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TROX

Tronox Holdings NYSE:TROX Stock Report

Last Price

US$11.84

Market Cap

US$1.8b

7D

2.0%

1Y

-52.0%

Updated

29 Sep, 2022

Data

Company Financials +
TROX fundamental analysis
Snowflake Score
Valuation5/6
Future Growth1/6
Past Performance1/6
Financial Health4/6
Dividends3/6

TROX Stock Overview

Tronox Holdings plc operates as a vertically integrated manufacturer of TiO2 pigment in North America, South and Central America, Europe, the Middle East, Africa, and the Asia Pacific.

Tronox Holdings plc Competitors

Price History & Performance

Summary of all time highs, changes and price drops for Tronox Holdings
Historical stock prices
Current Share PriceUS$11.84
52 Week HighUS$26.33
52 Week LowUS$11.14
Beta1.89
1 Month Change-21.54%
3 Month Change-28.93%
1 Year Change-51.97%
3 Year Change57.03%
5 Year Change-52.37%
Change since IPO-26.46%

Recent News & Updates

Sep 13
Tronox Holdings (NYSE:TROX) Takes On Some Risk With Its Use Of Debt

Tronox Holdings (NYSE:TROX) Takes On Some Risk With Its Use Of Debt

David Iben put it well when he said, 'Volatility is not a risk we care about. What we care about is avoiding the...

Aug 31

Tronox Has Reducing Cyclicality, Pricing Backstops, Reinvestment Economics And Tax Assets

Summary Margin stability agreements coming further into force helping reduce cyclicality, and competitors are getting hamstrung by higher input costs as less ilmenite enters the market from iron ore. Moreover, prices continue to rise for zircon and titanium oxide in their markets, indicating that their use cases in things like housing are not slowing down yet. The APAC exposures seem to not be forming a problem, and the company is guiding for improved pricing in Q3 to drive continued sequential net income growth. Investments in lower-cost replacement mineral sand mines look very promising and show an important reinvestment sink for the company that should justify higher multiples. Zircon volume recovery should create more scale and reduce costs on top of newTRON. Published on the Value Lab 26/8/22 We are learning more about Tronox (TROX) and it appears very cheap at the moment. There are reinvestment economics to the business. There are tax assets that create a margin of safety around price. They are reducing cyclicality by offering contracts with margin stabilization to customers. Finally, their markets have offsets in an environment of general commodity decline and are highly advantaged where capacity in their industry has been underinvested. Their scale will grow with their new mine coming online and providing more high grade zircon especially, which has seen meaningful volume decline, and despite substantial APAC exposure, we are still not seeing meaningful hits from end-markets on their results. Also, they are a bet on continued geopolitical tensions due to their access to titanium feedstocks. Quick Primer Before we discuss the points to the thesis, a primer on what Tronox does. They are vertically integrated and own mines of mineral sands that produce zircon (typically considered a byproduct but with value in ceramics and tiles important for APAC exposure but also gets used in specialty chemicals) and also all the elements that form feedstock for titanium. These are acquired from a separation process of elements mined from mineral sands deposits. Ilmenite is a well known one, and these titanium feedstocks are put through slaggers and through other processes to get titanium dioxide for paints and coatings. They happen to have an option on a slagger operation in Saudi Arabia as well as capacity already owned by them. These feedstocks can also be used to make titanium sponge which are used in defense and aerospace but this is not Tronox's business. TiO2 and zircon have a pretty decent exposure in the housing market. 35% of Tronox's exposure of zircon in China is for ceramics which is driven primarily by housing markets. But coatings and paints in general have plenty of housing exposure, but also industrial and chemical industry applications. All the Mitigating Factors to Softening Macro There are so many moving parts that investors should take into account from the Q2 that we will do a list of all the things supporting the business in contrast to their EV/EBITDA multiple of about 3.5x, indicating a very late-cycle situation: They have lost scale temporarily because they liquidated spare zircon inventories in 2021 to keep up sales. Volumes declined 38% YoY because of the extraordinary contribution of those inventories to sales last year. Price also went up 47% which did offset revenue declines to being only 8% YoY, and 5% decline sequentially. New major mines are coming online towards the end of the year that will restore zircon volumes and therefore fixed cost absorption. Unit margins will improve at that point. Timelines on Mines (Q2 2022 Pres) The new mining project will take about $175 million in CAPEX in 2022 and be replacing waning capacity in the Snapper and Gingko mines. The grade of zircon will be higher in this new mine, and its costs should be lower. As this mine takes over (in late 2022) for the older ones and frictions in passing the baton disappear, we should see operational improvements that lead to margin expansion. The CAPEX burden imposed here is more than half of the typical annual CAPEX. It will be about 7% of the company's PPE after one year of investment. There shouldn't be any extraordinary CAPEX beyond this for the Atlas Campaspe mine for at least a while where it guarantees the feedstock need for at least 10 more years. With the company operating at maintenance CAPEX prior to this, around 10% of the fixed assets can be said to be of this latest project, and the IRR's are expected to be about 50% over a 5 year period of active development. Their mining assets that assure their procurement are evidently an excellent sink for reinvested income. NewTRON continues to be a CAPEX sink to provide $200 or so in per unit cost increases, which is about a 20-25% in per unit cost declines. Currently the contribution annually was $20 million in procurement savings Which is about 2% of EBITDA annually, but these are expected to grow about tenfold. They make incremental improvement yearly, so this will protect margins. The slowdown in commodities has some benefits to TROX's market. Ilmenite is a byproduct of iron ore mining. With a current gully in iron and steel markets, ilmenite from that avenue is not entering the market. As a key feedstock, this is raising industry TiO2 prices. Since TROX is vertically integrated for 85% of its feedstock, it lets them reap the benefits of increased pricing that competitors need to do to stay profitable, where their own costs are meaningfully controlled. Moreover, the mineral sands deposits are underinvested in terms of mining, and giants like Rio Tinto (RIO) have spoken to that. So the commodity decline has some mitigating factors for them. The current evolution in costs is being driven by a concert of input inflation growth. Things like sulfur dioxide and other chemicals are already coming down in price as the macro environment softens. The only thing that is still very expensive is energy prices including utilities, natural gas and oil. These together account for about 10% of the company's OPEX, and this part is going to be evidently more durable, and we estimate it at about a $300 million annual additional headwind, so about 75% of the overall headwind in production costs. These could come down as well if run-cuts at refineries due to lower product spreads, where product spreads are already lowering in the chemical space, also lead to declines in crude and natural gas. However, the geopolitical situation and speculation also plays a large role in the levels of those commodities.

