Good day and thank you for standing by. Welcome to The Chemours Company Second Quarter Earnings Call. At this time, all participants are in a listen-only mode. After the speakers' presentation, there will be a question-and-answer session. [Operator Instructions] I would now like to hand the conference over to your speaker today, Jonathan Lock, VP, Corporate Development and Investor Relations. Please go ahead.

Good morning, and welcome to The Chemours Company's second quarter 2021 earnings conference call. I'm joined today by Mark Newman, President and Chief Executive Officer; and Sameer Ralhan, Senior Vice President and Chief Financial Officer. Before we start, I'd like to remind you that comments made on this call, as well as the supplemental information provided in our presentation and on our website, contain forward-looking statements that involve risks and uncertainties, including the impact of COVID-19 on our business and operation and the other risks and uncertainties described in the documents Chemours has filed with the SEC. 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 this presentation. With that, I'll turn the call over to our CEO, Mark Newman, who will review the highlights from the second quarter. Mark?

Thank you, Jonathan, and thank you to everyone on the call for joining us today. I'm excited to be speaking to you today on my first earnings call as CEO of The Chemours Company. It's a busy time here at Chemours but the energy I feel from our people, from our customers, suppliers, and investors is still incredible. This has been in part driven by the broader macroeconomic recovery from COVID-19, but more importantly, I think it reflects the enthusiasm and passion of our teams and a deeply held belief that our chemistry has the power to change the world. To that end, I have charged the people of this company to drive even sharper focus on creating the best products for our customers and helping solve the world's biggest challenges from climate change to energy storage to high-speed data. Our chemistry is fundamental to the future, and through our innovation, we have the power to make a difference. There is a rich canvas of opportunity which lays ahead of us, and we are well-positioned to drive long-term growth for the benefit of all our stakeholders. In 2021, we are focused squarely on delivering on our plans and ensuring that we take full advantage of market opportunities, which we are uniquely positioned to capture. Turning now to the highlights from the second quarter on chart 3. Demand momentum from the first quarter continued into Q2 as the global recovery from COVID-19 continued at pace. We set a number of revenue and profitability records across the portfolio in the second quarter, including achieving the third-highest quarterly sales in Chemours's history. Net sales increased 51% to $1.7 billion, while adjusted EBITDA of $366 million, increased $200 million from the prior-year quarter. Our Titanium Technologies results demonstrate the benefits of our TVS strategy,…

Thanks, Mark. Turning to chart 6. Results in the second quarter continued the trend from Q1 with demand improving across the portfolio. Q2 net sales of $1.7 billion were up 51% year-over-year, and 15% on a sequential basis. The global recovery continued to pick up steam across most of our end markets. GAAP EPS was $0.39 per share and adjusted EPS of $1.20 per share. Adjusted EPS reflects add-back of two key charges, $169 million related to remediation of onsite [ph] Fayetteville site to address legacy liabilities, and $25 million associated with the Delaware settlement which we announced several weeks ago. I'll cover these in more detail on the next chart. Adjusted EBITDA increased by $200 million to $366 million in the second quarter, driven by higher volumes and pricing with currency providing a slight tailwind. Margins rose to 22% on a company-wide basis. Free cash flow in the quarter was $189 million. Our cash performance in the quarter reflects our continued commitment to improving the overall quality of earnings to the company, and more importantly, converting earnings to cash. On July 28, our Board of Directors approved our third quarter 2021 dividend of $0.25 per share. This amount is unchanged from the prior quarter and will be payable to shareholders of record as of August 16, 2021. Turning to chart 7. Let's take a closer look at the composition of the two key charges we took in the quarter, including the potential cash flow impact over time. As previously announced, we entered into a settlement with the State of Delaware in the second quarter of which Chemours will be a 50% of the cost are $25 million. This amount is expected to be paid in the third quarter of this year. Second chart is $169 million add back to…

