Tronox Holdings plc (TROX) Q2 2020 Earnings Report, Transcript and Summary

Good day and welcome to the Tronox Holdings plc Q2 2020 Earnings Call. All participants will be in a listen-only mode. [Operator Instructions] This conference now is being recorded. I would now like to turn the conference over to Jennifer Gunther, Vice President of Investor Relations. Please go ahead.

Thank you and welcome to our second quarter 2020 conference call and webcast. On our call today are Jeff Quinn, Chairman and Chief Executive Officer; Jean-Francois Turgeon, Chief Operating Officer; John Romano, Chief Commercial and Strategy Officer; and Tim Carlson, Chief Financial Officer. We will be using slides as we move through today's call. Those of you listening by Internet broadcast through our website should already have them. For those listening by telephone, if you haven't done so already, you can access them on our website at investor.tronox.com. Moving to Slide 2, a reminder that comments made on this call and the information provided in our presentation and on our website include certain statements that are forward-looking and subject to various risks and uncertainties, including but not limited to the specific factors summarized in our SEC filings. This information represents our best judgment based on today's information. However, actual results may vary based on these risks and uncertainties. The Company undertakes no obligation to update or revise any forward-looking statements. During the conference call, we will refer to certain non-U.S. GAAP financial terms that we will use in the management of our business and believe are useful to investors in evaluating the Company's performance. Reconciliations to their nearest U.S. GAAP terms are provided in our earnings release and in the appendix of the accompanying presentation. As you saw in our earnings release, we provided our results on both a reported basis and a pro forma basis to assist in our discussion of second quarter 2020 performance compared to the second quarter of 2019 performance. Our primary focus on this call will be on the comparison of pro forma results to enhance your understanding of the underlying trends in our business performance and our markets. In the appendix of our earnings release and the accompanying presentation are a statement of operations and adjusted EPS and adjusted EBITDA reconciliations, including on a pro forma basis for the second quarter of 2019. Moving to Slide 3, it is now my pleasure to turn the call over to Jeff Quinn. Jeff?

