016.

Thank you.

You next question comes from the line of Roger Spitz with Bank of America. Your line is open.

Thank you. When you talk about getting your fair share of the market in TiO2, are you getting that in some way other than via price?

Yes. I think from our standpoint when you look at our product mix we have a very solid product mix. We have very high quality. We do development specific for customers. So, absolutely. You look at the quality of the product line we have. You look at where we are located around the world to be able to service our customers, and you look at the enhancements that we bring to the product those are the major components of how we drive share.

The other question is in the refrigerant gases business can you speak about the seasonality -- typical seasonality of that business perhaps order in the quarters and maybe suggesting from the weakest to the strongest quarter what rough percent strength is the weakest versus the strongest quarter?

Yes, so the refrigerants business flows with heat. So your second quarter going into your third quarter by far the strongest quarters. By far the weakest quarter is the first quarter. And so if you look in general at our business and if you look at how we are looking at 2016, the first quarter is going to be the weakest quarter for Chemours overall and refrigerants as well as TiO2 both play into that. But normal seasonality from that standpoint. The other thing you have to also look at in our first quarter, why it's going to be the weakest quarter for the year is, the delta in TiO2 price will be the most dramatic in that quarter. Almost through if you go back to the first quarter of 2015 to the first quarter of 2016, you're talking about over $400 a ton in price delta -- price and currency delta during that period. So just to sort of wrap it up, first quarter is going to be the weakest quarter for us overall from a refrigerant standpoint. You will see that ramp up in the second and third quarter.

Thank you very much.

Your next question comes from the line of Edlain Rodriguez from UBS. Your line is open.

Thank you. Good morning, guys. Just one quick question on fluoropolymers. Mark, you've talked about like lower volume there. What is really driving the weakness there, and do you expect to see a rebound in this market anytime soon?

Yes I would say there were two things that sort of affected us in the fourth quarter. One was, we saw the consumer electronics industry slow down for us a little bit, and we had a lot of applications into the consumer electronics industry. We were no different than anyone else there. If you talk to a lot of folks I'm sure they'd give you that same the back around that industry. We also saw a little bit of margin pressure primarily because of currency coming out of -- competitive products coming out of both Japan and Europe. That I think has subsided. So I think it is really about us getting back into the consumer electronics markets. We are very aggressive in there in terms of a lot of new application development. I think we will build that back as we go through the year. But that really was what affected that fourth quarter number.

Okay. And one last one on TiO2. In terms of capacity reduction, do you think the industry needs more capacity curtailments or whatever has been announced so far do you think that is it?

Yes I don't know what's going to happen, but I know from our standpoint we like the circuit that we have. We made our reductions last year with our Edgemoor facility, but we believe we have a very, very strong set of assets going forward. There is still a little bit of overhang of supply in the industry, but now I think you are getting to the point where it is pretty expensive capacity to take out primarily in Europe because of social costs. I was in China last week, and there is capacity still coming out of China. I was very encouraged. I spent most of my week in the marketplace, and capacity is coming out of China. It is usually the smaller sulfate producers either driven off of environmental regs that are requiring to shut down or the fact that they just can't make money. So I think that other folks are seeing that, too. So I think you are seeing some come out but a large chunk of capacity coming out. I just don't have visibility for that.

Okay. Thank you very much.

Your next question comes from the line of Don Carson with Susquehanna Financial. Your line is open.

Yes Mark, a question on pricing. I assume it takes you about 90 days to put through TiO2 price increase. What is the trend of pricing this quarter. Do expect pricing to still be down somewhat sequentially?

The way we're looking at pricing Don, right now is as you said it, we will have a much better visibility on price in the March timeframe. So it's a little bit early, but outside of North America we do have a lot of contracts that we could implement price increases effective earlier in the year, so we're seeing good momentum from that standpoint. We have seen -- like I said I was in China, we are seeing price increases occur in China. We're seeing good volumes so far, a normal volume pattern right now in the quarter as we are halfway through. So I'm very optimistic in terms of where we are around that. Our team is dedicated right now to drive this price increase. We think it's the right thing to do. So we're seeing positive signs from that standpoint, but as you said we're not going to have clarity until March.

Okay. And then finally can you talk a bit about ore costs. What the trends were in 2015 in terms of how much lower they were, and what is your outlook is for 2016 based both on your contracts as well as rationalizing some of your non-Altamira production which I assume you will run lower grade ores?