Thanks, Sameer. We are updating our guidance for the full year to reflect the momentum we feel across the business. We now believe that our full-year 2021, adjusted EBITDA, and adjusted EPS will be in the upper end of the previously communicated range. Recall that we had raised both of these figures during our Q1 earnings announcement. We are leaving our free cash flow guidance unchanged at greater than $450 million to reflect the impact of one-time cash payments in the year, including our Ohio MDL payment earlier in the year and our recent settlement with the State of Delaware, which Sameer took us through. Operating cash flow continues to be strong. This outlook, of course, excludes the impact of the Mining Solutions divested that we just announced. We believe we are well set up for a great 2021 and we will continue to focus on executing our differentiated business strategies throughout the year. We remain fully committed to generating significant earnings and free cash flow through the cycle, improving our quality of earnings over time, and maximizing the value of Chemours over the long term. In July, we celebrated our 6th birthday as a company. It's hard, typically you how quickly the time has flown. We have achieved a lot in the last six years and our bright future is built upon the strong foundation we have laid as a team. It all starts with our people. The 650 employees of Chemours who I am so proud to lead. I look forward to continuing our great work together. As CEO, I promise to lead with an eye toward helping each of you succeed and enjoy a rewarding career at Chemours. Together, we must continue to move fast and with the entrepreneurial spirit that has served us so well since been. As I think about the future, it is impossible to ignore the macro trends and the context in which we operate. As a chemical company with a long and proud heritage, we are the foundation for innovation around the world. Improvements in the performance, environmental footprint, and cost of our products has a multiplier effect well beyond Chemours. Opteon and Nafion are just two examples of how Chemours chemistry can change the world. We will continue to deliver market-leading improvements in our industry to help power the future. I look forward to engaging with you, our investors, over the coming months to help you see the full potential of this company through our eyes. I believe the future is bright here at Chemours and I appreciate your support in helping us achieve all that we are capable of. With that, operator, please open the line for questions.

[Operator Instructions] Your first question is from John McNulty with BMO Capital Markets.

Yeah, good morning. Thanks for taking my question. Maybe a quicker, relatively easy one to start out. On the TiPure business, you commented in the release that you saw pricing across all channels. Can you maybe unpack that on a little bit for us and speak to the pricing trends that you were able to capture in the TVS side of the business, the contract side of the business as well as -- and then maybe give us a little bit of color as to what you were seeing in the portal and distributor side?

Yeah, Hi. Good morning, John, and really a great interest in supply from our TiPure franchise throughout the quarter. As we have said, we adjust pricing regularly on our Flex Portal and through our distributor channel and as well there are mechanisms to pass on price increases contractually through our AVA contract. So we are seeing clearly with our strong production in the quarter and ability to supply more product through our Flex and AVA channel, but we are also seeing an ability to take price based on our contractual arrangement and where PPIs coming in this year. Maybe on PPI, I think the view is we will see mid to high single-digit this year, these are still published indices, but again, that's the primary mechanism in AVA and we continue to take advantage of that contractually.

Got it. That's some helpful color. And then and then thinking about the TSS segment, it sounds like the AIM Act is going to be certainly a sizable contributor to growth. Can you help us to quantify how additive that will be as you looked to 2022 when it first gets initiated into the U.S.?

So we expect -- So first of all, we are very excited about the AIM Act and the enforcement of the EPA regulations that are being designed and should be finalized later this year. And we believe that will provide a significant leg of growth in the stationary market we're up in especially and our expectation in the initial step down from a quarter perspective is approximately 10% from the baseline that jumps out the 40% from the baseline by 2024. So our expectation is, we'll start to see some impact in 2022 but that impact will become more significant and as people migrate to HFO technology. Clearly, as you heard in the call, we have OEM manufacturers who are already switching their product line, so that along with the order of magnitude in mind I will really drive in them.

Great, thanks very much for the color.

Thank you, John.

Your next question is from Bob Koort with Goldman Sachs.

Thank you very much. Good morning. Mark, I was wondering you guys talked about sort of flexing your circuit in TT in order to meet customer demand. I presume that to I mean higher grade more costly orders. I'm wondering if you could help quantify what the penalty on margins was or maybe as you look forward, how much more margin uplift you might expect in TT?

Yeah, I'll let Sameer make an additional comment here, but as we look at a year, clearly there is operating leverage in our TT business which you see with the margin expansion going from Q1 to Q2. We are having to give up some expansion in margin, really to focus on meeting strong customer need and addressing all of the supply chain disruptions. So, as we said early in the year, we've really not been able to put quote unquote optimize the circuit given strong demand and our desire to meet customer needs first. But as we work through the year, I think we continue to look for opportunities throughout the month. Sameer?

Yeah. Thanks, Mark. Bob, only additional comment I would make is as all the markets kind of normalize there will be an opportunity for us to optimize our circuits and drive the market up, but given all the supply in lined-up right now we expect it to be more of Q4 phenomena than Q3. So Q3 margins to be in line with where we are.

