Chemours (NYSE:CC) held its first-quarter earnings conference call on Wednesday. Below is the complete transcript from the call.

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Summary

Chemours delivered a strong first quarter, exceeding earnings expectations with standout performances in Thermal & Specialized Solutions (TSS) and Titanium Technologies (TT), driven by pricing actions and strategic market focus.

The company completed the sale of nearly all Kwan Yin properties, using proceeds to pay down debt, enhancing financial flexibility and balance sheet strength.

Future guidance indicates sequential net sales growth in the low to mid-teens for TSS and mid to high teens for TT, supported by pricing strategies and operational improvements.

Chemours signed a long-term chlorine supply contract with Olin, ensuring value-accretive supply for its Delil site and reinforcing its position as a low-cost TiO2 producer.

Despite a mixed global environment, Chemours maintains its full-year guidance, focusing on pricing strategies, operational excellence, and leveraging geopolitical conditions for potential upside.

Full Transcript

OPERATOR

Good morning, My name is Michelle and I will be your conference operator today. I would like to welcome everyone to the Chemours Company first quarter 2026 results conference call. Currently, all participants are in a listen only mode. A question and answer session will follow the conclusion of the prepared remarks. I would like to remind everyone that this conference call is being recorded. I would now like to hand the conference over to Brandon Onjas, Vice President, Head of Strategy and Investor Relations for Chemours. You may begin your conference

Brandon Onjas (Vice President, Head of Strategy and Investor Relations)

Good morning everybody. Welcome to the Chemours Company's first quarter 2026 earnings conference call. I'm joined today by Denise Dignam, 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 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 Chemours' SEC filings. These forward looking statements are not guarantees of future performance and are based on certain assumptions and expectations of future events that may not be realized. Actual results may differ and Chemours undertakes no duty to update any forward looking statements as a result of future developments or new information. During the course of this call, 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 posted our earnings presentation on our website yesterday evening as well. With that, I will turn the call over to Denise Dignam.

