Slide 1: Fourth-Quarter Preliminary Results
FOURTH-QUARTER PRELIMINARY RESULTS February 13, 2008
Slide 2: Forward-Looking Statement
Tronox makes certain forward-looking statements in this presentation that are subject to risks and uncertainties. These statements are based on the beliefs and assumptions of our management and on information currently available to our management at the time of such statements. Forward-looking state
Slide 3: Agenda
AGENDA § Financial Highlights Mary Mikkelson Senior Vice President and Chief Financial Officer § Fourth-Quarter Performance and Land Sales Update Robert Gibney Vice President Investor Relations and External Affairs § Perspective and Key Strategic Initiatives Tom Adams Chairman and Chief Executive Of
Slide 4: Financial Review
FINANCIAL REVIEW Tax Valuation Charge Covenant Amendments Cornerstone Cash to Cash Mar. 31 2006 Dec. 31 2007 (In days) 143 121 Cash Flows from Operating Activities FY 2006 FY 2007 ($MM) $ 111.6 $ 95.3 Inventory, Receivables & Payables Working Capital and Cash Flow
Slide 5: Balance Sheet
BALANCE SHEET $73MM Reduction in Term Loan Since IPO § $50MM accounts receivable securitization § $23MM free cash flow Outstanding Debt as of Dec. 31, 2007 § Term Loan $127 § Australian debt 8 § Senior Unsecured Notes 350 Total $ 485 2005 2006 2007 6/30/1905 195 190 147 127 ($MM) Term Loan $190 $127
Slide 6: Selling, General and Administrative (SG&A)
2006 2007 2008 East 139 118 112 SELLING, GENERAL AND ADMINISTRATIVE (SG&A) Project Cornerstone Reductions § Efficiency improvements § Restructuring § Retiree medical contribution changes § $93MM reduction in postretirement obligation § Lower retiree medical costs SG&A ($MM) $139 $113 - $116 IPO* 200
Slide 7: Financial Items
FINANCIAL ITEMS Financial Items ($MM) Q4 2007 FY 2007 2008 Outlook Interest Expense $12.6 $50.1 $50 - $55 Capital Expenditures $19.4 $70.9 $62 - $65 Depreciation and Amortization $29.5 $112.3 $108 - $110
Slide 8: Environmental
ENVIRONMENTAL Environmental Items ($MM) FY 2007 2008 Outlook Gross Spend $52 Reimbursements $19 Net Cash Spend $33 $40 - 45 As of 12/31/07 § Financial reserves = $189MM § Receivables for reimbursements = $68MM § Excludes anticipated future receivables of ~$30MM from DOE for West Chicago Mitigating I
Slide 9: Fourth-Quarter Preliminary Results
FOURTH-QUARTER PRELIMINARY RESULTS Higher volume, FX, freight costs and fixed asset abandonment of $4.9MM Includes tax valuation charge of $29.5MM $(0.56) excluding unusual items ($MM) Fourth Quarter 2007 Fourth Quarter 2006 Net Sales $ 357.6 $ 328.5 Cost of Sales 339.8 293.0 Gross Margin 17.8 35.5
Slide 10: Q4 2007 EPS Bridge vs. Q4 2006
Q4 2007 EPS BRIDGE VS. Q4 2006 0.19 (0.39) (0.24) (0.06) 0.14 (0.10) 0.14 (0.86) (0.22) (1.41) 0.85 (0.56) (2.50) (2.00) (1.50) (1.00) (0.50) 0.50 1.00 1.50 As Reported Prior Year Restructuring and Arbitration Prices Costs Cornerstone Freight SG&A Taxes / Other FX As Reported Unusual Items* "Adjuste
Slide 11: PPI Industrial Chemicals
Source: Census Bureau PPI Industrial Chemicals (1982 = 100) TiO2 Inputs PPI INDUSTRIAL CHEMICALS
Slide 12: Process Chemicals
PROCESS CHEMICALS Chlorine and Caustic Soda § Weak housing market and increased vinyl capacity in Asia-Pacific is putting pressure on chlorine pricing § Caustic soda tight due to lower chlorine production, increased exports and reduced imports. New capacity expected on stream in Q2 to ease market. S
