Slide 1: Second-Quarter Results
TRONOX Second-Quarter Results August 15, 2006
Slide 2: Forward-Looking Statement
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 stateme
Slide 3: Use of Non-GAAP Measures
This presentation contains operating profit and Adjusted EBITDA, which are Non-GAAP measures that are presented because they are used by management to monitor our business. In addition, Adjusted EBITDA is a material component of the covenants that are imposed on us by the senior secured credit facil
Slide 4: Tronox Second-Quarter Operating Results
Tronox Second-Quarter Operating Results ($MM) Net Sales Operating Profit Adj. EBITDA Adj. EBITDA Margin Diluted EPS from Cont. Ops. *(pro forma) $355.9 29.2 61.5 17.3% $0.21* 2006 2005 Second Quarter Ended June 30, $372.9 5.5 40.3 10.8% $(0.14)
Slide 5: 2006 Second-Quarter Summary
2006 Second-Quarter Summary Increased Cost of Goods Sold Energy (natural gas) Process chemicals (chlorine, coke & caustic) Maintenance Production Problems at Savannah Increased maintenance costs Lower production volumes Net Earnings in Unconsolidated Affiliates = $4.7MM Primarily land sale in Hender
Slide 6: Second-Quarter Results: Environmental Charge
Second-Quarter Results $7.7MM Environmental Charge to Discontinued Operations Net of tax Gross addition to reserves Majority of increase subject to future reimbursement from DOE for 55% Subject to future reimbursement from Kerr-McGee for $0.50 on every dollar, after DOE reimbursement
Slide 7: Segment Results
Segment Results Pigment Sales 5.3% Increase Over 2005 Q2 Good volume growth in Asia Pacific and Europe Pigment Prices Essentially Flat Q1 to Q2 Pigment Production: 144,500 tonnes Down 4% versus Q1 Savannah production disruption Electrolytic and Other Business
Slide 8: Financial Highlights
Financial Highlights Cash Flows used in Operating Activities Q2 2006: $1.0MM Capital Expenditures Q2 2006 = $22MM Projected FY 2006 capital expenditures = $90MM $81MM cash $ 9MM non-cash Term loan payment = $500,000 Term loan balance = $199MM
Slide 9: Outlook
Outlook Perspective on Quarter Strategic Plan and Project Cornerstone 2006 Outlook
Slide 10: Q1 to Q2 Bridge
Q1 to Q2 Bridge Additional Impacts Q1 2006 Actual Process Chemicals / Energy / Maint. Q2 2006 Prior Guidance Production Problems FX Q2 2006 Actual
Slide 11: Process Chemicals & Energy
Process Chemicals & Energy Energy Natural gas hedging Q1 = $11.46/mmbtu* Q2 = $7.41* Q3 = $7.50** Q4 = $8.79** Chlorine & Caustic Prices peaked in Q1 2006 Prices are expected to decline throughout 2006 Source: CMAI average market data Source: CMAI average market data Source: CMAI average market data
Slide 12: Q2 to Q3 Bridge
Q2 to Q3 Bridge Q2 2006 Actual Process Chemicals / Energy Maint. Mix Q3 2006 Prior Guidance Additional Impacts FX Q3 2006 Guidance Electrolytic Volume Chandala Shut- down
Slide 13: Chandala Synthetic Rutile Operation
Chandala Synthetic Rutile Operation Chandala Synthetic Rutile Operation Rotary Kiln
Slide 14: Project Cornerstone Update
TRONOX Project Cornerstone Update August 2006
Slide 15: Cornerstone History and Project Flow
Cornerstone History and Project Flow Benchmarking & Competitor Analysis Target Setting & Board Approval Team Formation & Planning Execution IPO Q1 Q2 Q3 Tom Adams Champion
Slide 16: Top Quartile Benchmarking
Top Quartile Benchmarking Note: All values are 2 year averages Operating Cash Costs Capital TRX Top Quartile Net Sales 100% 100% Cash Cost of sales 75% 71% Freight 4% 4% SG&A 10% 9% Total Cash Costs Cash as % of sales 89% 84% Gap to Target $60MM
Slide 17: Working Capital Benchmarking
Working Capital Benchmarking Cash-to-Cash Gap to Competitors Inventories: Finished Goods, Raw Materials Receivables Improvement Target $100MM in working capital Tronox Cash-to-Cash Gap Analysis Trailing 12 Months Inventory Receivables Payables Cash-to-Cash Days +/- Peer Average Illustrative
Slide 18: Project Cornerstone Overview
Project Cornerstone Overview Cornerstone Targets Cash Cost: $60MM Working Capital: $100MM Maintenance Capital Spend: $20MM Land Sales: $100MM Initiative Teams Operations/Supply-Chain Excellence SG&A Productivity Quality Improvement Electrolytic Growth Environmental Spend Accelerated Land Sales Capit