Denise Dignam

Thank you Brandon and thank you everyone for joining us during today's call. I will begin by discussing highlights from our recent performance before turning it over to Shane who will provide details around our outlook for the second quarter of 2026 and some commentary on the remainder of the year. Finally, I will provide updates on our meaningful progress against our Pathway to Thrive strategy and current view of our operating environment before taking your questions. We started 2026 with strong results, delivering a first quarter that was well above earnings expectations and showcased the strength of Chemours' disciplined execution and strategic focus across the company. Both thermal and specialized solutions and Titanium technologies delivered standout performances with TSS, not only achieving another quarter of double digit year over year growth in Opteon refrigerants, but also excelling in quota execution and capturing additional opportunities in Freon refrigerants through sharp market focus and agile commercial execution. TT also exceeded our earnings expectations driven by global pricing actions, strong commercial discipline across all regions and customer segments and continued operational focus in advanced performance materials. The business worked to quickly stabilize operations following the Washington Works outage and is seeing strength in our Performance Solutions order book, especially in high value data center and semiconductor markets. Adding to this strong performance and aligning with our efforts to improve our balance sheet, we completed the sale of nearly all of our Kwan Yin properties ahead of schedule and promptly used the available proceeds to pay down a meaningful portion of our near term debt to further strengthening our balance sheet and enhancing Chemora's financial flexibility. As we look ahead, we remain on track to complete the sale of the remaining parcel of the land in 2026 which should provide an incremental 60 million of gross proceeds. This development followed the 700 million refinancing completed in March of our 2027 unsecured notes and a portion of our 2028 unsecured notes. Extending these maturities out to 2034 and increasing our balance sheet flexibility let me expand a bit further on the quarter's business activities. Our Thermal and Specialized Solutions (TSS) business delivered a record first quarter with continued strength in both Freon and Opteon refrigerants driving double digit year over year growth. Net sales FOR TSS increased 22% versus the prior year quarter largely driven by higher pricing, stronger volume growth and a favorable product mix across refrigerant markets. Pricing benefited from automotive aftermarket Freon refrigerant sales in North America and Opteon blends, while overall volume growth was supported by seasonal strength. These top line results translated into record adjusted Earnings Before Interest, Taxes, Depreciation, and Amortization (EBITDA) for TSS in the quarter with margins expanding to 33% reflecting strong pricing realization for Freon and an improved Opteon blend mix. While higher input costs, particularly R32 created some offset, these results underscore the power of our commercial execution and disciplined quota management. Sequentially, net sales increased 28% consistent with the typical seasonal ramp we see across refrigerants and pricing strength in certain products. For our TT business in the first quarter, the team executed well amid a challenging market environment. We experienced continued global stability and observed solid seasonal demand improvements in North America and Europe. However, lower volumes and less favorable product mix in certain non western markets offset these gains resulting in reduced global volumes overall compared to the prior quarter. While volumes trended down sequentially, net sales finished within our expectations due to disciplined global pricing execution. Notably, adjusted EBITDA exceeded our expectations driven by our pricing actions along with strong cost management and our focus on operational excellence. In line with our efforts to improve supply security and input optimization, we've signed a long term chlorine supply contract with Olin to service our Delaware site starting in 2028. This agreement ensures a reliable supply at value accretive economics, strengthening Delaware's global competitiveness and supporting our operational excellence focus under Pathway to Thrive. It also reinforces Chemours' commitment to being one of the lowest cost chloride TiO2 producers worldwide. While we had previously announced our intention to pursue an on site Corning facility at our Delil site with a third party in March, the supply agreement terminated and we will not be proceeding with this project. As we look ahead, our team remains agile and responsive to ongoing market changes and economic uncertainty. We continue to keep our manufacturing operations flexible, modifying production levels to meet shifting demand. Our pricing strategy is firmly in place as exemplified in our recent price increase communication, first in December and continued on April 1st across all key end markets. These announcements demonstrate our ability to adjust prices while consistently delivering outstanding and dependable service and quality. The first quarter's results with pricing up 3% sequentially reflect the initial impact of implementing these price changes alongside our progress in operational reliability, which strengthens our ability to respond effectively to shifts in market demand. APM results in the first quarter reflected both operational and portfolio related headwinds, with net sales down year over year due primarily to lower volumes. Overall first quarter sales were constrained by the Washington Works outage and the prior closure of the Advanced Materials SPS capstone line. These factors provided a difficult comparison to last year and the outage weighed meaningfully on sales and incremental costs, resulting in a $25 million headwind in adjusted EBITDA. While our first quarter performance was not what we believe the business is capable of with these discrete events now behind us today, APM is building a more effective and efficient foundation for coming quarters. Notably, our Performance Solutions order book is seeing particular strength in high value markets, positioning APM for continued improvement as we move through 2026. Separately, our corporate level performance also showed a significant decrease in expenses compared to the same quarter last year, largely due to lower costs associated with legacy litigation activities. We remain focused on balancing the timely execution of global corporate initiatives with appropriate cash expenditures. With that, I'll turn it over to Shane to walk through our outlook for the quarter ahead and provide thoughts on what remains for 2026.

Shane Hostetter (Senior Vice President and Chief Financial Officer)