Thank you, Jennifer. Good morning to everyone and thank you for joining us today. Tronox delivered solid financial results in the quarter despite the significant reduction in demand and the other challenges associated with the COVID-19 pandemic. Our results reflect a demand profile consistent with the outlook provided at the time of our first quarter earnings release, all set parsley by our crystal transaction synergies, cost reduction initiatives, and prudent management of working capital. I will briefly discuss some of the highlights of the quarter before turning it over to other members of my team for a deeper dive. Revenue in the second quarter declined 30% versus the year ago quarter and 20% sequentially compared to the first quarter. This decline in revenue was driven by lower sales volumes due to the economic impact of the COVID-19 pandemic in the various world regions. TiO2 sales volumes and pricing were consistent with our outlook for quarter two while zircon volumes and pricing were slightly favorable to our expectations due to shipment timing and favorable product mix. Within the quarter, TiO2 volumes reached at low point in May, when the full impact of the lockdown was felt before recovering significantly in June, which was the best month of the quarter. We expect that momentum to carry forward into the third quarter. John Romano will provide more commentary on the market in a moment. Adjusted EBITDA was $142 million for the quarter and our adjusted EBITDA margin was a very strong 25% attributable to delivery of the synergies from the Cristal transaction and our continued focus on operational excellence. Jean-Francois will discuss both of these contributors to our results in a few minutes. But to steal a little bit of his thunder, we achieved total synergies of $107 million year-to-date, of which $84 million was reflected in EBITDA and $23 million in tax and other synergies. We remain on target for achieving our anticipated synergy targets for the year. Certainly, we are in a very different economic and market situation than what we anticipated at the time the Cristal transaction was completed, but the ability to deliver the synergies from the acquisition is making a huge difference in our financial performance. As I said before, the combined company is much stronger and is weathering the storm a much better than either of the predecessor companies would have done on their own. Adjusted EPS of $0.03 was impacted by lower sales volumes as well as an unusually higher effective tax rate for the quarter due to the generation of losses in tax jurisdictions in which we have valuation allowances. Our CFO, Tim Carlson, will discuss this in further detail in a few minutes. We have over $1.1 billion in available liquidity which is more than sufficient to sustain our business through any situation. During the quarter, as we previously announced, we signed a definitive agreement to acquire the TiZir TTI business from Eramet for $300 million. This is a highly strategic acquisition, which will further our vertical integration strategy by increasing our titanium feedstock production capacity, thereby enabling us to more fully meet our feedstock requirements internally and better serve our pigment customers with an even lower cost position. The facility will reduce our costs by reducing our reliance on third-party feedstocks and also presents an opportunity for costs and operating synergies. In addition, only TTI will provide technology support for Jazan, increasing the likelihood of success there even further enhancing our vertical integration and lowering our costs. We are continuing to work through the regulatory approval process and other customary closing conditions associated with the TTI acquisition. Speaking of Jazan. During the quarter, we also entered into an amendment to the technical service agreements related to that facility, as we briefly addressed in our Q1 earnings call. This amendment will allow Tronox to increase technical and managerial resources devoted to the project, as the project continues to advance towards startup in the first half of 2021 and sustainable operations in late 2021. The project has experienced some delays due to travel restrictions associated with COVID-19, but we are working with AMIC and AutoTech to call box some of that time. All in all, it was a very good quarter for Tronox. Solid operating results, given a truly unprecedented situation and several significant strategic advancements. I am pleased with our delivery of these results given the challenges the men and women have shown us overcame in the quarter. As an organization, we have remained relentlessly focused on the health and safety of our employees, managing our ongoing operations, protecting, preserving and strengthening our business and laying the foundation for the future. The efforts of my colleagues to proactively implement effective access protocols and other safeguards at all of our worldwide locations have minimized the spread of the virus at our facilities and preserved our ability to operate. As a result, we have continued to do to meet our customers' needs despite the environment. This focus will not waver as the economic climate improves in the back half of the year. I will now turn the call over to John Romano, our Chief Commercial and Strategy Officer, who will comment on our commercial performance and the trends we are seeing in the global markets. John?

