Chemours Q2 2025 Earnings Call Transcript

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Provided by Quartr
August 6, 2025

Key Takeaways

  • Positive Sentiment: Chemours agreed to a $250 million net present value PFAS settlement in New Jersey over 25 years, funded by $150 million in insurance rights and $50 million in escrow to cover obligations through 2030, reducing legacy litigation risk.
  • Positive Sentiment: The TSS segment delivered a 65% year-over-year growth in Opteon refrigerant sales with sequential volume gains, lifting Opteon’s share to 75% of refrigerants revenues and achieving a 35% adjusted EBITDA margin.
  • Negative Sentiment: In TT, sequential net sales rose 10% on a 9% volume increase, but $15 million of operational disruptions—including a rail service interruption and process discipline gaps—are expected to weigh on Q3 performance.
  • Negative Sentiment: APM saw sequential sales up 14% in Performance Solutions and 20% in Advanced Materials, boosting its adjusted EBITDA margin to 14%, but a power outage at the Washington Works site will incur approximately $20 million in additional costs and limit output into mid-August.
  • Neutral Sentiment: For 3Q, Chemours anticipates net sales down 4–6% sequentially with adjusted EBITDA of $175–195 million, and full-year 2025 guidance remains at $775–825 million in adjusted EBITDA, $250 million in CapEx, and 60–80% free cash flow conversion.
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Earnings Conference Call
Chemours Q2 2025
00:00 / 00:00

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Operator

Good morning. My name is Jericho and I will be your conference operator today. I would like to welcome everyone to the Chemours Company Second Quarter twenty twenty five Results Conference Call. Currently, all participants are in listen only mode. A question and answer session will follow the conclusion of the prepared remarks.

Operator

I would like to remind everyone that this conference call is being recorded. I would now like to hand the conference call over to Brandon Aunces, Vice President, Head of Strategy and Investor Relations for Chemours. You may begin your conference.

Brandon Ontjes
Brandon Ontjes
VP, Financial Planning & Analysis - IR at The Chemours Company

Good morning, everybody. Welcome to The Chemours Company's Second Quarter twenty twenty five Earnings Conference Call. I'm joined today by Denise Dignum, Chemours' President and Chief Executive Officer and our Senior Vice President and Chief Financial Officer, Shane Hostetter. Before we start, I would like to remind you that the comments made on this call as well as in the supplemental information provided on our website contain forward looking statements that involve risks and uncertainties as described in 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.

Brandon Ontjes
Brandon Ontjes
VP, Financial Planning & Analysis - IR at The Chemours Company

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, we 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 is included in our press release issued yesterday evening. Additionally, we also posted our earnings presentation and prepared financial remarks on our website yesterday evening. The prepared financial remarks are intended to largely replace management's quarterly financial prepared remarks, allowing for additional time for your questions.

Brandon Ontjes
Brandon Ontjes
VP, Financial Planning & Analysis - IR at The Chemours Company

With that, I will turn the call over to Denise Dignam.

Denise Dignam
Denise Dignam
President, CEO & Director at The Chemours Company

Thank you, Brandon, and thank you, everyone, for joining us. During today's call, I will begin by discussing our second quarter performance, including meaningful progress on our Pathway to Thrive strategy. I'll then turn it over to Shane, who will provide details around our outlook. Finally, I will share some closing remarks before taking your questions. As you saw in our announcement on August 4, we reached a settlement with the state of New Jersey, continuing the notable progress we've made under our strengthening the long term pillar of Chemours' Pathway to Thrive strategy.

Denise Dignam
Denise Dignam
President, CEO & Director at The Chemours Company

The settlement reached with New Jersey announced with DuPont and Corteva is a significant step forward as it resolves all environmental claims, including those related to PFAS, across four current and former operating sites and all statewide claims. Moore's share of the settlement on a net present value basis is approximately $250,000,000 reflecting a twenty five year payment time frame. In connection with this settlement earlier this week, Chemours also established a new agreement with DuPont and Corteva to acquire the rights to Chemours' insurance proceeds, which would provide approximately $150,000,000 to fund the payments for the New Jersey settlement. The combination of these insurance proceeds and the release of approximately $50,000,000 in restricted cash from the 2021 MOU escrow accounts fully funds $200,000,000 of Chemours' New Jersey payment obligation, which covers our obligations through at least 02/1930. The present value of payments remaining after 2030 by Chemours for the New Jersey settlement, not considering the potential for additional insurance recoveries, is approximately $80,000,000 This settlement is a meaningful step forward in our continued efforts to address the overall legacy PFAS and other environmental claims.

Denise Dignam
Denise Dignam
President, CEO & Director at The Chemours Company

We will continue to work in partnership with DuPont and Corteva to resolve such matters in the best interest of our stakeholders. In addition to this achievement, we also delivered strong second quarter results, surpassing our expectations with improved performance across each of our three businesses. In closing out the quarter, our results came in stronger, driven by the following: increased demand for Opteon tied to the 2025 transition TT sales ahead of our expectations with sequential volume growth across all of our regions and favorable pricing in APM from Performance Solutions in new higher value applications as well as solid sales execution for our SPS Capstone product line wind down, which is on track for the third quarter. However, with this strong momentum, we must acknowledge that we've had a significant impact from discrete operational issues in TT and APN, most of which were caused by external events, but some were due to controllable operational matters. We've taken actions to address these issues, which I will speak to later in the call.