Right. I would say it's going to be relatively flat. We saw some slight reductions during the year in 2015 but as we look at 2016 we are looking at relatively flat ore costs. And as you said how we utilize our ore is going to be the biggest factor in terms of our overall cost. So we continue to use the lower ore grades where we can, but just from a pure purchasing point of view, I would say think of it as flat through 2016.

Thank you.

Your next question comes from the line of Jeff Zekauskas from JPMorgan. Your line is open.

Thanks very much. Did you are TiO2 tons grow this year or did they shrink this year?

You mean in 2015?

Yes. 2015 versus 2014.

Relatively flat.

They're flat. Is your assessment that you lost share or that the TiO2 industry in 2015 didn't grow?

I would say the market was pretty flat, Jeff. When you think about the year the market really didn't grow that much during the year. We are anticipating 2016 to be a stronger year from that standpoint, but 2015 really was flat.

Okay. And then lastly your first quarter volumes, I think in 2015 were relatively weak. If the case that in volume terms in TiO2 you should have a relatively easy first quarter comparison or is that not the case?

From a volume perspective?

Volume perspective.

We should do better in the first quarter of 2016 than 2015 from a volume perspective, but you got to remember price is going to be a big delta there. The price is the bigger driver. It's almost $400 a ton delta first quarter this year versus first quarter last year when you put currency and price together. That's going to be the bigger issue for us. But from a volume perspective we should be a little bit stronger. As I said we used 2015 -- throughout the year we regained some share to get us to the right capacity share. We were probably weaker in the beginning of the year.

Okay. And lastly what is it that you are providing DuPont for the $190 million they are giving you?

A big smile.

What are the goods and services they get and how much was the extinguishment or working capital true-ups? How much lower were they, than you expected if they were lower?

Mark is going to say something a little bit to that.

It's Mark Newman, I will handle that. Obviously the cash true-up we disclosed was $49 million. The working capital true-up was on the discussion, and we already publicly disclosed an amount. So we were able through our discussions with DuPont to have both of those go away without payment. And then the prepayment really provides liquidity in the first half for goods that we will supply them over the next 12 months. So it really helped the deal with the working capital unwind that we see. And candidly we were able to leverage that into a meaningful discussion with our banks around an amendment of our revolving credit facility. So as we sit here today we have full access to our reduced revolver of $750 million. We do have some letters of credit on our revolver that reduce the net amount down to $625 million. But you can think about it, we ended the year at $360 million in cash. We then get help from DuPont in terms of no money leaving the system on the true-up and additional liquidity with respect to the pre-buy. And then we have full access to our revolver of $750 million. So we really set the stage, so that our leadership group can focus all of our efforts now on driving the transformation plan and really not having to worry about liquidity as we move through 2016.

And Jeff the [indiscernible] also just to give you context, these are very typical goods and services. We sell materials to DuPont that they utilize like sulfuric acid for their Kevlar facility. We share a lot of facilities where we are the landlord and they are the tenant, and so there's a lot of utilities that go across. So just normal course of business throughout the year between the two companies.

Okay great. Thank you so much.

Your next question comes from the line of Brian Lalli from Barclays. Your line is open.

Thanks for the time. Mark Newman, appreciating that there obviously are a lot of puts and takes related to TiO2 and refrigerants on FX. Given your confidence, and you restated it again on this call around the $200 million of cost improvement. Is there a level that you'd be willing to talk about that you would be disappointed to not reach from a 2016 EBITDA standpoint? I mean is a number of $700 million a level that we should be thinking about? Again I am just sort of thinking about where you ended plus $200 million and maybe what comes out of that from a headwind perspective?

Yes. So, Brian we're really not interested in trying to peg an EBITDA number out there other than we will improve over 2016. The one factor that you need to think about is, we are starting the year where the exit TiO2 price in 2015 is $200 a ton lower than the average in 2015, right. So on about 1 million tons you are starting with a $200 million price headwind, and so while you are setting yourself up with a $200 million cost reduction you have a pretty significant price headwind to overcome. Obviously throughout the year our goal is to reduce the amount of that headwind. And throughout the year we would expect cost reduction and the ramp up of Opteon to also have an accretive impact. But in terms of how it plays out for the full year, I think at this point, we are not willing to say anything more other than we expect full year adjusted EBITDA to be better for all of those factors.

And to your point, Brian, as Mark said so you start with that $200 a ton headwind off of the average price for last year on TiO2. So everything in our control that we have talked about are the things that were driving the ramp up on Opteon, the cost reductions. But the things we just don't know how to play yet are currency, demand and TiO2 price. That's why we believe we are going to be above last year from that standpoint. If some of those things go our way from a tailwind standpoint, it could be above that.

