Hello, and welcome to the Tronox Holdings plc Fourth Quarter and Full Year 2020 Earnings Call Webcast. [Operator Instructions] Please note today's event is being recorded. I would now like to hand the conference over to Jennifer Guenther, Vice President of Investor Relations. Ms. Guenther, please go ahead.

Thank you, and welcome to our fourth quarter and full year 2020 conference call and webcast. On our call today are John Romano and Jean-François Turgeon, Co-Chief Executive Officers on an interim basis; 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 already done so, 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 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. Moving to Slide 3. It's now my pleasure to turn the call over to John Romano. John?

Thanks, Jennifer, and good morning, everyone, and thank you for joining us today. For today's call, I'll first provide a review of the year and the quarter and walk through the commercial performance summary and then I'll turn the call over to JF to discuss our operational performance, synergies and key capital projects for 2021. Tim will then review our financial position and outlook. But before we turn to the financial highlights, I wanted to take a moment and review the priorities we laid out in 2020 in response to COVID-19. Throughout the pandemic, our focus has been on the safety, health and well-being of our employees and their families. Operating safely in all respects with managing our ongoing operations and protecting, preserving and strengthening our business and laying the foundation for the future. JF and I are very pleased with the organization's delivery of these priorities. Safety has always been one of our first priorities at Tronox. And in 2020, we achieved a record safety year. We are very proud of this accomplishment, especially considering the challenging external circumstances presented over the last year. I'd like to take this opportunity to thank all of our employees for their continued commitment to safety. We are on a journey to 0, and that journey starts with the performance records like we had in 2020. At the start of the pandemic, our operations were designated as essential, allowing us to continue to operate producing reliable tons for our customers. Additionally and importantly, we kept an eye on protecting, preserving and strengthening our business and laying the foundation for the future. We continue to increase our focus on sustainability. For the first time in 2020, we published a GRI report for the combined Legacy Tronox and Cristal organization. And for 2021, we'll be…

Thanks, JF. On Slide 9, in the top left quadrant, we have outlined our liquidity and capital resources at the end of the quarter. We have $1 billion in total available liquidity, including $619 million of cash and cash equivalents, our cash is appropriately distributed amongst our global operations and we have no trapped cash. Moving to the top right quadrant. Our total debt at the end of the fourth quarter was $3.3 billion, and our net debt was $2.7 billion, resulting in a trailing 12-month net leverage of 4.1x. We have made a $200 million discretionary debt repayment in December and are anticipating an incremental $300 million discretionary debt repayment before the end of the first quarter from cash on the balance sheet, as we announced in January. As you will see in the chart, we have no maturities on our term loans or bonds until 2024, and we 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, including those JF just outlined, and deleveraging with a targeted net leverage of 2 to 3x and gross debt of $2.5 billion. Moving to the lower half of the page. Capital expenditures in the fourth quarter were $66 million, and our depreciation, depletion and amortization expense was $85 million. Year-to-date capital expenditures were $195 million, which represents a reduction of $80 million from the midpoint of our original target for the year due to prudent management of our growth and cost improvement capital as a result of COVID-19. Our free cash flow for the quarter was $133 million. Improvements in EBITDA, inventory levels and accounts payable, partly offset by increased capital spending, resulted in improved fourth quarter free cash flow. While our outstanding receivable…

Thank you, Tim. Before concluding our prepared remarks, I wanted to close by revisiting our strategy on Slide 11. While we at Tronox have gone through some interim senior management changes, our strategy and business model remain unchanged. It is still focused on these pillars to become an advantaged global TiO2 leader. Our focus on capital expenditures will be dedicated to pursuing these pillars. newTRON directly addresses several of those components. As JF outlined, the project will transform our operations through automation and digitalization, both of which are foundational in reducing our cost and enabling Tronox to be a technology leader. And Atlas-Campaspe will reinforce our distinct advantage to feedstock integration. We will continue to invest in these projects and delever with incremental free cash flow while continuing to improve our safety track record and drive progress and enable achievement across all of these pillars. As we've conveyed on this call, we have a great year in front of us. Our strategy drives our ability to leverage our unique portfolio to optimize our assets and secure our position as the most adaptable, resilient TiO2 industry leader and allow us to continue to deliver industry-leading financial performance. That concludes our prepared remarks. And with that, I'd like to open the call for questions. Operator?

[Operator Instructions] And the first question comes from John McNulty with BMO Capital Markets.