Denise Dignam
Denise Dignam
President, CEO & Director at The Chemours Company

Now turning to each segment's performance in the quarter. Starting with TSS. Our TSS business delivered another impressive quarter, driven by continued momentum in the transition to Opteon refrigerants. Net sales of Opteon refrigerants grew 65% year over year, supported by seasonal demand and the impact of the 2025 U. S.

Denise Dignam
Denise Dignam
President, CEO & Director at The Chemours Company

AIM Act transition mandate for residential and light commercial stationary air conditioning. This performance contributed to a 35% adjusted EBITDA margin, underscoring the strength of our differentiated portfolio and ability to capture profitable growth as the market continues to shift towards lower global warming potential solutions. While in the last quarter, we highlighted challenges in the air conditioning aftermarket around cylinder constraints and product availability, I am proud of the TSS team's ability to remain steadfast and customer focused during this time. As a point of emphasis, our team's ability to be resourceful and solutions focused to meet the needs of our customers was key to delivering these better than expected results. Looking ahead, we expect continued Opteon demand growth in the second half moderated by typical seasonality with an unwavering strong regulatory framework to drive the transition within additional stationary subsectors.

Denise Dignam
Denise Dignam
President, CEO & Director at The Chemours Company

Driven by this transition, at the end of the second quarter, we're now seeing Opteon refrigerants make up 75% of total refrigerants revenues, up from 57% in the prior year quarter with superior positioning in the market. One area I also want to highlight is around the ramp up of our Opteon YF capacity expansion at our Corpus Christi site. This important investment has been key to securing the capacity to be able to support the growth we're experiencing during this regulatory transition. Through the second quarter, we remain ahead of our target of half the overall expansion project we plan to have available this year. This team's ability to drive this performance is a clear illustration of our strategic execution under our operational excellence pillar and what we're looking to achieve across all of our sites.

Denise Dignam
Denise Dignam
President, CEO & Director at The Chemours Company

To this, a big thank you to all those at our corporate site who have been part of driving this performance and remain focused on our continued ramp up efforts. Altogether, an industry leading performance from TSS, outpacing our Q2 expectations and setting a solid foundation for the second half. Moving to TT. In the second quarter, TT delivered overall results ahead of our previous guidance with sequential net sales up 10%, supported by increased volumes of 9% paired with overall flat pricing. In this weaker demand environment, our team executed well, securing increased volumes across all of our regions.

Denise Dignam
Denise Dignam
President, CEO & Director at The Chemours Company

While we are proud of this result, we've had some discrete operational issues, one being the rail line service interruption, which is now resolved, and the others caused by a gap of operational discipline in this low demand environment. The teams have now instituted a series of actions to rectify these issues. However, we do anticipate that some of these issues will impact our third quarter results. These recent challenges to run our plants at optimal levels have taken us off our transformation plan, and a refocus on our cost out diligence is well underway. I am confident that the team is taking the right steps to drive long term improvements through these actions, and I will speak to the efforts we're taking through our manufacturing COE later in this call.

Denise Dignam
Denise Dignam
President, CEO & Director at The Chemours Company

From a broader market perspective, in line with our expectations from last quarter, we are beginning to see the effects of Chinese producer capacity rationalization. This change in the global supply environment paired with recent fair trade actions have provided opportunities in Western markets where our teams have been able to drive commercial opportunities. While we find ourselves in a challenging environment in a global market that is in transition, our team has been diligent in efforts around commercial excellence and our long term winning strategy. Turning now to APM. Despite continued weakness in cyclical end markets impacting Advanced Materials and products serving the hydrogen market under Performance Solutions, APM delivered a notable performance in the second quarter.

Denise Dignam
Denise Dignam
President, CEO & Director at The Chemours Company

APM's performance reflects our continued focus on strategic execution under our portfolio management pillar, where we continue to shift our product mix to higher value applications in growing end markets and optimize our asset footprint. In our Performance Solutions portfolio, APM saw a sequential sales increase of 14%, driven by product sales into the data center cable market, with Advanced Materials seeing a 20% sequential sales increase, primarily driven by stronger pricing in the SPS Capstone product line in connection with the product line's planned exit in the third quarter. The impact of the strategic execution on our bottom line is evident in our adjusted EBITDA margin increasing from 11% in the 2025 to 14% in the second quarter. Our performance in the second quarter is indicative of how we view the APM business going forward, continuing to drive an improved quality of earnings across our strategic pillars with an added emphasis on portfolio management. However, as we move into the third quarter, I want to highlight an issue that we've had at our Washington Worksite related to a local power outage.

Denise Dignam
Denise Dignam
President, CEO & Director at The Chemours Company

This event caused an unplanned full shutdown of our site. After an initial restart and following further assessments, our team identified damage to a critical piece of equipment that resulted in unscheduled downtime into mid August. When these circumstances occur, our emphasis is on the safety of our employees and our surrounding community as we work through the repairs and a planned restart. Shane will speak to the impact on our Q3 outlook shortly. Overall, I couldn't be more proud of the execution from all of our teams in achieving these results for the second quarter, illustrating Chemours' collective focus on strategic execution.

Denise Dignam
Denise Dignam
President, CEO & Director at The Chemours Company

I know we will continue to keep the same focus as we move into the second half of the year. With that, I'll turn it over to Shane to walk through our outlook.

