Good morning, everyone and welcome to the Tronox Holdings Q3 2021 Earnings Conference Call. All participants will be in a listen-only mode. [Operator Instructions] After today's presentation, there will be an opportunity to ask questions. [Operator Instructions] Please also note, today's event is being recorded. And at this time I'd like to turn the conference call over to Jennifer Guenther, Vice President of Investor Relations. Ma'am, please go ahead.

Thank you, and welcome to our third quarter 2021 conference call and webcast. On our call today are John Romano and Jean-François Turgeon, Co-Chief Executive Officers; 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 3. A friendly 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 4, 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. I'd like to set the stage this morning by providing you with a quick overview of Tronox. We're the world's largest vertically integrated TiO2 producer with 9 pigment plants 6 mines and 5 upgrading facilities on 6 continents. Our trailing 12-month revenue totaled approximately $3.5 billion which is fairly evenly distributed across the Americas, Europe, Middle East and Africa, and Asia Pacific. Our 1.1 million tons of pigment capacity supports our well-balanced base of more than 1200 global customers. Our vertically integrated business model supplies approximately 85% of our internal feedstock needs, and this ensures consistent and secure supply for our customers. In addition to TiO2 we generate significant value as the world's second largest producer of zircon with approximately 297,000 tons of production capacity. We are very proud of the organization we've created following the transformative acquisition two years ago and the value we have and will continue to generate for our stakeholders. Turning to Slide 5, we've maintained our strong execution this quarter expanding margins, as improved pricing and cost savings have offset increased commodity and freight costs. We generated another record quarter of free cash flow from our differentiated business model, allowing for deleveraging ahead of our targeted objectives. The third quarter saw a continuation of higher volumes in average selling prices for both TiO2 and zircon compared to the prior year, owing to sustained recovery across our end markets along with strong demand for our products. Additionally, our capital projects remain on track with newTRON implementation progressing on schedule to provide the digital transformation that will enable meaningful long-term cost reduction. Turning to Slide 6, we are very pleased with our third quarter results and they were in line with our previously issued…

Thank you, JF. On Slide 10, I'll review our financial position, liquidity and capital resources at the end of the quarter. This quarter we achieved net leverage target of 2 to 3 times, 2 years early, and in the third quarter with 2.6 times of net leverage on a trailing 12-month basis, down from 4.1 times at the end of 2020. Total debt was $2.7 billion, a significant reduction from the $3.3 billion balance at the end of 2020. We are well on our way to reach our $2.5 billion gross debt target which we expect to achieve no later than Q1 2022. Total available liquidity as of September 30 was $764 million including $309 million in cash and cash equivalents, and $455 million available under revolving credit agreements. Moving to the right hand side of the page, capital expenditures in the third quarter were $65 million, totaling a $183 million on a year-to-date basis. We are currently anticipating $120 million of capital expenditures in Q4 reflecting the pacing of expenditures related to the newTRON and Atlas-Campaspe capital projects and other maintenance spend. Our total year outlook is now approximately $300 million. Depreciation, depletion and amortization expense was $72 million in the quarter. Our free cash flow in the quarter was $191 million totaling $418 million year-to-date due to our strong cash earnings. Year-to-date we also returned $46 million to shareowners in the form of dividends. Turning to Slide 11, I'd like to share our outlook. As John mentioned, both TiO2 and zircon prices are expected to continue to increase as we make progress with our regional and pricing initiatives. TiO2 market demand remains very strong, and we are balancing our market outlook with the ongoing global supply chain and logistics constraints. We expect fourth quarter tier 2 volumes to…

[Operator Instructions] Our first question today comes from Frank Mitsch from Fermium Research. Please go ahead with your question.

Good morning guys, it's Lisa on for Frank. My first question was, can you walk us around the world and maybe explain how the TiO2 dynamics are shaping up through the end of the year and into 2022 with particular interest on the North American pricing nominations and environmental crackdowns in China?

Yes, this is John Romano, thanks Lisa. From the standpoint of the fourth quarter, again we're not going to provide a lot of guidance on pricing, we did say that we would see increased pricing moving into the fourth quarter in line with what we've seen through 2021, and that would be globally. We're not just seeing pricing moving in one region, it's moving up in all regions. And with regards to demand, our demand continues or the demand continues to outpace supply. So when we think about where we are today in the current economic environment through 2022, we still are very optimistic about the volume growth. What's limiting our volume in the fourth quarter is strictly logistics issues. Okay, sorry, and then your second question regarding China, there is a lot of discussion going on out there now on the dual control energy and consumption policy that's in place. Our capacity has not been impacted. I would say that there has been some capacity that has been constrained. Our estimate has it at about 500,000 tons and we would anticipate that to be to the fourth quarter based on what we know now. It's tough to speculate exactly what's going to happen with regards to China, but at this particular stage, we still see good demand there. It's strong, it's above our capacity to supply it. Again, for Tronox specifically, China only represents about 6% of our total sales on a volume basis.