I guess maybe the first one would just be on the volume strength that you're looking at for the first quarter. So you're seeing -- you're looking for a pretty strong sequential improvement. I guess, how do you think -- and it's certainly stronger than the normal seasonality. I guess, how do you think about or how are you thinking about the seasonality and how it plays out throughout this year in 2021? Should we see kind of the usual jump from 1Q into 2 and 3Q and then it fade again? Or is it going to be a little bit different this time? I guess, how are you thinking about that?

Yes. Look, this is John Romano. So I'll answer that one. So the fourth quarter, as we mentioned, strayed significantly away from normal seasonality. We had a fourth quarter that was very strong, and the first quarter is coming out to be very strong as well. So I would say that the normal seasonality is not in place because of the strong demand that we're seeing. There's, I'd say, a fair amount of upside even moving into the second quarter based on the volume patterns that we're seeing right now. So normal seasonality, I would say, is not the case in Q4 and not what we're projecting in Q1 either. So I hope that answers your question.

Yes. No, that's helpful. And then I guess, can you speak to the -- how you're thinking about pricing as we look through the year? I mean we've certainly started to see some pretty chunky price increases and announcements on a global basis. But -- so I guess, can you kind of speak to how you're thinking about pricing progressing throughout the year? And then how some of your longer term contracts that you're locking in, like how should we be thinking about what impact they may -- that may have on your pricing for this year?

Yes. So we're experiencing good development on pricing globally in every market segment that we're selling into in the first quarter. And some of that depends on where we are. In China, we saw -- we do have an operation there, and we saw that pricing moving up towards the end of last year and into the first quarter. We're seeing pricing move in Europe, Middle East, Africa, APAC and North America. So we're seeing pricing moving up across the spectrum. With regards to long-term contracts, and I assume you're referring to margin stability, we do have some of those contracts in place. But as we think about our -- the momentum on pricing moving into 2021, we're not going to be running probably at the pace of increase that we were back in the last financial crisis in [2010] when it recovered, but we do -- we expect an opportunity to see good movement on pricing moving into the year.

And the next question comes from Frank Mitsch with Fermium Research, LLC.

Nice end to the year. I was struck by the comment on zircon volumes in 1Q being a record -- expected to be a record. I guess I've been kind of accustomed that, that would be kind of a lumpy type of business, very strong in 1 quarter and not so strong in another quarter. And obviously, you're coming off a very strong fourth quarter. So can you talk about the end uses there and what's driving that very strong volume you're expecting in 1Q? And then if you could talk about the sustainability as you see it?

Thanks, Frank. This is John again. So yes, we did have a very, I'd say, strong recovery in the fourth quarter and moving into the first quarter. China is a big driver of demand on zircon, and we've seen a significant uptick there. So it's not only in China, it's pretty much in every market that we're selling into. We reference a lot of things that are going on with stimulus, whether it's TiO2 or zircon. Stimulus has driven, I think, a lot of the uptick but it's not the only thing that's driving it. There's an increase in demand. So it's clear that we have some inventory, and we're able to take advantage of that inventory and converting it into cash as the market is recovering. And like we said in the prepared comments, based on the trajectory of the demand we're looking at right now, we would expect Q1 to be a record zircon sales quarter.

Interesting. Interesting. And I guess, JF, if I could follow-up on the Atlas project, which is going to replace capacity that's -- the mine that's near end of life, how does that impact your vertical integration? How should we think about the cost structures that the Atlas project will have on Tronox? Jean-François Turgeon: Thanks, Frank, for this question. Look, like every mine, when they reach their end of life, the cost structure is always higher than when you start with a brand new mine because at the beginning of the operation of a mine, you're in the high grade zone. So you have to see that our cost position from a mining point of view will improve as we start Atlas and we close the Ginkgo Snapper mine. We'll also benefit from more product coming out of the Atlas mine in the first 3 years of the Atlas operation because, look, a mine has a life of its own. And obviously, that investment is a long-term investment for the next 10 years. And the Atlas deposit is better than the Snapper Ginkgo, specifically in the first 3 years of operation that -- so I think that's going to be positive for us, but we obviously need to build the mine first. I hope that answers...

Got you. No. That's very helpful. So you're expecting additional capacity, at least in the -- at the beginning of it and overall lower cost to Tronox. Jean-François Turgeon: That's right.

And the next question comes from Hassan Ahmed with Alembic Global.