Shane Hostetter
Shane Hostetter
SVP & CFO at The Chemours Company

Thank you, Denise, and good morning, everyone. As shared in our earnings materials as well as the supplemental prepared financial remarks available on our investor website, I would like to now discuss our expectations for the third quarter followed by our outlook for the full year 2025. Beginning with TSS, for the third quarter, we expect TSS's net sales to decrease sequentially in the mid single digit percentage range, driven by traditional seasonality, primarily concentrated in our Freon refrigerants. TSS's adjusted EBITDA is also expected to decrease in the low teens percentage range sequentially, primarily driven by the seasonality I mentioned as well as overall product mix. For our TT business, we expect TT's sequential net sales to decrease in the low single digit percentage range, driven by seasonality and regional sales mix, with volumes expected to remain stable.

Shane Hostetter
Shane Hostetter
SVP & CFO at The Chemours Company

Adjusted EBITDA is expected to decline in the low teens percentage range sequentially due to lower sales paired with certain operational disruptions. Costs associated with these operational issues are anticipated to approximate $15,000,000 in the third quarter. As we look past the third quarter, we expect our operations to improve driven by broader COE efforts, which Denise will speak to later. For our ATM business, we expect ATM's net sales to decrease in the mid teens percentage range sequentially due to production constraints associated with the Washington Works downtime. Adjusted EBITDA is expected to approximate $15,000,000 in the third quarter considering the lower sales as well as additional costs from the referenced site outage, which will approximate $20,000,000 On a consolidated basis, we anticipate our third quarter net sales to decrease 4% to 6% sequentially, with consolidated adjusted EBITDA expected to range between 175,000,000 to $195,000,000 Also, we anticipate corporate expenses to decrease approximately 5% compared to the second quarter.

Shane Hostetter
Shane Hostetter
SVP & CFO at The Chemours Company

Our capital expenditures for the third quarter are expected to be in the range of $50,000,000 with free cash flow conversion expected to be between 6080%. Turning to the full year 2025, we expect to deliver adjusted EBITDA of $775,000,000 to $825,000,000 in 2025. Our capital expenditures are anticipated to approximate $250,000,000 and our free cash flow conversion for the second half of the year is expected to be between 60% to 80% driven by seasonal impacts as well as improvements to our net working capital. Also, the company's overall net leverage ratio is anticipated to continue to improve throughout 2025. With that, I'll hand it back over to Denise for final remarks.

Denise Dignam
Denise Dignam
President, CEO & Director at The Chemours Company

Thank you, Shane. I'm proud of the significant progress we've made to date in executing our Pathway to Thrive strategy. However, we still have work to do. While we've made great strides in resolving legacy litigation this quarter supported by overall strong business performance, operational excellence is a pillar where we continue to place our focus. Our efforts have driven clear success in certain instances as is exemplified in our ramp up at Corpus.

Denise Dignam
Denise Dignam
President, CEO & Director at The Chemours Company

But while many of our recent operational impacts have been caused by outside events, we have to continue to reduce business interruptions and strengthen our resilience. We have really ramped up the engagement of our manufacturing COE with my direct involvement. As a former operations leader at Chemours, knowing our asset base, I believe we have room to improve our own performance to be better prepared for the unexpected. By engaging our COE, I've outlined our priorities in the following phases. First, realignment of experienced resources, creating more effective alignment of in house manufacturing expertise to drive focus to the highest operational priorities in our circuit.

Denise Dignam
Denise Dignam
President, CEO & Director at The Chemours Company

This phase is now complete. Second, solidifying foundational capabilities, connecting people, processes, and data to enhance performance and achieve top reliability benchmarks. Third, building advanced operational capabilities with more effective use of technology to enable us to be an industry leading manufacturing enterprise. I believe these are the keys to drive improved operational excellence under Pathway to Thrive, ensuring we drive resilient operational consistency moving forward. I want to thank all our employees for their unwavering commitment and hard work, which have been instrumental in driving our progress this quarter and advancing our Pathway to Thrive strategy.

Denise Dignam
Denise Dignam
President, CEO & Director at The Chemours Company

There is no question that the Chemours team's dedication to keeping our customers first and driving strategic execution ensures that we will have continued outstanding performance like we did in the current quarter. With that, we can now open the line up for questions.

Operator

Thank you. We will begin the question and answer session. If you'd like Our first question comes from John McNulty from BMO Capital Markets. Please go ahead.

John McNulty
John McNulty
MD - Chemicals Analyst at BMO Capital Markets

Yes, good morning. Thanks for taking my question. So I guess I wanted to dig into the outlook for the full year, because based on your 3Q guide, the implications are that 4Q really doesn't have much of the usual seasonal dip. I guess some of that's probably tied to the hopefully the absence of one time items in APM and TiO2, but it still doesn't quite bridge me there. So I guess, how should I be thinking about the good guys, the things that kind of help to offset that usual seasonal pattern from 3Q down to 4Q?

Denise Dignam
Denise Dignam
President, CEO & Director at The Chemours Company

Thanks for the question, John. I'm going to turn it over to Shane to talk about it.

Shane Hostetter
Shane Hostetter
SVP & CFO at The Chemours Company

Yes. Thanks, John. As you mentioned, I mean, just doing math, right, we pointed to midpoint at roughly 1.85 for the third quarter and that kind of puts a midpoint at 195,000,000 for the fourth quarter. Just to note, right, that we had about $35,000,000 of operational items between TT and APM in the third quarter. You add that back, which we are doing everything from an operational perspective and everything looks good, so that that will not repeat into Q4.

