Chemours
December 1, 2017
09:00 AM EST
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Chemours
December 1, 2017
09:00 AM EST
Moderator: [Slide 1] Ladies and gentlemen, please welcome Chemours Treasurer and Director of
Investor Relations, Alisha Bellezza.
Alisha Bellezza: [Slide 2] Good morning, everyone. Welcome to Chemours Company's first Investor Day.
[Slide 3] As you know, a core value of Chemours is our commitment to safety. And in
that spirit, I want to take a minute to address where the emergency exits are located.
There are three exits on this floor as you can see on the slide. The closest exit to this
room is on my left in the back. Lunch will be held in Siebert Hall and the nearest
emergency exit to that room can be found within the elevator bank which is to the left
and down the hall.
[Slide 4] I also want to remind you that comments made today, as well as additional
information provided in our presentations, may contain forward-looking statements that
involve certain risks and uncertainties including those described in documents that
Chemours has filed with the SEC. [Slide 5] I also want to take a minute to remind you
that we'll be using some Non-GAAP measures today and you'll be able to find an
appendix with those measures on our website at the conclusion of the event.
[Slide 6] And finally, I just want to do a quick run through of today's activities. The
agenda today will begin with our President and CEO, Mark Vergnano. He'll be followed
by the three business presidents who will give you some overviews of each of our
segments. And Mark Newman, our CFO, will wrap up the day with a view on our
financial outlook and capital allocation plan.
We ask that you hold all questions to the end of the presentation so that we can remain on
schedule, and we'll do a formal Q&A at the end of the event. We would invite you to
join us for lunch in Siebert Hall following the conclusion of Q&A. Before we start the
formal presentations with Mark, I'd like you to take a look at this short video.
[video plays].
[BREAK]
Moderator: [Slide 7] Ladies and gentlemen, please welcome Mark Vergnano, President and CEO of
Chemours.
Mark Vergnano: [Slide 8] Good morning, everyone. We're delighted that you're joining us for our very
first Investor Day for the Chemours Company. We've been on quite a journey since
2015. Reliving some of those headlines you just saw in the opening video, for me brings
back memories of trepidation, of exhilaration, resolve and achievement, transforming and
being transformed. So today we will briefly take you through what we've accomplished
so far, but more importantly, where we see our company going over the next 3 years and
beyond.
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At Chemours, we pride ourselves on being open, something you've come to know and
expect. And today will be no different. We'll give you our assessment of what the future
holds and do our best to address the questions that you might have for us. But first I
thought it would be good if we just take a look back. As you know, Chemours became an
independent company 2.5 years ago, formed from DuPont's Performance Chemical
segment which included their TiO2, Fluoropolymers, Fluorochemicals, and Chemical
Solutions businesses. At spin, it became abundantly clear that the strength of our
portfolio with its world leading brands and market positions was being overshadowed by
an uneasy market sentiment fueled by legacy, liabilities and significant debt. We
definitely had our work cut out for us. Our most urgent task was to prove to everyone,
especially our customers and our investors, that we have the knowhow, the grit and a
commitment to execution that would enable us to fulfill our mission to become what we
call a higher value chemistry company.
We developed a 5-point transformation plan in August of 2015, our roadmap for getting
from good to great. Our plan spelled out very clear targets and ambitions goals all the
way through the end of this year. This was all about getting our house in order so that the
true investable value of our portfolio could shine through. A sense of urgency and a
well-designed plan gets you exactly nowhere without a very talented leadership team and
a workforce that's focused on creating a better tomorrow, and I believe we have that.
Together we bought the energy and enthusiasm of a startup, a 200-year old startup as we
sometimes call ourselves, along with the shared vision and optimism that comes from
being on the ground floor of something big, something that has the potential to bring
great value to customers and investors alike.
[Slide 9] While many of you have probably heard some of this before, I think it's useful
to quickly touch on the components of our transformation plan that you see here on the
screen. We committed to 5 specific points. Number 1, to reduce costs by $350 million.
Number 2, to optimize our portfolio into a targeted group of what we would consider
investable businesses. Number 3, to grow our market positions so that we could increase
adjusted EBITDA by an additional $150 million. Number 4, to refocus our investments
on high return opportunities. And number 5, to enhance our organization by building a
nimble, entrepreneurial culture that puts our customers at the center of everything that we
do. In total, we committed to deliver $500 million of adjusted EBITDA improvement by
yearend 2017 and reduce our net debt to EBITDA leverage ratio to approximately 3x by
yearend 2017.
When we first announced our transformation plan, some people expressed doubt that is
was more of an aspiration than a realistic opportunity. But it proved to be just the
blueprint that we needed to build the company we all knew Chemours could be. Our
focus on cost reductions have been intense. We closed our Edgemoore titanium dioxide
manufacturing site, we shut down an inefficient TiO2 line at our plant site in New
Johnsonville, Tennessee, as well as an obsolete production line in our Fluoroproducts
business. We've made strategic and disciplined purchasing decisions and reduced our
global headcount by nearly 20%. Easy decisions? Not one of them. But they were the
right decisions for Chemours.
These actions combined with an organizational resolve to find any and all cost reductions
that made sense, led to more than $300 million of benefit by the end of 2016. We are
committed to realize the additional $150 million with most of it being completed in 2018,
amounting to a cumulative $450 million of cost reductions since spin. I am personally
very proud of that achievement which is an achievement of this leadership team that's
here today and all of our colleagues around the world.
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In addition to reducing costs, we sold 3 businesses at EBITDA multiples of 10x to 12x
resulting in $685 million of gross proceeds. We shut down a reactive metals business in
Niagara, New York, and turned our Belle, West Virginia into a profitable venture, all in
the spirit of optimizing our portfolio. We grew our market positions through the startup
of our second TiO2 line at Altamira, bringing on low cost capacity to meet growing
customer demand and drove the adoption of our low global warming Opteon offerings.
Combined, these contributed over $150 million of incremental adjusted EBITDA. And at
the same time, our board of directors, being represented here today by our Chairman Dick
Brown, supported over $450 million in high return capital investments for our Opteon
and Mining Solutions facilities, supporting our commitment to refocus our investments
and support growing customer demand.
Enhancing our organization was more about shaping attitudes, refocusing energies, and
nurturing a startup climate than anything else. And our employee base has shown time
and time again that they fully embrace this new culture. A way of thinking, maybe a new
way of thinking, and behaving that gives life to our corporate values. Our results
hopefully to you speak for themselves. Our transformation plan powered tremendous
financial improvements in both our earnings and on our balance sheet. We made some
bold commitments and we delivered on those. Today we can officially declare that our
plan is complete and Chemours has been transformed. In fact, this afternoon we'll ring
the New York Stock Exchange closing bell to symbolically mark this achievement for
ourselves, our investors and our customers. And although this chapter in our young life
is officially behind us, the discipline we've developed in the drive to meet our
commitments is now deeply embedded in our DNA and will stay with us as we pivot
from transformation over to growth.
Our job since spin has been to earn your trust and your investment in Chemours. And
looking forward, our leadership team and our workforce are ready for the challenges that
come with growing our company. We will continue to push ourselves to realize our full
potential, basically earning our way to growth. We know that building trust is not one
and done. We must earn your trust every day by delivering on what we commit to do.
We completely understand that and that's a lesson we'll never forget.
[Slide 10] We now expect our 2017 adjusted EBITDA to be at the high end of the
previously announced range at approximately $1.4 billion. With that, we are on track to
see over $800 million of improved adjusted EBITDA from 2015 to 2017. Well over our
original $500 million target. And over that time, we've improved our margins by over
1000 basis points. This improved profitability alongside a disciplined focus on our
portfolio and capital investments has enabled us to increase our return on invested capital
from single digits in our early days to over 30% as of September 30. This was the
catalyst, along with excellent working capital management, for dramatically increasing
our free cash flow generation which is the currency as you know for growth and
deleveraging.
At the end of 2015, we had a debt position of about $3.6 billion translating into a
leverage ratio of over 6x adjusted EBITDA. Now we are sitting at just $2.6 billion of net
debt and about 2x of net leverage. This improvement has been recognized with our
recent credit agency upgrades from both Moody's and S&P. We have been thoughtful
about all our transformation plan actions to date. You have trusted us to take the right
actions and you've seen the value of those efforts, reflecting a total shareholder return of
over 150% since our spin. After today, we hope and expect you will trust us to deliver
strong returns going forward.
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[Slide 11] We've titled our first Investor Day, Higher Value Chemistry: Earning Our Way
to Growth. So what does higher value chemistry really mean to us? For us it's about
getting the most from the strength of our portfolio, our partnership, our performance and
our people. It implies thorough and careful thinking, planning and decision making that
yield high returns. It means acting quickly, turning on a dime to take advantage of
opportunities as they arise. And what's remarkable about our journey so far is not how
far we've come, but rather, how much more opportunity we have yet to unleash. It's all
about uncovering worlds of possibilities for improvement. The leaders of our 3
businesses are going to tell just how they plan to do that. You'll notice some recurring
themes. Strong market positions, a commitment to favorable cost structures, disciplined
growth strategies, and the ability to deliver solid top and bottom line growth.
Let me quickly address the 4 Ps of our higher value chemistry strategy. [Slide 12]
Portfolio. Our strategy revolves around enhancing our highly investable portfolio. A
portfolio that has the potential to grow faster than GDP and deliver industry leading
margins with exceptional returns on invested capital. A portfolio that we believe is
compelling for investment, yours and ours. But let's be clear, the pillar of our strategy is
not about a business portfolio that's linked by synergies, because it's not. No, it's a
portfolio that given our proven track record and world-class leadership team, we can
deliver great returns over and over again.
[Slide 13] Partnerships. We believe that collaboration is the fastest path to growth. Our
strong relationships with customers are some of our greatest assets. Listening to and
collaborating with our customers is essential and those relationships are strengthened and
enhanced when we continue to develop and deliver differentiated products. Products that
serve their needs as they grow. We know full well that our success is completely
conditional on theirs. Our collaborations will take different forms such as a partnership
with key market leaders in key geographies to accelerate our market penetration, like our
Fluoroelastomer joint venture with ChemChina. And to enhance our targeted R&D, we
are entering into a development agreement with the University of Delaware to build a
world-class research facility on their campus. Partnerships make Chemours a better
company, taking us places faster than we could do it alone.
[Slide 14] Performance. I believe we've demonstrated that we have and we strive to
meet, if not exceed, our performance goals and metrics. Our track record to date, our
performance culture, proves that commitment. For the next 3 years, we'll be focused on
generating revenue growth of 1x to 2x GDP through value stabilization in titanium
technologies, the expansion of Opteon refrigerants, application development in
fluoropolymers, and increased mining solutions capacity. Taken together, we expect our
businesses not only will grow their top line, but also compound the effect on profitability
by delivering EBITDA margin improvement by approximately 500 basis points. Which
means we anticipate growing adjusted EBITDA faster than we're growing revenue.
With this growth and improved margins, our portfolio will generate a significant amount
of cash over this 3-year horizon that we're addressing today. We expect to generate
cumulative cash flow of between $2 billion and $2.75 billion through 2020 and remain
committed to maintaining a very strong balance sheet. With that much cash generation,
we see tremendous flexibility in a number of options for pursuing growth, both through
internal investments as well as possible targeted M&A. And we recognize the obligation
of ensuring a balanced capital allocation including returning cash back to our
shareholders which we intend to do. We will continue our disciplined investment
approach focused on very, very high return capital projects. We expect this will translate
into sustained return on invested capital of greater than 30%. As we look at the strength
of our plans and future contributions, we believe we'll be able to deliver adjusted EPS
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growth in excess of 15% compounded annually through 2020. So here we go again with
an aggressive, yet we believe a very attainable plan intended to deliver value to all our
stakeholders.
[Slide 15] People. Back to our employees, really what is our life's blood. Our company's
ability to succeed is tired directly to the strength and motivation of its workforce. I am
proud to lead a team of incredibly talented and hardworking people. Our employees have
set us apart and will continue to do so. We have created a culture with clearly defined
and well communicated values, not the least of which is one we call collective
entrepreneurship. We encourage our people throughout our company at all levels to
speak out. If they see something that can be improved, they have the power to point it
out and help to find and implement the solutions. A year and a half ago, we formally
invited all our employees to offer ideas and propose initiatives for improving bottom line,
whether through savings or additional earnings. Literally hundreds of people came
forward with thousands of ideas. These initiatives formed the basis of how we were able
to put a plan together that became our transformation plan and one we delivered on.
As I've said before, looking for improvements in both cost reduction and commercial
opportunities is now engrained inside the DNA of every employee within Chemours.
Our employees know that their opinions, their perspectives, and their ideas really do
matter. They know that they own and will benefit from the positive outcomes that we
can all deliver together.