Thanks, Jeff. Moving to Slide 4, first, I'll take you through year-on-year comparison, which Jennifer said, focuses on the pro forma numbers for the year ago quarter for comparison purposes. Revenue of $578 million was 30% lower than $827 million for the year ago quarter, due to the impacts of COVID-19 pandemic. TiO2 pigment sales of $466 million were 29% lower, driven primarily by the sales volume decline of 27%, reflecting weaker demand across all regions, following the onset of the global COVID-19 pandemic. While pandemic has had a significant impact on the sales volumes, pricing has remained relatively stable. TiO2 selling prices were 2% lower on a local currency basis or 3% lower when adjusted for currency. Pricing in 2020 has been relative stable with some larger movements in sulfate pricing though the declines in sulfate pricing appear to be improving in Q3. Moving to zircon, sales of $68 million were 24% lower than a year ago. Zircon sales volumes were 12% lower, when compared to Q2 of 2019, driven by softer market conditions globally, and selling prices were 13% lower than a year ago. As you may recall from our first quarter discussion, zircon pricing declined late in the fourth quarter and early into the first quarter, so this comparison demonstrates the roll-forward of the trend on a year-over-year comparison. Product mix actually had a favorable impact on pricing this quarter. So, the decline was less significant than the Q1 year-over-year comparison. And in feedstock and other products, sales of $44 million declined 46%, largely due to the lack of mandated CP Slag sales associated with the remedy for the Cristal transaction and lower iron sales due to the global economic slowdown. Moving to the sequential comparison versus first quarter of 2020, revenue of $578 million declined 20% from the prior quarter on lower TiO2 and feedstock and other products sales due to lower demand, attributable to COVID-19 and partially offset by higher zircon revenues. TiO2 pigment sales of $466 million were 20% lower compared to $580 million. Sales vines were 19% lower and selling prices were level on both a local currency and U.S. dollar basis, both in line with the expectations that we discussed on our first quarter call. Sales volumes in June recovered significantly off the low in May, leading June to be our best month of the quarter. Moving to zircon, sales of $68 million increased by 5% from the previous quarter, slightly above our outlook, sales volumes were up 2% as a result of shipment timing representing some volumes that were expected in Q3 that shifted into Q2, and selling prices also increased by 2% due to favorable product mix. And finally, feedstock and other products sales are $44 million declined 43% due to no mandated CP slag sales in the quarter as I mentioned previously, lower pig iron sales due to COVID-19 and an opportunistic spot sale of excess ilmenite in Q1 that did not repeat in Q2. Now turning to the next slide, I'd like to speak to the demand trends we saw in Q2 by region and how we're seeing those transitions into Q3. In North America, social restrictions began lifting halfway through the second quarter. We've continued to see strengthen in the DIY market, with construction and professional paint markets seeing improving conditions later in the quarter, which we believe will continue into the third quarter. While the U.S. is experiencing a resurgence of cases and some reasons, which could influence the recovery, we have not seen any significant impact on demand in Q3 and believe that recovery will continue into the quarter. Similarly in Europe, social restriction began listing midway through the quarter on a country by country basis. Our customers operation started to reopen in May, and as a result, we began to see a greater demand poll in June. We are continuing to see improving demand into Q3. I believe the recovery in Europe will continue factoring in the seasonal slowdown that we normally see due to the holiday period. South and Central America were the most impacted during the quarter and remain challenged. Volumes there beginning to recover but the region remains behind the curve relative to other reasons. India like South and Central America also saw a significant surge in cases in Q2 but began reopening in early June. Despite an increasing number of cases in the country, we have not seen the signaling of another complete lockdown and have not seen a pullback in orders for Q3 up to this point. China demand continues to recover, but given an excess of TiO2 inventory in the region, we have not yet seen a full recovery. We have however, started to see a tightening of inventory levels and signals of increasing demand. The rest of Asia Pacific remains mixed and vary significantly by country. And we will continue to diligently monitor the recovery into Q3. For the third quarter we anticipate TiO2 demand will continue to improve relative to the second quarter. And with zircon, we expect the market to remain relatively level with the last several quarters. Zircon volumes are expected to remain largely in line with first quarter volumes are down slightly relative to Q2 due to the shipment I referenced earlier that sailed in Q2 as opposed to Q3. We anticipate lower demand in southern Europe and India will continue to offset improving demand in China through the end of the quarter. I will now turn the call over to JF for a review of our operating performance and profitability in the quarter, JF. Jean-François Turgeon: Thank you, John. Moving to Slide 6, let's first review the year-on-year adjusted EBITDA comparison. Adjusted EBITDA of $142 million was 29% lower than pro forma adjusted EBITDA of the year ago quarter. As John mentioned, demand declines across the business were driven by the global economic condition. We benefit this quarter versus the year ago quarter from $40 million in synergy, favorable exchange rate primarily the South African Rand and improve Australian mining costs. This was offset by the essence of the defer margin benefits from Q2 2019, higher net costs and costs associated with the shutdown of the South African mining operation and slowdown of the South African smelting operation during the 21-day country wide lockdown period combined with the remaining cost impact of the clear then shut down for the relining discussed on the fourth quarter call. Sequentially adjusted EBITDA of $142 million decreased 18% from $174 million driven primarily by decreased TiO2 and feedstock stuck in other products sales volume, as well as increased net costs and the impact of the 21 days country wide lockdown period on our South African operation. This was partly offset by incremental synergy of $9 million achieved in Q2 versus Q1 and favorable foreign exchange rate. Turning to Slide 7, we achieved $46 million of synergy reflected in EBITDA in Q2, amounting to year-to-date synergy of $84 million in EBITDA, or $107 million in total with the balance in tax and other synergy. We remain on track to achieve our targets for the year $190 million in total synergy of which $140 million will be reflected in EBITDA. As a reminder, the majority of the targeted synergy are coming from through cost saving, and not anticipated volume. So we therefore feel confident in our ability to achieve this figure despite the macro backdrop. Overall, our operations have been stable and uneventful in the quarter, which is always a positive in the operating world. This is particularly a great accomplishment considering the environment in which we are operating. I owe many thanks to my team and our employees for making this a reality. Thank you. Our focus continues to be on satisfying our customers' needs providing this Same high level of service our customer have grown to expect from Tronox while executing on our cost reduction opportunity. Using or Operational Excellence Program in our integrated business planning tool, we have identify and are implementing a cost reduction program to mitigate the impact of increased fixed costs absorption on our cost per ton. I will now turn the call over to Tim Carlson for a review of our financial position. Tim.