Got it. And then in APM, you had a very respectable improvement in margins, obviously a lot of volume recovery and fixed cost leverage coming through. Kind of surprised with that kind of volume cadence there was no pricing. So can you talk about the competitive dynamic there, I would have suspected that maybe broadly pricing across that franchise would have improved? Thanks.

Yeah. These are high-value in use polymers and they are priced for the most part based on value in use. There is a bit of a mix in APM when you have a strong economic recovery that we're seeing towards the more commoditized end of the spectrum. So I would say there is a mix impact there as well. And then finally, we were taking price through the quarter. But you will see the impact here as we move forward through time of that showing up more in our results.

Great. Thanks for the help.

Thank you.

Your next question is from Josh Spector with UBS.

Yeah. Hey, guys. Thanks for taking my question. I guess when you talk about in TiO2 normal seasonal trends in second half, can you just give us some more color on if that's a function of demand or more supply constraints? And within that outlook, where do you think your inventory and then customer inventories in the year at this point?

So we continue to see strong second half demand across all of our businesses including in TiO2. And clearly, as we've stated, we are taking action to be able to supply our customer needs. And if you look at inventories across, especially in TiO2, our sense in talking to our customer's inventory has remained low and the lower folks would like to see them in the entire supply chain. As we look into 2022, clearly we see the impact of -- potential impact of the stimulus coming and usually our high correlation with strong TiO2 demand. So yeah, looking out today, we certainly see very strong second half demand. Some of it is primary demand, some of it is really a preference for Type QR and the TBA strategy [ph]. And as we look beyond 2021, clearly, we could see the impact of the stimulus and rebuilding inventory.

Okay. Thanks, I appreciate that. And in the slide on your outlook, you talk about the majority of free cash flow being returned to shareholders, which isn't a change from how you talked about it previously, but you have high cash position now. You're getting from mining solutions. How quickly do you return that cash to shareholders and what's the right level of cash that you think you should be holding on a normalized basis?

So Sameer Ralhan, Sameer could comment on the right level of cash, but clearly, as we said in our -- in the call, we view our capital allocation as being balanced. There's a certain level of deleveraging, which we think is prudent from our learnings coming through the depths of the COVID-19 pandemic. And then we continue to return value to shareholders through dividends and stock repurchases which we started in the quarter. So we're going to have this balanced view going forward while we continue to invest -- re-invest prudently in the business. Sameer, I'll ask you to make a few comments.

Yeah. Thanks, Mark. I think Josh, the way you should be thinking about us from a balancing perspective is, as you've said, you're right, we do want to reduce our gross debt by company $0.5 billion over the next few years. So you're going to see us using our cash in a balanced form and it's won't make sure at that leverage is less than three times. With respect to the Mining Solutions point that you made, I think the way you should be thinking about it is the proceeds of Mining Solutions, of course, give us little more degrees of freedom, but grocery and Mining solution combined with a strong operating cash flow will be used in line with our capital allocation policy and that agreement. So you'll see us doing -- using it in a balanced form and that is composed of introductions, investments, and share buybacks.

Okay, thank you.

Your next question is from Matthew Leo with Bank of America.

Hi. So it looks like price declines in TSS are starting to moderate a bit. Is there any real tangible evidence that the illegal refrigerant trade into Europe is slowing, or is that more a function of just perhaps the shipping constraints we're seeing more broadly? And if it is the former, how do you, how can you expect pricing to develop in that segment, and when theoretically, if it's possible, would we see that royalty income flow back to the company or is that still kind of out of the question?

So, Matt, we remain very positive on our outlook for the TSS business. It's a multi-year secular growth trend with both [indiscernible]. Out to your question on pricing, we have cost down in some of our large OEM contracts, mainly on the automotive side, but across the rest of the portfolio, it's really driven by market dynamics. As we said on earlier this year, we see improving market dynamics in both North America and in Europe. In Europe, if you read the [indiscernible] you will see that there has been some a higher pace of significant features of illegal refrigerants. And as we said earlier this year, the combination of economic recovery, higher base refrigerant prices and endorsement, that really is driving a better margin. So the overall pricing performance in the quarter is a function of better fundamentals in North America and Europe. Along with our cost down that we had in some of our large OEM contracts.

This is Mark. Just one little point if I could add is, Matt, you point on the royalty given, I'm assuming you mean quarter sales. In fact, in the way you should think about this thing is, the team [ph] that could operate the full spectrum, this can be monetization of the fear to a goal list. It can be group quarter sales or products sales, so it doesn't have to necessarily come through the quarter bill we optimize it across the portfolio.