Thank you Denise and good morning everyone. As shared in the earnings materials available on our investor website, I now would like to discuss our expectations for the second quarter and provide some updates on our business as we look ahead. Beginning with TSS for the second quarter we project net sales to rise sequentially in the low to mid teens percent range, primarily attributable to favorable seasonal trends related to the cooling season in the Northern Hemisphere. It is worth noting that some demand and associated sales having about a $10 million impact on adjusted EBITDA was pulled forward into the first quarter due to timing which modestly tempers the sequential progression we would have otherwise expected and added strength to our first quarter TSS performance. Despite this pull forward, the seasonal uplift we anticipate for TSS will be underpinned by strength across our Opteon and Freon refrigerant channels. Adjusted EBITDA for TSS is also expected to grow sequentially ranging from 210 million to $225 million, primarily driven by seasonality as well as specific opportunities our commercial team is capturing. In the Freon aftermarket and continued transition to Opteon refrigerants in the first quarter and into the second, weakness in residential demand was more pronounced than anticipated. This softer demand has been largely driven by a slower start to the referenced cooling season which has delayed equipment installations and associated aftermarket activity and is consistent with what we are hearing more broadly across the residential H Vac value chain specific to expectations in the first quarter and into the second quarter. Overall aftermarket demand has slowed as new equipment demand has decelerated into distribution networks, an important leading indicator for downstream demand. Looking to the full year, we continue to expect year over year growth in the business supported by our strong market position, regulatory tailwinds and overall pricing strength. However, we remain appropriately cautious on residential demand signals. One other important factor to consider is that TSS is a quota driven business. Our company can drive differentiated values through disciplined execution and allocating our available quota to the most attractive pockets of demand. While we do not expect the same year over year double digit top line growth for the remainder of 2026 as comparisons begin to reflect the regulatory driven adoption under the US AIM act that drove robust demand in late 2025. We remain bullish on the opportunity ahead as we allocate our quota to achieve optimal profitability. Overall demand across our Opteon channels together with continued momentum in the Freon automotive aftermarket supports the growth profile and consistent margins we outlined last quarter for our TT business. We expect sequential net sales to increase in the mid to high teens percentage range in the second quarter driven by a more favorable seasonal comparison and related pricing actions. This improvement is supported by increased mineral sales following first quarter timing dynamics related to our mining restructuring as well as some strength we are seeing in our TiO2 pigment sales amid actively developing global market conditions. Our guide for the second quarter anticipates the initial effects of the price increase on April 1st as well as the continuing effects from pricing increases announced in December. These adjustments are being applied across our key end markets as contracts allow. Although global geopolitical events continue to affect supply chains and impact the worldwide TiO2 market both directly and indirectly, we are confident that our TT business is strategically positioned to take advantage of emerging opportunities aligned with the current market environment and the improved agility of our operational circuit. For the second quarter, we expect TT's adjusted EBITDA to range between 40 million and $50 million. Although geopolitical outcomes remain uncertain and the related market impact is unclear. Recent enhancements to our operating circuit and improved visibility of order patterns support the second quarter earnings range as the year develops. Consistent with prior messaging, we are controlling what we can control and we intend to stay true to our commercial strategy, which will be supported by robust pricing efforts that will continue based on our assessment of market conditions. We remain resolute in our belief that this strategy positions our TT business for success regardless of market and demand conditions. Now for our APM business for the second quarter, we anticipate net sales to increase within the low to high 30% range on a sequential basis, primarily due to the resumption of normal operations at the Washington Works Facility. Adjusted EBITDA is forecasted to be between $12 million and $18 million, while sequential growth in EBITDA is expected. Earnings remain below targeted levels as cost pressures and volume limitations related to the Washington Works downtime experienced in the first quarter continue to weigh on second quarter profitability. Although we are facing outage related constraints, our APM order velocity has reached a level that has not been experienced in the past several years. Within our Performance Solutions portfolio, demand remains strong in the semiconductor and data center end markets which are driving orders for our Performance Solutions products. These sectors are tied to growing and sustainable demand for APMs products and are areas where Chemours is uniquely positioned to serve these markets. In addition to our higher value end market activity, our Advanced Materials portfolio is also experiencing strong order levels while the industrial end markets that Advanced Materials generally serve remain weak. Our commercial team is seeing signs of destocking for specialty materials that may have been overbought in prior years. While the impact of these demand tailwinds is limited. In our second quarter outlook we see direct pathways to achieve significant secondhand strength while the macroeconomic environment remains tempered on a consolidated basis, we anticipate our second quarter net sales to increase in the range 15 to 20% sequentially with consolidated adjusted EBITDA expected to range between $220 million to $250 million. Also, we anticipate corporate expenses to range between 45 and $50 million. Our capital expenditures for the second quarter are expected to be in the range of 50 million with free cash flow generation of at least $100 million. In connection with the strong free cash flow we anticipate for the second quarter we expect to realize interest expense savings in the quarter as we reduced our debt by approximately $160 million in April. Also, we remain committed to enhancing our balance sheet flexibility including the 700 million refinancing completed in March which builds on the close to 2 billion of near term debt we have addressed since the fourth quarter of 2025. We are proud of these efforts which strengthen our balance sheet and enhance financial flexibility, key enablers of our Pathway to Thrive strategy. Turning to the Full Year Despite a mixed global operating environment that includes challenging commercial end markets and overall raw material and other cost inflation, we still expect our full year consolidated net sales, adjusted EBITDA and capital expenditure forecast to align with our previous guidance. Full year free cash flow conversion is now expected to be above 20%, slightly lower than our prior guide driven by Kuan Yin land sale tax implications which impact free cash flow. That said, the earlier than anticipated closure of the majority of the Kuan Yin parcels positions commerce to immediately begin to deliver as we paid down approximately $150 million of our outstanding euro term loan B in late April. As we close the final Kuan Yin land parcel and repatriate the remaining proceeds expected this year, we intend to use those proceeds to continue redeeming future debt maturities. This positive development paired with our diligent cash management activities provides us with confidence towards achieving our liquidity objective of net leverage below three times adjusted EBITDA for 2026. We now anticipate our net leverage ratio will be below 3.8 times adjusted EBITDA by the end of the year. Additionally, our efforts will provide approximately $9 million in interest expense savings for the company going forward annually by year end after the reference repayment in April. Overall, we started the year out well and looking ahead we see strong pricing momentum in tt, robust refrigerant demand and operational reliability improvement across our sites which gives us confidence to deliver a step up performance in the second half of the year enabling us to deliver on our full year guide. Also, we remain front footed on our assessment of operational and commercial impacts stemming from geopolitical considerations around the globe. To ensure we address inflation ahead of any financial impact, as well as addressing any potential opportunities as they present themselves. We have the right team in place and a strong understanding of our customer base to achieve the goals and outlook we have laid out for the current year.