Thanks, JF. On Slide 8, we've outlined are liquidity and capital resources at the end of the quarter. We have over $1.1 billion in total available liquidity including $722 million of cash and cash equivalents. Our cash is appropriately distributed amongst our global operations, and we have no track cash in any jurisdiction. The $722 million of cash and cash equivalents excludes $27 million of restricted cash of which $18 million is an escrow related to the TTI acquisition. Our current liquidity is sufficient to fund the TTI acquisition and preserve optionality for our business. Turning to the next slide. On Slide 9, we highlight the strength of our balance sheet. Our current total debt is $3.5 billion and our net debt is $2.8 billion. Our current trailing 12 months net leverage is 4.2 times on a pro forma basis. We have no maturities on our term loans or bonds until 2024. We also have no financial covenants on our term loans or bonds. Our capital allocation policy remains unchanged. We continue to prioritize disciplined capital spending on high return projects and deleveraging with a targeted net leverage two to three times and a gross debt level of $2.5 billion. Capital expenditures in the second quarter were $44 million and our depreciation, depletion and amortization expense was $72 million. Capital expenditures totaled $82 million in the first half of the year. We anticipate capital expenditures for the back half of the year to increase to $118 million to $128 million due to critical capital projects in Q3 and Q4, including our newTRON business transformation initiative and the development of our Atlas capacity mine, prepare for a seamless transition succeeding the snapper Jean coal mine, which is expected to phase out next year. Our free cash flow for the quarter was $56 million, driven by working capital improvements. Our accounts receivable balance in mid-July was 97% current so I don't see any impact on our aging that causes us concern. Turning up to the next slide, I'll discuss our outlook. As John mentioned, we anticipate third quarter TiO2 volumes continue to improve versus Q2 2020 and we anticipate the zircon markets remain relatively stable as compared to the last several quarters. As JF mentioned, we are managing our operations, utilizing our integrated business planning capabilities to ensure we continue to satisfy customer needs, while prudently managing working capital. We'll continue to focus through the rest of the year, which as a result will increase the amount of fixed costs absorbed in the inventory, resulting in a slight reduction in margins until the higher cost inventory works its way through the system. But we're not for the cost saving initiative that JF mentioned the impact would be greater. I would also like to comment on our income tax expense. This quarter, our effective tax rate was 167% influenced by income and losses in jurisdictions with full valuation allowances. A $2 million valuation allowance charge we took in Saudi Arabia and our jurisdictional mix of income has tax rates different than UK statutory rate. We anticipate our full year income tax expense to be $30 million to $40 million. As JF said, we also maintain our previous synergy target of $190 million, of which $140 million will be an EBITDA. Moving onto our expectations for full year 2020 uses of the cash, we anticipate net cash interest expense of $165 million to $170 million. Cash taxes of $20 million to $25 million, reduced slightly from our previous expectation of $20 million to $30 million. Working capital of $75 million to $90 million, increase from our previous expectation of $40 million to $50 million. Capital expenditures of $200 million and $210 million which reduced from $225 million and cash for pension contributions remains unchanged at $50 million. These represent our estimates based upon our current market outlook. We have ample levers to maintain flexibility and manage cash generation. And we remain confident in our ability to generate strong free cash flow for the year. With that, I'd like to turn the call back to Jeff to provide closing remarks before turning the call over to Q&A. Jeff?

