The Chemours Company (CC) Q2 2017 Earnings Report, Transcript and Summary

Good morning. My name is Juis [ph] and I will be your conference operator today. At this time, I would like to welcome everyone to The Chemours Company Second Quarter 2017 Earnings Conference Call. [Operator Instructions] Alisha Bellezza, Treasurer and Director of Investor Relations, you may begin your conference.

Thank you and good morning everyone. Welcome to The Chemours Company 2017 second quarter earnings conference call. I am joined today by Mark Vergnano, President and Chief Executive Officer, who will begin the call with the highlights of our second quarter; and Mark Newman, Senior Vice President and Chief Financial Officer, who will review our financial performance and liquidity position. Mark Vergnano will then review our business result and conclude the call with our updated outlook. 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 contain forward-looking statements that involve risks and uncertainties, including those described in the 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. A reconciliation of non-GAAP terms and adjustments are included in our release and at the end of the presentation that accompanies our remarks. I will now turn the call over to Mark Vergnano.

Thank you, Alisha, good morning everyone and thank you for joining our call. Our results for the second quarter are a testament to the efforts of our employees who have been implementing our transformation plan over the last two years, without their hard work we would not be in as favorable of a position to take advantage of the positive market trends that we are experiencing. Our titanium technologies business has benefited from increased year-over-year price and demand for our type tier products. During the second quarter we continue to work closely with our customers to implement our pricing strategies and as a result our prices increased 6% sequentially and 14% year-over-year. The floor product segment saw high demand for Opteon refrigerants, as well as our full range of fluoropolymer products. Base refrigerants have notably benefited from supply tightness and favorable regulatory actions which have contributed to increased pricing, particularly in North America and Europe. And our chemical solutions segment continues to be impacted by portfolio changes; however, we saw solid demand for both of its businesses in the quarter. These strong business results were partially reduced by higher transformation and performance compensation costs that were booked in the second quarter. Last quarter we told you that the final $150 million of our target transformation cost savings are the most difficult to achieve and we needed to make investments in order to deliver on them. The higher cost reflected in the second quarter were result of these initiatives. We engaged outside experts to support some of our short and long-term business process changes which will further strengthen our company through 2018 and beyond. We continue to implement these changes throughout our Company. With most of the support efforts completed during the second quarter, we do not expect the same level of expense to continue into the second half. We remained focused on delivering net cost reductions and anticipate that we will realize the majority of these reductions in 2018. Given the benefits of our transformation plan initiative, the lower level of transformation related costs in the second half, and the strength of our improving key end markets, we now expect to deliver 2017 adjusted EBITDA within a range of $1.3 billion to $1.4 billion. We are very pleased with our growth and look forward to continued progress in the coming quarters. I'll now turn the call over to Mark Newman to cover the second quarter financials.