[Slide 16] I invite you to take another look at our portfolio through the lens of what we
call higher value chemistry. Chemistry that delivers what our stakeholders need in ways
that enhance margins as well as drive growth. In just a moment, Paul Kirsch will unpack
the Fluoroproducts business for you, describing the long-term opportunities for not just
our fluorochemicals business, but also the compelling prospects for our fluoropolymers
business. After that, Chris Siemer will review the exciting growth that we expect to
realize as we complete construction and begin operating our new Mining Solutions
facility located in the fastest growing gold mining region in the world. Then you'll hear
from Bryan Snell who will talk about our unique opportunities in Titanium Technologies
to bring sustainable value to the supply chain with predictable dynamics. Finally, our
CFO Mark Newman will pull everything together and show what it means for Chemours
and our investors, providing not only our view on the performance metrics I laid out, but
also our recently board-approved capital allocation strategy.
[Slide 17] For Chemours, advancing high value chemistry means delivering not simply
good outcomes, but great outcomes and with speed. It means being goal driven,
disciplined and forward looking. That's our mindset as a fiscally healthy, industry
leading company that's committed to putting our customers first. We will not let go of
that approach and I promise you we will not become complacent. We are fired up and
intend to stay that way. And with that resolve, we hope to continue to earn your trust and
your belief that we are not only a good investment, but a great investment. So I want to
thank you for your time and now let's move onto the business discussions starting with
Fluoroproducts. Paul?
[BREAK]
Moderator: [Slide 18] Please welcome President of Chemours' Fluoroproducts, Paul Kirsch.
Paul Kirsch: [Slide 19] Good morning everyone. My name is Paul Kirsch and I am the President of
the Chemours Fluoroproducts segments. Pardon the voice, I'm fighting something off
here. But today I want to share with you my thoughts on our 2 businesses within
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Fluoroproducts. One is the story of untapped potential and the other is a story of a global
technology transition. Both of these businesses are poised to deliver solid bottom line
and top line growth now and well into the future. In the time I have with you this
morning, I'd like to tell you how we intend to accomplish this. But first a bit about my
background. Before joining Chemours I spend the majority of my professional career in
the automotive industry in a variety of functions and far-flung geographies. My nearly 2-
decade long boot camp in the highly competitive automotive components business with
Delphi taught me that no amount of improvement is ever enough. Subsequent moves to
XM Radio, still the automotive business there, and then to a true startup, Hughes
Telematics, provided me with the opportunity to hone my entrepreneurial skills by
creating new business models, sometimes radically new business models. So these
experiences were all about speed. Frankly in a lot of cases, day to day survival, which I
put to good use in my next assignment at Henkel running the automotive, metals and
aerospace division there. There we created a thriving enterprise by working with our
customers to apply our products in new and novel ways. And now I'm with Chemours 18
months, exactly 18 months today. And I think that all that I have just shared with you is
preamble because those experiences have more than prepared me to lead a global team to
unlock untapped business potential as well as guide the global technology transition.
This is truly an exciting time to be at Chemours. We have an extensive portfolio of
unique products, ready access to customers, and an incredibly talented team of
professionals committed to growing our segment. We have the courage to change, we
have the ambition to succeed, and I think we've more than proven that over the last year.
So you may well be thinking, what gives him so much optimism about the future? Good
question. So to help answer it, I'd like to take a minute to look at the world around us and
how it's changing and then connect those changes back to our products. [Slide 20] So
let's start with these omnipresent devices. How many of you are happy with your phone?
Or let's just say satisfied with your phone? How many of you have said something
unkind about your phone in the last week? It's too slow, the signal is too weak, the
battery always needs more charge, and chances are if you're a teenager or frankly
anybody younger than me, you're probably running out of memory for your selfies. This
ever-increasing consumer need and demand for connectivity and content is driving the
need for faster speeds, more memory, and ubiquity of coverage. If you've ever been in a
traffic jam, you have a teenager driver or watched anxiously while someone tried to drive
and text, you most certainly understand how vehicle density and the need for safer travel
are driving the demand and development of autonomous vehicles. Hold that thought.
There is an ever-increasing demand for a wide array of products and processes that make
responsible use of our planet's resources. They include alternative energy vehicles,
hybrids, fuel cell, electric, just as an example. More fuel-efficient combustion engines,
new ways of managing our existing energy infrastructure and innovative ways of energy
extraction just to name a few. People want this kind of sustainable, solution driven
innovation and regulators the world over are responding.
Add to that population increases, especially in developing countries which create demand
for new food production, preservation and distribution. Each of these trends and many,
many more require either new technology or the expansion of existing technology. We
need faster microprocessors, denser memory, more and more sophisticated sensors, and
like it or not, more cameras. And that's just off the top of my head. Each of these
requires more sophisticated materials to advance the cause of progress. And it so happens
that the Fluorene molecule has just the properties that they need. And it just so happens
that Chemours is a pioneer in this space. We are well positioned to use our legacy
experience and the unique capabilities of our products to bring about these solutions.
That, ladies and gentlemen, is clear cause for optimism.
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So now, how are we going to turn unbridled optimism into business results? That starts
with an overview of the complete segment. [Slide 21] So through the third quarter of
2017, the Chemours Fluoroproducts segment generated approximately $2.6 billion in
revenue and $600 million in adjusted EBITDA on a trailing 12-month basis. We are a
global leader in both fluorochemicals and fluoropolymers, participating in a wide range
of end markets from air conditioning, refrigeration, automotive, the medical, energy and
consumer electronics. Guided by our 5-point transformation plan, we have grown our
segment adjusted EBITDA by nearly 50% and increased margins by over 1000 basis
points since 2015. Over that time, this segment has been a significant contributor to the
overall cost reductions of the company.
How? Well we've lowered cost of our plants, we've reduced or reallocated investments
where they have the most impact, and optimized our product lines all in support of the
journey we are on to unlock value by fundamentally managing our assets in a more
differentiated way. Another key growth driver in the plan you're about to see is our
ability to innovate. [Slide 22] We effectively invented the Fluoroproducts category in the
1920s and 1930s with the discovery of the fluorine based refrigerants and polymers. We
all know them by the brand names Freon and Teflon. And since then, we've invented
other recognizable fluoropolymer brands such as Krytox, Nafion, and Viton, each
successfully commercialized across a variety of industries and used in a number of
mission critical applications in jet engine components, semiconductor fabrication and
oxygen delivery systems for premature babies, just to name a few examples.
Fluorochemicals, which are used primarily for refrigerants and foam blowing agents,
have also advanced over time to drive more sustainable solutions and address regulatory
needs, transitioning from CFCs, the original Freon, to the latest refrigerant technology
with low global warming and zero ozone depleting potential which is branded as Opteon.
The big takeaway here, 90 years of experience and a broad portfolio of solutions for
today's problems and tomorrow's challenges.
[Slide 23] Now let's pause for a moment and address why the Fluorine molecule is so
special. One simple word answer. Stability. It's stability in almost any condition makes
fluoropolymers the clear choice when dealing with elevated temperatures, corrosive
chemical exposure, extended UV light exposure, high friction environments or
electromagnetic interference, all conditions found in many industries and many
applications. As technology advances and we move towards a smarter, faster, more
connected, more sustainable world, it is precisely these unique properties that make them
integral to many applications where other alternatives fall short, sometimes demonstrably
short.
So how do these products become high value solutions? [Slide 24] Historically, and this
is key, our innovation was rooted in fundamental research where products were
developed as basic material solutions with a very narrow application in mind. A very
product oriented approach. This R&D model if you will, gives you a deep understanding
of your technology but restricts scale and frankly sub optimizes value capture. And this
is precisely what we're changing. We are shifting from a product orientation to a market
orientation with an intense focus on trends like the ones I just presented that require the
unique performance of our fluorene based products. We see emerging opportunities to
expand into new markets and new applications, on enhancing the markets where we
already participate. For example, we are broadening the use of our fluoroelastomers used
in automotive applications to the consumer electronics space. Using our Viton products,
we've essentially created watchbands from automotive materials as an example.
Watchbands that are resistant to staining, discoloration, cracking and they're
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hypoallergenic to boot. Fluorine based technology allows performance under a wide
range of conditions and that's what's unique about it. And that accounts in large part to
its ever-increasing value as the technical challenges facing a growing number of
industries increase with no signs of slowing down. We are closely working with our
customers and value chain partners to identify more opportunities where products can be
used to solve new and more demanding problems. And our current position within many
attractive markets opens the door to expand our products into new applications and that's
how potential is unlocked and that's how value is created.
[Slide 25] So as you heard, our fluoropolymers are used in a wide variety of applications
across a broad spectrum of industries including military, medicine, construction, textiles,
energy, electronics and automotive. This has been a business with a lot of commodity
pressure and intense competition and we have faced this head on and made the strategic
decisions that have allowed us to grow. Make no mistake about it, this is a bread and
butter and core business for us and we will continue to be a market leader. [Slide 26]
Alongside our core business, we see even more potential. Certain trends are expected to
drive higher than GDP growth rates for differentiated fluoropolymers within the
electronics, energy and automotive markets.
These include faster data speeds, necessitating superior dielectric insulating properties
within and between electronic modules, smaller electronic devices like our phones,
requiring more efficient component packaging and better thermal stability. Smaller,
hotter vehicle engines which need higher temperature resistant components and the ever-
growing need for energy, creating demand for chemical resistant products only fluorine
materials can provide. And we're putting a much greater focus on these markets,
identifying new applications that will help address these demanding technical challenges.
So let's look at a few more examples in detail. [Slide 27] Within automotive, increasing
under hood temperatures, aggressive fluids, fuel composition changes and emission
regulations have created a greater than $1 billion market for fluoropolymers. We
estimate that this market is expanding at roughly 5% annually as a result of these trends
and our offerings are used in all major vehicle systems cross the entire automotive
industry. Fluoroproducts are found in everything from engines to chassis, electronics,
and of course HVAC applications. Our Krytox performance lubricants are commonly
used in chassis, power train and HVAC components. And Teflon fluoropolymers provide
high temperature and antifriction insulation for sensors. Our Nafion membranes are a
critical fuel cell component and Viton fluoroelastomers are a critical sealing component
used in many engine gaskets and hoses.
So let's take a closer look at the hoses to illustrate that point. [Slide 28] More rigorous
global emission requirements are driving smaller, more fuel-efficient engines. To
maintain sufficient power output, these smaller, hotter running engines are being outfitted
with turbochargers which use highly corrosive exhaust gases and need high-performance
materials to manage these gases. Fluoroelastomers are the only cost-effective technology
that can reliably withstand the demands of this environment. Let's take another look,
another example, of this potential in the electronics space. [Slide 29] We see an
increased need for fluoropolymers in electronics and communications, a roughly $1
billion market today, due to the demand for both better data speeds and ever smaller sized
components. This and the rising use of electronic circuits in general is expected to drive
approximately 8% to 10% growth for fluoropolymers over the next decade. Our strong
established presence in the electronics industry allows us to be a provider of choice with
a variety of our core technologies. Today, as an example, our fluoropolymers are found
in several applications from mobile phones to data centers. The versatility of our Teflon
offerings gives us multiple opportunities within the entire communications ecosystem.
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They're used to shield magnetic interference within mobile phone antennas, as insulation
for high speed LAN cabling in data centers and commercial buildings, as insulation for
earbud power and data cables, and for cabling found in network infrastructures like cell
towers. But that's today. What about the future?
[Slide 30] Well we see great opportunity for our fluoropolymers in the semiconductor
market. Every generation of electronics, and that's roughly a 12-month cycle these days,
provides increased functionality in a more compact space driving more and smaller node
sizes on semiconductors. This trend, along with the overall volume growth of circuits due
to the integration of chips and sensors and everything from refrigerators to clothing, is
creating a need for new chip production and new materials to produce them. In fact,
according to IHS, by 2020, semiconductor chip sales are anticipated to reach $450
billion, up from roughly $400 billion in 2017. The equipment to produce the
semiconductor chips has a network of chemical and fluid handling tubing valves and
fittings. These components are manufactured with ultra-high purity fluoropolymers
developed and produced by Chemours. And each fab plant has approximately 50 miles
of fluoropolymer tubes and pipes. More potential to unlock, more value to capture.
[Slide 31] Now let's consider the energy market. As smart grids develop and energy
storage needs increase, the use of fluoropolymers and renewable energy generation and
storage applications is expected to grow approximately 20% over the next 10 years. The
need to manage peak demand and surges is driving the installation of intermittent
renewable sources of power known as flow batteries which require ion exchange
membranes to perform at their peak. Our Nafion product line is the industry standard for
ion exchange membranes providing superior chemical and thermal stability, durability
and mechanical strength. Once again, we are uniquely positioned to address these
emerging applications and renewable energy production and storage.