Shareholder Returns

TROXUS ChemicalsUS Market
7D2.0%-2.8%-3.1%
1Y-52.0%-13.5%-21.5%

Return vs Industry: TROX underperformed the US Chemicals industry which returned -13.1% over the past year.

Return vs Market: TROX underperformed the US Market which returned -20.3% over the past year.

Price Volatility

Is TROX's price volatile compared to industry and market?
TROX volatility
TROX Average Weekly Movement6.4%
Chemicals Industry Average Movement6.4%
Market Average Movement6.9%
10% most volatile stocks in US Market15.7%
10% least volatile stocks in US Market2.8%

Stable Share Price: TROX is not significantly more volatile than the rest of US stocks over the past 3 months, typically moving +/- 6% a week.

Volatility Over Time: TROX's weekly volatility (6%) has been stable over the past year.

About the Company

FoundedEmployeesCEOWebsite
n/a6,500John Romanohttps://www.tronox.com

Tronox Holdings plc operates as a vertically integrated manufacturer of TiO2 pigment in North America, South and Central America, Europe, the Middle East, Africa, and the Asia Pacific. The company operates titanium-bearing mineral sand mines; and engages in beneficiation and smelting operations. It offers TiO2 pigment; ultrafine specialty TiO2; zircon; feedstock; pig iron; titanium tetrachloride; and other products.

Tronox Holdings plc Fundamentals Summary

How do Tronox Holdings's earnings and revenue compare to its market cap?
TROX fundamental statistics
Market CapUS$1.83b
Earnings (TTM)US$585.00m
Revenue (TTM)US$3.66b

3.1x

P/E Ratio

0.5x

P/S Ratio

Earnings & Revenue

Key profitability statistics from the latest earnings report
TROX income statement (TTM)
RevenueUS$3.66b
Cost of RevenueUS$2.71b
Gross ProfitUS$957.00m
Other ExpensesUS$372.00m
EarningsUS$585.00m

Last Reported Earnings

Jun 30, 2022

Next Earnings Date

Oct 26, 2022

Earnings per share (EPS)3.79
Gross Margin26.12%
Net Profit Margin15.97%
Debt/Equity Ratio108.5%

How did TROX perform over the long term?

See historical performance and comparison

Dividends

4.2%

Current Dividend Yield

12%

Payout Ratio