Okay. And one more if I can, does the TVA and flex mix -- flex portal mix in 2Q shift back to more normal levels? It seemed like 1Q was pretty contract-heavy. And I guess of that 15% quarter-over-quarter increase in TiO2, like how much of that was with the flex volumes?

So I think what we said on Q1 -- in our-- well, what we said earlier is we've decided to take our share of ADA contract up towards 70%. We had previously been 60% and Delaware's really as part of our strategy by as parts in the team in really making this as more sticky, building a better quality of work going forward with long-term contracts and customers coming back to get more and wanting us to supply them. So we have leveraged a very tight market, it's a build-out of our AVA book. So that's really where we are today. Our expectation is we would like to stay in that range of about 70% because we don't really want to -- we want to be able to supply all of our AVA customers. Most of these contracts as you know are based on some share or share commitment so we have to grow with our customers and be able to support them. We are very dedicated to all three of our channels as part of our TVS strategy and we really view Flex and distribution as a way of making sure we can serve all our customers need.

Okay, thanks.

And your next question comes from the line of Hassan Ahmed with Alembic Global.

Good morning, Mark. Mark, obviously very strong volumes within titanium dioxide, great 15% sequential gains in the like. Now we know obviously, you guys had commented on regaining pretty much all your lost market share by year-end. So I'm just trying to figure out where we stand with regards to sort of regaining that lost share, have you guys played catch-ups yet? And I guess where I'm going with the conversation is how should we be thinking about volume growth in the back half of the year? Do you feel that you will grow at a more rapid rate in the market?

I would say, we -- based on our assessment and it is a market that we will have to look at where everyone reports in the quarter, but certainly based on our assessment today in our view is that we continue to regain share, and in fact, I think it's very likely that we have recaptured all the share that we launched in implementing TVS and our -- with respect to the second half I will just say, we see strong demand in the second half. Our team is very focused on being able to supply that from both the supply chain and operations perspective going forward.

Understood, understood. And now sticking to TiO2, more on the raw material side of things, obviously on the ore side we have seen sort of supply issues be it in South Africa, be it in Sierra Leone and it seems some of these issues will linger on for a while. So how are you guys thinking particularly as you look at 2022 and contracts get reset in the like? How are you thinking about availability as well as pricing for ore? And part and parcel with that, it seems chlorine supply now is becoming a bigger issue as well and chlorine prices obviously marching up as well. So what's the thought process over there and how do you feel about that market as well?

Hassan, we remain well-positioned with respect to our supply of all of our inputs to meet our customers' needs for 2021 and continue to work on our book by 2022 based on our outlook today. And so, clearly, as I mentioned earlier, some of the supply chain factors, whether it's ore availability or other input, is really having the impact that we can't optimize our circuit to optimize margin, again such a high demand that we're seeing. Our focus really remains on supplying our customers and this is a huge part of our value proposition and it's a strengthening part of our franchise as we regain share. So this has been the focus. Our view is as things moderate going into the second half and into 2022, some of these disruptions will be transitory and we will be able to optimize our circuit more fully. Sameer, if you have any other comments?

Nothing in the market just grows, I mean entering other raw materials that we secure. We secure it from the diverse set of suppliers on long-term contractual basis. We make every effort to ensure that these are staggered and that includes ore employing.

Very helpful. Thanks so much guys.

Your next question is from Vincent Andrews with Morgan Stanley.

Hi, this is Steven Haynes on for Vincent. Staying on TiO2, as wondering if you could just talk a little bit about demand trends in China and whether you are seeing any type of slowdown or if remaining strong and any additional commentary you might have on export outlook would be great.

On our TiO2 demand, we are seeing strong demand across really all of our product lines and in every region, and we continue to have a great franchise in China which is growing. So with respect to exports from China and Chinese producer market share, our assessment has actually declined this year based on inability to supply in that market needs.

Thank you.

Yeah.

Your next question is from Arun Viswanathan with RBC.

Great, thanks for taking my question. I'm just curious when you -- could you comment on the disruptions in supply chain issues for GT, we've seen the purchase issues but the impact as that flows through for you guys and would that be positive? Just given your flexibility to source from several areas. Thanks.

