The Chemours Company (NYSE:CC) Q3 2023 Earnings Call Transcript

The Chemours Company (NYSE:CC) Q3 2023 Earnings Call Transcript October 27, 2023

Operator: Good morning. My name is Rob, and I will be your conference operator today. At this time, I would like to welcome everyone to The Chemours Company Third Quarter 2023 Results Conference Call. All lines have been placed on mute to prevent any background noise. After the speaker’s remarks, there will be a question-and-answer session. [Operator Instructions] Thank you. Brandon Ontjes, Vice President of FP&A and Investor Relations. You may begin your conference.

Brandon Ontjes: Hi. Thanks, Rob. Good morning, everybody. Welcome to The Chemours Company’s third quarter 2023 earnings Q&A conference call. I’m joined today by Mark Newman, President and Chief Executive Officer; and Senior Vice President and Chief Financial Officer, Jonathan Lock. Before we start, I’d like to remind you that comments made on this call, as well as in the supplemental information provided in our presentation and on our website, contain forward-looking statements that involve risks and uncertainties, as described in Chemours’ SEC filings. These forward-looking statements are not guarantees of future performance and are based on certain assumptions and expectations of future events that may not be realized.

Actual results may differ, and Chemours undertakes no duty to update any forward-looking statements as a result of future developments or new information. During the course of this call, management will refer to certain non-GAAP financial measures that we believe are useful to investors evaluating the company’s performance. A reconciliation of non-GAAP terms and adjustments are included in our release and at the end of our presentation. As a reminder, our prepared remarks, a full transcript, plus our earnings deck have been posted to the Investor Relations section of our website along our earnings release. This morning’s call will focus purely on Q&A. With that, I’ll turn the call over to our CEO, Mark Newman. Mark?

Mark Newman: Thanks, Brandon, and good morning, everyone. Thanks for joining us. You know, 2023 has been a challenging year with a weaker second-half than we expected. But The Chemours team remains focused on driving long-term shareholder value and improvements in our three industry-leading businesses. Most of our year-over-year performance deterioration has been driven really by lower TT volumes, and we have responded with reductions of the TT Transformation Plan, which will shine through in 2024, as we see demand weakness decelerating. Our APM business is also seeing some demand weakness, especially in advanced materials, but we have achieved, again, double-digit growth year-to-date of 11% in our performance solutions. And this business remains tied in to long-term secular gains in advanced electronics and clean energy, which we’re hugely excited about.

And then finally, our TSS business continued with strong performance with another record net sales. This is the seventh quarterly net sales record in a row. And as we look again to 2024, we have the step down in the AMAC that’s going to drive further Opteon adoption and beyond ‘24 [Technical Difficulty] of immersion cooling in 2025. So again, we’re excited about the work that’s on the way here at the company. And despite the challenging environment we see ourself in, remain focused on what we have to do going forward into 2024. So with that, I’ll turn it over to Rob to begin our Q&A.

See also 20 Best US Cities for Nature Lovers and Outdoor Enthusiasts and 24 States Where Sports Betting Is Legal.

Q&A Session

Operator: [Operator Instructions] And your first question today comes from the line of Duffy Fischer from Goldman Sachs. Your line is open.

Duffy Fischer: Yes, good morning guys. Mark, I was hoping you could just walk through on the step down for HFO coming up this year. Historically it seems like there’s been a little bit more pre-buying of the older product, but this time that doesn’t seem to have happened. So can you just walk through what’s transpired over last year? Do we build a little bit of the HFC volume at the distributor level earlier this year? And that’s why there’s not kind of a price bump and a run for the door here late? And the how do you see that playing out next year? It seems like there is distribution inventory, when next year do you see that push that the step down, you know, kind of, really starts to accelerate the volumes for HFO?

Mark Newman: Yes, so definitely a great question. And as you said, we have always indicated that we would wait till Q4 to see, based on usage of inventory and quota usage in the year, whether we would indeed have a step up in HFC volumes. Interestingly, what we have seen in Q4 is higher HFC pricing, and so there is an indication in my mind that there is increasing interest in HFCs ahead of the quarter step down. Clearly, as we go into 2024, our view will be that, you know, there will be continued ramp up in HFO volumes. You know, whether that happens at the beginning of the year or more ratably, you know, we’ll wait to see. But clearly as we look at the OEM adoption of HFO platforms, you know, we see meaningful growth in HFOs in 2024 for the full-year.

Duffy Fischer: Okay. And then in Europe, we had an issue about a year into their big step down where you started to get some illegal product flowing in. How were you guys set up differently in the U.S.? Have you identified potential routes for that and who is, I guess, kind of the policing force if you notice that, that you would go after? Do you feel like that’s set up well enough that you can stop that from happening in the U.S.?

Mark Newman: Yes, well, first of all, we did a lot of work as an industry with the EPA in implementing the AMAC to take every precaution to make sure that didn’t happen here. Clearly, there’s fewer borders as it relates to the U.S., Canada, and Mexico than there is in the EU with 28 member countries. But listen, I think the industry, not just us, but the OEMs who have invested significantly in the HFO franchise are very focused on rolling out that adoption. Obviously, there’s meaningful climate benefit with HFOs, and so I think that risk is a lot lower here in the U.S. and certainly we’re not seeing any meaningful indication of that risk today.

Duffy Fischer: Great. Thank you guys.

Operator: Your next question comes from a line of John McNulty from BMO Capital Markets. Your line is open.

John McNulty: Yes, good morning. Thanks for taking my question. So I was hoping maybe we could peel back the onion a little bit on the TT business. Because the volume weakness that you’re seeing definitely doesn’t seem to be matching up with what the end customers’ volumes are doing. And I guess I’m a little bit surprised it’s gotten actually worse as we’ve gone through the year. And normally I’d be a little nervous you’re losing share or something like that. But in this case, you’ve got a lot of longer term contracts locked up. So it doesn’t look like that’s the case. So I guess, can you help us to think about where that demand disconnect is and when maybe we see the end of that de-stocking and kind of a normalization, even if it’s lower than kind of whatever 2019 type levels. But when we see a normalization of that business, I guess, how should we be thinking about that?