Question around your Q1 guidance. Initially, when I read the press release -- the earnings release, looking at relatively sort of flat EBITDA sequentially with a backdrop of 11% to 15% TiO2 volume increments surprised me a little bit. But obviously, on the call, you guys have talked about a series of one-offs, be it the CP slag side of things, be it selling sort of higher cost TiO2 produced in Q4, in Q1 and then obviously the whole FX side of things as well. What I'm trying to understand is that if some of those one-offs weren't there in Q1, how would -- I mean could you give us some sort of a measure of what sort of lost EBITDA you may have on the back of these one-offs, be it the absolute measure or be it what sort of margin compression is being caused by these one-offs?

Thanks for the question, Hassan, it's Tim. The 3 items that we mentioned, and you just summarized; FX, no feedstock sales and then higher cost TiO2. I'll address each one of them. The FX impact in the quarter is going to be worth about -- we're estimating, given the current rates, about $10 million of a headwind. The lack of the feedstock sales in Q1, given the end of the FTC consent order, we'll get the benefit of that, obviously, in Q2 and Q3 and Q4 when we sell that -- or that feed -- when we use that feedstock internally. So that will be a high single-digit headwind -- EBITDA headwind in the quarter. And then lastly, the TiO2 cost structures, Hassan, as we talked about in our Q3 and our Q4 calls, as we reduced our production to match market demand, we had an increase in the overabsorption on a per unit basis, which cost us about 1 to 2 margin points in the quarter. So we should see that reversing in Q2 as well. So once all 3 of those item -- once the 2 items flow through, we'll see a continued improvement in EBITDA in Q2, 3 and 4 and depending on one ends up with FX, we'll either have a headwind or a little bit of a tailwind there.

That's very helpful. Very helpful. And as a follow-up on pricing, it seems that there were some price hikes on the table for January, and that's obviously not even the seasonally strong period. And it seems, as things are evolving, with demand looking as robust as it is, possibly, there are more price hikes to come. I'm just trying to understand the realization of these pricing increments, keeping in mind the margin stability measures you guys have. So could you sort of help us think through how we should think about how you guys -- the mix of longer term contracts as a percentage of maybe your overall portfolio, is it 10% that are sort of long-term contracted for? Is it higher than that, lower than that? Just some sense around that, please.

Yes. Thanks, Hassan. This is John again. So from the standpoint of margin stability, and we typically haven't provided a lot of guidance on how many customers we have on that, our program is a little bit different. These are win-win situations that we've negotiated over time. I would say that we've got, like I mentioned earlier, plenty of runway on price moving into the quarter and into second quarter from the standpoint of our ability. It also depends on the regions that we're selling into. Margin stability is not something that everybody is accustomed to or wants. So ours was not a mandated. It was a choice with regards to what unique kind of setup we could have with individual customers. So I would say, depending upon the region, we've got -- specific to Asia Pacific, there's not a lot of margin stability in there. So -- I mentioned earlier on China, for instance, our pricing is moving very quickly there. We have a plant there. We've been moving that price as costs have moved up since, I'd say, the fourth quarter, into the first quarter. And we're seeing Chinese TiO2 pricing from our facility and exports now approaching chloride pricing. So I'd say there's still some upside with regards to where that's going, and it's having an influence on our ability to move the price on the chloride side as well.

Very helpful. And is it fair to assume that even these long-term contracts will have some sort of pricing escalators, maybe a couple of times a year, which you could revisit based on maybe some sort of competitive pricing index or something like that?

I'm not going to go into the details of the contracts because there -- but ours, I would say, again, it's not a standard process that's generated by an index. These are contracts that are individualized with customers. They do have opportunities to move pricing during the year.

And the next question comes from Josh Spector with UBS.

Just on TiO2 volumes, based on your 1Q guide, I was wondering if you can give us a feel of where your capacity utilizations are expected to be in the next quarter? And kind of with that in mind, how are you thinking about potential growth from 1Q through the rest of the year and maybe even over the next couple of years? Jean-François Turgeon: Josh, it's JF. Look, obviously, as Tim mentioned, we had a dreadful production in Q2 and Q4 last year. But when we saw this strong pickup in demand happening, we have restarted all of our assets and we are in the process of having all of our plants running at full capacity. I would say the exception is our Yanbu plant in the Middle East. And we're not as quick as bringing that plant to full capacity because of the COVID-19 situation. And I think you remember that at our Investor Day, we said that we would use the know-how of our Hamilton plant to help bring the volume out of that facility at the same level as Hamilton. And the travel restrictions have kind of delayed a little bit our success in doing that. But it's certainly something that we're working on at the moment. And as the market continued to increase and we have more demand for our products, we'll ramp up the capacity of all our assets to meet that demand.