Yeah. As we said earlier, we source all of our major inputs very strategically. We have long-term contract, we diversify our supply day, as Sameer said, we ensure that they're well ahead. So we don't have to make on traffic buying at any one time. And with that, we remain well supplied despite a lot of challenges from a supply chain perspective. The main impact it's having on our business is our inability to say our up combine to our circuit to drive production let us say from our lowest cost plants to optimize or plan that sort of thing. But I think in our view are transitory aspects we continue to evaluate and the team has just done an amazing job from the procurement, supply chain, operations, and customer service to ensure we continue to meet customer needs to the best.

Okay, thanks for that. And just some early over on the mobile side for refrigerants and would you expect some extra catch up next year due to the severe chip shortage over there? Thanks.

Yeah, that's probably -- that's a great question. That's one of the areas where we see some noise in our Q2 results and expect to see some as we move through the rest of this year. Most of the OEMs are indicating to us that to the extent they can, they will try to catch up in the second half of this year and dealer inventories remain extremely low based on all the public data that we're raising. And so our expectation is the demand from an order perspective will go well into 2022 as OEMs try to rebuild the related ores and really respond to very strong customer demand for vehicle.

Thanks.

Your next question is from PJ Juvekar with Citi.

Hi, good morning. It's Eric Petrie on for PJ.

Hi, Eric.

How did that your Nafion and ion exchange membranes grow in the quarter and first half and are you seeing greater demand pull from electrolyzers or how do you can fuel cells currently?

We continue to see growth across all of our APM segment including Nafion. As we highlighted in our APM deep-dive earlier this -- in Q2, we see this business kind of in three phases. One, where we are today is a pretty significant turnaround and saw with the expansion of margin in the quarter. The second is really a GBP-plus growth through product development across the entire portfolio. And then thirdly focus on secular growth as we move towards the middle of the decade around hydrogen and 5G. So we're spending a lot of money today in that business on product development and working within the ecosystem of the hydrogen economy to tie ourselves in very well with both the growth in main brands for electrolysis and fuel cells. So a lot of work going on there and we continue to see improvement in that business, but that really become a secular growth. It starts, I'd say towards the middle of the decade.

Okay, helpful. And just secondly, you announced I think groundbreaking as the new mining facility for titanium ores in Florida, will that increase your backward integration into ores or is that to replace declining production at other sites?

That's primarily to replenish mines that are at end of life in Florida. So our view continues to be approximately 10% integrated based on our Florida, Georgia, complex mining, but great ore bodies and great supply are given all the supply chain risks that we're seeing today.

Thank you, Mark.

Thank you.

And your final question comes from Roger Spitz with Bank of America.

Thank you. Good morning. Two, first is Mining Solutions. Would you be prepared to provide us LTM June 2021 sales in EBITDA recognizing that the business is materially improved since the 2020?

Roger, I'm not sure I heard your question. Could you repeat it for me, please?

Of course. Would you be able to provide Mining Solutions LTM June 2021 sales in EBITDA?

Yeah. Roger, this is Sameer. Why don't I jump in, as you know, we don't disclose that. But overall, if I think about the mining business based on the commentary in Q1 and Q2, yes, we have seen strength of the business on a year-on-year basis, but I wouldn't -- the increase is not such an earnings that you would expect [indiscernible] possible -- the business and the proceeds that we guided is at 10 times raised even if you look at on EBIT.

Got it. And secondly, you spoke about normal seasonality in Q3 for TiO2, but would you prepare to give any view of what that year-over-year TiO2 volumes for you guys might look like in Q3?

No, not really. What we've said is normal seasonality, but a very strong second half demand.

One more point I would add, Roger, that at this point, the added team are running the circuit on flat out given the ores or issues that we some people have raised on the other calls. But at this point our circuit is running flat out. And we're going to get into Q4, we'll get an opportunity to optimize it further as Mark said earlier in the call. So at this point, it's all about meeting the customer's needs that we have.

Got it. Thank you very much.

I will now turn the call to Mark Newman for closing remarks.

Well, thanks everyone for being with us today when I reflect on the quarter and we review our year-to-date. I'm just very thankful to our 6,500 amazing employees for so many achievements, responding to really strong demand, meeting our customers' needs, going after secular growth, especially in our two core businesses, looking for opportunities to selectively resolve legacy liabilities and our progress on our corporate responsibility commitment. And we're doing that in an environment that is challenging, and we continue to de-lever the company and we continue to return cash to shareholders. So, just really thankful for the focus, the execution, and the accountability of the team. And we remain, as I said earlier, focused on delivering a great 2021. So, thank you.

Ladies and gentlemen, this concludes today's conference call. Please disconnect.