Thanks Mark. Let's turn to Slide 3; with strong business performance in this quarter we saw a year-over-year increases across all key financial metrics. We generated $1.6 billion in revenue at 15% improvement with broad-based growth across all of our businesses. Excluding the 2016 portfolio impact from results, sales would have increased 21% in the quarter, a significant year-over-year improvement. Adjusted EBITDA of $361 million nearly doubled year-over-year reflecting our strengthening performance in 2017. We saw a significant improvement in profitability with a 900 basis point increase in our adjusted margin, even after making investments in our transformation activities and recording higher performance compensation costs. We also saw notable free cash flow improvement in the quarter, up over $100 million; this was driven by increased operating earnings which more than supported our seasonal use of cash for working capital purposes. Our 27% pretax return on invested capital or ROIC increased from 9% in the second quarter of 2016. We remain focused on driving superior shareholder returns by improving profitability on existing assets and investing capital in high return projects. As you can see on Slide 4, adjusted EBITDA increased $174 million versus the second quarter of 2016 driven by price and volume increases. In fact, higher pricing contributed over $100 million of the improvement driven by Ti-Pure titanium dioxide and to a lesser extent, base refrigerants. These were modestly offset by lower fluoropolymer pricing which abated in the last two quarters but remains a year-over-year headwind. Volumes were up across all business segments adding $110 million to adjusted EBITDA. Fluoro products accounted for the majority of our volume growth with Opteon as the principal driver. Opteon refrigerant sales grew both, in Europe and the U.S. due to our share in larger vehicles which require more refrigerant per vehicle. Fluoropolymers was also volume accretive in the quarter. As Mark mentioned, we incur transmission costs in the quarter primarily related to third-party consultants who have been working with us to drive targeted growth initiatives and cost reductions. These costs along with increased employee performance incentives resulted in approximately $40 million of higher costs in the quarter versus the prior year. This headwind was primarily reflected in our titanium technologies and fluoro product segments. Additionally, chemical solutions reflected 2016 portfolio changes which drove at $10 million headwind to adjusted EBITDA; this was partially offset by favorable other income in the quarter. On Slide 5 I'll now review our liquidity position. We ended the quarter with a cash balance of approximately $1.5 billion; this reflects positive free cash flow including about $70 million used to fund capital expenditures, and the proceeds of our recent $500 million bond offering. Including revolver availability of approximately $750 million, total liquidity stood at about $2.2 billion at the end of the quarter. Net operating cash flow was $183 million including an $83 million use of capital for working capital. Resulting free cash flow was $114 million reflecting about $100 million in year-over-year improvements. Capital expenditures year-to-date totaled $140 million. Our new Opteon and mining solution facilities are under construction and we expect CapEx to ramp up in the second half of 2017 through 2018. We now believe CapEx for 2017 will be between $400 million and $450 million and about the same level next year. Given our focus on free cash flow, we are proud of our year-to-date performance which improved nearly $260 million. This excludes the impact of the DuPont pre-payment received in 2016 which is now fully extinguish. As a mentioned during the quarter, we completed a $500 million offering of ten year senior notes. We intend to use the net proceeds of the offering for general corporate purposes including funding our current portion of the PFOA MDL settlement which we expect to pay later this month. Our net debt now stands at $2.5 billion, translating into a net leverage ratio of approximately 2.2 times on a trailing twelve month basis; this is well below our net leverage target of 3 times including our new debt and issuance, and demonstrates our significantly improved credit profile. Over the last couple of years we have focused on significantly improving our cash generation and strengthening our balance sheet. We are now actively working with our board to review your capital allocation strategy and expect to provide an investor update towards the end of this year. I'll now turn the call back to Mark.