[Slide 32] So, by diligently applying the 5-point, the principles of the 5-point
transformation plan, improving our mix, and working every single day to capture value
through better pricing, we have arrested the decline of the polymers business. Without
question, our results to date are promising, but we are convinced that much of the
potential of this business is yet to be tapped. You've seen examples of the wide range of
solutions these unique products provide today in a broad range of industries. The
unparalleled performance characteristics of fluorine based polymers make them perfectly
suited to address many of the demanding challenges our customers are facing as market
and technology trends place more demands on their products. As a customer centered
global team, we are working closely with our customers in developing a pipeline of
innovative solutions to address their most complex and demanding problems using our
unique portfolio of products and capabilities.
In the meantime, as these solutions make their way to market over the coming years, we
will protect and enhance our core business. We anticipate this work will drive topline
growth slightly above GDP and expand our margins as we shift to more differentiated
products. The benefits of this shift will become more pronounced on our bottom line
over time as more of our solutions reach full market potential. I can assure you, this will
be worth the wait.
Now let's move to the other half of our story, the fluorochemicals business. [Slide 33]
This is a story of a global technology transition to low global warming potential
refrigerants, foam blowing agents, propellants, and fire suppressors. As I mentioned
before, we created this market in the 1920s with the invention of Freon and have
remained the market leader to this day by developing innovative new technologies to
address evolving market needs and regulation. So let's look for a moment at the history
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of the transition from the original invention of CFCs to today's HFO refrigerants.
HFCs were developed in response to the discovery that CFCs had ozone depleting and
high global warming potential. With each new generation of fluorochemicals, the
potential environmental impact improved. Today, our HFO technology branded Opteon
has both low global warming and zero ozone depleting potential. [Slide 34] We're an
innovation powerhouse and we take justifiable pride in this. We take justifiable pride in
being recognized as such. You see here two prestigious awards that we were recently
granted, but I want to take a minute to emphasize that our new Opteon products provide
more than just low GWP alternatives to existing products. They reduce the operating
costs of our supermarket customers and improve the R-values of insulating foam using
Opteon 1100.
[Slide 35] As you may be aware, the fluorochemical industry is a highly regulated market
and these regulations have been a key driver for the adoption and transition of
fluorochemicals over time. Regulatory mandates in this market were first introduced in
1987 with the signing of the Montreal Protocol. This protocol implemented a phase out
of ozone depleting gases over a prescribed timeline. Since then, further regulations have
been developed to address the phasedown of HFCs. This slide summarizes the key
regulatory drivers that are currently in place as well as regulations that are under review,
primarily in the EU and US markets.
As you may know, the transition to low global warming potential products is largely
driven by caps, step downs and bans of HFCs or incentives to reduce carbon footprints.
Many automotive OEMs have chosen our Opteon refrigerants to meet the EU Mobile Air
Conditioning Directive commonly called MAC. It requires the use of a refrigerant with a
GWP of less than 150 for all new vehicles sold in the EU as of January 1, 2017. Our
MAC Opteon product for reference has a GWP of less than 1. Less than 1. Other
countries that have regulations in place similar to the EU directive include Turkey, Korea
and Japan. And the US MAC transition is being driven by US CAFE standards which we
expect full adoption by 2020. And we expect comparable regulations to be implemented
across the globe over the coming decades as developing countries continue to work to
phasedown HFC refrigerants used in automobiles.
EU FGas legislation and regulation are currently driving Opteon refrigerants in the used
stationary air conditioning, refrigeration and foam blowing markets. Given that the FGas
phasedown timeline is longer, Opteon adoption is expected to grow steadily rather than
the steep ramp we experienced from late 2016 mainly driven by MAC. It is worth noting
that the Kigali Amendment to the Montreal Protocol implements phasedowns across
nearly 200 countries. Phasedown timing differs from country to country beginning with
certain developed countries committing to reduce HFC consumption in 2019.
Developing countries are expected to begin phasedowns starting in 2024 and continuing
beyond 2040. According to the Institute for Governance and Sustainable Development,
the phase down of HFCs will have reduced the impact of the expected global temperature
rise by as much as 4/10 of a degree Celsius by 2050 and avoided the equivalent of
approximately 70 gigatons of CO2.
In stationery applications, we expect this technology conversion will contribute
significantly to topline growth. In addition, there is still demand for our base
fluorochemicals and we remain committed to supplying the needs of our customers with
both base and Opteon refrigerants.
Now let's take a look at the broader market and how it develops over time. [Slide 36] We
think of the fluorochemicals markets as 3 submarkets. Mobile, stationary and foam
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blowing agents. Each of these markets is expected to grow over the next decade with the
total fluorochemicals market increasing from $5.4 billion to $8.8 billion in 2025. Over
the same period, we would expect HFO adoption to accelerate while non-HFO
fluorochemical volume growth decelerates or in some regions declines as the regulatory
phasedowns kick in.
[Slide 37] You see that the transition to low global warming potential refrigerants differs
among these markets. Mobile air conditioning is leading the way, driven by the EU
MAC directive and the US CAFE standards. This market is expected to almost double by
2025 with much of the growth coming from HFO technology. And the majority of our
Opteon growth in 2016 and 2017 can be attributed directly to the mobile air conditioning
market. We expect to see continued steady growth of HFO for mobile air conditioning,
albeit a more muted trajectory than the last 18 months, as we cross the one-year
anniversary mark of the EU MAC implementation. We expect the mobile air
conditioning aftermarket to become a more meaningful growth driver in the coming years
as the installed base of vehicles using HFO increases. We estimate this market will grow
greater than 40% compounded annually over the next decade.
Stationary refrigeration which includes chillers, commercial refrigeration, residential air
conditioning, is expected to have a slower HFO adoption rate than MAC over the 10-year
period. However, we will see some margin benefits and the overall size of the stationary
market is expected to grow substantially with growth of both HFO and non-HFO
products. As a footnote, we expect the use of non-HFO products to grow due to their
anticipated increases in air conditioning and refrigeration systems in developing countries
as the demand for food preservation and basic comfort grows.
Given the size of this market and the long-term adoption timeline, we expect to see
volume growth for the foreseeable future. More specifically, we expect, we estimate the
average 10-year growth rate to be approximately 40% annually. But let's be clear, our
base refrigerants will remain an important part of our portfolio even as we support
phasedowns in developed countries. Foam blowing agents are a smaller part of our
overall HFO market, but still important. This segment is expected to reach full transition
to low GWP offerings within the next decade. Development of Opteon has allowed us to
enter this market with our Opteon 1100 launch and we believe that customers will choose
this product ahead of regulatory deadlines not only because of its environmental profile
but because it enables improved performance for them.
So let's summarize. Regulations in developed countries are expected to extend the
transition to HFOs over the next decade. Non-HFOs will also grow over this time period,
specifically in stationary applications as developing countries increase use, more than
offsetting some phasedowns in developed countries.
Fluorochemicals is a sizable and growing market and we will play there in meaningful
ways with both existing and future products. Opteon represents not only a significant
technological advance with respect to the environment, but it also provides our customers
with tangible operating and performance benefits. [Slide 38] So a fundamental question
in this space is, how do we protect this valuable investment? We have invested nearly $1
billion in research, development and commercialization resources to meet evolving
regulatory mandates. Along the way, we have developed and have access to multiple
layers of intellectual property across a wide range of offerings and countries. These
include our Opteon trademark, technical knowhow and trade secrets, and nearly 900
patents covering composition of matter, application use and manufacturing processes.
We actively defend this intellectual property while adding to it to protect these important
investments. Given the breadth and the depth of our patent portfolio, we are confident
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that it will provide the protection we need beyond 2020.
[Slide 39] So how else do we protect this investment? In addition to our IP, we are
putting our process technology expertise to work by building the largest, lowest cost HFO
production facility in the world which will use a proprietary process to ensure we
maintain our cost competitiveness. We broke ground on this $300 million facility in
Corpus Christi, Texas and construction is progressing on pace. We expect production to
start by yearend 2018 and when complete this site will triple our Opteon refrigerants
capacity, positioning Chemours to continue to hold a leadership position as this global
technology conversion continues.
[Slide 40] So in summary, fluorochemicals is expected to deliver very favorable growth
over the next decade and beyond with contributions coming from both Opteon and our
base business. Our leading market positions across refrigerant markets are expected to
translate into significant profitability. Over the next 3 years, growth will be primarily
driven by the steady adoption of Opteon refrigerants, specifically in stationary
applications. Our HFO product line is expected to increase 20% on an annual basis from
the end of 2016 through 2020, while our base business offerings are expected to show
modest contribution growth over the next several years.
[Slide 41] So big picture, with its broad lineup and rich history of innovation, our
fluoropolymers business is poised to tap into growth potential driven by technological
changes in every corner of the world. Fluorochemicals is leading yet another significant
long-term technology transition, a technology that Chemours developed, and when fully
implemented, will deliver results not only to our customers, but to all of us in the form of
a cooler planet.
We are excited about our future and we believe we are well positioned to take full
advantage of market trends in a changing regulatory environment. As we execute our
plan, we expect to deliver GDP-like growth through 2020 on a revenue basis while
realizing a much stronger bottom line due to our favorable mix as we shift towards higher
margin products. As I said when I started my presentation, this is a tale of 2 businesses.
One, a story of untapped potential, and the other a story of a global technology transition.
The materials are the rails upon which the engine of technological process rides and
Chemours is laying the tracks for the future. We're off to a great start, but frankly, our
story is just beginning. [Slide 42] Thank you for your time this morning.
[BREAK]
Moderator: [Slide 43] Ladies and gentlemen, Chris Siemer, President of Chemours Chemical
Solutions.
Chris Siemer: [Slide 44] Good morning, everyone. I'm Chris Siemer, President of Chemical Solutions.
I started my career working in a range of technical roles with Stauffer Chemical, a US
company. Following their acquisition by the British company ICI, I moved into
commercial roles leading business units both regional and global with assignments in the
Americas, Europe and Asia. After the breakup of ICI, I joined DuPont in 2010. And
inside the company, I found great people, amazing technology and really enviable market
positions. But I also saw that 200 years of success had institutionalized complexity.
When I took the Chemical Solutions role in 2014, I saw our spin as an opportunity to
keep the strengths inherent in DuPont and improve everything else, releasing huge value.
When we launched our 5-point transformation plan, I had the opportunity to take the role
of Chief Transformation Officer for Chemours. In this role, I was and am responsible for
transformation with rigorous tracking systems, stretched milestones and a relentless
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emphasis on execution. The overarching goal was to get everyone involved in improving
our company in every way, from our financial performance to how well we work as a
team, to how rapidly we effect change.
We introduced a new operating rhythm at Chemours, a weekly cadence. Translation,
anything we can't get resolved elsewhere is in front of our CEO in 5 workings days or
less. These were and are big changes and not easy ones. But they took hold and they are
deeply felt and acted upon through the entire company. They're now part of how we
operate. Nowhere are the effects of our transformation more evident than in Chemical
Solutions.
[Slide 45] This is the story of reinvention. At spin, Chemical Solutions was $1 billion
portfolio, 6 businesses with barely breakeven profitability in total, and a negative free
cash flow. At one time, these businesses had been ingredient suppliers to other DuPont
business segments or had been acquired as part of what were now long obsolete
strategies. The portfolio was withering on the vine. Significant issues and opportunities
had to be addressed pronto. And just as important, Chemours needed cash in the short
term. Guided by our 5-point transformation plan, we took a good, hard look at the
portfolio with an eye to improving performance and generating cash. We also had to
determine if Chemical Solutions actually had an investable core. This was reinvention
from the ground up.
We shut down our reactive metals business. We sold our Beaumont aniline production
site to Dow. We sold our sulfur products business to Veolia and we sold our clean and
disinfect business to LANXESS. With each of these divestitures, we found strategic
buyers for whom these were investable businesses. As you heard from Mark, these
divestitures yielded gross proceeds of $685 million with multiples ranging between 10x
and 12x. But we're not done yet. Right now, we're looking at our other aniline production
site in Pascagoula, Mississippi to determine its future.
Now I'd like to address that attractive, investable core I just referenced. Businesses that
were part of the original inherited Chemical Solutions portfolio. We have decided to
retain and grow our Mining Solutions business and we will keep and grow our Belle,
West Virginia based performance chemicals and intermediates business. Over the last 12
months, our reinvented portfolio generated approximately $570 million in revenue and
approximately $50 million in adjusted EBITDA. That's an increase of 60% over what we
made prior to our divestitures. However, we are far from satisfied with these results. We
are now in a position to focus and invest in this reinvented portfolio.