Very helpful, thank you for that. And for followup, can you provide any comment, concerns or [indiscernible] to the client availability in U.S. following recent producers announcements to defer products from the TiO2 industry? Thank you.

As we stated on the call, that was, we did have an issue in earlier in the quarter in the third quarter that has since been adjusted. We're getting plenty of chlorine now. Earlier in the year we had, so one of the benefits of our vertical integration we were able to actually modify our ore blend to offset some of that impact, but at this particular stage, we've addressed that issue and we're getting plenty of chlorine.

Thanks guys.

Our next question comes from John McNulty from BMO Capital Markets. Please go ahead with your question.

Yes, good morning. Thanks for taking my question. So, it looks like between you guys having some issues in terms of production around supply chain and a whole host of others across the industry, we're at a point where inventories are really kind of at anemic levels at this point. I guess, can you speak to how long realistically to take to kind of get the industries inventories back on their feet again, especially given, kind of what still appears to be a pretty strong demand environment just from a kind of normalized demand let alone from the inventory restock phase? I guess, how should we be thinking about that?

Yes, look so I'll make a comment on that with regards to Tronox. We are running our assets as hard as we can at this particular stage. There have been some limitations. So to your point we're well below seasonal norms on our inventory, although we're -- I think the effort would be to try to build a little bit of inventory to your point, because we need to maintain our service levels, but at this particular stage, definitely not perform midyear, next year do we see the inventory actually is starting to rebuild. There's lots of questions about what the supply chain is doing. We don't believe there's any inventory that's being built in the system of any significant amount. Again, it's hard to monitor every single customer, but at this particular stage, we have more inquiries coming in for volume than we can actually -- than we can fill. So we feel pretty confident that TiO2 inventories are going to remain low for a period of time.

Got it and then can you speak to some of the supply chain issues that you're specifically having and when you think realistically those will be alleviated? And then, and I guess as a follow-up to that, I heard mentioned 40,000 ton capacity increase in '22 versus '21. I didn't hear whether that was on the ore side or whether that was on the TiO2 side, so if you can clarify that, that would be helpful? Jean-François Turgeon: So John, maybe I can start with that. It's really on the pigment side that 40,000 tons of additional capacity for next year. So that's, sorry we should have mentioned that. And on the other question that you had, I think that we resolved our chlorine issue which is a good news for us and going forward we don't expect that to be a constraint for us. Being 85% vertically integrated obviously gave us a huge advantage in the market at the moment, because it's very tight for feedstock, and the fact that Jazan will start and that we are buying from all of the major producers and obviously 85% come from our old mine. And as I mentioned, those mines and upgrading facility are running very well at the moment, so that helped us on the supply chain side. Look our biggest challenge at the moment is energy price are like going to the roof, and I mean, we had unexpected increase of natural gas, specifically in Europe, and that are coming in Q4. And look that's always a challenge. We're working very hard to lower our costs and we're very confident in the value that our project newTRON is delivering, but unfortunately inflation is going faster than those cost reductions.

And we talk a lot about logistics too and there is a cost element to that. When we think about our fourth quarter kind of forecast, unfortunately we are actually using a larger percentage of non-contracted lanes then we would historically just to make sure we get those orders out. There's a shortage of containers out there. I'm not telling you anything you don't know, but the freight element of that is I would say not significant considering our global freight spend and that's on inbound and outbound.

Yes thanks.

And again, just to make reference, as we go into the balance of the year, we're obviously negotiating non-contracted lanes and we believe some of that on the freight costs at least from the standpoint of being out of line with what we would normally have non-contracted lanes will be resolved as we move into 2022.

Got it, that's helpful. And maybe just if I can speak one last one, and just on Jazan, I understand like the earliest you can kind of officially take things on because everything ran well and passed all the tests is the end of 2022 are there specific mile markers we should be looking at in terms of either operating rates or what have you that will get you and us comfortable that this is going to happen and even if it's before the fourth quarter that it feels like things are, the problems of the past are solved and it seems like this is getting to the finish line? Jean-François Turgeon: Look John, look we'll keep you informed as progress go. I don't think there's much we can add at the moment, because we haven't started, but look it's a it's a ramp-up of the new technologies, so there's always things that could happen. We hopefully that it's going to be smooth and successful ramp-up, but we've been conservative in our assumption of how much and how it's going to ramp up, so I hope that helped. But we'll be able to talk more about it at the beginning of next year when we have a few months of operation behind ourselves. We're still in hot commissioning at the moment.