Slide 19: Cornerstone Cash Cost: Operating
Cornerstone Cash Cost: Operating Scope Manufacturing expenses Supply-chain costs Cost of quality Strategy: "Doing Things Differently" Process optimization and Six Sigma Lower cost, alternative materials Low-cost country / competitive sourcing Waste reduction and by-product sales Manufacturing excell
Slide 20: Cornerstone Cash Cost: SG&A
Cornerstone Cash Cost: SG&A Scope Outside services Discretionary spending Benefits Strategy: Complexity reduction and re-engineering Systems and processes Organizational productivity Outsourcing Processes Benefits Right-costing activities Target: $10-15MM
Slide 21: Case Study: IT Systems Right-Costing
Case Study: IT Systems Right-Costing IT Systems & Services Select Savings Examples: Outsourcing of data center Right-sized key systems and services Cost-effective hardware platform Competitive licenses Mid-Size Chemicals Large Chemicals Tronox IT Benchmarking IT % of Revenue
Slide 22: Cornerstone: Working Capital
Cornerstone: Working Capital Scope Finished goods inventories Raw materials and MRO inventories Receivables Strategy: "Blocking and Tackling" Inventories Sales and operations planning Consignment for MRO and raw materials Receivables Target: $100MM
Slide 23: Cornerstone Execution
Cornerstone Execution Tom Adams Champion Cash Cost Team Marty Rowland Op Costs Steve Wachnowsky Supply-Chain Greg Thomas SG&A Robert Brown Cost of Quality Kelly Green Electrolytic Paul Gutwald Cash Team Mary Mikkelson Inventories Kelly Green Receivables John Romano Capital Marty Rowland Add'l Land S
Slide 24: Cornerstone Execution: Implementation Timeline
Cornerstone Execution Millions of $ Implementation Timeline Implementation Timeline Millions of $ Quality, Electrolytic
Slide 25: Outlook
Outlook Fundamentals Remain Strong Operating rates >90% Inventories at or below seasonal norms Global demand >4% Price Increases North America Europe Asia/Pacific Japan US$0.04/pound €130/tonne US$100/tonne Yen 30/kilogram July July Aug. April 1, 15, 15, 1, 2006 2006 2006 2006
Slide 26: Second-Quarter Results
TRONOX Second-Quarter Results August 15, 2006
Slide 27: Slide 27
Slide 28: Tronox Incorporated: Operating Profit Reconciliation
TRONOX INCORPORATED Operating profit is not @ presentation made in accordance with generally accepted accounting principles, or GAAP. The following table reconciles operating profit to income (loss) fram continuing operations for the periods presented. Second Quarter Ended Six Months Ended June 30,
Slide 29: TiO2 Pigment
TiO2 Pigment Quality-of-life Product, no effective substitutes Unsurpassed Opacifying and Whitening Properties Paints & coatings, plastics, paper, consumer products and specialties Semi-specialty, differentiated and frequently customized customized customized customized customized customized customi
Slide 30: Company Overview
Company Overview Began TiO2 operations 40 years ago IPO on Nov. 22, 2005 Tronox traded on NYSE under "TRX" and "TRX.B" Leading supplier of TiO2 utilizing chloride and sulfate technologies #3 global producer; #2 via proprietary chloride process Gross production capacity of 624,000 metric tons Strong
Slide 31: Global Producer / Strong Leadership Position
Americas Europe Asia-Pacific Huntsman Kronos Others East 0.48 0.31 0.21 0.11 0.11 0.28 DuPont Lyondell Tronox Huntsman Kronos Others East 0.23 0.14 0.13 0.11 0.11 0.28 Global Producer / Strong Leadership Position Highly concentrated industry - top 5 producers account for ~70% of global production #3
Slide 32: Global TiO2 Manufacturing Operations
Location M Tonnes Hamilton 225 Savannah 110 Kwinana 110 Botlek 72 Uerdingen (Sulfate) 107 Global Capacity 624 Global TiO2 Manufacturing Operations Strategically located plants effectively serve global markets Experienced operational management and plant-level leadership 1998 1999 2000 2001 2002 2003
Slide 33: Integrated Western Australia Operations
Integrated Western Australia Operations Integrated Western Australia Operations