Shane Hostetter
Shane Hostetter
SVP & CFO at The Chemours Company

You will see a seasonal decline. I would say, as you mentioned, some of the positives that we do see for the fourth quarter that are offsetting some of that normal seasonality. I think the strength in TSS as we look ahead, as demand continues to wrap up with the regulatory change is going to be a positive and we'll continue to execute across both of the other businesses as as we end the year.

John McNulty
John McNulty
MD - Chemicals Analyst at BMO Capital Markets

Okay, fair enough. And then I guess just maybe follow-up, maybe we can talk a little bit more about TSS. It looks like a lot of moving parts. I mean, you guys clearly you blew out kind of your own expectations, our expectations, pretty much everyone's expectations on that one. I guess can you help us to unpack the drivers there?

John McNulty
John McNulty
MD - Chemicals Analyst at BMO Capital Markets

It sounds like a lot of it may have been some of the aftermarket improvement and the ability to access that or target that market. Can you speak to how maybe how big that bucket was? How much was just the regulatory shift for the OEM side and maybe some of the catch up around the raw material costs that you were dealing with the OEMs? And I guess also to that, how much of that do you feel like is hesitate to say one time, but maybe might not be recurring just because of all the cylinder issues as we look to 2026? And how much of it do you think carries over and continues in terms of the strength that you're seeing?

Denise Dignam
Denise Dignam
President, CEO & Director at The Chemours Company

Thanks, John, for the question. Yes, we are super proud of the TSS team for how we've executed. There's clearly the transition has come on strong, But I would say our performance, we have outperformed our expectations for the market. And we have a lot of confidence. Clearly, there was some shortage.

Denise Dignam
Denise Dignam
President, CEO & Director at The Chemours Company

Was some, what we think is potentially some hoarding going on because of the shortages. But we still are really confident in the growth for the rest of the year and see double digit growth throughout the year. And we have a lot of confidence going into 2026. We have to consider competitive dynamics. But I would say that, yes, there were some hoarding, maybe a one time issue, short term issue with the aftermarket, but we don't think that's going to have a big impact on the rest of the year.

John McNulty
John McNulty
MD - Chemicals Analyst at BMO Capital Markets

Got it. Great. Thanks very much for the color.

Operator

Our next question comes from Ike Osterland from Tru Securities. Please go ahead.

Peter Osterland
Peter Osterland
Equity Research Analyst at Truist Securities

Hey, good morning. Thanks for taking the questions. My first question is on TT. Are your operations and earnings in that business more vulnerable to being disrupted right now just given that you're also working on some pretty substantial cost improvement efforts? And I guess, is there any portion of your cost cutting target that you're finding you might need to delay or cancel in order to focus on maximizing reliability?

Denise Dignam
Denise Dignam
President, CEO & Director at The Chemours Company

Hey, thanks for the question. Yes, absolutely. From a cost out perspective, I would say absolutely no concerns. I don't think that there's anything relative to our cost out efforts that have impacted the reliability of our operations. We're really focused on productivity and we're really confident in that.

Denise Dignam
Denise Dignam
President, CEO & Director at The Chemours Company

I would say, looking at TT, the overall market is definitely a challenge. But we have a lot of confidence in our strategy. We're focused on our cost out driving to lowest cost, gaining share in fair trade markets. We definitely have had some issues, discrete issues in operational performance. But I just want to make sure everyone knows I'm fully engaged in the operational aspects of the business.

Denise Dignam
Denise Dignam
President, CEO & Director at The Chemours Company

We have a clear plan, and I have confidence that we're going to fix these issues and kind of have them behind us.

Peter Osterland
Peter Osterland
Equity Research Analyst at Truist Securities

Very helpful. Thanks. And then just as a follow-up on the full year guidance. Could you give a bit more color on what's happening with the APM outage? I mean, you mentioned it as one of the drivers for hitting the lower or the high end of the full year EBITDA guide.

Peter Osterland
Peter Osterland
Equity Research Analyst at Truist Securities

So just wondering how much visibility you have there into the total earnings impact and the timeframe? And how much of this is under your control?

Denise Dignam
Denise Dignam
President, CEO & Director at The Chemours Company

Yes. I would say the actual issue that occurred was a bit outside of our control, although we really pride ourselves on trying to be resilient for all those things. I wouldn't look at it first of all, the second quarter was a really good performance by the business. I would anchor back to that. The issue that's happened at Washington Works is really a blip.

Denise Dignam
Denise Dignam
President, CEO & Director at The Chemours Company

It's something that happened from a power outage that really shouldn't have happened. So think of that as a one time $20,000,000 impact. But this business is really focused on making progress against the third pillar, portfolio management and commercial excellence. You saw that in the second quarter, and that's what I would expect as we go into the fourth quarter. This should be isolated to the third quarter.

Peter Osterland
Peter Osterland
Equity Research Analyst at Truist Securities

Great. Thanks a lot.

Operator

Our next question comes from John Roberts from Mizuho. Please go ahead.

John Roberts
John Roberts
Managing Director at Mizuho Financial Group

Yeah. Thank you. Maybe one for Shane. On Slide seven on liquidity, I guess I had never really thought of insurance proceeds as a source of liquidity. Does the $150,000,000 insurance rights that you sold only relate to existing claims?