Thank you, Tim. Tim just walk you through our latest news on the demand profile for the quarter the cash outlays for the year based upon the current macro economic situation. While globally there appears to be more optimism about the recovery uncertainly remains. This outlook is based on current information available to us. We remain diligent and monitoring the status of our markets and have developed the ability to adapt very quickly. The cost reduction initiatives we have implemented have strong results and we have identified other actions that could be taken if there is a further decline in the economic environment. I continue to believe in our differentiated global network of assets and our vertical integrated business model. Our business model will continue to define us as the most adaptable, resilient, TiO2 industry leaders and now allow us to continue to deliver industry leading financial performance. The TTI acquisition, as the next step in furthering our vertical integration strategy will enable us to continue to lower our costs and provide improved service to our customer base. I would like to thank my colleagues around the world for continue to tackle any new challenge that is presented. I am proud of their commitment to delivery safe, quality, low cost sustainable times for our customers. I especially want to thank our senior leadership teams around the world. During this time they have provided strong, positive leadership consistent with our Tronox values. Leadership does matter, and in a time like this even more so. I'm very grateful to have the privilege of working with this team every day. We remain focused on providing the same high level of service our customers have grown to expect from Tronox, while ensuring the safety of our employees who make this possible and being a good steward of our shareholders capital. This concludes our prepared remarks for this morning. With that, I'd like to turn the call back to the operator, Grant, for your questions. Thank you.

[Operator Instructions] Our first question is posed from Frank Mitsch with Fermium Research. Please go ahead.

Hey, guys, it's actually Aziza on for Frank. My first question was. We've been seeing Chinese producers announcing price increases. And just to get a sense of how you're seeing that playing out and any regional impacts associated with it?

John, you want to address that?

Yes. Yes, sure Jeff. So, we have been seeing -- we believe as we exited the second quarter pricing China has bottomed out and we are in the midst of implementing some pricing in the upward direction, as I mentioned in over prepared comments. We do expect to see pricing on the sulfate side start to move up.

Okay. And I know you guys mentioned synergies are still on track, irrespective of volume trends. Is there a level where you guys think you might have been ex-coronavirus and might be a step up when and if we returned to normal?

As I think the synergies in general, most of those synergies were not related to volumes at all. So, I think, as volumes do improve in the back half year as we get through this pandemic a bit. There's some slight change in sort of the buckets that the synergies will be realized in, but I would not expect to see a as significant increase in that number. We remain on target with what we said before with perhaps a little upside there as we progress through the rest of the year.

Our next question will come from Duffy Fisher with Barclays. Please go ahead.

Yes. Good morning. First question is, some of your customers on the paint side and the plastic side that come out with their numbers already. In aggregate, it looks like they're down kind of high-teens versus your TiO2 volume down high-20s. So, do you think, your volume was off more than industry? And can you kind of triangulate where you think industry volumes in the second quarter were versus real consumption at the customer level?

John, you want to just that?

Yes, so I can't really speak to the industry at whole, but I don't believe we've lost any share. When we think about our quarter-over-quarter comparison being down 19% on volume, a lot of that had to do with customers pulling back on purchases, so we do believe that there was an inventory draw down on that as well, so they weren't buying as much. Early in the quarter, I'd say early in the second quarter, we anticipate that could be a little bit higher than that. I think our guidance was high teens to low 20s on the downside from Q2. So I think based on what we know, I believe we're in line with what was happening in the market based on the COVID-19 sentiment.