Yes, and I guess as it dovetails into the free cash flow positive guidance, and that's what I was backing into. I guess Mark, you commented earlier that there could be some components around that, that are working capital related. Is it safe to assume that the $190 million is not in that number, the $190 million from DuPont that is?

It is not.

That is correct.

It is not. Okay. So then…

There is no DuPont -- just to clarify. In the $399 million working capital unwind in Q4 there is also no DuPont impact, because it is all non-cash.

Got it. So I mean again can we -- we can go through our own models and figure out the components of cash drawn, and obviously working capital is the delta and that might triangulate to something on the EBITDA side. Is there anything else in there that you are putting in your free cash flow estimate?

I think the ingredients for free cash flow obviously is EBITDA, is CapEx, is working capital. We've also just disclosed in our liquidity chart that we expect our restructuring payments to be a little over $100 million in 2016. So if you put all of that into your calculus you can solve for what might be an EBITDA number depending on what you think the other factors are.

Understood. And then just one last housekeeping for me. The sale of the Aniline facility to Dow, one, I guess is there a number you could disclose in terms of what that is going to hit, and then that is going to hit in the first quarter, right? That's going to be a positive cash item as it relates to the balance sheet? Just what should we model in, I guess is what I'm saying, that number.

It's going to be in the first quarter. So we have met all our closing conditions with Dow so we'll go forward with the sale there. We have announced previously that $140 million from the standpoint of gross proceeds of that. We are going to have a pretty healthy net result off of that primarily because we are in a loss carry forward condition in the U.S. So it's going to be $130 million to $140 million.

Okay. That's great, Mark. Thanks for the time, guys.

Your next question comes from the line of Lauren Gallagher with Credit Suisse. Your line is open.

Thanks for taking the time. First question revolves around the Fluoroproducts business. Since they are related to consumer electronics in your attempt to build the book there, I guess as you look out to 2016 do you expect more of the demand and more of the demand growth to be in the second half of the year, or how do you think about the timing of that business recovery?

That doesn't have as much of a cycle as our fluorochemical business or our TiO2 business, so this is really application development related and introduction by our customers and their customers. So I would say it's probably not going to be a build out from a seasonality standpoint. It's really going to hit as these applications hit. So I think it's going to be fairly steady throughout the year, Lauren.

Great. And then a follow up regarding the $190 million with DuPont. Is that effectively for all the services you provide for them over the next 12 to 15 months, or is there more cash that would eventually come through?

Lauren, it is Mark Newman. It's U.S. goods and services, so as Mark alluded to it is really primary around our supply to them of intermediates as well as where we have tenant agreements on shared facility sites. So we would expect the $190 million to unwind over the next 12 months or so.

Okay great. Thanks for the time.

Your next question comes from the line of Bill Hoffmann with RBC Capital Markets. Your line is open.

Thanks, good morning. Just a couple more questions on the Fluoroproducts business in general. You talked about for the Opteon role on the second half of the year. Just wondering if you can give us some kind of context on how to think about that from a dollars EBITDA standpoint?

What we had said in the past which is no different than how we see things is Opteon in a 2017 timeframe is going to be about $100 million EBITDA opportunity for us, and we are going to ramp up to that throughout 2016. So it's -- because it is really predicated on the 2017 model year cars in Europe you are going to see that ramp up occur really in the second half primarily with the fourth quarter probably being the strongest going into that. So you won't get to that full $100 million until you are in 2017, but you are going to be ramping up toward the end of the year toward that. If that helps, Bill.

Absolutely. And then just with regards for fluorochemicals you talk about the competitive pressures. Your general thought there was those pressures have abated. Why do you think that is the case, just because of currency obviously hasn't changed much here.

Yes I was alluding to the fluoropolymers side from that standpoint. What I say is we saw a -- I wouldn't say they are abated from the pressures. I would say what's abated is the drop that we saw. So we're at steady-state now from that standpoint. And we secured our customers. There is some price gives that had to be made there. But from a standpoint we're pretty much at steady-state on our fluoropolymer business right now.

Okay. And just final question on that. On the whole Fluoroproducts business the cost saves, how much of that is targeted towards that segment?

Of our total $200 million?

Yes.

I would say we haven't tried to peg into our three business units, but we have cost saves across the three BUs and our corporate [tax]. I would see TiO2 and fluoro represents our two biggest businesses and so I would expect cost saves would be in this two businesses.

Okay. Thank you for your help.

Your next question comes from the line of PJ Juvekar from Citigroup. Your line is open.