Denise Dignam

Given these perspectives on the second quarter and remaining year, I'd like to now hand the call back over to Denise to share her closing thoughts and perspectives. Thank you Shane. As I look across our first quarter performance, we continue to see clear progress against our Pathway to Thrive strategy which remains the foundation for how we operate, allocate capital and create long term value. We remain on track and are seeing tangible accomplishments across all pillars including improved operational reliability, disciplined cost execution, targeted growth investments, continued portfolio improvements and efforts to derisk our balance sheet aimed at strengthening the business over time. Our teams are performing effectively across all Pathway to Thrive pillars. In the area of operational excellence, we continue to integrate the Chemours business system to implement lean principles ensuring a high standard of consistency, reliability and cost efficiency. Although CBS was implemented earlier this year, we are already observing positive outcomes for enabling growth. Our focus remains on areas that set us apart and provide clear market advantages. This is evidenced by ongoing momentum in Opteon refrigerants, increased engagement within high value end markets across TSS and APM and continued efforts to drive value through recent pricing strategies for portfolio management. Paired with our disciplined capital allocation approach, we've improved our balance sheet with the nearly completed Kwan Yin land sale and existing cash reserves enabling a reduction in debt that will continue through the year. We are dedicated to aggressively reducing our leverage while making steady progress in our strengthening the long term pillar where we are progressively working to reduce our exposure to legacy matters. These efforts highlight our focus on de risking chemours to ensure our ability to secure our future in exciting high value end markets and opportunities. In taking a broader view of Chemours, we are closely monitoring the ongoing conflict in the Middle east and the resulting volatility across energy markets and global chemical supply chains which is adding uncertainty to the broader macro environment with the potential to weigh on demand, particularly in more impacted regions. To this, we are focused on actively working to mitigate cost headwinds through core price and other pricing mechanisms. As sulfur markets tighten due to this conflict, sulfate based TiO2 producers are seeing tangible cost inflation, creating potential opportunities for those positioned to respond. Chemours has decades of leadership in the titanium dioxide market with deep technical, commercial and regional expertise. As conditions evolve and potential tailwinds emerge, we are applying that experience with discipline, remaining selective and deliberate as we monitor the macro environment and act accordingly. In parallel, we are taking a disciplined approach to risk management across the enterprise, prioritizing cost control, supply chain resilience and capital allocation to ensure flexibility in this more uncertain macro environment. We believe that our positioning considering these market dynamics could provide opportunities for Chemours as we move into the second half. Before we move to questions, I want to thank our employees around the world for for their continued focus, resilience and commitment. Their execution and adaptability are central to our performance and our progress against pathway to Thrive. I'd also like to thank our customers for their ongoing partnership and trust as we support their needs across critical end markets. With a strong start to the year, the right strategic actions underway, and a proven ability to execute through uncertainty, Chemours is well positioned to deliver on our commitment and drive sustained value creation for all of our stakeholders as 2026 progresses. With that, I'd like to open the line for your questions.

OPERATOR

Thank you. As a reminder to ask a question, please press star 11 on your telephone and wait for your name to be announced. To withdraw your question, please press star 11. Again, we ask that you please limit yourselves to two questions. Please stand by while we compile our Q and A roster. Our first question is going to come from the line of Joshua Spector with ubs. Your line is open. Please go ahead.

Joshua Spector (Equity Analyst)

Hi, good morning. I wanted to ask just on TSS and specifically in first quarter, when you're talking about some of the benefits from the pricing step up in the Freon products into the auto aftermarket, I was wondering if you can characterize that, was that more of a step up in some contract type structure or is that more of a tightening of the legacy refrigerant market? And did you expect that I guess when you gave your guidance earlier in the year?

Shane Hostetter (Senior Vice President and Chief Financial Officer)

Question, Josh? Yeah, from Freon. First of all, we as a business are always looking to optimize our EBITDA by per quota. So we do see strength in the auto aftermarket, but we are uniquely positioned when it comes to the auto aftermarket. We have you're one of two domestic suppliers of 134A versus other foreign suppliers. We also have a great quota position and then also there are some constraints for other suppliers that are stemming from EPA regulated phase down of a key raw material that goes into their process of tce. So we see this as very sticky. I would say going into the quarter we did anticipate strength going in, maybe not as high as it turned out to be but we certainly expect that to continue.