Got it, thanks very much for the color. Jean-François Turgeon: First half is the first key.

Got it, okay. Thanks very much for the color. I appreciate it.

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

Yes, good morning. Since the Reuters article came out in early September, I mean really the only thing people want to talk about on you guys is the potential for Apollo. So could you talk about the genesis of that article and just your views on it?

Yes, look I'll take that one. I mean it's going to be a short answer. We don’t part -- we're not going to comment on market speculation about that article, so that's all we can really say about that.

I understand that, but I mean you guys are doing are doing yourselves a disservice because nobody can really invest unless they have a view on that. So I mean, just saying nothing I think hurts the story. So okay, just my view on it. So then you guys talked about inflation on energy, can you talk about geographically or maybe by plant, where is natural gas versus where is electricity the issue?

Yes Duffy, thanks for the question. I did want to highlight before I talked about the transitory headwinds in Q4 that the teams that that we have globally have done a great job in offsetting the inflationary commodity costs increase in Q3 through our cost-saving programs and our cost controls. Natural gas itself is nearly going to be about a $10 million headwind for us in Q4 primarily in the UK, is our biggest to increase there. Commodities themselves are another about a $10 million headwinds primarily coke, sulfur, sulfuric acid, sulfur issues primarily in Brazil. And then we've got just general cost inflation through the rest of the network that we've offset a good chunk of it that we're saving so far this year. There is so much savings that we have in the plan in Q4, but we've got additional savings next year obviously with newTRON and with the ongoing savings. So overall headwinds from a cost standpoint between natural gas, commodities and in the freight issue that John talked about in terms of going through non-contracted lanes is about a $30 million headwind in the quarter. But despite those headwinds Duffy, we still remain very confident in our ability to expand margins in 2022.

Great, thank you, guys.

Our next question comes from David Begleiter from Deutsche Bank. Please go ahead with your question.

Thank you, good morning. Just on China, can you discuss the impact you're seeing on the cost curve over there the last few quarters? And what's your thought on capacity, because it could be a risk throughout 2022 given dual control and power curtailments?

Yes, as far as fourth quarter goes, I mentioned it briefly, at this stage our internal estimate is that there is about 550,000 tons that has not been impacted by that. A little bit hard to say how that's going to run into 2022, but there is no question that the dual control energy consumption policy along with colder winter we've already got some indications that there could be some power restrictions attached to colder months, it happens every year. With regards to cost, I mean costs in China are largely being driven by feedstock and sulfur and that's up significantly and it's been up for a period of time. We haven't seen really any change in the feedstock market. Feedstock is going to continue to be in our opinion tight on both the sulfate side and chloride side. So I don’t know if JF, do you want to make any additional comment? Jean-François Turgeon: Maybe I made the comment that this -- those power interruptions and the extra effort on the environment has had a very important limiting production impact on the ilmenite production in China, and that's why the price of ilmenite remains very high and we don’t expect that trend to change with the pressure on this. And the other thing is, ilmenite production in China is highly linked to iron ore production and with the reductions in iron ore price, there is less incentives to produce more ilmenite for those mining companies and that also pushed the price of ilmenite high and maintain it high.

Very good and just on capital allocation how do share buybacks go into your future plans to deploy capital?

In principle getting to our $2.5 billion target continues to be our number one priority. But we expect to get there in Q1. We'll provide a lot more details as part of our year-end call in terms of specific capital allocation. But with that being said, we do expect to generate significant free cash flow next year and remain committed to returning capital to shareowners while being prudent to ensure that increases in dividends that we make we will make sure that every and each increase is sustainable. And with that being said, I do believe we will have additional free cash flow for share repurchase targeting dilution from equity compensation and also are targeting the dilution from the 7 million shares that Exxaro issued.

Thank you.

And our next question comes from Josh Spector from UBS. Please go ahead with your question.

Yes, hi guys, thanks for taking my question. Just a quick follow-up on the cost side, when you lay out the higher cost specifically on the energy side in the fourth quarter, if costs stay elevated is there another leg of that to come in first quarter or is all that baked into your fourth quarter comments?