Okay. And the second question, just on the doubling of the cash needed for working capital, with volumes being downs are usually working capital throws off more cash than you would expect. So, what's the dynamics happening there? Why that needs to consume so much more cash some you thought original.

John, do you want to address that?

Hey Duffy, thanks for the question. It was more of an increase in inventory in Q2, as a result of the significant decline in demand. As we, adjust our operations to meet customer demand. we're managing working capital a little bit more prudently in Q3 and Q4, but it was a little bit bigger build in Q2 than we anticipated.

Our next question will come from Hassan Ahmed with Alembic Global. Please go ahead.

Over the last couple of quarters, we started seeing some sort of pricing momentum develop on the ore side of things, particularly the high grade ore. Did you guys see that continuing through Q2? And what's the outlook Q3 and beyond, and how do you see the industry reacting to that?

Yes. Thanks Frank. JF, you want to address that in terms of what we're seeing on ore side? Jean-François Turgeon: Yes. I'd say, Hassan that the ore price has been quite stable. I think that there was a momentum in price moving up, as we enter the first quarter and that momentum hasn't stopped, because as you know, those contracts are loan-term and they take time to react. And so, I'd say that some of the high-grade stuff like route tile that was in very high shortage, we have seen price still moving up. But I think that this will pause because of COVID-19 and the fact that, look, everybody has to react to a lower demand. And so, we will have a more balanced high-grade feedstock going forward.

Understood, understood, very helpful. And as a follow-up, again, over the last few quarters, we had seen, certain market share sort of shifts within the pigment side of things, particularly in on the fixed additive side end market-wise. I mean, are those mostly behind us? Did you guys mostly in the industry see relatively stable market share?

Yes. So, I think, from our viewpoint, we've maintained market shares, not to say that, if there's been a certain situation out there where we saw pricing moving in a direction that wasn't consistent with the value we believe we need to get from our product that we haven't adjusted. But our strategy remain the same to focus on getting at least fair value for the products we produce and aligning ourselves with strategic customers that are growing faster than the market. So, I would say, we're consistent on that line.

Our next question will comes from Jim Sheehan with SunTrust. Please go ahead.

Could you talk about your TiO2 volumes? What the year-over-year decline rate was in June and what you're seeing so far in July? You talked about improvement there, just curious about, what your year-over-year change is in July, relative to June.

We're not going to break down the quarter by months. But what I can tell you is, similar to what we had in the prepared comments. April was down obviously. May was the worst month we had in the quarter in June rebounded significantly. And when we look at July, July is in the same kind of range as we saw in June. So, when we think about moving into the quarter, that's why we're pretty confident at this point in time, assuming that there's no significant change, which we haven't seen in COVID-19 resurgence or slowed or lockdowns in economies, that our volumes in Q3 will be North of where they were in Q2.

And when we TiO2, go ahead, I'm sorry. So, on TiO2 the industry in China, can you talk about, the high-cost producers there and what pressures they might be under? Do you expect any high cost capacity in China to be shutting down anytime soon?

Look, I think at this particular stage, there's always a risk of Chinese producers closing down, clearly pricing coming out of China had dropped. We talked about that. Those were not sustainable levels in my opinion, or in our opinion as a company. And it's always possible that those plants could close down and actually get some third-party analysts in the market that are actually expecting that to happen. So the issue is as pricing moves up, you typically can start sulfate plants up again. But from the standpoint of where the pricing was, and factoring in environmental liabilities and restrictions that are changing in China, it's definitely a possibility that as those close this time, they could close permanently, but it's yet to be seen. I don't know if you have another anything else to add on that Jeff.

No, John, I think that's exactly right. I mean there is pressure and coupled up about economic pressure with the continuing environmental regulations and enforcement in the fact of sulfate is sort of falling out of favor a bit. I think there is certainly a lot to be said that some of the marginal producers will be under extreme pressure.