So first, let me tell you about Belle. [Slide 46] At spin, the Performance Chemicals and
Intermediates Business supplied from our Belle, West Virginia manufacturing facility
was an extreme underperformer. Belle had once been DuPont's largest manufacturing
site with, as you would expect, significant site infrastructure. But over time, most of the
production units had been shut down and dismantled. However, site infrastructure and
overhead costs had not been reduced accordingly. The business was losing about $30
million of adjusted EBITDA annually. So we set about transforming Belle. Headcount,
including contractors, was reduced by over 60% while improving output and customer
service. And this year, the Belle businesses will generate positive adjusted EBITDA.
Now I'd like to tell you a bit about the products we make at Belle. Methylamines are
industrial building blocks made directly from methanol and ammonia and they're used in
a wide variety of industrial uses. Our Vazo products are reaction initiators that serve the
polymerization and coatings market. Glycolic acid is an organic alpha hydroxy acid, the
alpha hydroxy acid, whose unique properties are used in a wide range of specialty
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applications, but it's also used as a monomer for polyglycolic acid, a biodegradable
polymer with really amazing physical properties. We're the largest and only continuous
producer of glycolic acid in the world and our production process is proprietary and
protected. We will begin work to add glycolic acid capacity in 2018 to support new
applications. This is a very attractive opportunity for Chemours.
The other broad opportunity at Belle is to leverage its location. The site has available
land and a large, well maintained infrastructure. The plant is located right in the heart of
the Marcellus and Utica Shale Gas Reservoirs with high pressure natural gas pipelines
running by and into our site. The products we make on the site are produced from direct
derivatives of natural gas like methanol and ammonia. So we are currently negotiating
with potential tenants who are interested in leveraging both our infrastructure and some
of the cheapest natural gas in the world to produce large scale commodity derivatives.
An example of this type of interest is the recent announcement that China Energy intends
to invest $83 billion in West Virginia into shale gas and its derivatives. Yes, Belle
business started in a really challenging position. But we see a great future here.
[Slide 47] Now before I tell you about Mining Solutions, I'd like to give you some
background on what sodium cyanide, our main product, does in the process for the
production of gold. In word, it's essential. Solutions of sodium cyanide dissolve the
small quantities of gold in mined ores and then in a second step, pure metal is released.
It's used for about 90% of the world's gold production and there are no viable alternatives
for this critical step in modern gold mining. And while toxic, cyanide is readily
biodegradable and has been safely used in this industry for decades.
[Slide 48] Moving on, growth of sodium cyanide consumption is being driven by two
factors that are illustrated in the graph you can see. Across the globe, there's a consistent
decline in the gold content of ores. This in turn leads to a steady increase in the tonnage
of ore being processed which drives a direct increase in the quantity of sodium cyanide
required. In addition, the decline of gold content in ore also results in an increase in the
quantity of cyanide required per unit of gold produced. So these two factors drive the
long term growth in the sodium cyanide demand.
In the Americas region, we forecast that that demand will be about 9% per year for the
next 5 years, continuing the rate of growth we've seen over the past 5 years. This is a
very attractive market. [Slide 49] The production and sale of sodium cyanide for
precious metal mining is the strategic focus of our Mining Solutions business. At our
manufacturing facility in Memphis, Tennessee, we also produce hydrogen cyanide which
is sold on site for the production of acrylic monomers. Sodium cyanide can be produced
either as an aqueous solution or in solid form. We produce solid sodium cyanide which
reduces logistic costs and allows us to market our produce over a broad geography.
Chemours is the largest producer of solid sodium cyanide in the world and following the
startup of our new facility in Mexico, we expect to be the largest sodium cyanide
producer and supplier in the Americas.
Chemours leads the industry in the safe production, transport and use of this material. We
have a strong logistics network that our customers count on. We have an industry leading
commitment to safety and environmental stewardship and we were a founding member in
the principal author of the International Cyanide Management Code. We have a great fit
with this market as well.
[Slide 50] Turning to the next slide, our Memphis Mining Solutions facility has been sold
out since well before spin. In 2015, responding to customer demands, we announced
plans for the construction of a new manufacturing facility in Mexico. We began
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construction earlier this year in the state of Durango and expect the new facility to be
completed by the end of 2018. Our capacity expansion is strategic. Growth in the
Americas region is being driven by the factors I described earlier. In Mexico it's the
fastest growing country in the region. Additionally, the Americas overall has a lower
average gold production cost than the rest of the world, driven by the average gold
content in the ore and the ore's proximity to the surface. Mexico specifically is the single
largest market in the Americas, accounting for nearly 40% of total demand. We chose
our Durango, Mexico location specifically because of its proximity to the mines, natural
gas supply, and other raw materials. And when started, Durango will set a new standard
for safety and sustainability. We expect the plant to produce over 50 kilotons per year.
Construction is on schedule and volume from this new facility is already committed to
support the growth of our existing customer base.
[Slide 51] So in summary, we've reinvented the Chemical Solutions portfolio. There's a
lot more to do. We found an attractive, investable core. Mining Solutions is expected to
grow, delivering strong and sustained margin performance. We expect to grow the profit
and the profitability of our Belle businesses and we are working with partners to leverage
our site infrastructure and its proximity to low cost shale gas. We will maintain our focus
on the optimization of our portfolio and continuously improving how we operate. The
impact of our reinvention is already evident. Our trailing 12-month adjusted EBITDA is
higher than it was prior to our divestitures and on a considerably smaller footprint. We
expect to be a more meaningful contributor to Chemours adjusted EBITDA and free cash
flow through 2020 and we are well positioned to grow both profit and profitability in the
coming years, earning our place in the Chemours portfolio. Thank you, it's been my
pleasure to speak to you.
[BREAK]
Moderator: [Slide 52] Please welcome to the stage Bryan Snell, President of Chemours Titanium
Technologies.
Bryan Snell: [Slide 53] Good morning, everyone. I'm Bryan Snell, President of Titanium
Technologies. I've held this position since shortly before spin, but I've worked in this
industry for most of the last 25 years. I know this business from many angles and entry
points including strategy, M&A, manufacturing and sales. I've seen a number of changes
in the industry over those years, but through it all, one thing has not changed. Our
Titanium Technologies business has been and remains the premier producer of TiO2.
Without question, this business is a cornerstone of Chemours. But in the last 2 years, it's
taken on a new character. It's been infused with an entrepreneurial spirit, a speed in
decision making and a customer focus that I have not seen before. Some of that is a
consequence of the corporate transformation the Mark and Chris spoke about. But there's
more to it than that. There's a renewed enthusiasm on my global team that is rooted in
the excitement of potential that has been unleased. We're changing who we are to our
customers while strengthening the technical and operational capabilities that have served
us so well for so long. This is the story of a paradigm shift. We are thinking about our
business in a very different way and I'm pleased to be here to tell you more about that.
[Slide 54] But first, let's begin with a little background, which many of you know well.
The dimensions of our business are laid out for you on this slide. Here's the essence.
We're known around the globe for market insight, quality, innovation and unique
production capabilities. Market Insight. We are the world's largest TiO2 enterprise. Our
Ti-Pure products are sold in all major markets and applications worldwide. Quality. Our
Ti-Pure products are well-known for their consistently high quality which in turn enables
our customers to sell premium products to their customers. Innovation. We are
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innovative in our formulation capabilities, in the way we look at our markets, and of
course in our recognized brands themselves. Unique Production. We invented the
chloride production route to TiO2 and now operate the unique version of it at all of our
manufacturing sites. Our process technology delivers an industry leading cost position,
great reliability, and unmatched feedstock flexibility. This is a big competitive
advantage.
As part of the implementation of the Chemours transformation plan, we closed our least
efficient manufacturing assets, our Edgemoore plant site in Delaware and one production
line at our Johnsonville plant in Tennessee. Those were tough calls, but the right thing to
do, so that we could focus our resources where we had the best competitive advantages.
[Slide 55] At the same time, we continued the construction of a second production line at
our plant in Altamira, Mexico and began commercial operations of that line in May of
2016. This new line uses the best of our unique technology and has been configured to
produce additional Ti-Pure grades to satisfy diverse customer demand while adding
flexibility to our manufacturing operations. I am delighted to be able to report to you that
we have achieved Altamira's target capacity at its expended grade capability and we have
demonstrated our total capacity of about 1.25 million metric tons across our total
production circuit. For us, that's exciting stuff. I am so proud of our Altamira team who
with the support of colleagues from across our circuit delivered a world-class asset and
brought it to full design capacity in record time. Bringing up Altamira line 2 was a key
part of our transformation plan and we executed it flawlessly. As we converted these
capabilities into business performance, we have been able to double our adjusted
EBITDA on a trailing 12 months compared to full year 2015. [Slide 56] Now that's what
we've done.
Let's talk about where we're going, the aforementioned paradigm shift. We've been
thinking about our business quite differently. If I were to ask you to describe a TiO2
business, most of you would use words like cyclical, commodity and tied to GDP growth.
Truth be told, we would have used those same descriptors in the not too distant past.
That was part of our legacy mindset. But now we're taking a different approach. Not
different simply to be different. I believe we can deliver on a business model for titanium
technologies that is more stable, supplying an enhanced commodity that achieves greater
than GDP growth. I know that sounds bold, but we have the unparalleled assets and
deeply experienced people required to reshape our landscape.
The market insights, operating discipline and process technology from our history, now
paired with a new customer focus and a business purpose, will make this possible. Now
what do I mean by enhanced commodity? I mean that we can't entirely distance
ourselves from commodity-like forces of the marketplace. But we can certainly bring
more value to our customers when we have a deeper focus on segments and applications
for Ti-Pure TiO2. If we're going to deliver greater than GDP growth in our new business
model, we must be focused on 3 initiatives. First, what I call Ti-Pure value stabilization.
Second, great investment in new offering development. And third, capacity that flexes as
our customer needs grow and change. I'd like to take you through each of these
initiatives on the next few slides.
[Slide 57] Let's start with Ti-Pure value stabilization, what that means, and how it
benefits our business and our customers. [Slide 58] You're probably pretty familiar with
this slide by now. We've used it before to describe our view of the TiO2 marketplace.
Today, I'll start my explanation of value stabilization with an update on how we view the
marketplace. Bottom line, we see strong demand for Ti-Pure TiO2 beyond 2018 in part
due to favorable market conditions and in part due to the products features. As depicted
on this slide, there are clear quality separations as you move across the spectrum of
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applications. Not all titanium dioxide is fungible. We demonstrated Ti-Pure quality and
value separation into the more demanding applications from the fit for use and
multipurpose applications served primarily by producers in China.
Capacity utilization in the more demanding segments served by multinational producers
of TiO2 is currently high and commentators expect it to remain above 90%. As we move
down the quality spectrum, we see some participation from multinationals within the
lower end of the multipurpose segments, but most of that demand is supplied by Chinese
producers. Utilization rates there are above 80%. Over the past 15 years or so, the cost
and quality of TiO2 capacity in China has revealed differential segments at the low end
of the marketplace. We believe that there are more subsegments to be revealed at the
upper end of the quality spectrum without stepping squarely into niche specialty
applications. And this is where much of our value pricing and our offering development
work is focused.
[Slide 59] Over many years, global demand for titanium dioxide and global GDP growth
have been linked. There have been intermittent short-term departures from that trend,
most recently during the global financial crisis and its aftermath. But we've been back on
trend line for the last several years. And if the economic environment remains stable, we
expect this correlation to continue. We see no impact on our business of permanent
demand restructuring as reported or speculated from the previous abnormal price cycle of
2010 to 2012. We believe that the relationship between global demand and GDP has
always included some titanium dioxide efficiency gains as well as the reduction of TiO2
in some applications and the emergence or growth of others. In this regard, we do not see
the future unfolding differently than the past.
The performance and affordability of TiO2 delivers a substantial value separation from
any not in-kind alternatives. [Slide 60] Now, if you've only been following this market
since 2009, you probably think of it as extremely volatile. But over the long term, that's
not really the case. Following the global financial crisis, the titanium dioxide market saw
a significant swing in average price during the 2010 to 2015 timeframe. As demand fell
sharply during the global financial crisis, some high cost sites were shut down, shrinking
industry capacity. Within a year, this was followed by a strong surge in demand driven
by economic stimuli aimed at infrastructure investments. This brought on large price
increases over a very short period. And soon thereafter, a huge influx of Chinese TiO2
capacity came online, creating a supply environment that drove prices down. Absent a
substantial global economic event, we do not foresee a supply/demand fluctuation
comparable to the experience of the last 9 years.
We now understand how to position our Ti-Pure offering differently as well. During the
period I just described, titanium dioxide prices behaved like a basic commodity with
price primarily driven by supply/demand. We bought into this approach ourselves and
we experienced wide fluctuations of T-Pure TiO2 price across the megacycle. In the
short market, our price increases were out of synch with many of our value chain
customers. And when the new Chinese capacity came online, I don't believe we properly
understood the value of Ti-Pure relative to the Chinese product. This drove down Ti-
Pure prices to a point well below the true intrinsic value and certainly unsustainable from
a business perspective. That has changed.