Joshua Spector (Equity Analyst)

Okay, thanks for that. And I guess just sticking with TSS and thinking about 2Q I think your comments clearly say you expect Reqir resi oem. I think that's the interpretation. So you're being somewhat conservative there. Does that help your view on margins in the quarter? And I guess there's just a bunch of moving parts now with costs moving up, you trying to get pricing and generally just trying to understand kind of the margin cadence you'd expect as either OEM comes back into the mix or some other factors maybe help on the cost side as you go further through the year. Thank you.

Shane Hostetter (Senior Vice President and Chief Financial Officer)

We always talk about the TSS business to be around the 30%, 30% margin or higher in the low 30s. So you know that's kind of where we are. When I think about equipment installations in 2026, we're really around the projection is around 7.5 million units which is really low and we expect that to grow as there's more optimism around height housing and expecting more around the 9 million unit as on a on a longer term basis. We see a lot of strength in our aftermarket positioning and see a lot of growth that's coming from that. So we anticipate around Opteon still a really good growth year for us. Hey Josh, which to add too. I mean you mentioned about the Q2 guide in a little bit of weeks. I do want to emphasize in the script we talked about a $10 million adjusted EBITDA impact that was pulled into the first quarter. Our commercial team did great executing at the last part of the quarter and we shifted about $10 million of EBITDA quarter. So if you normalize the Q2 for that 10 million I think you would see more seasonal trend.

Joshua Spector (Equity Analyst)

Thank you.

OPERATOR

Thank you. And one moment for our next question. Our next question is going to come from the line of John Roberts with Mizuho. Your line is open. Please go ahead.

Fabian Jimenez

Good morning, this is Fabian Jimenez on for John Question on apm. With the Washington works outage and your closure of SPS capstone line, what should we expect to see in terms of a sustainable earnings power of the segment? And also what's the timing of this ramp?

Shane Hostetter (Senior Vice President and Chief Financial Officer)

Thanks for the question. Yeah, we expect the APM business to be in the 30 to $40 million EBITDA range and we definitely expect getting back to that range in the back half of the year. We have a really strong order book when you look at our performance solutions portfolio really centered around semiconductor growth and data center. So you'll start to see that as we get into the back half.

Fabian Jimenez

Thank you. And switching gears here on Corpus Christi, can you share what your playbook is if the city declares a level one water emergency, what levers can you pull here potentially?

Shane Hostetter (Senior Vice President and Chief Financial Officer)

Thanks for the. Thanks for the question. Hey, this is something that has been on our radar for the better part of two years. So we've been very proactive. We actually, we don't see right now there's a potential for a 25% curtailment which is potentially announced for the fourth quarter that is already dialed into our outlook. So we do not see any hiccups from that. And we also have a very, very robust supply chain. So if it came to other knobs, we have other partners that we work with that we can supply our customers.

Fabian Jimenez

Thank you.

OPERATOR

Thank you. And one moment for our next question. Our next question comes from the line of John McNulty with BMO. Your line is open. Please go ahead.

John McNulty (Equity Analyst)

Yes, good morning. Thanks for taking my question. So wanted to dig into one of the points that you were bringing up toward the end around some of the sulfur related impact on other parts of the TiO2, I guess, producer market. We've seen because of sulfur constraints, we've seen some really significant price hikes from a lot of the Chinese producers. I guess. How do you think about your playbook as you push through the rest of this year in terms of either going after price and working underneath that higher pricing umbrella that some of your competitors are pushing or going after the volumes that may be left on the table because you don't have to necessarily raise price quite as much? I guess. How are you thinking about that from a playbook perspective? And can you speak to your ability to, to address some of the international markets that are starting to see some of that really aggressive pricing pushing through?