When you think about where pricing is today and compare that to where ilmenite pricing is, Chinese ilmenite prices still in the $170 to $200 range, which is significantly higher than it was the last time pricing dropped down to this level. So the pressure there is more significant. And I mean, we have a bit more visibility into that this time around because we have a plant in China.

Our next question will come from Roger Spitz with Bank of America.

Given the additional design smelter servicing agreement advisory activity that you'll be doing, should we take away that there are more issues regarding starting up this smelter than you were previously aware of?

No, I don't think there are more issues, Roger. I think what it is, is that, the reason it was put in place at the time of the Cristal acquisition, a similar set of circumstances, but there are several is no significant time ago. And as the process has developed, there's this more opportunities that we identified, where the resources and experience and expertise have shown us to make up make a real difference. And so I think, by being more involved, not only do we bring our technical services, we bring our project management skills and whatnot. So it's just enhancement of that and increasing the likelihood of success, but not really any new issues. I mean, it's not a certainly lightened Jazan, there is always identified as being something where there was risk. And so we think this is a very prudent man and manner of increasing the overall likelihood of success. Jean-Francois, do you want to comment on sort of your perspective as leading our effort there? Jean-François Turgeon: Yes, and I think just mentioned the project management skills, it is clear that Tronox with our global footprint and our experience, we have good people that we could dedicate it to help Jazan and put some more discipline and how to make the modifications that are being made at the moment and increase the likelihood of success. And that's really what that immense technical agreement is all about. So we're more involved in also getting ready for when Autotech will have to modify the smelter with the operation readiness. So training, preparation of the operator, preparation of how we're going to ramp up and operate will be more involved in the last time around. So, all of that, hopefully will help the probability of success to increase. There's a risk on our side hasn't changed. I mean, what we have explained to you, our financial commitments haven't changed and on our side. On the contrary, I think that the possible gain higher for Tronox.

That's great. Secondly, can you compare to your ilmenite to the cost position and quality of your South African and Australian ilmenite operations? And any thoughts regarding the comparison to the relatively nearby Tronox's Norwegian ilmenite mines?

I guess, I'll comment and JF maybe you can follow up. But I think, all in all, with our integrated business planning capabilities, we'll be able to use the TTI ilmenite, I mean the TTI output at our plants in Europe, where we can get the most effects of that and improve overall cost of feedstocks to the entire portfolio. JF, do you want to comment on the relative competitiveness of the various sources? Jean-François Turgeon: Sure. And look, one element that I want to emphasize Roger is, TTI for us, is the best way to increase the chance of Jazan to be successful because the TTI smelter in Norway use a technology that is the most similar to the Jazan technology. And that's obviously a big driver of us strategically acquiring that asset. So we could increase the hud of Jazan of being successful. So that's the first element. Another big element is the Norwegian smelter use hydropower as the source of energy. And it's a clean power so that make it one of the most Itanium smelter in the world. And we see that as a big advantage with a stability on the highest costs, which is power. And so, we see that has as an advantage in our portfolio. And look, we identify synergy that are real, like the synergy that we have identified with the Cristal pigment plants, there will be gain in technology exchange between South Africa and Norway. And this is only us having the capabilities to what Eramet was -- all in all, look there's just plus or minus from a cost point of view, but as a very good asset, with comparative cost structure to what we have in South Africa.

Yes, I think Jeff that's clear. This is a world class asset. And we've been the majority customer from there for a number of years. And the ability to internalize this production and patient will reduce our costs. And lower our cost position and make us an even more competitive producer of TiO2 pigment.

[Operator Instructions] Our next question will come from John McNulty with BMO Capital Markets. Please go ahead.

Hey, good morning. This is Colton being on for John. So, I guess to the pricing question that was asked earlier. So, a number of North American coatings producers prior TiO2 crises to be up modestly in the coming quarters. Is that something that you guys said starting to look more of a possibility?

John, do you want to address that?

