Chemours' fourth-quarter loss nearly triples at $86M
Chemours Co. continues to hemorrhage cash, reporting a net loss late Tuesday of $86 million for the fourth quarter and a full-year net loss of $90 million.
The Wilmington-based chemical company has lost money every quarter since spinning off from DuPont. It lost $18 million and $29 million in the second and third quarters of last year, respectively.
But the losses nearly tripled in the fourth quarter, as sales for its lead products continue to plummet. All three of Chemours' product lines reported a double-digit sales decline in the quarter and overall sales fell to $1.4 billion, a 12 percent decrease from the same quarter the year before.
Chemours forecasts weaker fourth quarter
"One bad quarter doesn't mean problems unless its part of a larger trend," said James Butkiewicz, chair of the University of Delaware's department of economics. "The negative trend is really the important thing here, and it is a very bad trend they are on."
Sales for Chemours' flagship product, the pigment titanium dioxide, also known as TiO2, reached $589 million, a 14 percent decline from sales in the 2014 fourth quarter. The product's earnings before interest, taxes and depreciation was $62 million, a staggering 61 percent decline compared with last year's fourth quarter. In the third quarter, titanium dioxide sales were $616 million.
Chemours blamed the loss on reduced pricing and the strong U.S. dollar in overseas markets impacting a return on sales.
The company had initially said its earnings announcement would come at 7 a.m. Wednesday, then released the figures Tuesday after the stock market closed.
Chemours, the world's largest Ti02 manufacturer, announced last year, that effective Jan. 1, 2016, it will increase its TiO2 prices by $150 per ton. The company said demand for TiO2 has dropped in the Latin American and Asia Pacific markets.
Chemours' two other product lines – chemical solutions and fluoroproducts – didn't fare much better. Fluoroproducts reported fourth-quarter sales of $515 million, a 10 percent drop from fourth quarter in 2014 and a reduction from $575 million in the third quarter of 2015. The lower sales were the result of weaker demand for fluoroproducts in the consumer electronics and industrial applications industries, Chemours said in the announcement.
The Chemical Solutions segment posted $256 million in fourth-quarter sales, a 10 percent drop over the previous fourth quarter. The company cited price decreases in that industry. In the third quarter of 2015, Chemical Solutions posted sales of $295 million.
"When everyone is making your products, it drives the prices down," Butkiewicz said. "You find the profits get eaten away by the competitors."
Chemours sells Texas plant to Dow Chemical for $140 million
Chemours has made some moves to stop the bleeding in the Chemical Solutions unit, currently under review for a possible acquisition or divestiture. It sold a Beaumont, Texas, plant that produces the oily, colorless liquid Aniline to the Dow Chemical Co. for $140 million. The company is also shuttering its Niagara Falls reactive metals plant in 2017, a move expected to save the company $20 million next year.
Chemours didn't fare much better for all of 2015. The company reported annual net sales of $5.7 billion, a 10 percent decline from $6.4 billion in 2014.
Chemours said restructuring costs, impairment changes and $132 million in interest expenses all contributed to the $90 million net loss.
JPMorgan Chase Bank, the company's lender, reduced Chemours' available credit to $750 million from $1 billion. In addition, DuPont advanced Chemours $190 million this month for good and services Chemours will provide DuPont over the next 12-to-15 months.
Chemours Chief Executive Mark Vergnano highlighted the company's five-point transformation plan in a statement. He claimed the plan delivered $100 million in savings in the second half of the year with roughly half of that occurring in the second quarter.
"We are on track with our transformation plan and already have line of sight into the next $200 million of cost reductions, for 2016," Vergnano said.
The company is seeking to slash $350 million from its budget through 2017, increasing its cash flow. In addition to selling the Texas plant and closing the Niagara Falls operation, it will close its TiO2 facility in Edge Moor, impacting 200 workers and 150 contractors. The company laid off 400 employees worldwide, including about 55 in Delaware.
Chemours will lay off 400, including some in Delaware
Butkiewicz said cost reductions are normal for companies, even successful ones. He said the wholesale cuts at Chemours were likely a "last-ditch effort to save something."
"If you are trying to put your thumb in the dike before it breaks, the dike usually breaks," he said. "If there was more value here, why would DuPont spin it off?"
Chemours has about 1,000 Delaware workers, including 680 in downtown Wilmington. The company is temporarily headquartered at the DuPont Building across from Rodney Square, but has not made a permanent commitment to the city or the state. Pennsylvania and New Jersey have made overtures to attract Chemours, but some question the wisdom of spending taxpayer dollars to keep the company here while it continues to struggle.
"Given the state Chemours is in, are they going to survive and how are they going to survive?" Butkiewicz asked.
Contact Jeff Mordock at (302) 324-2786, on Twitter @JeffMordockTNJ or jmordock@delawareonline.com.