Shane Hostetter (Senior Vice President and Chief Financial Officer)

Great. Our playbook is, as we talked about before, our strategy is around gaining share in fair trade regions, but along with that is also profitability and prioritizing price. So we came out in December ahead of any disruption with the Iran war and started raising prices and were successful. You can see, you know, into going into the first quarter, our pricing's up 3%. So we're going to continue as we see opportunities to raise price. So we already made an announcement for a price increase of the same order of magnitude in April. One thing, you know, just to say we have great flexibility in our contracting around, around driving pricing. So I would say we're going to continue around our platform is continuing around driving our shareholders in the fair Trade market, but also prioritizing profitability and raising prices. It's clear with sulfur costs increasing there is an opportunity to go back in history. As sulfur costs increase. There's a one for one correlation to what happens in the cost curve of sulfate producers. I would just add too, John, if market disruptions occur and there's volume opportunities. You might remember in the third quarter last year we talked about bringing capacity down about 10 to 20% just to align with where we thought demand was going to be. We have flexible operating circuits that we could bring that back up to address that as well. Yeah. And even in the first quarter we felt volumes increasing over what we had expected. We were able to respond.

John McNulty (Equity Analyst)

Got it. Okay. No helpful. And then I guess can you just give us an Update on your 2 pick solution? I think NTT was doing some heavy trials on you. You know, I think you've also got some, some potential capacity coming up later on this year I guess. Can you give us an update as to how that's progressing?

Shane Hostetter (Senior Vice President and Chief Financial Officer)

So yeah, we're excited about, you know, towards the end of the year we're going to have the capacity that that comes on and you know, we're going to be using it to sample customers as well as refining our process technology for, for future scale up. So when it comes to NTT, the 12 month field trial using our fluid was successful. There were no signs of fluid or equipment degradation. There were over 200 prospective customers and partners that have seen the fluid in action. So we're going to continue working with NTT through 2028 and really continue to expand the visibility of that technology.

John McNulty (Equity Analyst)

Great. Thanks very much for the caller.

OPERATOR

Thank you. And one moment for our next question. Our next question comes from the line of Hasan Ahmed with Olympic Global Advisors. Your line is open. Please go ahead.

Hasan Ahmed

Morning Denise and Shane, you know, question around your Q2 as well as full year guidance. I mean if I sort of take a look at what you guys have guided to, I mean you're guiding to a first half ebitda of around 404 million. And if I compare that to what that means or implies for the back half of the year, it's essentially a range of 396 to 496 million. So I'm just trying to sort of figure out that bridge to the higher end of that EBITDA range. I mean what gets us to that incremental. Call it almost 100 million on the higher end side of things. I mean particularly factoring in seasonality and the like.

Shane Hostetter (Senior Vice President and Chief Financial Officer)

Thanks for the question. Hassan. I'll just start by saying you're coming into 2026. We were very optimistic on growth 2025 to 2026 and we remain very optimistic on that growth. When you think about pricing, we have very strong pricing. When you think about volume, we see very stable volume and our cost actions are really working. So we feel good about the growth year over year. But I'm going to turn it over to Shane to get into more of the specifics around your question. Yeah, thanks for the question San. So certainly as you just put the math to it, it looks as if we're back end weighted. But you have to remember we started out the year really slow in ATM with Washington Works outages. We mentioned 25 million in the first quarter and then we also had some expense come through as well as constraints on overall sales into the second quarter as well. That normalized for the second half is a good Runway to get to that balance, I would say. Outside of that, we talked a bit about tt. We really are looking at strong pricing and some tailwinds according from that side. Denise mentioned the strong adoption in December and we just announced April as well. You know, so on the backs of a lot of these efforts and controlling what we control as well as operating, you know. And then also APM had a really good order book and I mentioned in the script, you know, the best we've seen in several years. So we feel very confident with this guide. And you know, as we think about opportunities within TiO2, I think there's upside here from Tailwinds as well. Very helpful. And as a follow up on the TT side of things, I mean I know you guys commented on, you know, sulfuric acid and some of the price increases we've seen over there. I mean as you take a look. So the question really is around where cost curves sit today and also sort of how that impacts the rationalization that we were seeing leading into some of these sort of sulfuric acid price moves. I mean, if I've run my numbers correctly, some of the sort of latest rounds of price hikes in TIO2 that we've seen, it just seems barely cover the higher sort of cost coming out of higher sulfuric acid prices and the like. So I mean the state of affairs for TiO2 cost curve wise was pretty dire even prior to this run up in sulfuric acid prices. So I mean, where are the cost curves today? Are a large chunk of the producers still losing money despite these price hikes? And how does that impact sort of rationalization, particularly in China On a go forward basis. Yeah, thanks for the question. I mean, first of all, let's just go back to what our strategy is. And it's really to be low cost chloride producer globally and we continue on that path. We don't have any sulfate production, so we are very much on the left side of the cost curve. Clearly for sulfate producers, they're moving to the right, you know, depending on how much sulfur increases, that's how far they're going to the right. Can I say, you know, what kind of decisions they're going to make around their capacity? No, but what I can say is we are clearly focused on our strategy of gaining share in the fair trade markets, continuing our advocacy and being reliable suppliers to our customers.