Yes, sure. I mean, what I mentioned on our prepared comments, again, talking about pricing, moving into the third quarter. We didn't give too much specificity on that, but with regards to what we're seeing right now, pricing in the Americas has remained state and we have seen a bit of variability, but nothing course of the last six quarters. So, obviously, I would say, yes, there's a possibility in the coming quarters that we could see price improvement. Moving into about where we are today, we're not going to provide a lot of guidance significantly out of line with where we were on pricing for the last six quarters with regards to movement. With regard to China, I think we all are aware, at least we mentioned during the call that there has been some volatility there. Pricing in China in the second quarter, at least as far as Chinese TiO2 and sulfate products move down more significantly in the back half of the quarter. So, entering the third quarter, our average on that sulfate price is a bit lower. And again, we’re starting to see into Q3.

Okay. Okay. That's helpful. And, just one more question. I mean, you guys mentioned the sequential pickup in zircon mix. I was just wondering, is any of that pick up back to the kind of premium quality of zircon and are you starting to see some real possibly longer-term audio break]?

Yes, so that makes variants in China. There was a fair amount of [audio break] in the first quarter and into the early part of the second quarter. And some of those Chinese concentrate producers who upgrade that material didn't have product available. So, they gave us with some of our higher grade products. So, I wouldn't say at this particular stage that, that may be long-term sustainable, but moving into Q3, we're seeing a similar -- significant as it was in Q2.

Thank you. Our final question will come from Travis Edwards from Goldman Sachs. Please go ahead.

Good morning. This is Birdy Ray for Travis. Just a few quick questions. Could you remind us what your target is around the vertical integration now that TTI acquisition announced and the guidance you provided on Jazan, will those two projects be sufficient to get to your optimal vertical integration level?

Yes. Currently, we're sort of in the 75% range and depending upon that pigment demand of that might increase a little bit, as we go through the year with less third-party feedstock purchases. But as we reach TTI, there's a portfolio that will increase and certainly will increase towards full vertical integration. And then when Jazan comes on, we'll be able to reach out to full vertical integration. But of course, Jazan will come in a sort of a stage manner. Plus, I think it's important to say when Jazan comes on, will have the ability to grow and still remain at a very high vertical integration level. So there may always be some third party feedstocks in the mix just for the mix profile. But with TTI and Jazan, we will effectively be fully vertically integrated.

And secondly, as a follow up, as we saw one of the major TiO2 producers get material mock of share last year. And as we think about past recovery, how should we expect to pick up the demand to be distributed among pigment producers?

John, you want to address that.

Yes, I'm sorry. I heart there was a bit broken. Could you repeat the question one more time, please?

Sure, sorry about that. So as we saw one of the major TiO2 producers give up material market share last year. And as you think about past recovery, how should we expect to pick up in demand to be distributed among segment cases?

Look so it's our intent moving into the quarter to maintain our share, as I mentioned earlier. I can't give you clear guidance on what our competitors are doing. That was obvious that one of our competitors had lost in shared with a different program they had employees. Our projects, our plan is to be consistent with how we've been growing our business over time. So aligning ourselves with customers that are growing faster than the market so that we can continue to develop and gain share as the market grows. Does that answer the question?

Yes. Thank you very much.

This will conclude our question-and-answer session. I would now like to turn the conference back over to Jeff Quinn, Chairman and CEO, for any closing remarks.

Thanks, Grant. I just want to conclude by thanking all of you for your time this morning and your continued interest in Tronox. Certainly, it's an unprecedented time. We look forward to being able to re engage with many of you in person and in the months to come. We look forward to speaking with you here in a few months to update you on the third quarter. As economies around the world start get back to business, I think and some the state of Tronox is very strong. Solid operating performance prudently managing working capital and cash, managing our working cap our capital expenditures. But not turning a blind eye to the future. No, we think it's very important to continue to position the Company from a position of strength to fully participate in the recovery that will come and we look forward in future quarters talking with you guys about that. So thank you very much. Everyone have a great day.

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.