Yes, so we do believe the energy costs are transitory, just given the current natural gas curves that you see in the marketplace, some of it will roll into Q1 just given the winter season in the UK, but the cost curves do come down quite a bit. But with that being said, as John mentioned earlier, we are also confident in our ability to pass these costs on within the channel. Jean-François Turgeon: Look, I would add on that Josh, that in the UK it's not sustaining the price of natural gas at the moment. There's many plants that were shut down because of the cost of natural gas being so high and had been moving so quickly. Look, we're lucky because with our cost reduction initiatives and the fact that we were able to increase our own price, we're still running successfully in the UK, but we expect that it's going to improve in 2022 as Tim mentioned.

Okay, no I understood, just was wondering if there is some inventory timing issues, but that's fair. And just as a follow-up, when I look longer term and the back integration that's kind of key to your strategy, I mean you guys are investing in Atlas to help you get the materials needed for the next few years. I guess, I wonder if I look out five, 10 years is there another Atlas type investment that needs to happen to maintain that back integration or does Atlas get you further than that? Jean-François Turgeon: So Josh, it's a very good question and look, like any mine, they have a life. So obviously Atlas-Campaspe will give us a good 10-year and more of production, so this is there in the investment will be complete next year. But within our five-year plan we have some investment to do in South Africa to continue to have the level of vertical integration that we have and that's the good news is we have project to sustain that vertical integration for more than 20 years with our resource and reserves already in our hand if I could use that expression.

Got it, thank you.

Our next question comes from Matthew DeYoe from Bank of America. Please go ahead with your question.

Good morning, thanks. Have you seen any shift in the availability of upstream ores? I know in general it's been tight right? But we had a pretty significant outage during the summer and one of your other competitors is committed to bringing down their asset in 4Q, so I'm just wondering if you've seen a pickup in market activity trading or anything that would lead you to be concerned about [indiscernible] ability more broadly on the ore side?

Yes, look, it's clearly the ore market has been tight for an extended period of time and some of the disruptions that happened in South Africa did not, I wouldn’t say improve that, made it I would -- exacerbated it. From our standpoint as we've stated we're 85% vertically integrated. We've got feedstock managed internally and we also buy feedstock on the external market. So it's a challenge for us. It's not as much of a challenge clearly for us as we're 85% vertically integrated. And then as JF mentioned earlier, we've also got the opportunity coming up with Jazan first half the slag coming in the fourth quarter. JF? Jean-François Turgeon: Yes, no, look I think that Matthew, what we could say on that is, it's a market that we track closely. We want to make sure that we're already -- always ready for the coming year. So it's not something that we manage quarter-by-quarter, but we try to have a full-year view.

Okay, and… Jean-François Turgeon: I think the timing of our Atlas Campaspe mine starting is also very good for us.

Yes, I think it's just a good point, when we think about our five-year plan, for us you've got a five-year plan for the business that's supported by a 20 to 30-year plan to JF's point on the feedstock. So feedstock is something that we spent a lot of time on.

Yes, kind of to build on that, is there any shortfall in integration as you transition away from Snapper and Ginkgo to Atlas Campaspe or is that expected to be fairly seamless and what should we see on the financial statements from that whole transition? Jean-François Turgeon: Yes, that's a good question and it's a seamless transition and obviously as the Atlas ramp-up there's more benefit in Atlas, because it's a new mine and like every mine, when you end the life of a mine you have higher costs and lower grade, but when you start a new mine you have the high-grade zone that you start to exploit, and we're going to have more production of rutile and zircon as the Atlas Campaspe start.

All right, thank you.

Our next question comes from Hassan Ahmed from Alembic Global. Please go ahead with your question.

Good morning, guys. I just wanted to revisit some of the commentary you made on feedstocks. You talked earlier about resolving the chlorine issues. I just wanted to sort of dig deeper into what you mean by that. I mean, contractually have you gotten into sort of longer term volume contracts? If you have, I mean is it based on some sort of formula based pricing, just if you could help me think through the contractual nature of these things and the duration of any contracts you may have struck?

Thanks Hassan. Look on the chlorine, that was not a contract issue. That was a supplier that filed a force majeure. And we were able to manage less of the, I guess the decreased volume specifically in Hamilton on chlorine by managing our head grade. So we were able to adjust the head grade, use higher TiO2 content ore to offset some of that. Towards the end of that process we did have a little production issue, which we've referenced, that's been resolved. So the chlorine issue wasn't a contract issue. It was a force majeure and now we're getting chlorine was more than offset what we needed for that particular facility. Jean-François Turgeon: Yes, and Hassan, John talked about the force majeure in the U.S., but we also had a chlorine issue in the UK because there was a power cut and there's only one chlorine client in the UK and obviously the plant was affected by that loss of power and that gave us a few issues. And those two happened to happen at the same time unfortunately, but those two events are resolved now and we feel that we're in a good position.