Hasan Ahmed

Very helpful. Thank you so much.

OPERATOR

Thank you. And one moment for our next question. Our next question comes from the line of Arun Biswanathan with RBC Capital Markets. Your line is open. Please go ahead.

Arun Biswanathan

Great. Thanks for taking my question. Congrats on the results here. So I guess I just wanted to follow up on the last point. So for PT, I think you're guiding to about 40 to 50 million for Q2 EBITDA, how does that evolve as you kind of move through the year? Are there any discrete items like cost reductions or maybe something on the ore supply side that would lift that in Q3 or is it going to be mainly dependent on demand? Thanks.

Shane Hostetter (Senior Vice President and Chief Financial Officer)

Yeah, I would say that we definitely see improvement as we go through the year. And I would point to two primary factors. We are not building any volume upside into our outlook. It's really pricing and continuing costs. Our cost outwork, which we definitely see evidence every we saw it in the first quarter, we see it coming through

Arun Biswanathan

the rest of the year.

Shane Hostetter (Senior Vice President and Chief Financial Officer)

Okay, thanks for that. And another question on tss, I guess if I could, when you think about the last year, last year, and you did have a pretty big step up because of the step down in the quota, how are you seeing growth play out this year in tss? In absence of that, do you still have a strong backlog that's trying to catch up to prior orders? And also maybe if you could comment on the pricing environment and the mix environment, will you be selling any more Freon and would that affect the mix and positive or negative way or you know, is that destocking? All done. Thanks. Thanks. Thanks for that. Yeah. So as it, as it evolves, we've said first of all we still expect year over year growth in Opteon and in tss, we as we get to the second half of the Year you're going to see more of a slowdown as we've talked about because of the transition. But we see a lot of upside in the aftermarket as new equipment gets installed. And we have a really, really strong position in the aftermarket when you think about Freon. And as I said earlier, we see stickiness in our pricing and in our volumes because of our position in the auto aftermarket. So we feel very optimistic about the growth and our position for the rest of the year and as it relates to the margins. Arun, you know, Talked about the 30 plus margins in this business and we feel very confident with that. Seasonally, Q2, Q3 tend to be the seasonally the strongest margins and we anticipate such.

Arun Biswanathan

Again, thanks.

OPERATOR

Thank you. And one moment for our next question. Our next question comes from the line of Pete Osterlin with Trust Securities. Your line is open. Please go ahead.

Pete Osterlin

Hey, good morning. Thanks for taking the questions.

Shane Hostetter (Senior Vice President and Chief Financial Officer)

Just wanted to start on TT. So you called out the lower TiO2 sales in North America in the first quarter. It looks like sales were down 12% year over year in the region. Was that a reflection of underlying market demand, I guess, or anything to note from a customer inventory perspective. And just going forward over the next couple of quarters, what's your outlook for the North American market? Yeah, I mean going into actually coming into the year we had projected, you know, this, the volume, actually we, and particularly in North America then we had anticipated as we go into second quarter, we definitely see a step up with the, with the coating

Pete Osterlin

Okay, thanks.

Shane Hostetter (Senior Vice President and Chief Financial Officer)

And then just as a clarification on your free cash flow guidance being lowered to 20% from 25%, does that represent anything other than the tax outflow from the Kuan Yin proceeds? I guess. Any other cash headwinds that you hadn't previously incorporated? Thanks, Pete. Yeah. I appreciate you bringing this up. As you mentioned. Yeah. This is really just specific to the Kuan Yin land sale. We had taxes that are forecasted to be in operating cash flow, whereas the Kuan Yin proceeds are going to be outside of free nationalists. It's really just a presentation models. But I will make sure to emphasize that 20% is a floor. Right. We're confident in really generating upside here and we'll continue to focus on that free cash flow generation of this company. Great. Thanks very much.

OPERATOR

Thank you. And one moment for our next question. Our next question comes from the line of Duffy Fisher with Goldman Sachs. Your line is open. Please go ahead.

Duffy Fisher

Yeah, good morning. Question on the new chlorine contract. One is it more of a cost plus or is it a market minus type contract? And then two, if you look at it versus what you've paid over the last two or three years, is it a meaningful cost advantage for you when that rolls through?