John Roberts
John Roberts
Managing Director at Mizuho Financial Group

Or did you sell forward any rights to insurance for potential future claims? Or how do we think about insurance adding to your liquidity?

Shane Hostetter
Shane Hostetter
SVP & CFO at The Chemours Company

Hey John. Yes, so related to the $150,000,000 of insurance that we talked about in the New Jersey settlement, this was related to past claims as it relates to obviously the New Jersey settlement for Natural Resources. The 150,000,000 is an advance from Corteva and DuPont that will be realized throughout the next five years as we talked about to offset the payments underneath the New Jersey settlement. So as we think about what these are, these are areas where we feel very good about getting the actual amounts from the insurance carriers down the way. The $150,000,000 is just a piece of the total pie we noted in the slide that there's about $750,000,000 out there.

Shane Hostetter
Shane Hostetter
SVP & CFO at The Chemours Company

It's not to say we're going to get $750,000,000 We feel very comfortable with the first $300,000,000 hence why I believe we were receiving the 150,000,000 upfront.

Operator

Our next question comes from Arun Viswanathan from RBC Capital Markets. Please go ahead.

Arun Viswanathan
Arun Viswanathan
Senior Equity Analyst at RBC Capital Markets

Great. Thanks for taking my question. Hope you guys are well. I guess I wanted to ask about the slide that you put out on some of the longer term priorities. So looks like you have guidance or line of sight to greater than 5% sales growth in the few next few years.

Arun Viswanathan
Arun Viswanathan
Senior Equity Analyst at RBC Capital Markets

So does that start as soon as 2026? And then I guess maybe if you were to think about how that shapes up, I imagine maybe high single digit growth can continue in TSS, but that could be offset by more moderate growth in the other two segments. And then along with that, if you could potentially provide some updates, if there are any, on the portfolio review as well, that would be great. Thanks.

Denise Dignam
Denise Dignam
President, CEO & Director at The Chemours Company

Thanks, Arun. Relative to the 5% sales growth, we definitely see that impacting in 2026. Definitely, TSS, we we see significant growth. But if you look at our second pillar around enabling growth, we have a lot of work going on around commercial excellence. You saw in the second quarter with APM, all the pricing efforts that are going on, and that's going to continue.

Denise Dignam
Denise Dignam
President, CEO & Director at The Chemours Company

Relative to our portfolio work, we're still, as we've announced, working on the review of our European assets. And we've given some updates relative to the exit of the SPS portfolio, which there are three sites where that business operates, and that's well underway. So we feel really good about that portfolio work.

Arun Viswanathan
Arun Viswanathan
Senior Equity Analyst at RBC Capital Markets

Thanks for that. And then if I could, just as a follow-up then. So it does start in the '26 period and driven by TSS. Does that also imply that maybe as that mix continues to grow of Opteon above 70% of TSS, you could see some margin growth as well. And so the EBITDA growth should be well above that 5% level, maybe high single digits.

Arun Viswanathan
Arun Viswanathan
Senior Equity Analyst at RBC Capital Markets

How should we think about how that translates, how the sales growth translates to EBITDA, maybe even EPS growth? Thanks.

Shane Hostetter
Shane Hostetter
SVP & CFO at The Chemours Company

Yes. Thanks, Arun. We obviously have not given guide as it relates the bottom line here on a longer term base. But we always strive for growth on the bottom line above our top line right in that side, some of which could come from margin expansion. But as we look at we're really excited about the business and its perspectives and feel great about being above that 30% EBITDA margin.

Arun Viswanathan
Arun Viswanathan
Senior Equity Analyst at RBC Capital Markets

Thanks a lot.

Operator

Our next question comes from Josh Spector from UBS. Please go ahead.

Josh Spector
Josh Spector
Executive Director - Chemicals Equity Research at UBS Group

Yes. Hi, good morning. I want to try again on some of the TSS questions to some extent. If I kind of think about where we came into the year, I mean, Shane, you just made this comment again, 30% plus EBITDA margins. Our math looks like you're running closer to 32% now.

Josh Spector
Josh Spector
Executive Director - Chemicals Equity Research at UBS Group

Top line assumptions initially longer term thinking high single digits, maybe now you're running mid teens. So of what you're doing this year, is this a base from a margin perspective and a top line perspective that you build off of into 2026, 2027? Or to John's question earlier, is there a little bit of giveback on either of those points sales or margins because of some of the outperformance in the aftermarket this year?

Shane Hostetter
Shane Hostetter
SVP & CFO at The Chemours Company

So yes, thanks for the question, Josh. I'll address the margins first as we think ahead. We come back to the 30%, but and as you just talked about run rate 32%. There we have some delay in some of the raw material costs increase where we priced ahead a bit. So we will see a little bit of impact there, but we still feel very good with where we're going to exit the year as we think about run rates above 30%.

Shane Hostetter
Shane Hostetter
SVP & CFO at The Chemours Company

Looking ahead and longer term, I think we're excited about the business and think about the prospects of just overall further adoption in the aftermarket driving performance. That said that is we do believe there'll be more competitive dynamics going forward. So we're not committing to any growth numbers at this time, but we'll just continue to execute and really believe that TSS is going to be a strong growth enabler for our company going forward underneath of the next three years under our strategy.