[Slide 61] Now let's take look at the price history of titanium dioxide within the context
of the overall coatings value chain which is the largest end use application that we serve.
Price histories for specialty purpose coatings in yellow, deco coatings in light gray, and
OEM finishes in dark gray are plotted on this slide in descending order. The price of
titanium dioxide is also shown in magenta. Titanium dioxide price has tended to grab the
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headlines due to its volatility. But as you can see, for much of the last 15 years, it's really
traded at a modest price relative to coatings products, the only exception being the global
financial crisis as I stated before.
We all know that the largest issue for both producers and consumers throughout the value
chain is volatility. If we had more stable price trajectory for Ti-Pure, it would enable
users to focus on their downstream customer needs and give our customers confidence in
the long-term stability of their supply base. Through our recent moderate price actions,
we are working towards more value driven Ti-Pure prices. This will contribute to more
stability for ourselves and for our customers in the long run. To that end, we plan to
temper the average price movement for Ti-Pure products across 2018. In the fourth
quarter, we sent our customers notice of price increase. Once those are implemented, any
further increases across 2018 are expected to be in the low to mid-single digits on a
percentage basis.
[Slide 62] So let's delve more into this idea of Ti-Pure value stabilization. I want to
pause for a minute on the first point on this slide so that we're clear. If our customers
experience ups and downs in their need for Ti-Pure based on their market conditions, we
will support them on the upside and we will absorb it on the downside. That's part of our
relationship with our customers. We will gladly take fluctuating customer demand as a
volume variance instead of a price variance. We will price Ti-Pure to reflect its actual
value in applications and look to maintain that pricing while adjusting our production if
needed. We made a number of changes to our supply chain in recent years to enable us
to do that. You may recall that we introduced this concept of value stabilization earlier
this year. It's based in part on our ability to work closely with our customers to capture
strategic value in use of Ti-Pure products and systems in their commercial offerings. We
want our customers to have the confidence that we'll be there to support their growth,
both with increased supply of Ti-Pure and with sustained investment in product
innovation. This will eliminate the back and forth dialogue we commonly hear today, the
anchor points of which are, can I get the TiO2 I need? And how high will the price go?
So that's the idea.
Here's how we'll bring this paradigm shift to life. [Slide 63] First, we're going to take a
significantly different approach to sales contracts with our customers. Today, less than
half of Ti-Pure products are sold through contracts. In the future, the vast majority of Ti-
Pure sales will be under contracts with terms conducive to a more stable commercial
relationship. Second, we will continue to improve our already flexible supply chain so
that we can operate with advantaged economics while responding to any short-term
fluctuation in our customers' marketplace. In addition, we will continuously enhance our
capacity to support our growth. And third, we will grow new offering capability in Ti-
Pure pigment performance as well as in service, brand and technology so that we find
new value for our customers and for ourselves. Ti-Pure value stabilization creates a more
stable customer/Chemours relationship and allows the Chemours Company to continue to
invest in capacity and new offerings to support growth in our customer base. Which
means more stable returns to our shareholders.
[Slide 64] Now, I'm going to focus on Ti-Pure's value to customers. [Slide 65] As we
look back at the titanium dioxide market segmentation, it's worth noting that there are
different price points within each of these segments depending on the grade of titanium
dioxide as well as on the specific end use application. We are expanding the portfolio of
offerings to serve segments with different needs within the high quality space and we are
expanding the degree of differentiation and how we price the different applications and
different customer segments. This is allowing us to take a hard look at differential and
value when pricing our products.
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[Slide 66] In my comments so far, I've referred to the average price of TiO2 as reflected
in third party reports or in our own experience. But in the way that we think about price
today, we are moving away from a one size fits all pricing approach for Ti-Pure. In 2016,
our average price for Ti-Pure had fallen to a price point that reflected a deep and
unsustainable discount relative to the value we bring. Furthermore, there was very little
differentiation by customer segment or by application in specific Ti-Pure grade
performance within an application. When we started correcting Ti-Pure prices in 2016,
we did so initially on a broad-based approach because our entire portfolio of offerings
was trading at a deep discount. In 2017, we shifted our focus from widespread price
increases to more tailored ones, allowing us to differ prices by application, end user and
quality.
The chart on the left-hand side of this slide depicts the realization of our differential
pricing. Over the last 18 months, we have raised our average price nearly 30% and
widened the range of price to better realize value and use of specific offerings. This
differential pricing approach enables Chemours to work with customers through a range
of sustainable prices based on total business value, theirs and ours. Our most recent
customer letters communicated new pricing effective January 1 or as contracts allow. As
I mentioned earlier, we plan to temper Ti-Pure price movement in 2018 and we expect
price movement across next year to be in the low to mid-single digits on a percentage
basis once all previously communicated increases are in place.
[Slide 67] Let's take a deeper look at our ability to enhance downstream value. Here we
have a couple of examples from the plastics segment to illustrate new value created
through technology built into the TiO2 particle. For the masterbatch producer, we
recently upgraded our Ti-Pure R-104 to improve tint strength while retaining a clean,
bright blue undertone with exceptional process ability and dispersion into polymers. For
agricultural film applications, our Ti-Pure R-105 works with UV stabilizers to enable
extended service life for agricultural films. This high durability grade is weather resistant
and delivers high opacity with a neutral undertone. These features can enhance crop
yield and shorten time from planting to harvest. These plastics examples show value
improvement through particle technology that cannot be replicated by less capable
manufacturers in China or anywhere else.
[Slide 68] Let's take a look at the coatings market for a different illustration of how we
pair our technology with market insights, formulation expertise, and brands to enable new
value for our customers. Our technical and marketing teams work collaboratively with
our customers to produce better quality paints that deliver more value to the consumer
and return more value to Chemours and to our coatings customers. Newly formulated,
high quality paints are paired with a Ti-Pure or a Teflon cobrand as an integral part of the
consumer value proposition. And if you look at the graph on the lower right, since 2003,
the compounded annual growth rate of coatings with Ti-Pure and Teflon cobrands is
11%, while the growth rate for overall architectural coatings is just 4%. Impressive.
Today, Chemours has cobranded product sales in 58 countries around the world.
Including the addition of 6 Teflon licensed partners in the last 2 years and 11 Ti-Pure
licensed partners in 2017 alone.
[Slide 69] Now let's take a look at the strength and flexibility of our manufacturing
circuit. [Slide 70] There's a long track record of GDP-like growth within the TiO2
industry. We plan to participate in this growth with regular capacity expansion through
process technology improvements and low capital intensity investments. On occasion,
we would expect to make a largescale investment in a new line, but we like the
incremental expansion options that we have right now. We're going to take a very
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different view for all capacity decisions and not just time capacity to market cycles.
There are 2 critical questions related to capacity. Number one, how do you make the
decision to install it? And then secondly, once installed, how do you plan to run it?
Trying to time capacity investment decisions to market cycles in TiO2 industry just
exaggerates the cyclical experience for us. Our approach is grounded in our confidence
in the growth of the marketplace and in our ability to leverage our unique capabilities to
add capacity consistently over time. The paradigm shift continues.
Now we make decisions to add capacity based on the quality of investment and the value
of the products that we make, without a focus on market cycle timing. Once we install
new capacity on a rational, steady basis, we will adjust our production up or down to
support our customers through the changes in their marketplaces. Our operating
discipline makes that not just doable, but smart. Our manufacturing capability gives
Chemours the flexibility to operate efficiently near capacity as well as at lower levels
when our customer needs warrant an adjustment to output. We are well positioned to
operate cost effectively at any and all expected use levels.
Last, we pride ourselves on our reliability and how we can use it for the benefit of those
customers who are committed to a long term, stable relationship with Chemours. Over
the next few years, I believe we can incrementally increase our production capacity by
approximately 10% through technology enabled debottlenecking processes. This is
essentially adding a new production line while using significantly less capital to do so.
Our increased production capacity will also be supported with capital investments to
extend our ilmenite mine and by long term ore contracts with our suppliers. We believe
that unlocking an additional 10% of capacity is in line with the anticipated needs of our
customers for the next few years.
Longer term, as we exhaust our incremental capacity options on existing facilities, we
will consider options for a full new production line. While we're not ready today to
invest in a new full line, we certainly don't intend to wait the 22 years it took between the
startup of our Kuan Yin plant and the startup of the Altamira line 2.
[Slide 71] Now let's take a further look at our manufacturing flexibility. Our unique
capability to use a broad spectrum of ore feedstocks is well understood, but the progress
we made in recent years to extend this capability, has certainly exceeded my
expectations. Not only have we expanded ore use capability across our circuit, we've
improved yield, lowered total and unit fixed costs, and improved quality and consistency.
And all of this I am proud to point out has been accomplished with improved employee
safety and an abiding commitment to process safety management.
In concert with the Altamira line 2 investment, we've significantly improved the
flexibility of our entire circuit through small, high return investments and line product
capability. This gives us the ability to serve the demand for high value grades while
ensuring that our supply chain operates at optimal costs, whatever the demand scenario.
Being able to offer broader grade capability at increased capacity and lower cost is the
foundation of our production flexibility.
[Slide 72] Okay, now let's switch gears. I'm going to cover how new offerings and
capacity allow us to participate in our growing China market. [Slide 73] China remains
the largest and fastest growing TiO2 market. Although China is an exporter of fit for use
and some multipurpose grades, there is also demand for high quality product within
China to meet an evolving expectation of quality by the Chinese consumer. Currently,
Chinese titanium dioxide producers are unable to manufacturers the highest quality
grades of TiO2 needed in many applications. Chemours is the largest multinational
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supplier into China to help meet this need and we understand the Chinese market for
TiO2 very well. We also have a strong supply and customer support capability through
our Kuan Yin plant in Taiwan.
There are some strong forces shaping the TiO2 manufacturing landscape in China. In
short, to us it sounds like the message to heavy manufacturing industries is carry your
own weight, be sustainable. That applies to the TiO2 industry in a couple of ways. Most
visible is the government's auditing of environmental performance of manufacturing
facilities to enforce existing environmental protection laws. Clearly, actions are being
taken to curtail production when needed to drive home the requirement for improved
environmental performance. We also think becoming sustainable suggests being self-
sufficient on cash requirements. It appears that cash subsidies are being reduced for
underperforming entities and redirected to enterprises that are run responsibly. And
recently, we see the emergence of chloride technology and consolidation of players.
Only those players that will have the staying power to become proficient with chloride
technology will remain viable as TiO2 producers long term. Efficiency gains, resourcing
of environmental improvements and overall business acumen may lead to further
consolidation among Chinese producers.
A shift from sulfate production to chloride is fundamental to a sustainable business
model. Chinese regulators and producers have expressed their intent to move forward
with chloride technology, although the operating knowhow required to run chloride
process is causing a slower than expected conversion. It's also worth noting new chloride
based production will require different ore feedstocks, most of which are not available
domestically in China. And processing spend for those feedstocks will likely add cost to
China's future chloride facilities.
All in all, we see China evolving in a way that is supportive of responsible
manufacturing, and good for the local communities, eventually providing a more
balanced playing field for TiO2 sold into China or for that exported by Chinese
manufacturers. Chemours understands the competitive dynamic inside and outside of
China. We are also positioned to meet the growing needs of customers in China at both
the high end and the multipurpose segments.
In order to help the Chinese user move to chloride based products, we are now offering a
new product line exclusively for this market. It's called BaiMax. [Slide 74] Chemours
launched our new titanium dioxide product BaiMax in October of this year. BaiMax is a
chloride solution from Chemours and a companion offering to the Ti-Pure brand of
titanium dioxide. Manufactured at our Kuan Yin plant, we will only sell it in greater
China and it is aimed at those TiO2 users who are interested in making the switch from a
sulfate to chloride based TiO2. BaiMax delivers consistent quality and chloride
brightness across multipurpose applications to those Chinese customers growing their
businesses within China. Though not at the same performance level of our Ti-Pure line,
BaiMax does improve the quality and sustainability of products in which it's used,
including architectural and industrial coatings, wood finishes, PCV window profiles,
plastics, compounding and laminate papers. Our intention is that China, as China grows
and matures, it's need for chloride technology produced TiO2, Chemours will be there.
We'll be there with BaiMax in the early stages and there with Ti-Pure as consumers begin
to demand higher quality offerings.
[Slide 75] In summary, Chemours Titanium Technologies is driving a robust business
model focused on durable forth around the globe. We believe our approach to stabilizing
the value of Ti-Pure titanium dioxide is good for everyone. Good for our customers, our
suppliers and our investors. Our goal is to be the go-to supplier for customers through
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reliable product supply, regular capacity additions, and a portfolio of innovative
offerings. And I have no doubt that we will achieve that goal. And we welcome the
challenge to participate in China's development as the largest high quality TiO2 provider
into this market.