Thanks Mark. On Slide 6 you can see that we generated $729 million in revenue and $193 million of adjusted EBITDA in our titanium technology segment. We saw a substantial customer preference for our Ti-Pure product line resulting in 8% volume growth. Volume increases were broad-based with improvements across all applications and regions, notably high quality laminates group double digits year-over-year while coatings and plastics also remained healthy sources of our growth. As you know, demand for TO2 tends to be in-line with global GDP growth. However, this year our demand has trended above GDP in the high single digits, a result of market supply tightness and customer preference for our Ti-Pure products. We value our long-standing relationships with our customers and we appreciate their support to work with us given that extended lead order times continue to persist. Our circuit has been and will remain highly utilized for the rest of 2017. We are working to meet our customer's needs as we fully ramp up our production at Altamira. In fact, to better address the needs of our customers we continue to add production capability to allow different grades to be manufactured on our second line at Altamira. The product capability expansion beyond the initial design has reduced the original contemplated capacity; however, this will be offset across all of our manufacturing circuit and will not impact our overall nameplate capacity. With the addition of these grades we are pleased with the ramp up progression at Altamira and expect to reach our production targets in 2018. Moving to price in the quarter; the global average price for Ti-Pure titanium dioxide increased 14% year-over-year and 6% sequentially. In June we sent letters to customers communicating additional price increases across our Ti-Pure portfolio in-line with our strategy to achieve value and use for our product offerings, the price communication amounts varied by application, grade, and end-user. We continue to implement these price increases in-line with Ti-Pure's value and consistent with contractual agreements. Segment adjusted EBITDA margins for titanium technologies improved nearly 800 basis points year-over-year to approximately 26% despite the higher transformation and compensation costs previously mentioned. Sequentially, margins improved as price increases during the quarter were partially offset by those higher costs. Given the effect of price actions in our current raw material outlook, we expect margins to show additional improvement throughout the remainder of the year. Moving to Slide 7; our fluoro product segment generated $710 million in revenue and a $197 million of adjusted EBITDA in the second quarter translating into a segment margin of 28%. Our adjusted EBITDA margin improved almost a 1000 basis points year-over-year including the impact of transformation and compensation costs in the quarter. Year-over-year revenue for our Opteon refrigerants doubled in the quarter. The Opteon ramp-up continues to benefit from the U.S. market trend towards larger vehicles and strong auto production in Europe. Based on our first half results, we now expect revenue of Opteon refrigerants to increase about 50% in 2017 versus last year. As Opteon continues to grow, we look forward to the completion of our facility in Corpus Christi [ph], Texas. Construction is progressing as planned and we continue to expect the facility to be completed on time next year. Moving to the remainder of our fluoro chemicals portfolio; volumes for our base refrigerants was slightly down year-over-year. However, prices were higher due to supply tightness out of China and regulatory enforcement in both, the U.S. and Europe. Our fluoropolymers products saw double digit volume increases also affected by China supply tightness, as well as the implementation of our increased market participation strategy. We're gaining traction on our previously announced resin price increase. While fluoropolymer's price was down 1% year-over-year, it was slightly positive sequentially versus a 1% sequential decline last quarter. As we move into the second half of the year, we expect the fluoropolymers volumes to stabilize while pricing headwinds continue to dissipate. Let me now review the chemical solutions segment results on Slide 8; sales for the quarter were $149 million, a $65 million decline from the previous year quarter. Adjusted EBITDA of $7 million was down $4 million year-over-year but we maintained an adjusted EBITDA margin of 5% for the quarter. Both sales and adjusted EBITDA were impacted by the divestitures and the closure of our Niagara facility. Volume in the segment increased 9% year-over-year with favorable contributions from both mining solutions and performance chemicals and an intermediates businesses. Prices also increased in the quarter which helped to partially offset the impact of increased raw material costs. Within mining solutions demand for our offerings remained solid, we are currently operating at full capacity and expect this to continue throughout 2017; however, we are seeing increased competitive pricing pressure. We continue to provide our mining customers market leading service, reliability and stewardship which really distinguishes us in the marketplace. As you may have seen earlier in the quarter, we broke ground on our new mining solutions facility which is located in the State of Durango, Mexico. This facility will increase our capacity by 50% and allow us to better serve our customers in Mexico. We remain on-track to complete this facility by the end of 2018. Now turning to our outlook for 2017 on Slide 9; our results paired with further visibility into the second half give us confidence that we are on-track to deliver a strong year of both top and bottom line growth while continuing to invest in our businesses for the future. For the full year 2017 we now expect adjusted EBITDA to be within a range of $1.3 billion to $1.4 billion. We anticipate continued business strength across our portfolio, as well as lower transformation costs for the remainder of 2017. We expect this will result in adjusted EBITDA margin enhancement throughout the second half of this year. If continued strength is based on customer preference for our Ti-Pure products, our Opteon refrigerant growth, a positive impact from base refrigerants, increased volume of fluoropolymers and the continued demand for our chemical solution products. We also expect our free cash flow to be approximately breakeven including our $335 million payment as the PFOA MDL settlement. Again, I want to thank our team for their unyielding commitment to moving us forward as a company. We are well positioned to benefit from improving end markets and are working to drive these benefits to the bottom line. We are pleased with the success of our transformation plan and are looking for additional opportunities to build on this foundation. By the end of this year, we look forward to sharing with you our vision for the next chapter for Chemours. We'll now open the call for your questions.

Your first question is from P.J. Juvekar with Citi. Please go ahead.

Good morning, Mark. Its Eric Petrie on for PJ. How has auto OEM conversion to Opteon progressed and when do you expect full penetration?

