Chemours reports profit and announces $230 million expansion in Texas

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Chemours Corpus Christi plant.
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Chemours Corpus Christi plant.
Chemours Corpus Christi plant.

Wilmington-based Chemours Co. reported a profit for the first quarter as it announced plans to expand refrigerant capacity.

EO Mark Vergnano stated, “Our first quarter performance was a solid start to 2016 as we continue to execute on all aspects of our transformation plan —reducing cost, growing market positions, optimizing our portfolio, enhancing our organization and refocusing investments. We realized over $40 million of transformation plan savings in the first quarter, and we continue to have line of sight to $200 million of savings in 2016”.

Vergnano went on to say that demand for Opteon refrigerant  grew significantly as automotive manufacturers prepared  for new refrigerant regulations.

“We made steady progress on the strategic review of our Chemical Solutions segment with the signing of a definitive agreement to sell the C&D business. We strengthened our organization through the addition of new leaders in key roles. Finally, our working capital initiatives across all our businesses resulted in a notable year-over-year reduction of seasonal cash use that, in turn, improved free cash flow considerably. Overall, we made steady progress across all fronts,” Vergnano said.

First quarter net sales were $1.3 billion, a decrease of 5 percent from $1.4 billion in the prior-year quarter.

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First quarter net income was $51 million  versus net income of $43 million during the same period a year ago.

Lower average prices in Titanium Technologies and approximately $22 million of unfavorable currency movements were partially offset by improved profitability in Fluoroproducts and Chemical Solutions versus the prior-year quarter.

Cost-cutting efforts have included the closing of the Chemours Edgemoor site last year as prices  slid.

In a related note, the company  announced its decision to invest in new Opteon capacity.

The $230 million   investment will establish the world’s largest hydrofluoroolefins (HFO) manufacturing facility positioned closest to the biggest regulated markets – the United States and the European Union.  Start-up is slated for   2018 at the plant near Corpus Christi, TX.

The  new facility will triple Chemours’ Opteon  capacity to meet growing market demand for low global warming potential products into mobile air conditioning and refrigeration applications, the company stated.

In the first quarter, the company continued its strategic review and streamlining of the Chemicals Solutions segment. In March, the company completed the sale of its Beaumont Aniline facility to The Dow Chemical Company for $140 million, and, in April, Chemours announced the sale of the C&D business to LANXESS for $230 million. The company expects to close the C&D transaction in the second half of 2016.

The company continues to have $3.6 billion in debt net of cash, a heavy burden that came out of the spin-off from DuPont.

As previously reported, the company and its lenders entered into an amendment of its existing credit agreement during the first quarter. Chemours believes that this agreement, along with the DuPont prepayment, provides enhanced liquidity and flexibility to implement the company’s transformation plan.

Vergnano  stated: “We remain focused on improving our profitability in Titanium Technologies, getting the business back to acceptable profitability levels through cost reductions and modest price increases that will support our reinvestment requirements for long-term, quality supply for our customers. We began implementing TiO2 price increases globally in the first quarter, ending the quarter with global average prices higher than we started. We fully expect our new Altamira (Mexico)  TiO2 line to be begin commercial operation in the second quarter, as planned. Flawless execution of our transformation plan is putting us well on our way to $500 million of improved EBITDA in 2017 over 2015, significantly improving free cash flow and reducing our net leverage.”

 

1 Excludes $166 million of benefit from DuPont prepayment.

 

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