Our paradigm shift is well underway and we expect our efforts to result in more stability
in our business performance, higher value for our customers, and above GDP growth in a
global TiO2 marketplace. And with our low-cost position that further enhances our
margin profile, we expect to fully contribute to the Chemours Company bottom line
growth. [Slide 76] Thank you for your continued interest in Chemours Titanium
Technologies.
[BREAK]
Moderator: [Slide 77] Ladies and gentlemen, please welcome Chief Financial Officer of Chemours,
Mark Newman.
Mark Newman: [Slide 78] Wow. [Slide 79] You've just heard 3 compelling stories. One about untapped
potential and technology conversion. One about reinvention. And one about a paradigm
shift. There is a common thread that runs through these stories and it is change. Change
that challenges longstanding assumptions and especially change that jumpstarts growth
and generates value. The overarching theme of today is simply this. While we've
accomplished a lot in our first chapter of transformation since spin, our next chapter
holds a great deal of promise. It is inspiring and exciting to work with business leaders
so focused on value creation starting at the top. We all believe we can create much more
value going forward though the long-term growth plans that we've laid out and presented
today. As CFO, I'd like to take my place in the program to address 4 key topics.
First, reaffirm our 2017 outlook. Second, provide our outlook for 2018. Third, describe
our expected earnings and free cash flow trajectory between 2018 and 2020. And finally,
announce our capital allocation plan. As you heard from Mark at the opening, the
turnaround by the Chemours team since spin has been impressive by any measure. At the
outset, we had to fight to survive. Now, we have a thriving platform from which we
drive further value for our customers, employees, and investors.
Someone said earlier that this is an exciting time to be at Chemours. I couldn't agree
more. [Slide 80] Let's step back and consider where we've been. When we look at
expected 2017 performance versus 2015, revenue is expected to grow by approximately
$500 million. However, adjusted EBITDA is expected to increase over $800 million,
well above the $500 million transformation plan target we set back in 2015. Some of that
can be attributed to more favorable market conditions for sure. But the true magnitude
would not have been realized without the diligent work of our entire employee base.
Fired up with a vision of taking Chemours from good to great, their collective focus was
clear from the start, optimize the Chemours portfolio into a set of highly investable
businesses.
I will remind you that this impressive growth includes the impact of divestitures. We
grew our earnings while shrinking our portfolio, which has contributed to a significant
improvement in ROIC during this period. As Mark mentioned when we opened the day,
we expect 2017 EBITDA, adjusted EBITDA to be approximately $1.4 billion,
representing the high end of our previously communicated range. Additionally, we had
told you that we expected to be free cash flow positive for the year. I can report that we
now expect to generate in excess of $100 million of free cash flow after taking our $335
million PFOA settlement into consideration.
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Even with the investments in our two facilities, we still anticipate 2017 ROIC to be above
30% this year. [Slide 81] Return on invested capital is an important metric for us. We
have driven impressive improvement here since spin. Our focus on streamlining our
portfolio and with our disciplined approach to reinvestment, is core to how we run the
company. We keep our corporate value of simplicity and the expectation of high returns
in front of every action we consider and every strategic move we contemplate. We view
both working capital and fixed assets as investments in our businesses and we apply the
same rigor and discipline in our decision-making so that we can drive the best returns for
the company.
For example, to meet Titanium Technologies customer demands, we made an investment
in our raw materials inventories during 2017 while remaining disciplined in working
capital management. We view capital projects as a portfolio of investments, evaluating
one against the other on returns, payback periods, to ensure that we are prudent and
appropriately prioritizing our spend. Finally, we build capacity wisely, focusing on low
cost manufacturing facilities as well as using existing infrastructure where we can, both
evidenced by our Altamira and Corpus Christi facilities. We will continue to use ROIC
as a benchmark of how well we're managing our portfolio. And we expect we will be
able to sustain ROIC of 30% or greater on our current portfolio through 2020.
[Slide 82] Not only have we been able to demonstrate improvement in our returns, we
have used that momentum to solidify and strengthen our balance sheet. Our current
balance sheet is quite different than what we started with at spin. We have significantly
improved our liquidity position with over $1 billion more of cash on hand and full access
to our revolver, even after funding the recent POFA settlement. We have shown
discipline in our prudent use of excess cash to reduce debt when it made sense. In less
than 2.5 years, we have been able to de-lever our balance sheet, reducing our net leverage
ratio from north of 6x to approximately 2x today, well below what we contemplated at
spin and much faster, too. This improvement has been recognized by our rating agencies
with the recent Moody's and S&P upgrades. We are committed to maintaining our strong
BB credit profile. We believe that at this level, we retain the flexibility we need to
execute our growth strategies and deliver value to our shareholders.
Before I go into our longer-term views, let's start with our expectations for 2018. [Slide
83] We expect 2018 adjusted EBITDA to be within the range of $1.7 billion to $1.85
billion, an increase of 25% at the midpoint versus our 2017 expectations. This translates
into an approximate range of $4.70 to $5.25 for adjusted earnings per share on a diluted
basis given our current share count. These improved earnings will be driven in large part
by the meaningful appreciating we have seen in TiO2 pricing throughout 2017 which
results in an exit price greater than the average price realized this year.
As you heard from Paul, our growth is also attributable to further adoption of our Opteon
offerings, even when the increased earnings it delivers to the company is partially offset
by the expense associated with the construction of our Corpus Christie facility. We
expect the ongoing work within fluoropolymers to revitalize the portfolio will add
modestly to overall growth in 2018. Many of the end markets that Paul enumerated
earlier are expected to ramp up and become even more meaningful over time.
Similarly, we expect Chemical Solutions performance to be slightly above this year's
results as we work with our mining solutions customers to meet demand. We anticipate
that the combination of our TiO2 and Fluor businesses will generate a tremendous
amount of cash in 2018. In aggregate, we expect free cash flow generation to be between
$500 million to $600 million after funding increased levels of capital investments across
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our portfolio and the expectation of higher tax rates as our profitability increases.
[Slide 84] As you know, we broke ground on two facilities earlier this year, our Opteon
plant in Corpus Christi, Texas and our Mining Solutions site in the state of Durango,
Mexico. Including our maintenance CapEx, we expect to invest between $475 million to
$525 million in 2018. We recognize that this is another big year of capital expenditures
as we complete our two new facilities which represent approximately $450 million of
investment. Beyond 2018, we expect to slow our CapEx spending after funding this
year's significant growth in investments.
[Slide 85] Looking towards 2020, as you've heard from our 3 business presidents, all of
our segments are expected to contribute to growth of both top and bottom line. On a
revenue basis, we expect to deliver 3 years of revenue increases initially driven mainly by
our TiO2 pricing then followed by strong contributions from Fluoroproducts and
Chemical Solutions in 2019 and 2020 after we complete the capacity expansions next
year. This top line growth, which we expect to see at a rate of 1x to 2x GDP, along with
our laser focus on cost containment, will result in higher levels of adjusted EBITDA
growth. In fact, we anticipate expanding adjusted EBITDA margins by approximately
500 basis points through 2020 over 2017 levels. We expect to achieve this through our
continued focus on costs as we grow revenue and as our portfolio shifts to more
differentiated products.
[Slide 86] As we have demonstrated since spin, we can realize significant shareholder
value from our portfolio. We believe that each business within our portfolio is integral to
our long-term growth. Let me remind you of the key points we covered today. In
fluoropolymers, our application development will provide new and important customer
solutions in fast-growing markets. In fluorochemicals, we will optimize our refrigerant
mix as we balance the need for our base refrigerants with the fluorochemical of the
future, Opteon. In Chemical Solutions, we will meet the increasing demand for sodium
cyanide in the Americas with our new facility in Mexico, built at the center of the world's
fastest growing gold mining market.
In Titanium Technologies, our focus on value stabilization should allow us to reduce the
volatility of the TiO2 supply/demand cycle and its impact on Ti-Pure prices. Our new
BaiMax offering will meet the increasing demand for chloride TiO2 within China. And
our unique manufacturing capability and/or flexibility will remain a competitive
advantage as we unlock additional capacity to serve market growth over the next few
years.
[Slide 87] Our portfolio provides strong cash generation as well as many opportunities
for reinvestment to realize future gains. With the set of highly investable businesses we
have today, we can drive significant value through smart portfolio management. Our
Fluoroproducts segment will require near term and longer-term investments to realize
Opteon's full potential and the renewal of our fluoropolymer business. With these
investments over time, we expect to see a higher proportion of differentiated sales that
will enhance margin and provide more meaningful cash flow. Our Chemical Solutions
business driven by our Mining Solutions expansion, is expected to realize stronger double
digit adjusted EBITDA margins and positive free cash flow in the coming years. And our
cash generating TiO2 business is expected to be more than able to support its own growth
needs.
When you add it all up, this will provide additional free cash flow to support growth
investments across the entire Chemours portfolio. We see these investments taking two
forms. Organic opportunities that are identified naturally as our businesses grow and
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develop new technologies, and inorganic growth through strategic M&A. At this point,
we believe we have the flexibility to consider attractive adjacencies via bolt-on
acquisitions that could enhance our offerings. We will prioritize high return, organic and
inorganic growth investments with a discipline of providing meaningful return of capital
to shareholders. Our highly investable portfolio has the power to do both.
[Slide 88] I am pleased to announce that our Board of Directors has declared our first
quarter 2018 dividend of $0.17 per share which we expect to pay in March. This
represents an increase of more than 5x, yes, you heard me right, more than 5x our
quarterly level of $0.03 per share and translates into about $125 million per year to
shareholders. We worked with our Board to ensure our new dividend level is not only
sustainable, but also provides us with a platform to reward shareholders as our earnings
continue to grow. On top of that, our board has authorized a share repurchase plan of
$500 million. This authorization is valid through 2020 and we expect to execute the plan
opportunistically over the next 3 years. We believe that the combination of these
vehicles for returning cash to shareholders represents a significant portion of the free cash
flow we expect to generate. Importantly, it also provides us with balance and discipline
as we consider our best uses of our cash.
[Slide 89] Now I'd like to reflect on where we've been and where we're going with
respect to capital allocation. At spin, as you may remember, our first priority was to
stabilize the company. Our financial policy set out 3 uses of our cash. One, invest in our
businesses to realize organic growth. Two, return cash to shareholders via modest
dividend. And three, deliver the company down to 3x net leverage or below. With the
portfolio and growth prospects that we have described this morning, you see that we are
in an entirely different place as a company than where we were 2.5 years ago. Now we
have the flexibility, the funding flexibility to maximize the value of each business and
reorder our financial priorities. Over the next 3 years, we believe our portfolio will one,
give us the ability to identify and fund organic growth opportunities as well as the
flexibility to support M&A adjacencies and extensions to our businesses. Two, return
significantly higher levels of cash to our shareholders. And three, support a strong BB
balance sheet.
[Slide 90] In closing, we have generated a ton of value from our portfolio since spin and
have line of sight to even more shareholder returns. We see the next 3 years as building
on the foundation laid by our transformation plan from which we will deliver strong,
profitable growth well into the middle of the next decade. From our 2017 baseline, we
expect to realize topline growth at a rate of 1x to 2x GDP while driving even higher
EBITDA growth rates and resulting margin expansion of approximately 500 basis points.
And this implies that our adjusted EPS will grow over 15% per year between 2017 and
2020 on a compounded annual basis including the impact of our share repurchase plan.
At the same time, we expect to invest in high return opportunities that should result in a
sustained ROIC of greater than 30% on our current portfolio. Further, we anticipate that
our businesses will generate $2 billion to $2.75 billion of free cash flow which will give
us the flexibility to consider M&A adjacencies and support our newly announced capital
allocation strategy. Folks, this capital allocation strategy is expected to return nearly
$900 million of cash to our shareholders over the next 3 years, a huge step up from where
we've been. What a difference 2.5 years makes. We're fundamentally a different
company than we once were. You trusted us to complete our first chapter of our
transformation and we delivered on that commitment. Now, we invite you to turn the
page to our next chapter with us as we grow and unlock more value from our portfolio for
our investors as well as our customers. We're onto the next chapter of our story.
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At Chemours we like to say that the future of chemistry begins now. As we close the
formal portion of our first Investor Day, before moving to Q&A, we'd like to leave you
with these final thoughts. Thank you.
[video plays].
[BREAK]
Alisha Bellezza: [Slide 91] At this time, I'd like to welcome the Chemours executive team back on the
podium for Q&A. The way we'd like to do this Q&A is please just raise your hand and
I'll acknowledge you. We've got two mic runners in the room, just give them a minute to
get to your seats. Lawrence? Maybe just repeat your name and your firm as well.
Lawrence Alexander: Lawrence Alexander, Jefferies. Two quick questions. On the strategic M&A, can you
define adjacency and give us a sense for what your internal capital hurdles might be?