So, Eric you got to look at it around the world right. So from a European standpoint it has converted. All new vehicles has converted over to Opteon. So you are seeing the normal ramp up as well as the normal build right now moving up and that's where the increase is. In the US, we have about 50% penetration right now. That's going to move up over time by the time we get to 2020, 2021 when the regulations in the US kick in that will move to 100%, but you'll probably see some level of ramp between now and then but remember you have a whole mother market specific to automotive which is the aftermarket right and the aftermarket build as these new models get in the place. So that continues to move as newer vehicles 2017 model year and past require recharging because they were in automobile crashes or other maintenance issues that might have. So I think you're going to see this build occur through now to 2020, 2021 just in those two countries and then you have the other countries that will come into play from a regulatory standpoint countries such as Japan, countries such as Australia already have those regulations in place.

Okay, helpful. And then you have raised guidance for full year would you say that's driven more by titanium technologies and TiO2 price increases or stronger adoption in Opteon and growing earnings in the products segment?

I think both as we look at normally we have a stronger first half and second half but as we see the momentum here one titanium technologies volume as well we see really strong fluoro chemicals Opteon being a key of that. We're also seeing strength in our four polymers business. So when we look across the board, we see you momentum and that's the reason that we brought the guidance up for the rest of the year.

Thank you, Mark.

Your next question is from Rob Koort with Goldman Sachs.

Thank you very much. Good morning. Mark on parallel processing here when your customers is holding a conference call as well, they complained about the shutdown in China inflating the TiO2 market and maybe continuing for the foreseeable future. I was wondering if you might give us your perspective on what's going on in China in the TiO2 business at the moment?

Yes. So, I mean what we're seeing Rob is there has been a bit of curtailment of supply out of China as a lot of the manufacturers are under scrutiny for environmental purposes. So some of those facilities have been shut down, we think some of those are temporarily shut down some of those are permanently. So, it's hard to tell as you know it's not always easy to see through the opaqueness in China. But for sure there is less supply coming out of China primarily from the lower smaller lower tier sulfate producers. So I think that when you see that coupled with some of our competitors who had issues early in the year with some of their facilities, I think you're seeing that coupled with a little bit stronger demand probably a little bit stronger than GDP demand in the markets that we serve and that's putting a little bit of pressure on right now.

Can I ask you if there were lessons learned or a change in approach on pricing from the last cycle obviously, it created some animosity with your customers and that's a pretty vicious down cycle after the gigantic up cycle it appears this time you're being more tempered in the price I guess maybe they're continuing to come but it's not quite as aggressive is there a belief that your customer base can accommodate these price hikes if it's more gradual or consistent or how do you think about that relative to the last cycle and we're hearing a little bit of pain from some of those coatings customers at least in terms of margin pressure?

Yes. For sure we are trying to not duplicate what happened in 2010 and 2011; I don't think we were good actor at that time. We've been very open about that in terms of how we want to go forward and we've talked in these calls but we talk very directly with our customers all the time about we saw continuous price movement going through this period, we want to do it in a way that allowed them to be able to take that in plan their business accordingly based on that so we're trying to do it in a measured way. No one likes price increases, we understand that but our customer base is also very intelligent customer base. So they understand the dynamics of the marketplace as well so our job is how do we work with them and as you've seen we've moved away from blanket price increases. We've moved away from regional price increases and we're going for more targeted price increases and that's really trying to reflect the value of our product but also trying to work with our customers in a way that allows them to get that through as they can. So yes, I think we're acting a very different way and hopefully our customers are seeing that.

Great, thanks for the help.

Your next question comes from Duffy Fischer with Barclays. Please go ahead.

Good morning. Just question around reinvestment in TiO2; the Altamira plant that you guys built I think came in around $3000 a ton capital cost. If I just annualize your EBITDA in TiO2 in the second quarter and bide by say operating rates. You're making about $650 a ton of EBITDA. So that would be kind of a 22% return EBITDA to capital. So is it time to start thinking about another investment in TiO2 and if not kind of when should that discussion happen?