Josh Spector
Josh Spector
Executive Director - Chemicals Equity Research at UBS Group

Okay. Thanks for that. And if I could just follow-up on the PFAS comments specifically around insurance. Can you just give us a little bit more framework of if when that can apply? I guess it appears this was maybe a bit more specific with the sites in New Jersey or Jersey, I don't know if it was product related.

Josh Spector
Josh Spector
Executive Director - Chemicals Equity Research at UBS Group

Basically, can this apply to a settlement in North Carolina or anything else you have down the pike, which then maybe extends the MOU funds further out? Or how should we think about that?

Shane Hostetter
Shane Hostetter
SVP & CFO at The Chemours Company

So a couple of things there, Josh, right? So as I look at these insurance, and I mentioned a total of $750,000,000 but that number is the gross number. We'll have to think through what the carriers will ultimately provide and what we'll settle for in that side. Under the MOU, this does extend the amount of items underneath the MOU and provide more cover there. As we think about the applicability and where this is, we're really much focused on the New Jersey settlement at this time, right?

Shane Hostetter
Shane Hostetter
SVP & CFO at The Chemours Company

And think that this is a really good advance to help us cover the next five years from a cash flow perspective. The specific areas is around product liability and other areas which were applicable to the national resources underneath the New Jersey. And so we'll continue to look at other avenues to try and apply this elsewhere, but just really focused on New Jersey at this time.

Josh Spector
Josh Spector
Executive Director - Chemicals Equity Research at UBS Group

Okay. Thank you.

Operator

Our next question comes from Duffy Fischer from Goldman Sachs. Please go ahead.

Duffy Fischer
Duffy Fischer
Equity Research Analyst - U.S. Chemicals at Goldman Sachs

Yes, good morning. I was hoping you could talk to us about what your strategy is in TiO2 currently. Historically, you've been stronger on price and have given up volume to peers in weak periods. This quarter, if you look, your pricing year over year was 4% weaker than your biggest competitor, Western competitor. Your volumes were 10% better.

Duffy Fischer
Duffy Fischer
Equity Research Analyst - U.S. Chemicals at Goldman Sachs

So it's pretty clear you are much more aggressive in the market than they were this quarter. Is that a structural change in your strategy to be more volume driven? And if so, do you think there'll be a competitive response from them?

Denise Dignam
Denise Dignam
President, CEO & Director at The Chemours Company

Thanks for the question, Duffy. I mean, we are really confident and clear in our strategy. And when we started this, we really looked at we need to be lowest cost manufacturer. We took out our high cost capacity, and we talked about the fact that we are going to continue to do that in our assets, and we're going to gain share in fair trade markets. Whenever we have an opportunity, we have a very diligent process.

Denise Dignam
Denise Dignam
President, CEO & Director at The Chemours Company

We evaluate all opportunities. I'm confident in our strategy driving lower costs and achieving share gain in those fair trade markets. I really can't comment on what the response of the competitors will be. But I think it's some really positive signs when think about what's going on with the capacity that's been taken out of the market. We believe there's at least 400 kilotons that have been taken out.

Denise Dignam
Denise Dignam
President, CEO & Director at The Chemours Company

And just even looking at the export data from China, significant reductions year over year, quarter over quarter, even into Brazil and India, which yet would still do not have the firm duties or tariffs in place. So again, we're focused on lowest cost and gaining share in fair trade zones.

Duffy Fischer
Duffy Fischer
Equity Research Analyst - U.S. Chemicals at Goldman Sachs

Great. Thanks. And then maybe just to jump to TSS. Last year, your sequential sales Q2 to Q3 were down about 10%. But the decremental margin was roughly equal to the segment average.

Duffy Fischer
Duffy Fischer
Equity Research Analyst - U.S. Chemicals at Goldman Sachs

This year, your sales are down less, but your decremental margin looks like it's double what the segment average is. So is that a mix shift issue? Is that something around the four fifty four issues? Why is the decremental so much greater this year than last year?

Shane Hostetter
Shane Hostetter
SVP & CFO at The Chemours Company

Yes. Thanks, Duffy. It's really a mix shift. As we look at the Freon roll off last year and the pricing according that was so dramatic from the decline, went right to the bottom line versus a shift in kind of the volumes this year.

Duffy Fischer
Duffy Fischer
Equity Research Analyst - U.S. Chemicals at Goldman Sachs

Okay. Thank you, guys.

Operator

Our next question comes from Hassan Ahmed from Alembic Global. Please go ahead.

Hassan Ahmed
Senior Equity Analyst at Alembic Global Advisors

Good morning, Denise and Shane. I just wanted to revisit the earlier question, get a little more granular around TT and the 9% sequential uptick you guys saw in volumes versus one of your largest competitors sequentially reporting a 2% decline. I mean, my understanding is that Europe sort of became the battleground with the whole sort of anti dumping stuff going on over there. And it just seems that you guys were very aggressive on pricing. So again, sort of revisiting some of the stuff that you said earlier, I mean, my fear is that could this potentially signal a walking away from the whole sort of value over volume strategy that the industry so painstakingly sort of evolved into over the last five, six years?

Denise Dignam
Denise Dignam
President, CEO & Director at The Chemours Company

Hassan, thanks for the question. I wouldn't jump to the conclusion that this is a dropping price. I would focus on our strategy, our overall strategy of commercial excellence and really winning in the marketplace based on the value proposition that we offer.