Okay. That's helpful. And just on the zircon side, I guess two quick things. I mean kind of a follow-up from Frank's question about the strength of volumes in 1Q. Where do you think zircon volumes could be for '21? I guess, I kind of think about the 40 to 50-ton range is kind of a more normalized quarterly basis. Do you get back to there in 2Q, 3Q? Or does that sustain higher? And then related with that, pricing has continued to kind of come down pretty modestly the past couple of quarters sequentially. What turns that around? Or does that turn around in your view over the next couple of quarters here?

Yes. So from a volume perspective, I would say that, again, we're going to -- I'm not going to suggest we're going to have record sales quarters every quarter. And I think to the point that was made earlier about shipments being somewhat lumpy, we are still having some disruptions. I even referenced that on the call with regards to some of the shipping channels. But I would expect 2021 is going to be a better year than 2020 by all measures on zircon. And our volumes in the first quarter are typically not to peak, but we also -- I think there's a bit of inventory rebuilding from our customer base. The fact that there are shipping issues and a lot of these shipments are based on bulk shipments. We did a lot of work in the fourth quarter to reposition volume so that when the market did rebound, we would have volume located where we could have the customer able to buy that as opposed to having it in South Africa. So I would say that based on what we're seeing right now, we should see some of that additional volume creep outside of the Q1 into Q2 as well, and 2021 is definitely going to be a better year for us on volume. As far as pricing goes, if we're looking into the second quarter, I would expect that we would start to see some upside potential to move price on zircon moving into Q2.

[Operator Instructions] And the next question comes from Roger Spitz with Bank of America.

Can you give an update on the Jazan smelter? I'm not sure I saw any mention of it in the press release. Jean-François Turgeon: Roger, it's JF. Look, we -- as we said in our last quarter, we were expecting Jazan to start toward the second -- the end -- the second half of this year. There's a little bit of a delay. That delay is created by logistic issue that the main contractor, Metso Outotec, is experiencing. I think we talked about important modification that were being made by the provider of the technology to the smelter. And because of COVID-19, some shipment of equipment that are critical have been delayed. And those shipments were happening through the Christmas, New Year. And we're now expecting that we should be in a position to start the commissioning in the third quarter of '21. So we're talking about 6 weeks delay versus what we had originally anticipated. And it's all related to COVID-19.

And related to that, I think if I remember correctly, you were looking for, when up and running, at least in the first phase, a $12 million a quarter EBITDA benefit. Is that still the case? And should we think about with this a modest delay that we really won't see that big, if any, EBITDA realized in 2021 from the Jazan smelter?

Roger, it's Tim. That is correct. Just given the delay, the EBITDA realization will be delayed as well. But our overall assumptions as it relates to the returns from that project remain unchanged once we get to sustainable operations, which we're expecting in -- JF, later '22? Jean-François Turgeon: That's right. We always said that when we start the commissioning, within a year after the start-up, we will know if the project is successful or not. And obviously, if successful, as part of the agreement that we have with TASNEE, we will acquire the facility. And if not successful, well, we'll reevaluate our options.

Yes. So that EBITDA benefit is probably 2023, Roger, and not 2022, just given the delays that JF talked about.

And the next question comes from Travis Edwards with Goldman Sachs.

Just maybe a follow-up on Jazan and overall vertical integration. I think after the canceled TTI acquisition, just wanted to ask and see if you're comfortable now with the current level of vertical integration? If there are other projects outside of what you've already highlighted that you're considering in order to get that higher -- I think in the past, you were looking to get to sort of 90%, 95%, which is on TTI. So wondering if your plans there, strategy have changed after dropping the recent acquisition? Jean-François Turgeon: Thank you for the question. Look, it's clear that we were disappointed not being able to realize this unique opportunity with TTI. It would have helped the chance of Jazan to be successful because of technology transfer, and it will have been in line with our vertical integration strategy. But as the regulator did not agree with our view of the industry, we had to turn around and change what to do. And it's clear that developing Atlas-Campaspe as a project is a solution for us that will give us natural rutile, that will give us zircon and keep us in line with our vertical integration strategy. So instead of doing it through acquisition, we're doing it with brownfield development of our own mining assets. At 85% vertically integrated, we think that this is the best position for the company because, obviously, our mine will run at full capacity in any market situation. And look, we don't have to buy a lot of feedstock on the market to run our asset at full capacity. So I hope that answers your question, Travis.