Yes. Duffy, I would say the way we look at this. One is every supplier has their reinvestment economics everyone is different right. So for us, yes we have a lower cost position and because of that it gives us probably better reinvestment economics but we still feel like we have opportunity to unlock capacity out of our existing facilities and that's really were we're spending our time and effort right now. We have our facilities here in the US and Mexico and in Taiwan and there is opportunity there that we are spending some cost maybe a little bit of capital to free up that capacity first. For us that's the low hanging fruit from a capacity point of view, we won't exhaust that first. And we think we have we have a couple of years of opportunity there.

Okay. And then if you exclude you guys and exclude the Chinese. What's your best guess what's the capital cost of another western player to build Greenfield?

Yes. I don't know if I can give you a good answer on that. You recited the economics for us really well. We had publicly said that $600 million investment for our second line in Altamira. I really couldn't guess it what it would be for a competitor.

Okay. Thank you.

Your next question comes from Laurence Alexander with Jefferies. Please go ahead.

Good morning. I guess first question just thinking about the higher performance grades that you're rolling out in TiO2 portfolio. Is it fair to say that over a couple of years that's maybe $150 million of EBITDA less above and beyond whatever end market price trends are doing? And secondly can you speak a little bit to your tax rate. I think a few quarters ago you were thinking you would take a few years to get to a mid-20's tax rate what's your current thinking about that?

On the first I'll let Mark answer the tax rate question Laurence. But on the first one you know we are actively generating higher grades of TiO2 and maybe more than higher grade just very unique and specific applications. We've highlighted one of our products Ti-Pure protect which goes into the milk bottle market, which is a very unique product or unique product where we actually are able to increase the value of milk or at least the time it could be on the shelf. So there's value in use that goes into that beyond just the TiO2 pigment itself. So those are the areas that Brian Snell and his team really are focusing on as well as always improving quality of our base products but where can we have some unique products that really have significant value and use and I do believe over the next you know two to five years that will have a nice uplift in our EBITDA and nice little uplift in our margin for the whole product line. From the standpoint of the tax rate, maybe I'll turn it over to Mark Newman.

Yes, thanks Mark. Laurence, year-to-date we're still in the mid twenty's we are on 22% effective tax rate. I think as we look at our cash tax rate, our view is we'll probably be in the mid-teens for the full year. Bear in mind that our tax rate will be affected obviously by that PFOA settlement that really affects our cash taxes here in the US. So our view is we're still kind of mid to low twenty's effective book tax rate and then probably mid-teens or so on our cash tax rate given our US NOL.

Thank you.

Your next question comes from Don Carson with Susquehanna. Please go ahead.

Good morning this is Emily Wagner on for Don. Could you describe the current price environment for the different grades of ore and outlook for the remainder of the year? And if you continue to get pricing on TiO2 what if producers want to raise prices as well?

Emily, I'd say that when we look at as you and everyone knows we were able to utilize those pretty wide range of ores. So we could use -- we could use natural -- that are go to beneficiation so it gives us a lot of flexibility. As we look at through. And we work out or contracts in a way that we have a ladder of contract so that we don't have an cliffs in a way that the team really sort of lays that out. So we feel confident where we are for the next several years. Specifically, to your point, we're not seeing much movement on the -- side I'd say on the side we're starting to see a slight uplift from that standpoint and I think that's common across the market right now. Normally, we see ore prices trail pigment prices and you're seeing that same phenomena happening here, so from that standpoint that's at least how we're seeing it right now.

Okay. And then is it possible to give us an update on where you are with GenX concerns and the costs associated with some of the medication actions are taking.

So from the GenX point of view this is something that we're working very closely and cooperation with the federal state and local government agencies in the area of Wilmington North Carolina and in Fayetteville in North Carolina and the U.S. We're working very closely with them. We made a voluntary decision to stop any of the effluent going out of that site that was something that wasn't required for us to do, we just felt it was the right thing to do as we are having these conversations. And there is a cost associated that and we built that cost in to the guidance for the rest of the year so that's something that is fully contemplated in the guidance that we gave earlier.

Right, thank you.

Your question comes from John Roberts with UBS. Please go ahead.