Understood, understood. And as a follow-up, I understand there are sensitivities around the Reuters article and the like. So completely cognizant of that, but there was a very specific number given, $27 a share right? Can you broadly talk about how you think about valuation as it pertains to Tronox? I mean, look the fact of the matter is, you guys are in a very unique situation where you have multiple levers, and what I mean by multiple levers is obviously there seems to be a new baseline set for normalized earnings for you guys. So one can sort of assess valuation based off of that, then you guys are generating ample free cash flow. You are delevering, so that obviously helps that valuation as well. You have NOLs. You have the Jazan option which are all sort of valuation accretive. So can you just help me think through how you internally are thinking about valuation, particularly with your stock price where it is, with the speculated $27 number that Reuters talked about and the like?

Well Hassan, I'll tell you, you almost answered the question to yourself, so you did a good job on that.

That's why they pay me the big bucks.

Yes, we're not going to speculate, again on the rumor, but I think a lot of where we are at this particular stage is we do believe we've been undervalued. And our strategy, as we have been doing everything with regards to one of our most important targets was reducing our debt and we've done that through extremely strong cash flow. All the work that we're doing on our project newTRON to reduce cost is going to help us continue to have lower cost as we move into 2022. It's not just about cost and margin expansion though, we also are confident as we move into 2022 that we're going to have growth in our EBITDA. So Tim, do you want to make a comment?

No, I think you summarized it very well, John.

All right, thank you, guys.

[Operator Instructions] Our next question comes from Vincent Andrews from Morgan Stanley. Please go ahead with your question.

Hi guys, this is [indiscernible] on for Vincent. Just a question on the demand side. Given [indiscernible] really shouldering out, but are you seeing that impacts the buying patterns of your paint customers and that they are slowing down purchasing or has their demand been relatively unaffected? And then can you talk about the extent to which shortages of raw materials are impacting demand from other customers and other industries as well?

I'm sorry Will, can you repeat the first part of your question, it was a bit muffled?

Yes, so I mean, [indiscernible] are really short right now, so are you guys kind of seeing that impact the buying patterns of your pain customers, I mean that they were slowing down purchasing and has their demand been relatively affected?

Yes, I think I got that question. And the short answer is, yes we had seen some, I'd say specifically in North America, some reduction in the third quarter. That being said, we're starting to see a pickup in that volume moving into Q4. And that shortage I would say of, I guess on other raw materials that were impacting some peoples capability to produce coatings. For us we exported a lot more of that TiO2 to other markets were it wasn't an issue. So from the standpoint of where we are today with even with that disruption in the coatings industry that came from other raw materials, we were still well oversold and we redistributed the volume and again redistributed that volume into other areas where demand required it was exacerbated by the logistics issues that we've referenced. So I think the short answer is, we do believe a lot of that's been resolved. You've probably heard some of the earnings calls of some of the larger coatings companies which have indicated that, and we're seeing a healthy demand in North America for coatings moving into the fourth quarter and beyond.

Got it, and then just as a follow-up question, I mean given all the volatility and moving parts in the supply chain, is there any risks you kind of achieved in your newTRON target [indiscernible] or are you guys trying to be more [indiscernible] regardless of the [indiscernible] conditions? Jean-François Turgeon: No we are still very committed to the savings and were could measure those and we could track those and we're confident they're not really related. Look, obviously the inflation could alleviate those savings, but the savings are real, specifically when we talk about improving our maintenance, the automation of our plant and the digitalization of our assets, look all of those transformations are real and will help our cost position and we're still committed to those.

Thank you.

And ladies and gentlemen, with that we'll conclude today's question-and-answer session. At this time, I'd like to turn the floor back over to John Romano for any closing comments.

Thank you. And thank you again for joining the call today. I think we'd just like to end with a little bit clearly fourth quarter little bit of a challenge moving into that, but maybe more longer-term moving into 2022, we are very optimistic about 2022. There's a significant amount of work that's gone into the projects that JF outlined with regards to cost savings opportunities and our ability to increase our capacity to meet the demand of our customers along with where we are in economic cycle we think we're early at an up cycle from the standpoint of our ability to actually continue to generate additional margin enhancement, as well as I EBITDA growth moving into 2022. So thank you again for your time and have a good day.

Ladies and gentlemen, with that we'll conclude today's conference call. We do thank you for attending. You may now disconnect your lines.