And for the TiO2 side, there was one reference in a slide to expanding mine capacity.
Can you talk a little bit about what would drive that? And is that tied to doing a new
capacity after 2021?
Mark Vergnano: Lawrence, that second half of that I missed.
Lawrence Alexander: Is the expansion of the mine capacity necessary for the current wave or is it after 2021?
Mark Vergnano: So maybe on the first piece, I'll start us. I think the thing we want to make sure everyone
understands, we're not going out to acquire a fourth giant leg. That's not our intention at
all. So the way we think about M&A and the way we will think about M&A is, we're a
customer centered company. How do we fit this into what our customers need from us?
So that's the way we're going to be thinking about this. So we're not going to lay out all
the adjacencies that connect to that, but I think you know the markets that we play in and
I think those would be the logical places that we would go. But I for sure don't want to
get anyone thinking that oh, these guys are going to go out and drop a fourth leg that has
nothing to do with the other two businesses. That's not the intention at all.
I'd say our returns are going to be very similar to the way we think of our internal returns
today. We like to think of mid to high teens as our hurdle rate for our returns and that's
going to be very similar as we think beyond that. Regarding the mine, maybe I'll ask
Bryan to give you a little bit of insight into how we're thinking about expanding the mine.
Bryan Snell: Sure. We've got access to properties adjacent to the Florida mine that we have, both
north and south. And those properties, we've got choices as to the rate of development
that we have for them. They can handle us. We can extend mine life comfortably to 2030
and beyond.
Alisha Bellezza: Next question. Chris Evans?
Chris Evans: Thanks, guys. Chris Evans, Goldman. Your 2018 EBITDA guidance and revenue
growth assumptions get you a long way towards that 500-basis point improvement that
you talked about through 2020. I was wondering why not a more aggressive target or
what might be hindering your enthusiasm after 2018?
Mark Vergnano: Well the one thing you have to remember about 2018 is we have a lot of costs associated
with capital. So as our two facilities are getting built, there's some cost associated with
building those facilities that are inside of that. Mark, I don't know if you have any
additional thoughts about --
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Mark Newman: Yeah, so just to add to what Mark said, obviously there's quite a jump in 2018 EBITDA
to a great degree predicated on the exit price of TiO2 at the end of 2017 versus average
which doesn't get repeated again beyond there on the basis of value stabilization of TiO2.
Obviously beyond 2018, we'll start to see the benefit, the full benefit of both what's
happening at Corpus Christi and in our Chem Solutions business. We will have some
startup costs in 2019 as we bring those plants online and we'll see the full impact in 2020.
But there will be margin expansion. It will be just less pronounced in 2019 and 2020.
Again, based on just the calculus of TiO2 price impact.
Mark Vergnano: And Chris, to Mark's point, that's why we said greater than 500, right? So I think you
guys are getting to know us a little bit. From that standpoint, the fluoropolymer
opportunities that Paul laid out are going to play out over time. We think that's going to
be improving as well. So we sort of level set that at beyond 500 basis points.
Chris Evans: So another one then, with your new TiO2 strategy, are you expecting to maintain an
absolute pricing differential independent of what happens at the lower end of the market?
I mean if the Chinese get looser, can you still maintain an absolute pricing or are you
expecting more of a premium to the lower grade?
Bryan Snell: Are you referring to the BaiMax offering specifically or are you just talking about the
broad strategy? I think we've demonstrated that we've got good quality and value
separation from the Chinese products at this point in time. So if there would be
movement in Chinese prices, we wouldn't be all that sensitive to that. That's your
question if I understood it correctly.
Chris Evans: So you think you can hold an absolute price, not assume a spread off the bottom?
Bryan Snell: Right.
Don Carson: Don Carson with Susquehanna. Two questions. One on TiO2 margins, you've had good
price realizations, you've also had a very favorable ore environment. How do you see the
margins going forward with rising ore costs in 2018 and 2019? And then just a question
for Mark, if you could comment on, give us a GenX update and operations of your plant
down south?
Mark Vergnano: Maybe start, Bryan, with ore?
Bryan Snell: Yeah, our pricing actions anticipate where we think ore prices are going to go. So we
don't expect any margin deterioration as a result of changes we might see in ore pricing.
Mark Vergnano: So the second half of your question, Don, and maybe just to level set for everyone in the
room, we have a situation in North Carolina at our Fayetteville facility. And from that
standpoint, the best way I can sort of center it for everybody is we have a permitting issue
that we're working with local and federal government officials on. We're in deep dialogue
with them around this, but knowing that this would be an interesting topic for folks in the
room, we asked Dave Shelton, our general counsel, to step up and maybe give you a little
bit more of an update around that.
Dave Shelton: Thanks, Mark. I think it would be helpful in answering questions about Fayetteville if I
gave you a little bit of background on the situation and then perhaps more importantly go
into what we're doing about it. So as we've previously reported in our financial
disclosures, we face governmental inquiries and litigation concerning the Fayetteville
works facility in North Carolina. The issue initially concerned the plant's discharge in
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processed waste water of a chemical compound called C3 dimer acid which is the same
compound as our polymer processing aid known as GenX. The issues have expanded
and now include the process wastewater discharge of other HER or polyfluorinated
compounds, onsite and offsite groundwater issues at and around the area of the facility,
and air emission issues. Effective November 30, 2017, the North Carolina regulators
suspended the facilities permit to discharge processed wastewater from the Chemours
manufacturing lines at Fayetteville and asked us to meet with them to discuss a
permanent solution. That's the background.
Here's what we're doing about it. Number one, we're working hard to cooperate with all
governmental inquiries and requests. Number two, we are capturing for offsite disposal,
all processed wastewater from our manufacturing lines at Fayetteville, so the facility is
able to continue to operate lawfully, notwithstanding the partial permit suspension I just
mentioned. Third, we've accepted the North Carolina regulators' invitation to meet and
we looking forward to developing with them a permanent solution. We remain committed
to operating the Fayetteville facility which employs hundreds of North Carolina residents
in accordance with all applicable laws and regulations and in a manner that respects the
environment and the public health and safety.
We also believe that we and DuPont have valid defenses to the litigation that's been
brought. Including, among other things, that the discharges did not cause any damages or
injuries. As we address all the legal and regulatory issues, we realize that our
communications to you, the investors, as well as to other stakeholders will seem pretty
reserved at times. There are at least a couple of reasons for that. First, because many of
these matters involve active litigation, we're simply not in a position to provide further
comment on them and that includes today. Second, as we engaged in permitting
discussions, we intentionally chose to remain quiet in the media out of respect for the
process and the regulators and instead to focus our energy on finding a long-term solution
with them. For additional information, we encourage you to look at our public
disclosures. In the meantime, we sincerely appreciate your patience and faith in our team
to manage the issues for the best outcome. Thank you.
Mark Vergnano: Thanks, Dave. So from our standpoint, as Dave said, we can't talk a whole lot more
about it, but I'm convinced we'll come to a permanent solution with the regulators.
Duffy Fischer: Question maybe for Mark and Mark on the financial stuff. So you talked about $500
million buyback, what looks like is going to be about $400 million of dividends, but free
cash flow of between $2 billion and $2.75 billion which leaves somewhere almost $1
billion to $2 billion. In our models, should we be penciling that in as acquisitions or will
you build significant amounts of cash potentially over that period? What happens with
that other $1 billion to $2 billion?
Mark Vergnano: Maybe I'll start and Mark can clean up any mess I make here. One, so you may have this
right, Duffy, from that standpoint. And I think that the way we're looking at things,
we've said that we're going to have a high CapEx level next year. For those of you who
have been following us, we said we want to get to a rate of about $350 million of CapEx
going forward. I will say that we continue to learn that we have good investments inside
the company, good organic investments that we don't want to shy away from. So
although we do believe $350 million is about the right base rate for CapEx, if we see
good opportunities that are going to be good payoffs, we'll be willing to spend more
CapEx if they are great returns. And we've been very disciplined on our CapEx, so we're
going to be very disciplined going forward.
The other piece is, we want to be opportunistic on acquisitions if there's good bolt-on that
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make sense. So those, that's the flexibility that we want to have as a company and I think
the flexibility you'd want us to have as a company to be able to try to drive growth. We
will be incredibly disciplined about that. We're not going to spend that cash if it doesn't
make sense and if it can't give a good return. Mark, I don't know if you want to add
anything?
Mark Newman: Yeah, I think Mark covered it well. I think you're right, Duffy, in that suggest that our
model has optionality. So what we like is, as Mark mentioned, meaningful reinvestment
in our core business, meaningful return of capital to shareholders, and the optionality to
be opportunistic with bolt-ons to the current portfolio that we think drive further value.
So on balance, we think this is a nice disciplined approach to provide a balanced capital
allocation, but keep optionality in the model all the while being a strong BB credit. So
we like that position.
Duffy Fischer: Great, thanks. Then maybe one question for Paul. You kind of showed us a bucket of
$2.4 billion of the HFO target out to 2025. But within those buckets, is there going to be
a different competitive dynamic set? I mean we've had announcements say the Mexican
[DiChem] joint venture where they say they have a low global warming product. Where
do you think in that between now and 2025 period will you see other competition and
how would you think that $2.4 billion kind of gets split up between market participants as
we get out that far?
Paul Kirsch: On the IP protection slide, so we mentioned we have more than enough confidence in the
MAC side of the business to last us through 2020, the protection there. The stationary
portfolio actually is much stronger and goes much longer because these products were
developed even later. So I couldn't put a bet on when a competitor might break into that
market, but we're confident in the 2020 number for MAC and a much later year for the
blend.
Mark Vergnano: The only thing I'd add, Duffy, is I think we continue to be, we continue to add to our
patent portfolio here. So this isn't something that's stagnant, it's something that's active.
We haven't seen anyone come up with something that is uniquely different than the HFO
molecule. So that molecule I think is incredibly protected for a period of time and as
Paul said, probably longer in the stationary side, maybe been more than the mobile side.
And on top of it, the stationary side is much more complex because it uses blends. And
so the knowhow and the relationship you have with customers there is also another
important barrier. So I just don't think you're going to see a lot of folks breaking into this
space in a short period of time.
Duffy Fischer: So just to be clear, everybody who has announced something that's HFO you would say
is counter to you patent, that they really couldn't produce that molecule and sell it as it's
been advertised so far?
Mark Vergnano: That's our belief up to now without knowing everything that everyone has, but that's our
belief.
Jeff Zekauskas: Good morning. Jeff Zekauskas with JPMorgan. Two questions. So there's a $500
million share repurchase plan, so if your shares were at $50, you could buy back 10
million shares. How much share issuance would there be over the next 3 years so that we
know what the net reduction in shares might be? And secondly, in 2018, what are your
general expectations for Opteon volume growth? In that your new expansion doesn't
really come on until 2019, are you constrained in how much you can produce? What do
you expect to produce? What could you produce if you ran full out incrementally?
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Mark Vergnano: Maybe I'll start on the second one first and then I'll had the first question over to Mark
and Paul can follow up on anything else on the Opteon side. A couple of things you need
to think about from the Opteon side, we have plenty of capacity right now until we start
up Corpus Christi. So the growth that we have projected and maybe a little bit more,
we're confident around the capacity that we have in place. But remember, Corpus
capacity gives you two benefits. One is it gives you capacity for the future growth. But
it's also much lower cost than our current capacity. So it allows you margin expansion at
the same time. So as we get Corpus up, we'll be shipping our production as fast as we
can over to the Corpus facility because we get the value of the lower cost production
capability there. So that will expand margin itself. So between the two, we're very
confident that we have plenty of capacity over the next several years. And then sort of to
tie in, we saw a tremendous ramp up between 2017 and 2016. And as you saw from
Paul's chart, we're going to continue to see growth in Opteon, but not at that level that we
saw in the last year. Paul, I don't know if there's anything you want to add to that?
Paul Kirsch: Think about the Opteon growth in 3 buckets. One is with MAC. As Mark said, you had
a very quick ramp up in Europe because of the January 1 deadline this year. The US
market ramps up at a slightly slower rate due to CAFE. You've got Turkey, Korea and
Japan, 3 big markets coming on in 2019 and 2020, or 2018, 2019, 2020, sorry. And then a
longer ramp up on the stationary side just because of the way Kigali rolls out and FGas.
And then on the foam blowing side, you've got a smaller market, but it will convert a
little faster. So those are the 3 ways to think about how those markets develop.
Mark Vergnano: And we think the capacity that we have is going to be fine for us for our growth going
through that. Mark, the first piece??
Mark Newman: Yeah, so on the share issue, as you mentioned, Jeff, what we're announcing today, if you
just applied it to the current base, would largely take care of the dilution since spin.