Thank you, nice quarter. I usually think about your capacity being variable in TiO2 because of the ore quality you're running but you talked about product grades affecting product volumes. Now that Altamira is ramped, do you expect volume to vary more from ore quality or do you expect volume to vary more from the product mix you're running?

Probably more for a product mix John. I mean for Altamira just to make sure it's clear to everyone when we originally were building that facility, we were really thinking of that operating on just a couple product lines. And as we've gone through this year and really looked at our circuit and the demand that's coming to we've added more product to Altamira. Overall, we think it's the right thing to do for the full circuit and it gives us the maximum capacity utilization as well as cost position across that circuit to be able to do that but I'd think going forward right now it would be more product mix that would give us the biggest benefit.

Secondly, I see that -- filed last month in Europe to into the age of freezer and mortgage are you planning for more competition in the market within the next couple years?

Well, from our standpoint we have a pretty strong patent position, we continue to protect that position with the existing as well as new patents. For instance, we have working very very closely with our customers as we developed blends that are in the stationary refrigeration as well as stationary air conditioning markets and that's an area that we haven't talked a whole lot about. I think we'll talk a little bit more about that later in the year as we sort of get a picture of what the next couple of years look like but those are ramping up really nicely in Europe specifically from that standpoint. So as I said before over a long period of time, I can't imagine they'll just be two competitors in this space, but I will tell you that we are working hard to protect our position and our IP and that's not just in the base product that's also in the many blend that we're developing for our customers to well.

Thank you.

Your next question is from Roger Spitz with Bank of America/Merrill Lynch. Your line is open.

In Opteon can you give what you think the global market share split is between you, Honeywell and any others say in Q2 17.

No, I can't give you the specifics there Roger, what I've always said to folks is from our standpoint I look at it as -- our sales force. I give them a lot of grief if they're not able to get a good lion share of that market share that's our job right to go be able to get it. But I can't give you a good split on market share though.

Okay. And then secondly, you mentioned to near term pricing pressures one in mining solutions and the other for Chinese base refrigerants and fluoropolymers. Could you comment what is driving each of those I guess those are three different ones?

Yes. So let me start with the base refrigerants, actually base refrigerants were seeing price lift from that standpoint. What we're seeing in base refrigerants as you might remember, there is a quota system in many of the countries that are ramping out those refrigerants. So you have a natural tendency to volume our supply is coming down which normally moves price up but at the same time we've seen curtailment of some of the Chinese production facilities in those base refrigerants which has put a little bit more pressure on supply in the marketplace which has moved prices up. So actually price has gone up on the base refrigerant side. On the fluoropolymers side, this is something we've talked about in the last couple calls that we've had seen a bit of pressure on price there. This is an area that Paul Kershaw president of that business has been working with his team on as we've been doing more demand creation in some of those markets trying to really use where we have some unique products if you will or some specialized products. And I'd say because of the uplift in the oil and gas industry the uplift in the semi-con industry and the uplift in some cases in automotive we're seeing the volume pole on those businesses and the price that was dropping in the past couple quarters has started to reverse itself. So that's starting to flatten out. So, I think we have a better price profile in our fluoropolymers business than we did a couple quarters back. And then in mining solutions, this is primarily going into the Americas North America as well as Latin and South America for gold mining. We have new competitors in place there who are bringing capacity up and that's really the issue that we're dealing with there. The market is growing significantly, it's well above GDP from a marketplace standpoint. So we see that price pressure occurring right now. This is something we think will abate over time, but it's just a period of time right now where volume is up but price is under pressure and we're maintaining our volume.

For clarification on the Chinese on the base refrigerants fluoropolymer supply tightness is that due to environmental issues were they getting pressure like they are in TiO2 or is that for something else?

It is. It's very much the same phenomenon we're seeing in TiO2 where the government entities are really looking at environmental performance of those facilities. And again, some of those we think will be shuttered and some of those might be temporary shutdown as they repair or fix their environmental issues.

Thank you very much.

Your next question comes from Brian Lalli with Barclays. Please go ahead.

Hi, good morning. Congrats on the great quarter.

Thank you.