Hassan Ahmed
Senior Equity Analyst at Alembic Global Advisors

Understood. Understood. And if I could just sort of follow-up with, again, sticking to the TiO2 side of things. I mean, you just give me your views both on the supply side and the demand side of things, as you see them sort of progressing 2026 and beyond? And more particularly, you guys mentioned some capacity rationalization, particularly in China.

Hassan Ahmed
Senior Equity Analyst at Alembic Global Advisors

So if you could sort of expand on that a bit more on the supply side. And on the demand side, obviously, it appears that over the last couple of years, we are well below normal levels on the demand side. So how do you see the cycle evolving 2026 and beyond, both from the supply and the demand side of things?

Denise Dignam
Denise Dignam
President, CEO & Director at The Chemours Company

Yes. I'll just hit demand first. Mean, a demand standpoint, we don't see anything for this year, any big trigger this year. Certainly, we look at certain indicators like everyone else does and expect to see some improvement next year, but really nothing in the short term. I think the story really is on the supply side.

Denise Dignam
Denise Dignam
President, CEO & Director at The Chemours Company

There's been significant capacity that's been taken out of the market, starting initially with us. But we see at least 400 kilotons from China coming out, which really gives a more balanced supply demand picture. But also on top of that, the tariffs and duties and the real differentiation between the fair trade markets and the non fair trade markets definitely, I would say over the next couple of years, is a very improving trend.

Hassan Ahmed
Senior Equity Analyst at Alembic Global Advisors

Very helpful, Denise. Thank you so much.

Operator

Our next question comes from Laurence Alexander from Jefferies. Please go ahead.

Daniel Rizzo
Daniel Rizzo
VP - Research Analyst at Jefferies

Hey guys, it's Dan Rizwan for Laurence. Thank you for taking my question. So in terms of PFAS, what's the kind of the next? Is North Carolina, I don't know, coming up soon? Or is it I mean, is are you in negotiations?

Daniel Rizzo
Daniel Rizzo
VP - Research Analyst at Jefferies

Or what's the timeline and what can we expect maybe in terms of another announcement, if there's anything you can tell us?

Denise Dignam
Denise Dignam
President, CEO & Director at The Chemours Company

Sure. I really appreciate this question. I first want to start with, New Jersey is a major milestone for us, and we are just really pleased for just a whole host of reasons. You look at the comprehensive settlement. This was four former and current operating sites.

Denise Dignam
Denise Dignam
President, CEO & Director at The Chemours Company

You talk about North Carolina and West Virginia. Already, with New Jersey, we have four behind us and two more in the future. It's a twenty five year payment at NPV value. So it puts more, I'll say more, under our MOU in addition to the advancement of insurance of $150,000,000 with no cash interest payments along with the escrow, giving us more also more room under the MOU and no payment at least through 02/1930. So just incredible.

Denise Dignam
Denise Dignam
President, CEO & Director at The Chemours Company

And then you go to, well, 16,500,000.0 that's been pointed out, dollars 16,500,000.0 that was pointed out in the settlement at the PFAS allocation for New Jersey, it really aligns well with the allocation of liability that came from the Water District settlement in the 3% to 7% range. So really can't underestimate the importance of this. So when you think about what's next, I talked about the four sites behind us. There's two, North Carolina and West Virginia, when you think of the big milestones for the states. And then beyond that would be personal injury.

Denise Dignam
Denise Dignam
President, CEO & Director at The Chemours Company

And we're following a process. We're in settlement discussions. But all I'm going to say here is that overall, we have the same interest in resolving all of our outstanding litigation and liabilities in the same spirit and manner that we did for New Jersey. This is clear examples of executing on our strengthening the long term pillar and bringing confidence and clarity to our stakeholders. And it really reflects our resolve to derisk our portfolio.

Daniel Rizzo
Daniel Rizzo
VP - Research Analyst at Jefferies

And the 3% to 7%, that the blueprint we should think? Or just I mean, obviously, anything can happen. But is that the blueprint we should think of going forward when we're thinking about how North Carolina and West Virginia might shake out?

Denise Dignam
Denise Dignam
President, CEO & Director at The Chemours Company

As you said, we can't project out, but certainly the blueprint we think about. Really, it's demonstrating throughout the settlements that it's holding.

Daniel Rizzo
Daniel Rizzo
VP - Research Analyst at Jefferies

All right. Thank you very much.

Operator

Our next question comes from Jeffrey Zekauskas from JP Morgan. Please go ahead.

Jeffrey Zekauskas
Jeffrey Zekauskas
Analyst at JP Morgan

Thanks very much. In some of the press and legal accounts of the New Jersey settlement, it's talked about as a 2,500,000,000 settlement in that I think a $1,200,000,000 remediation fund has to be set up and a $475,000,000 reserve fund has to be set up. Are there claims on you for those? Or how do those amounts relate to the settlement amounts that have been agreed to?

Shane Hostetter
Shane Hostetter
SVP & CFO at The Chemours Company

Yes. Thanks, Jeffrey. So as you mentioned, the reconciliation to what we provided versus what the state provided are the same numbers. They're just differently presented. The two big items that you mentioned, so there was a remediation fund of call it 1,200,000,000 in the state's numbers.

Shane Hostetter
Shane Hostetter
SVP & CFO at The Chemours Company

What that is, is really kind of a reference, a surety or a backstop for future remediation efforts over many years, right, in this side. Just to note, as we think about that, that's really already in our ongoing cash flow on what we're actually doing on a day to day basis at these plants to make sure they're operating appropriately and remediating those environmental items. The other area outside of the 1,200,000,000.0 was about $05,000,000,000 reserve fund. That is a backstop for surety of which Corteva and DuPont have to post that in that side.