Slide 13: Ocean Freight
OCEAN FREIGHT Baltic Supramax Day Rates 0 20,000 40,000 60,000 80,000 100,000 120,000 7/1/2005 10/1/2005 1/1/2006 4/1/2006 7/1/2006 10/1/2006 1/1/2007 4/1/2007 7/1/2007 10/1/2007 1/1/2008 Dollars per Day Earnings BSI Route S1A: Antwerp - Skaw Trip Far East BSI Route S1B: Canakkale Trip Far East BSI
Slide 14: TiO2 Pigment
TiO2 PIGMENT Sales Revenue § Strong Asia-Pacific, European and Latin American demand offset weak North American market Production § Capacity utilization low to mid 90s Operating Profit § Higher freight costs, FX and asset write off § Offset by lower SG&A and lower manufacturing costs as a result of
Slide 15: Electrolytic & Other Chemical Products
2006 2007 East 23 28 ($MM) Sales ELECTROLYTIC & OTHER CHEMICAL PRODUCTS 14% $23 $28 Q4 Q4 2006 2007 Executing Strategies § Chlorate production expansion § Boron market penetration § LMO rechargeable battery market growth EMD Antidumping Action Progressing § Preliminary determinations due March 2008
Slide 16: Land Sales Progress
LAND SALES PROGRESS Henderson Land Sales § NFA received in January § 53-acre parcel financing fell through for buyer § Pursuing other buyers at this time § Closed on sale of smaller parcel § Net proceeds ~$2MM 100%-Owned Land Progress LandWell Interest Progress LandWell 2,200-Acre Development Negoti
Slide 17: 2007 Key Actions Taken
2007 KEY ACTIONS TAKEN Debt Structure Reduced debt by $64MM to $485MM Cost Structure Reduced cash costs by $43MM through Project Cornerstone Product Pricing TiO2 - global price increases announced, working to implement ASAP Electrolytic - antidumping case for electrolytic manganese dioxide SG&A Rest
Slide 18: Cornerstone Execution
CORNERSTONE EXECUTION Status Summary § Teams ahead of schedule § Adding $12MM in additional savings to our cash cost reduction § Uerdingen efficiency project to add savings when process finalized § Capital reduction ahead of target Cash Cost Reductions $MM (Cumulative) $0 $15 $30 $45 $60 $75 $90 $10
Slide 19: TiO2 Pricing Environment
TiO2 PRICING ENVIRONMENT Market Fundamentals Support Higher Prices § Global demand up ~3% - 4% § Capacity utilization ~92% - 95% § Inventory levels below seasonal norms Increased Prices Required to Offset Rising Input Costs § Caustic, chlorine, petroleum coke § Freight costs § Energy Price Increases
Slide 20: Environmental Strategy
ENVIRONMENTAL Environmental Strategy § Reserves down from $239MM at IPO to $189MM at end of 2007, receivables ~$68MM § Pursuing number of mitigation strategies to reduce and contain future liability Legacy Risk Mitigation Strategies § Reimbursements: DOE, DOD § Pursue PRPs § Insurance, land sales §
Slide 21: 2008 Outlook
2008 OUTLOOK U.S. Economy and TiO2 Demand § TiO2 recessions typically lead U.S. recessions § Globalization of TiO2 business has dampened volatility § Continued strong demand in Asia and Europe will continue to provide an outlet for U.S. produced TiO2 § TiO2 global demand growth in 2008 estimated to
Slide 22: 2008 Actions
2008 ACTIONS Debt Structure u Covenant amendments approved by lenders Cost Structure Reduce cash costs by $22MM through Project Cornerstone, includes $12MM additional savings announced today Finalize Uerdingen efficiency study - announce additional savings when finalized Product Pricing TiO2 - imple
Slide 23: Q&A
Q&A