I just have question if I may on the cash flow and capital allocation side. First and I appreciate that this is a bit of a housekeeping question, but just on the free cash flow breakeven comment if I take the midpoints of your EBITDA and CapEx and then make assumptions around taxes and interest and working capital actually do you have generating something north of $100 million free cash flow, I suppose the answer may lie in some of those assumption. So, is there any guidance you can give us on some of those buckets and namely working capital for the balance of the year?

Yes, Brian. I would suggest maybe a more detailed offline conversation with Alisha in IR could probably help you there in terms of some of the moving pieces. But I would say working capital continues to be a headwind this year vis-à-vis when you look at prior quarters. So EBITDA is up, CapEx is up but you know depending on how volume and price and other assumptions play out in the second half working capital will also be a bit of a headwind.

Okay. That's great. I appreciate it Mark. And I can follow-up with Alisha. And then just my second one looking at the balance sheet obviously, your debt securities are trading pretty well in the market right now particularly the new issue. I guess Mark how are you thinking about the next maturity that 2023 that becomes callable in May of next year. I'm just curious if you start thinking about that as a liability management target over the next few months.

Yes. I think it's probably too early to comment on what we would do there. I think we were very happy with the debt raise that we did in the quarter and with the PFOA payment likely to happen at the end of this month I think it was very timely that we raise that debt then. Our debt securities continue to trade very well based on our financial performance and so we think that gives us a lot of latitude as we move forward in terms of how we manage our balance sheet but probably too early to comment on debt that's becoming callable next year.

Okay. I appreciate the time. Congrats again. Thank you so much.

Thank you.

Your next question comes from Jeff Zekauskas with JPMorgan. Please go ahead.

Thanks very much. I think earlier in the call you said that your Opteon revenues would be up about 60% for the year. Many of your customers now are very large auto OEM customers and I would imagine that they have some purchasing power. So, is there a negative mix in Opteon and is the 60% revenue growth is in line with the 60% volume growth or is the volume growth more like I don't know 100% this year?

Jeff, I wouldn't say it's a 100% but your thesis is right around OEM's right. So as anyone knows, anyone who works with large OEM understands that as you do long term contracts or multi-year contracts with an OEM. There is cost price kickers that go on throughout that, so that that's just a mechanism that every auto manufacturer has if you want to have a contract beyond one year. And so that plays out over the next year, two years, three years for sure. Now our job is how do we get our cost points lower from that standpoint so that we can work on maintaining our margins despite that. And that's one of the drivers of us building this new Opteon facility at Corpus Christi which gives us a lower cost of manufacturing towards the end of next year to help us with that as well. So yes, these contractors for sure have price down movement over time our job is how do we maintain our margins through our cost to manufacture.

And then for my follow-up; I think you said that you expected your TiO2 volume growth to be high single digits this year. And so, I was wondering where the volume was going that is in which region of the world are you growing much faster than the overall TiO2 growth rate. And what we've seen recently is some very sharp changes and currency values and TiO2's price originally. So, I was also wondering whether you were in the process of sort of targeting different markets given some of the currency changes?

Yes. Jeff, first of all you are right. As we said, our volume is going to be more like low single digits. I would say the market itself is although it always trends about GDP is probably slightly above GDP as well at least in our view right now. Now if you just look at, I think our recent quarter is a good indication of where we're seeing volume growth. If you go across the world, we're seeing volume growth in all regions. But we saw more of it in Europe and stronger in Asia as well. Europe thrives very well with the comments I made before a lot of our laminate customers are seeing some nice growth so that plays out in the furniture industry where laminates play well, externally well maybe more than in North America play well in Europe in Asia. So our laminate players are growing probably beyond normal GDP they're seeing some good growth rate and we're seeing some good growth rates from many of our customers in Asia as well. So I'd say our job is to really supply our key customers what they need when they need it. We can't say enough about the customers that we embrace and they have been with us for a long time and we really -- they rely on us and we rely on them to make sure we're getting them the product that they need. But and as you look at the regions and the currency differential that's one of the reasons why we've moved our pricing to be end-user driven or product driven and customer driven from that standpoint. So we'll move those prices as we see the value for that and currency obviously will be taken in account at that time too.

