Venator Materials PLC reported second quarter 2018 results with revenues of $626 million, net income attributable to Venator of $196 million, adjusted net income of $91 million and adjusted EBITDA of $157 million.

Simon Turner, President and CEO of Venator, commented:

"Our second quarter results highlight continued titanium dioxide pricing momentum and further benefit from our $90 million Business Improvement Program translating into solid free cash flow generation.

"Although we expect the pricing environment in the second half of 2018 to reflect regional dynamics and historical seasonal patterns, long-term fundamentals for the titanium dioxide industry remain favorable and continue to support an elongated cycle. We are well positioned to capitalize on the positive trends supporting industry profitability.

"We have positioned Venator such that we may have the opportunity to acquire the high quality Ashtabula, Ohio TiO₂ complex. These assets would dramatically increase our North American TiO₂ presence, expand our product offering and enhance our overall global competitiveness. Additionally, we are reviewing the full rebuild of our Pori, Finland, complex and expect to provide more clarity in the coming weeks as further information becomes available."

Segment Analysis for 2Q18 Compared to 2Q17

Titanium Dioxide
The $54 million, or 13%, increase in revenues in our Titanium Dioxide segment for the three months ended June 30, 2018 compared to the same period in 2017 was primarily due to an 18% increase in average selling prices, a 6% improvement driven by the favorable impact of foreign exchange rates, primarily against the Euro, partially offset by a 12% decrease in sales volumes. The increase in selling prices reflects continued improvement in business conditions for TiO₂, allowing for an increase in prices globally. Sales volumes decreased due to lower than expected customer orders, and lower product availability relating to a manufacturing shortfall in the current year period and higher inventory levels in the prior year period.

Segment adjusted EBITDA of our Titanium Dioxide segment increased by $54 million, or 58%, for the three months ended June 30, 2018 compared to the same period in 2017. This improvement was primarily a result of higher revenues, $6 million from the sale of carbon credits and a $4 million benefit from our Business Improvement Program, partially offset by increases in raw material and other direct costs.

During the second quarter, and in conjunction with the receipt of the final insurance payment from our insurers, we recorded $325 million of income related to the losses incurred to date and yet to be incurred.

Performance Additives

The increase in revenues in our Performance Additives segment of $10 million, or 6%, for the three months ended June 30, 2018 compared to the same period in 2017 was primarily due to a 3% increase in average selling prices, a 4% improvement driven by the favorable impact of foreign exchange rates, and a 2% increase in volumes, partially offset by a 3% decrease due to sales mix and other. The improvement in selling prices was primarily in certain timber treatment and functional additives product lines, where we raised prices to offset increases in raw material costs.

Segment adjusted EBITDA in our Performance Additives segment increased by $2 million, or 10%, for the three months ended June 30, 2018 compared to the same period in 2017, due to the increase in revenues and a $3 million benefit from our Business Improvement Program, partially offset by increases in raw material costs.

During the second quarter, we implemented a plan to restructure our Color Pigments manufacturing facility in Augusta, Georgia resulting in a non-cash restructuring charge of $126 million.

Corporate and Other

Corporate and other represents expenses which are not allocated to our segments. Losses from Corporate and other were $13 million, or $7 million lower for the three months ended June 30, 2018 than the same period in 2017 as our costs to operate as a standalone company are lower than those costs historically allocated to us from Huntsman.

Strategic updates

On July 16, we announced that we signed a Business Transfer Agreement with Tronox for the purchase of its European paper laminates business, or the 8120 grade, contingent upon closing of its merger with Cristal, which will expand our differentiated product grades and further strengthen our leadership position in Europe. Separately we signed a memorandum of understanding providing Venator exclusive rights to negotiate the purchase of the Ashtabula, Ohio TiO₂ complex, currently owned by The National Titanium Dioxide Company Limited, or Cristal, should a divestiture of Ashtabula be required to complete the pending Tronox/Cristal merger. Acquiring the high quality assets in Ashtabula would dramatically grow our North American presence and enhance our global TiO₂ portfolio, enabling Venator to better serve our valued customers.

Earlier this year we took steps to strengthen our Pori, Finland, project resources and improve our probability of success. Within the past few months, we engaged additional outside experts and hired and re-allocated additional internal resources for the project, with an objective of improving both the execution and cost management of the project, and to update our view on the total cost of rebuilding the site. This process identified that additional reconstruction would be required outside the immediate fire zone, leading to increased costs. Unfortunately, our contractor on the site also experienced a recent and significant safety incident, which paused construction for several weeks while the incident was under investigation, which also has extended the reconstruction timeline. These recent changes and events have led us to believe now that a full rebuild and commissioning may require more self-funding than our previous estimate of $325 to $375 million and may result in a longer period of time for project completion. As a result of these recent developments and in light of our potential acquisition of the Ashtabula complex, we are reviewing options within our manufacturing network, including the option of transferring the production of Pori's specialty and differentiated products to elsewhere in our network, and are pacing our on-going construction activities at Pori accordingly during this period of review.

Tax Items

We recorded income tax expense of $45 million and $65 million for the three and six months ended June 30, 2018, respectively, compared to $16 million and $12 million for the three and six months ended June 30, 2017, respectively.

Our income taxes are significantly affected by the mix of income and losses in tax jurisdictions in which we operate. We continue to expect our adjusted long-term effective tax rate will be approximately 15% to 20%, with no material impact from the U.S. Tax Cuts and Jobs Act of 2017 given the low percentage of our global pre-tax income earned in the United States. We expect our near-term cash tax rate will be between 10% to 15%.

Liquidity and Capital Resources

As of June 30, 2018, we had cash and cash equivalents of $354 million compared with $223 million as of March 31, 2018. In addition, we have in place an undrawn asset based revolving credit facility available for our working capital needs and general corporate purposes with an available borrowing base of $271 million.

As of June 30, 2018, net debt was $394 million compared to $529 million as of March 31, 2018. In the second quarter of 2018, capital expenditures, excluding Pori, were $22 million. We continue to expect total capital expenditures, excluding Pori, to be approximately $120 million in 2018.