Slide 1: Second-Quarter Preliminary Results July 30, 2008
Second-Quarter Preliminary Results July 30, 2008
Slide 2: Forward-Looking Statements
This presentation should be read in conjunction with the news release of Tronox dated July 30, 2008, available at www.tronox.com and Tronox's filing with the Securities and Exchange Commission available at www.sec.gov. Forward-Looking Statements: Some information in this presentation regarding the c
Slide 3: Agenda
AGENDA § Financial Highlights Mary Mikkelson Senior Vice President and Chief Financial Officer § Second-Quarter Performance Robert Gibney Vice President, Corporate Affairs § Perspective and Key Strategic Initiatives Tom Adams Chairman and Chief Executive Officer
Slide 4: Credit Agreement Amendment
CREDIT AGREEMENT AMENDMENT Financial Covenant Amendment Leverage ratio amended Interest rate unchanged LIBOR plus 350 basis points Additional 50 basis points if leverage ratio > 4.25x Reasons for Amendment Rapidly escalating input costs in Q2 Q2 production difficulties Ongoing weak U.S. economy Leve
Slide 5: Debt and Cash Balances
DEBT AND CASH BALANCES $540.1 Total Debt $516.8 Net Debt $69.0 Debt Outstanding on Revolver $23.3 Cash and Cash Equivalents At 6/30/08 ($MM)
Slide 6: Financial Review: Working Capital
FINANCIAL REVIEW Working Capital Inventory drawdown due to increased sales Inventory, Receivables and Payables Inv., Rec., & Pay. (Days) Change in Inv., Rec., & Pay. ($MM) 93 103 113 123 133 143 Start 2006 2007 2008 2009 2010 Q1-06 Q2 Results / Target Inv., Rec., & Pay. (Days) ($169) ($135) ($101) (
Slide 7: Financial Review: SG&A
FINANCIAL REVIEW SG&A ($MM) $139 $108 - $111 2008P $118.5 22% Reduction IPO* Run Rate 2007 *As adjusted for reclassifications $127.3 2006 Second-Quarter 2008 $2.8MM decrease vs. 2007 period Restructuring: eliminated ~70 positions, resulting in ~$8MM savings annually One-time charge in Q2 of $4.2MM 1
Slide 8: Financial Review: Q2 2008 Financial Items
FINANCIAL REVIEW $108 - $111 $27.2 SG&A $115 - $117 $45 - $48 $48 - $52 FY 2008P $29.0 Depreciation and Amortization $12.7 Interest Expense $7.3 Capital Expenditures Q2 2008 Financial Items ($MM)
Slide 9: Environmental
ENVIRONMENTAL § Reserves down from $239MM at IPO to $183.8MM at end of Q2 2008, receivables ~$63MM § Excludes anticipated future receivables of ~$27MM from DOE for West Chicago § Reimbursements: DOE, DOD § Pursue PRPs § Insurance, land sales § Kerr-McGee / Anadarko Total Spend n $137 $121 $98 $85 $6
Slide 10: 2Q 2008 Preliminary Results
2Q 2008 PRELIMINARY RESULTS ($MM) Q2 2008 Q2 2007 Net Sales $ 403.8 $ 366.5 Cost of Sales (403.6) (336.5) Gross Margin 0.2 30.0 SG&A (27.2) (30.0) Gain on Land Sales 12.4 - Restructuring Charge Impairment Charge (4.2) (13.5) - - - Provision for Environmental Remediation Net of Reimbursements Loss fr
Slide 11: Q2 2008 EPS Bridge vs. Q2 2007
Q2 2008 EPS BRIDGE VS. Q2 2007 * Cornerstone reflects quarter-to-quarter comparisons and does not include cumulative $93MM cash cost reductions Continuing Operations Based on 41MM diluted common shares outstanding as of 6/30/08 Uerdingen and Kwinana production difficulties accounted for $0.32 of the
Slide 12: Process Chemicals
PROCESS CHEMICALS Source: CMAI US$ / lt Chlorine US$ / mt Caustic Soda Sulfur * U.S. Caustic & Chlorine Prices Source: Pentasul * Cost and freight for sulfur delivered to Central Florida As a percent of manufacturing costs, process chemicals were ~15% higher in Q2 2008 vs. Q2 2007 and ~5% higher in
Slide 13: Freight (Inbound/Outbound)
FREIGHT (Inbound/Outbound) Source: Clarksons PLC 2001 2002 2003 2004 2005 2006 2007 2008 Earnings / day - USD Baltic Supramax Index (Inbound Freight) TiO2 outbound freight costs increased ~16% in Q2 2008 vs. Q2 2007 and were relatively flat in Q2 2008 vs. Q1 2008 Challenges: increasing fuel surcharg
Slide 14: Energy
ENERGY Energy Cost by Location 47% Europe 8% Asia-Pacific 45% U.S. Energy costs as a percent of manufacturing costs increased ~3% in Q2 2008 vs. Q1 2008 TiO2 projected energy cost increase of ~15% in 2008 vs. 2007 Energy Accounts for 13% to 15% of Manufacturing Costs Energy Cost by Type 27% Electric
Slide 15: Pigment
PIGMENT Net Sales § Strong demand in Asia-Pacific § Effects of FX § Increased pricing on acid sales Production § Capacity utilization: ~90% (decrease due to Kwinana and Uerdingen production difficulties) Operating Loss § Increased input costs § Production difficulties at Kwinana and Uerdingen § Non-
Slide 16: Electrolytic
($MM) Net Sales ELECTROLYTIC $26.3 $29.4 Q2 2007 Q2 2008 Executing Cornerstone Strategies § Chlorate low-capital expansion § Boron business market development § EMD higher end products EMD Antidumping Nearing Conclusion § Australia and China importers to U.S. must post bonds at preliminary determina
Slide 17: Land Sales Progress
LAND SALES PROGRESS § Weak U.S. economy § More difficult for buyers to secure financing § Residential development slow § Commercial development beginning to be impacted Land sales gains of $12.4MM recognized in 2Q 2008 § Small parcel in Henderson, Nev. § Parcel in Oklahoma City Total YTD land sales
Slide 18: Cornerstone Execution
CORNERSTONE EXECUTION § Cumulative cash cost reductions of $93M since July 2006 § Teams ahead of schedule Achieved $15MM in additional cash cost reductions in Q2 Expect total cost reductions of more than $30MM for 2008, with cumulative cash cost reductions exceeding $100MM by year end Continuing wor
Slide 19: TiO2 Pricing Environment
TiO2 PRICING ENVIRONMENT Market Fundamentals § Global demand: ~3% increase projected for 2008 § Capacity utilization: ~94% - 96% § Inventory levels slightly below seasonal norms Price Increases Needed to Offset Rising Costs § Caustic, chlorine, petroleum coke § Freight costs § Energy Global 1.3% 1.6
Slide 20: TiO2 Pricing Environment: Asian Supply/Demand
TiO2 PRICING ENVIRONMENT Asian Supply / Demand Tightening - Impacting Global Supply Expect substantial implementation of July 1 price increase across Asia Supply impacted by competitor's Australian plant outage and Chinese earthquake Second Round Of Price Increases Announced by Tronox and Industry S
Slide 21: 2008 Actions
2008 ACTIONS Goals Actions Status Cost Structure § Q1: Increase Cornerstone cash cost reduction targets $8MM for 2008 projected total savings of $30MM Pursue additional savings initiatives - total expected savings of >$100MM by end of 2008 Uerdingen restructuring plan $15MM in Q2 YTD: $23MM Cumulati
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