Jeffrey Zekauskas
Jeffrey Zekauskas
Analyst at JP Morgan

So are there cash flow claims that are in addition to the $500,000,000 in net present value that you're responsible for? Or how exactly do those remediation and reserve funds affect your future cash flow, if they do affect them?

Shane Hostetter
Shane Hostetter
SVP & CFO at The Chemours Company

So Jeffrey, in our ongoing results, right, so we have monitoring, we have maintenance, we have other areas to remediate these plans. And so they're in our ongoing in our past cash flow and will be on our ongoing cash flow for some time. That is depending upon the agreement of how to remediate these sites, which we wouldn't have conversations on in the future. And just to note, the $1,200,000,000 is the high end of that surety, right? So we believe it will be a lower amount, which will be discussed within this one year description underneath the agreement.

Denise Dignam
Denise Dignam
President, CEO & Director at The Chemours Company

Okay. And then maybe to add a little bit to the top end and how that top end was arrived. We have done assessments based on science, and they're at the low end of the range. It's not like we've gone into this blind. So we've done our assessment work.

Denise Dignam
Denise Dignam
President, CEO & Director at The Chemours Company

In order to get the settlement done, the timing didn't really allow for a lot of diligence and reconciliation between what New Jersey thought and what our science would tell us. So we established this range. And as you'll see in the JCO, just a really practical process to align, and we're really happy with that outcome.

Jeffrey Zekauskas
Jeffrey Zekauskas
Analyst at JP Morgan

Okay.

Jeffrey Zekauskas
Jeffrey Zekauskas
Analyst at JP Morgan

And then lastly, your CapEx is roughly $250,000,000 this year, roughly. What's normalized level for you when you think about the next few years? Where do you think your capital expenditures normally will be?

Shane Hostetter
Shane Hostetter
SVP & CFO at The Chemours Company

Yes. Thanks, Jeff. Yes, we've had we expect around $250,000,000 as we've guided. I would note that's lower than any recent periods and think more is a history. The outlook depends upon some strategic growth initiatives, which we've had very focused spend in this given year and we'll continue to very much focus on that side.

Shane Hostetter
Shane Hostetter
SVP & CFO at The Chemours Company

I do think as we look ahead, there may be a little bit more CapEx, but it's not going to be anything past the range of where we're at you know from you know now and past history it's not going to get out of bounds. The efforts here is really to be strategic on what is really needed to operate our sites both safety and compliant as well as very much focused on strategic growth initiatives that are very much focused.

Jeffrey Zekauskas
Jeffrey Zekauskas
Analyst at JP Morgan

So does that mean $350,000,000

Shane Hostetter
Shane Hostetter
SVP & CFO at The Chemours Company

Yes, Jeff, I'm not going to give a guide long range from a CapEx perspective. I do think if you look in the past, right, so this is the lowest for area. I do think we'll have potentially a little bit more as we look ahead, but I'm not going to give a range to the high and low end at this point.

Jeffrey Zekauskas
Jeffrey Zekauskas
Analyst at JP Morgan

Okay, great. Thank you.

Operator

Our next question comes from Vincent Andrews from Morgan Stanley. Please go ahead.

Justin Pellegrino
Justin Pellegrino
Analyst at Morgan Stanley

Good morning. This is Justin Pellegrino on for Vincent. Wanted to shift back over to TT for a second and ask if you could give us kind of the competitive dynamics in the different regions around the world. And then within the countries that have put in place the fair trade or the antidumping duties, have you seen some duties be more effective than others? And kind of what are driving those differences? Thank you.

Denise Dignam
Denise Dignam
President, CEO & Director at The Chemours Company

Thanks for the question, Justin. So relative to the competitive dynamic, I would say on an overall perspective, in the regions where we call the fair trade markets, it's more of the multinational competitors, excluding the Chinese manufacturers. I would say it's pretty competitive in those non fair trade markets. There's a lot of pressure from Chinese producers in those areas. Can repeat the second part of your question? I'm sorry.

Justin Pellegrino
Justin Pellegrino
Analyst at Morgan Stanley

Yeah, just within the countries or regions that have put in antidumping duties, is there any differences between or within the duties that they've put in place? And if there are any differences, what's driving those differences?

Denise Dignam
Denise Dignam
President, CEO & Director at The Chemours Company

Yes, thank you. I would say that where the duties have been put in, they've been very effective. So in The US and Europe, there's a time for transition, right? So once they come in and you say, when did Europe finally, probably took a good nine months for inventories to be worked down, But you can see the signs of how these are going to be effective in other regions where that are contemplating the or have preliminary rulings around tariffs or antidumping duties. As I mentioned earlier, you can just look at the exports into India.

Denise Dignam
Denise Dignam
President, CEO & Director at The Chemours Company

You can see the drop there. You can look at the exports into Brazil. You see the drops there. So I would say when the rules become final, there's a lot of confidence in the effectiveness of those.

Justin Pellegrino
Justin Pellegrino
Analyst at Morgan Stanley

Wonderful. Thank you.

Operator

We have reached the end of our question and answer session. Thank you for joining the Chemours Second Quarter twenty twenty five Results Conference Call. You may now disconnect.

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