Shane Hostetter (Senior Vice President and Chief Financial Officer)

Yeah, thanks for the question, Duffy. We can't talk about specifics of the contractual terms, but all I can say is this provides secure reliable supply chlorine at a very attractive rate. It secures our competitive position and is very aligned with our drive to the left side of the cost curve. Okay, and then on the Q1 slide deck you called out $17 million of kind of one time impacts that you thought were going to happen in TT with that quarter now Done.

Duffy Fisher

What was that? Did it come in at 17? Was it higher? Was it lower? Did some of that get pushed into Q2? Can you just talk about that?

Shane Hostetter (Senior Vice President and Chief Financial Officer)

Yeah, thanks Duffy. Yeah, I appreciate you bringing that up. That was really related to some ore mix items within the cold season at some of our plants. I would say the 17 million we saw come through. However, we did have some one time benefits that came through as well. So we had less than the 17 million that we saw come through. But not too much of a quantum lesson.

OPERATOR

Great. Thank you guys. Thank you. And one moment for our next question. Our next question comes from the line of Lawrence Alexander with Jeffries. Your line is open. Please go ahead.

Dan Rizawan

Hi, good morning, this is Dan Rizawan for Lawrence. You mentioned the Freon is sticky. When you say sticky. Is it for this year where it's some sort of restock or is it like a multiyear growth story? And I guess more importantly, can it provide some tailwind when the Opteon adoption kind of slows a little bit? I'm sorry, can you ask the second part of that question again? Well, I was wondering if Freon is going to be a multi year growth story because as I mean Opteon is still very strong. It will eventually peter out and not peter out but it'll slow to a more, I guess longer pace. And I was wondering if Freon could kind of augment that.

Shane Hostetter (Senior Vice President and Chief Financial Officer)

Yeah, I mean we see a, you know, a multi year trajectory around Freon strength. So as we said, we're always the way we run this business is managing quota and getting the best margins per CO2 equivalent. As I said, you know we have a very advantage position in the US relative to this product and you know we have a good quota position and we have our process is not impacted by some of the EPA actions.

Dan Rizawan

So definitely see this persistent and is the demand. I Mean, and maybe a simple question, but is the demand coming almost entirely from auto aftermarket or are there other factors or other areas contributing?

Shane Hostetter (Senior Vice President and Chief Financial Officer)

Yeah, it's really auto aftermarket. And I would say if you look at even the trajectory of like ICE vehicles, you know, there's a long tail for that. So that's how you can kind of think about that. Freon.

OPERATOR

Thank you. And one moment for our next question. Our last question will come from the line of Vincent Andrews with Morgan Stanley. Your line is open. Please go ahead.

Vincent Andrews

Thank you. And good morning. Just wondering if you could comment a little bit on the TiO2 market and what you think the impact to the market as well as to you will be from the restarts of the venator assets. I guess there's one in Italy that's restarting and then LB seems to have gotten approval for the one in the United Kingdom. It's not clear exactly when that might be, might restart. But what will, what I know Europe's not necessarily the biggest market for you, but what, what do you think that'll do to the market and how will you play around that?

Shane Hostetter (Senior Vice President and Chief Financial Officer)

Yeah, I mean, I think.

Vincent Andrews

Thanks for the question. You know, I think there's, there's definitely, you know, will be a small impact. We'll see how those assets start up. They, they, they definitely need some work to get started. So I think it would, if anything we would start seeing something maybe next year. But we feel especially around say the UK asset, there's going to be, I would say our biggest concern there is can that asset be used for pull through of other Chinese volume and we see the risk of that low. We have a lot of trade advocacy going on, making sure there's no circumvention of anti dumping tariffs and also really strengthening, working with authorities to strengthen the rules of origin definition. So I would just say, you know, it's really not something that we see as a big impact. These are also very high costs to operate facilities. Okay. And then Shane, if I could just follow up on the cash flow. You know, at fourth quarter when you put out the 25% number, you obviously had announced the sale of the land at the time. Did you just think there was going to be a way to not incur taxes on that and then that didn't play out or just what, what, what happened there? Yeah, thanks. I appreciate the question. You know, I'd say as we announced that, you know, I think we were fine tuning the overall distribution plan, you know, out of Taiwan we are going to carry with it. That said we are. You know, we've announced net proceeds of 290 million here way ahead of time. Right. As well as we're seeing net. Net probably more than we expected. We said net roughly around 300. I would say net. We're roughly in the 310 million range. So, yes, the original 25% did not take into account that tax item, but it was more presentation. We anticipated that net item being kind of netted with the quantum proceeds instead of being presented in operating cash flow. Okay. That's very clear.

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