Are TiO2 prices relatively level globally or there are some regions where you think they're higher and some regions where you think they are lower?

I could speak for us, right. And I would say there's a very narrow difference across the world right now. Very close.

Thank you.

Your next question comes from Rob Koort with Goldman Sachs. Please go ahead.

Good morning this is Chris Evans. Just wanted to get a little more color on your Opteon expansion Corpus Christi you mentioned the costs reductions you're expecting is there any way to size or quantify that in terms of the margin or just the net cost takeout as you get closer to the customer and have a much more improved scale?

Chris we haven't disclosed that obviously, we wouldn't disclose that for competitive purposes. But I can tell you that it is a lower cost facility not just because of size it's a much bigger facility but also because of the process it's a different process than we're using today to really get at some of those lower cost opportunities and it's no - shouldn't escape you that it's located down on the post which is going to give us the benefit of raw material costs as well. So where it is, the size it is and the process all three of those are contributing to why that's going to be a lower cost facility for us.

Thanks and then just maybe on the fluoropolymers side you know you tried to get you put on pricing actions in the market doesn't seem like those are really taken hold yet. Can you give us a little more color on maybe the longer term outlook and maybe what you think you could do in that business as it's sort of lagging its partner in the segment?

Yes. So we've had some success in the price increases in the fluoropolymer space. It would be a mistake or misleading if I said we're going to get a blanket price increase across that whole patch because it's very -- these are very different product lines. We sell membranes, we sell resin, we sell lubricants, we sell very different product types there. So each one has its own value and use and each one of those has its own set of competitors in terms of our ability to raise price. I think as you look at this to your point longer term, longer term for us is how do we create more value for our customers and that is new products and that is a product that actually get to either their cost down in what they're making or give them an enhancement of what they sell versus what they have today and that's where Paul is aiming his team right now more is application development for specific customer needs. That's where I think you'll see the majority of our lift versus a blanket price increase across the entire segment.

Thanks, Mark.

Your next question comes from Jeff Zekauskas with JPMorgan. Please go ahead.

Thanks. Is the meaningful use of Opteon outside of the auto markets or if you look at how Opteon has progressed over the past year or two how is the non-automotive application changed and how big is it?

Yes, so the non-automotive side of Opteon as a market size is bigger than automotive. Right, so there's really four big areas for you or for the Opteon type product. Number one is automotive and that's not only OEM but also aftermarket. The second is commercial HVAC and residential HVAC. We also have commercial refrigeration and finally blowing agents. Where this is used as a homing agent as well. Those are the four markets we've been going after. Now regulation has come in faster on the automotive side particularly in Europe, but that's moving very quickly in Europe to the other pieces as well and into the US with the snap deregulations that occur in 2021. So all these markets are opportunities for us and these are big opportunities across the board. Those other three are bigger than the automotive market itself.

Right. But are you selling any meaningful amount to the non-automotive markets here?

Yes. Primarily in Europe, because that's where regulations are really enforced and I'd say that is playing out in the commercial refrigeration for sure. We had about a thousand supermarkets that we were supplying, I think that's ramping up pretty quickly to about ten thousand and then in the blends that were made for commercial HVAC we're seeing tremendous uptick in Europe as well. U.S. is going to lag there, but I can tell you our development efforts in the U.S. are [Technical Difficulty].

What are the applications of those credits?

So, I would say the applications are not that different. The applications are not that different than the beginning users were going into whether [Technical Difficulty] customers that can differentiate us from others.

Okay, great. Thank you so much Mark.

There are no further questions at this time. I turn the call over to Mark Vergnano.

Well, thank you Ruth. And in closing, we are pleased with the progress this year and we'll continue to look for opportunities to strengthen our position as a company. Our three businesses are leveraging the leaner cost structure in the entire company to deliver favorable returns within each business. And again, we think our employees. We think are key customers for making this possible. So, thank you all for your continued interest in Chemours.

This concludes this conference call. You may now disconnect.