Obviously based on our public filings, there will be new issuance for management comp
going forward. That tends to be at a rate of about $20 million to $30 million a year. So
as you will see, I think it significantly will help with the share count. It will be a bit of a
tailwind, but obviously your model will be very subject to your assumptions on where the
stock price goes from here in terms of the dilutive impact of future issuances. But I think
you can do the math and I think you will conclude that it will certainly significantly
reduce or help to reduce the dilution impact today.
Jeff Zekauskas: On order of magnitude, does Opteon grow greater than 10% in volume or less than 10%?
Paul Kirsch: We haven't been specific about that, but I think we will have appreciable growth. But I
just don't want to give the sense that it's going to be the same growth that we had in 2017.
But we'll still have solid growth in 2018.
Alisha Bellezza: And when you look at what we've presented on the slides today, we demonstrated a
CAGR that we expect between 2016 and 2020 to be about 20%. When we think about it
from a 2017 base to 2020, it's between 8% and 10% is what we're expecting.
John Roberts: John Roberts, UBS. I think one of the reasons it was 20 years between TiO2 expansions
is DuPont had been trying to do a plant in China for a long time and finally gave up on
that. How do you see your capacity strategy in Asia evolving? Do you see exporting
more to the region? Do you see Taiwan expanding at some point? Or do you think you
go back to that plant? And then secondly, on GenX, are you trucking water off, process
water offsite and treating it so you can operate indefinitely while you have your
negotiations with the state?
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Mark Vergnano: I'll let Bryan take the TiO2 question, but let me clarify, we are moving the process water
off the site with a contractor who is taking care of that for us which is allowing us the
freedom to operate that facility. Bryan, you want to talk a little bit about --
Bryan Snell: Well I agree with your starting point that maybe it took a while, while we were trying to
get Kuan Yin plant approved. But today, we sit with expansion options at our Kuan Yin
site and I think there are credible locations inside and outside of China. So I think there's
more than one option we can look at if we that think Asia is the right place to build a
plant.
Mark Vergnano: I think the beauty of what Bryan and the team have sort of put together for TiO2 business
is this 10% incremental capacity that we can free up in the next 3 years which is
fundamentally another line for us. And at a fraction of the capital expenditure that a full
line would cost. So I think over that period of time we're going to have plenty of capacity
to allow our customers to grow while we're sorting out what's the next big increment of
capacity that's going to be needed. And I think it's going to get very obvious soon to all
of us where that should fit.
Bryan Snell: And we don't have any limitations getting from any of our plants into any markets.
Alisha Bellezza: Any other questions?
Eric Petrie: Eric Petrie with Citi. The incremental $300 million to $450 million EBITDA growth
next year, can you just give a rough split between the segments? TiO2 and
Fluoroproducts? I'm guessing the majority will be from TiO2 with the price increase, but
any kind of qualification would be helpful.
Mark Vergnano: Obviously we don't give guidance on the specific segments from that standpoint, but as
Mark said before, we're going to be exiting with a pretty strong price point on TiO2
versus what our average price was. So I think the lion's share will be from that. But as
you go in that 3-year period, you're going to see this shift as we get the capacity up in
Mining Solutions, as we get our Corpus facility up, you're going to see that earnings
growth shift to the other two businesses. So lion's share primarily from TiO2 price in
2018, over the 3-year period, very balanced across the 3 businesses.
Eric Petrie: Secondly, could you just talk a little bit about China's push to chloride technology? I
believe a major producer is targeting about 300,000 tons of chloride capacity by end of
this decade and even more aggressive in the next decade. With the total of roughly 1
million tons by the mid-2020s?
Bryan Snell: I've heard the million ton number. Put it in the context of what the market growth is
going to be. So if you look at just GDP growth on a 6 million ton market, in the next
decade you're going to add a couple of million tons of demand. Divide that by 0.85 or
0.9 or whatever you think the utilization is going to be, and that ought to ballpark what a
responsible capacity number is. So I think number one, there is space in the demand that
will actually require some capacity. And then number two, chloride lines aren't that easy
to run. So I think for somebody who is new into that technology, it's probably kind of
hard to say just how confidently they can bring it online when they say they can bring it
online.
Eric Petrie: As a follow-up, how much of your capacity do you currently ship into China? What is
the share representative, as well as, is your Taiwan plant expandable?
Bryan Snell: So the last one is yes. The others we haven't disclosed details on our share positions. But
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we are the largest supplier into China among the internationals.
Mark Vergnano: And I think the thing you have to think about, I think Bryan said this well in his remarks
earlier, over the next several years, there is going to continually be demand growth for
TiO2 because it's a GDP growth rate business. So you can calculate pretty quickly where
that is. There's not any obvious capacity coming online and there appears to be actually
capacity continually coming out on the sulfate side with China. So there is room for
expansion in this space, and as Bryan said, over a 10-year period you're going to need 2
million pounds of capacity and only 1 million being talked about. I would continue to
say talked about because we're not seeing anything coming out of the ground. I think
you're going to continue to see robust market dynamics for the TiO2 industry going
forward.
Mark Newman: I think all our plants look at incremental expansion options, so I wouldn't get too hung up
on whether one is or isn't. We have credible options across the portfolio and they can all
access all markets.
Unidentified Participant: Some of my questions have been answered, but just on your EBITDA margins, can you
tell us for Opteon inside the Fluoroproducts space, is it roughly average or is it better or
slightly below right now the rest of the product mix?
Mark Vergnano: I'll let Paul give you a little bit more detail, but the thing you have to remember about --
so with Opteon, margins are higher than the rest of the segment. But as you go in time
with just stick with refrigerants for a second, in fact our margin profile across all of fluor
is very similar if you look about fluoropolymers and fluorochemicals. But inside
fluorochemicals for refrigerants, you have base refrigerants and you have Opteon. Over
time, and I think it was denoted in Paul's charts, you see volume decrease in the base
refrigerants because they get replaced by Opteon. But the price point moves up because
they get under quota. So you actually have strong margin on both sides of base and
Opteon, just to give you context of how to think about that. But your premise is right,
Opteon margins today are higher than the rest of the refrigerants I'd say.
Unidentified Participant: Margins right now are relatively low. Once you get Durango built, etc., we should see a
substantial increase in that margin?
Mark Vergnano: Yeah. Our goal, and Chris's go-do and he is committed to is we want the margin profile
of Chem Solutions to be very similar to the margin profile of the rest of Chemours. And
we think we can do that. Mining Solutions being a piece of that, Chris talked about
glycolic which we have some upside on and the continued work that your team builds on
cost.
Chris Siemer: Yeah, so I'd say we've got detailed plans to deliver that.
Alisha Bellezza: I think we have time for maybe one or two more. Chris?
Chris Prowell: Thank you. Chris Prowell of Bloomberg Intelligence. How, Mark, should I think about
the cash spend for environmental issues over the next couple of years, not including the
GenX issue, but legacy DuPont issues that you've had to deal with in site remediation?
Mark Newman: I'd start first by saying any anticipated spend is reflected in the guidance we provided
today. We have reflected our spend against our environmental accrual which today I
think stands at about $290 million. We had quite a bit of spend this year related to the
Pompton Lakes and we expect that spend to gradually decline over time while of course
the reserve will continue to come down as it has since spin. So I wouldn't expect any
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significant change in cash spending. Obviously as we have given our guidance for next
year, we are anticipating the kinds of things that we talked about earlier with respect to
the costs of operating Fayetteville.
Kevin McCarthy: Thank you, Kevin McCarthy, Vertical Research Partners. A couple of questions on your
TiO2 marketing strategy. I think you mentioned that today you sell less than half of your
sales as per a contract structure. Where do you think that number can go over time? And
can you talk about how the number varies by region of the world, recognizing I think
you've got 32% of your sales derived from Asia Pacific and often in my experience,
buyers there prefer spot behavior.
Bryan Snell: We're not going to quantify the scale, but I would say it's comfortably the majority of our
transactions in the future would be under contracts with much more rigor to them than
what we have today. And I think how the -- we don't have a regional design that says by
region there will be a certain portion that won't be under contract. It's going to be much
more tied to the application and the customer.
Mark Vergnano: Kevin, maybe just to add to Bryan's point, the contracting strategy, I don't want anyone to
take the contracting strategy as boy, a wishful thought. I think the team has been very
successful already with that strategy as we've been rolling this out to customers. And it's
because it's helpful to them as well. I'd say this year we've learned that what's really
continually important, I wouldn't say it's a new thing, but continually important to our
customers, is knowing that they can be supplied in the future. That was one of the
reasons behind Altamira was because we needed to convince our customers that we can
continually supply them as they grew. And so this is all about making sure that the
customers that want to be with us have a continuity of supply with high quality product
and at a price point that allows them to plan their future and allows us to plan ours as
well. So it's a solid thought and one that's actually gained significant traction this year
with Bryan and his team with our customers.
Kevin McCarthy: Then as a follow-up to that, I guess part of my takeaway was that you are endeavoring to
mitigate price variance in the business. And I think you made a comment, Bryan, that
you may be prepared to absorb volume variations, I'm paraphrasing there. So in that
context, how would you characterize your contribution margin? In other words, if your
business fluctuates by a dollar in sales due to volume, how would that flow down to
profit based on let's say 2017 economics? How do you think about that?
Bryan Snell: Well we're doing a lot of work to build out the flexibility of the circuit so that there's not
a lot of margin impact as we're bearing volume across the circuit. I think one of the
benefits that you get if you get into this whole stabilization idea with our customers is,
that you also, with a stable price, you remove some of the volume variability. Because
today I think the volume swings more because people are building inventory or setting
inventory based on what they think is going to happen with the TiO2 price. If they didn't
have to worry about that, they wouldn't have a driver to vary their working capital so
much. So I think that would narrow the band of volume that we'd have to absorb and
really only take it back to sort of that volume variance that was introduced by economic
conditions and nothing else.
James: Just following up on the previous question, as a market leader, do you think other
industry participants will look to go towards more contracts in the future? And second
question sort of related to that, you mentioned you're looking to expand the ilmenite
facility in Florida. What currently is your integration percentage and are you looking to
increase that over time?
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Bryan Snell: The second question was what is our percentage of feedstock in Florida? Let me take
that one first. It's a small fraction of our total demand. Florida is not the only place
where we're very active in the mining industry. We have over years either a varied
investment from mineral rights to offtake agreements to sponsor new mine development
and we will continue to do that to ensure that we get the feedstock that we need. In
addition, we have quite a bit of leverage with the large producers in that we're a big buyer
and so we're a favored outlet for their product as well. So I have no reservations about
our ability to acquire ore and acquire it at favorable terms that connects to our unique
production capabilities. And the first question was back on?
James: With you seeking to increase the percentage of your TiO2 that's contracted, do you think
other producers will follow your lead? Is that sort of part of the strategy?
Brian Snell: That's probably their decision.
James: So just going back to the first question, on the integration, do you look to be more
integrated, backward integrated going forward?
Bryan Snell: Well think about it as significantly integrated already sort of in a virtual context. We can
use low grade ores that nobody else can use. That bypasses the entire beneficiation step.
And furthermore, we're very active in the acquisition of those ores to keep those costs
down under very favorable market conditions. So we're kind of virtually backward
integrated as we are.
Mark Vergnano: James, maybe just to add to Bryan's point, we are the chloride ilmenite market. I mean
no one really can use those kinds of ores. So as Bryan says, I think we have strong
buying power from that standpoint. But the mine that we do have in Florida, as we've
said to others, it's about 10% of our total use. I don't think the expansion will add much
to that. It's a very rich mine for ilmenite, it is very, very helpful to us. So although I've
said to many of you that we don't anticipate spending a lot of money, a lot of our capital
to expand into mining, we don't think that's the best use of our capital versus other
choices we have. This is a, I'd put it as a no brainer for us in terms of the return we get
out of this because we can basically expand what we're already doing down there versus
opening something new.
Alisha Bellezza: So we're going to close the formal Q&A session at this point. I think, Mark, you want to
make a few closing remarks?
Mark Vergnano: Yeah, and obviously we're going to have time with everybody when you join us for
lunch, but first of all, we covered a lot of ground this morning. We talked a little bit
about the past, we gave you a snapshot of what we think today looks like and hopefully a
little bit more of a view of what's coming next. So I hope you've come to the same
conclusion that we have, that we believe Chemours has been a great investment for those
of you who have been in it over the past two years and under our disciplined leadership,
have the ability to continue to be a great investment going forward. We've taken a pulse
of our workforce just recently as part of our transformation work and it's clear as we look
across the globe, we could not be more energized, more focused, or more determined to
take this company from what we've been saying, good to great, or earning our way to
growth. So as we close this formal portion of the Investor Day, we'll be moving over to
Siebert Hall for lunch. We'd like to thank you for being here. We'll all be available if
you have more questions for us. But more importantly, thank you for coming here today
and thanks for your continued interest in the Chemours Company. Thanks, everybody.
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