Good morning, Mark. This is Eric Petrie in for PJ. You made a comment in your slides that you expect volumes to return in TiO2 to more GDP-type growth rates versus a flat market in 2015. What gives you the degree of confidence that the returns to that run rates?

Well I think that we said is over time we see that getting there, and if you just look at the last 50 years of data you would see that the correlation to TiO2 volumes at GDP are spot on. If you look over that period of time you will see their are perturbations where the volume of TiO2 drop underneath GDP and all the sudden it will try to make that up, and that is exactly what we're seeing over the next couple years. We will get back to that GDP line. It's just history.

And then appreciate your comments about what you are seeing in China. Do you have any census to how much capacity is being taken off-line per year, and do you see any risks with that being replaced with chloride technology?

I think the time you will see chloride technology replace sulfate technology. It's not going to happen short-term. And I'm even more convinced of that now that it's not going to happen short-term, but in time that's going to happen. We've seen -- it is so hard to get real data out of China around that, but we have seen people talk about anything from 400,000 to 500,000 tons coming out. I can't verify that for you, but I think of the reports have come out around those numbers.

Okay. And last if I may. What's -- you prior stated that Altamira was going to deliver $20 million to $70 million of net cost EBITDA. Where do you stand on that range based on current fluoro prices today? And your plans to shutter the equivalent amount of capacity throughout the remainder of your production lines.

Yes, first of all we are probably at the lower end of the range based on where the market is today and where ore prices are. So we are at the lower part of that range as we are going forward. And the other piece, we're not shuttering any capacity. We have the ability to operate our facilities at lower ore blends which brings our variable costs down, and it takes our output down at the back end. This is how we meter our facilities which is pretty unique to Chemours versus a lot of other folks, because these ore blends really dictate how much product comes out the back end, but it also affects your variable costs coming in. So it's an elegant way for us to be able to meter the capacity of the overall circuit.

Okay. Thanks.

We have time for one more question. Your last question will come from the line of James Finnerty from Citigroup. Your line is open.

All right. Just squeeze one at the very end. Just want to get a bit more clarity on the enhanced liquidity agreement with DuPont. Can you tell us how it came about? Was is something that DuPont approached you with? Was is something that you proposed to DuPont. And a follow-up question is to clarify. How much sales are there between Chemours and DuPont on an annual basis?

So, James -- let me start. We had to settle up with DuPont on the true ups that were in the master separation agreement. So we knew prior to year end -- or by year end we would need to settle with them with respect to these two items. As a result of that and discussion that came out of that discussion we agreed that this liquidity enhancement which is essentially a commercial pre-buy of their U.S. requirements would be very helpful and could be leveraged into a more substantive discussion with our lenders on the credit amendment. So I would say it started really with the premise that we needed to agree on how to handle the true ups. It led to an enhanced liquidity arrangement which in turn led to an improved credit amendment facility. And again the $190 million represents a one-year on U.S. goods and services.

James, probably when you look at -- it is hard to peg in an exact number because some of this is utilities, but it is under $300 million.

Okay. And just a more qualitative question, should we expect DuPont to offer this type of support going forward, or do you think this is a one-time event?

I wish I could answer that question for you but I don't know. I don't think this is something that's going to be a regular basis from them, but we will see from that standpoint. I really can't answer that definitively. I look at this as this was an opportunity as Mark said, we had to discuss the true ups anyway, so there was a logical time and place to have this conversation. I don't expect us to walk into their offices every quarter to talk about this.

Right. If it was a true unrelated third-party this wouldn't be occurring. Relationship must play into it.

On that point the $190 million is an [indiscernible] length pre-buy. There is nothing on market about that.

Right. And just one last question on China. You talked about the capacity coming out over there in 400,000 to 500,000 tons per third-party consultants. Net-net do you think capacity in China in 2015 and 2016 is flat, down, or up with taking into account of any additions?

It is hard to tell. Right. So I would say it is somewhere flattish maybe a little bit down. Somewhere in there.

Sorry. One last question. In terms of the currency in China the weakening of the yuan, has that impacted exports out of China in recent months? Have you seen any impact from that?

It looks like exports out of China are about 3% down year-on-year, and we're not seeing a whole big difference going on right now versus what we've seen before. But, thanks. Thanks for the questions James. As I said in my previous remarks we remain confident in our five-point transformation plan. We will continue working hard on transforming Chemours into a higher value chemistry company.

Thanks for all your questions and thank you for your continued interest in Chemours. Talk to you next time.

Ladies and gentlemen, this concludes today's conference call. You may now disconnect.