Yes, that's really helpful. And I guess just a quick follow-up with that. That 85% is pro forma for your current projects being completed, is that correct? Or is that where you sit today? Jean-François Turgeon: No. That's where we sit today. As we said, the Atlas-Campaspe will replace the Snapper Ginkgo mine. So we're producing from Snapper and Ginkgo at the moment. Look, I mentioned that Atlas will produce more, but we're also planning to increase our pigment capacity going forward. So that's why we will remain at about 85%, even with an increased production from the mine.

And we also -- just a quick add on that, JF. And we mentioned in the prepared comments the fact that the agreement that we had with the FTC to continue selling CP slag has ended. So we'll be internalizing that. And that gets us to the 85% as well. Jean-François Turgeon: We're also working on debottlenecking our existing asset to grow the mining and upgrading side at the same rate that we're growing and debottlenecking our pigment plant.

Got it. Helpful color. Maybe 1 more quick one, if I may. You just touched on maybe some of the potential logistical constraints impacting your operations in the 1Q time frame. I was just wondering if you could elaborate a little bit on that? And what's in your control, what's not? And do you expect it to be a concern sort of beyond the next couple of weeks? Or is this pretty temporary?

So look, the logistical issue has been going on, I'd say, consistently through COVID. Speaking specifically to this, it's -- for us, it's been a lot of ocean freight, having a lot of rollovers and things of that nature. So it's not something that I would say is critical at this particular stage, but it's out there. There's no question that there are issues. It's absolutely not a demand issue when I referenced that, that's why we had that variance on the guidance of 11% to 15% depending upon how we manage those. So again, we feel like we'll come comfortably into the range, the ranges that we provided on the call. But I would expect, as we have continued to see these logistical issues around ocean freight lines continuing to be congested, port congestion, that's probably going to continue into Q2 as well, but we're managing it.

And next question is a follow-up from John McNulty with BMO Capital Markets.

Just a question on project newTRON. I think you indicated that you could start seeing some of the returns actually even in 2021. Can you help us to understand how much of that might be coming in? And then how it phases into that $150 to $200 per ton by the end of 2023? Is there a way to think about the sequencing of that? Jean-François Turgeon: Yes, John. Look, I'll try to give you a bit of color around that. Look, newTRON is the automation of our plant and the automation of our process and system. And the first big initiative in newTRON is linked to supply chain. And when I said that we will get benefit, it's on the supply chain front in 2021. Look, it's obviously more toward the fourth quarter of the year that you will see those benefits. So there's none of those benefit in Q1 and Q2. It's a multitude of small project, newTRON, but the pipeline is very healthy, and we feel confident that it is significant the savings that we will see even in '21. And it's obviously raising significantly in '22 to reach the -- about $150 to $200 per ton toward the end of '23. So you should see an evolution from Q4 this year and every quarter going on, all the way to the last quarter of '23. So that could help you color how to distribute the saving per ton going forward.

Got it. And that's in addition to the $60 million of incremental benefits that you think you're going to get this year and next year on the synergies and cost-saving initiatives from Cristal, is that right? Jean-François Turgeon: That's right. That's correct. I mean that -- look, as we said, the synergy that we have achieved up to now were really real cost saving. The synergy that we see going forward are more linked to debottlenecking opportunity like we talked at Investor Day, transfer of best practice that takes longer to be implemented, but that will still be implemented on top of newTRON, which really is a different technology approach.

And this concludes our question-and-answer session. I would like to turn the conference back over to Jean-François Turgeon, Co-Chief Executive Officer, for any closing remarks. Jean-François Turgeon: Thank you, Keith. In closing, I want to convey how extremely proud John and I are of how dedicated our entire Tronox team has remained throughout 2020. Prioritizing safety and looking out for the health and well-being of one another, while continuing to deliver safe, quality, low cost, sustainable ton for our customers. Thank you to our colleagues around the world. Our performance speaks to the resilience of our business and the dedication of our people. Tronox is very well positioned in the recovery. We are looking forward to the continued demonstration of the power of our vertically integrated portfolio. Thank you to everyone on the call for your question and interest in Tronox. Have a good day.

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