Valhi, Inc. (NYSE: VHI) reported net income attributable to
Valhi stockholders of $26.2 million, or $.92 per share, in the
third quarter of 2022 compared to $39.0 million, or $1.36 per
share, in the third quarter of 2021. For the first nine months of
2022, Valhi reported net income attributable to Valhi stockholders
of $99.6 million, or $3.49 per share compared to net income of
$75.2 million, or $2.64 per share in the first nine months of 2021.
Net income attributable to Valhi stockholders decreased in the
third quarter of 2022 as compared to the same period of 2021
primarily due to the net effects of lower operating results from
our Chemicals Segment, income from tax increment infrastructure
reimbursement in our Real Estate Management and Development Segment
in 2022 and a gain on the sale of land not used in our operations
in 2021. Net income attributable to Valhi stockholders increased in
the first nine months of 2022 as compared to the same period of
2021 primarily due to the net effects of higher operating results
from our Chemicals Segment, the impairment of our Real Estate
Management and Development Segment’s water delivery system fixed
assets in the second quarter of 2022, and a gain on sales of land
not used in our operations in 2021.
The Chemicals Segment’s net sales were $459.6
million in the third quarter of 2022 compared to $499.8 million in
the third quarter of 2021 and $1.6 billion in the first nine months
of 2022 compared to $1.4 billion in the same period of 2021. The
Chemicals Segment’s net sales decreased in the third quarter of
2022 compared to the same period in 2021 primarily due to lower
sales volumes in European, export and North American markets,
partially offset by higher average TiO2 selling prices. The
Chemicals Segment’s net sales increased in the year-to-date period
compared to the same period in 2021 primarily due to higher average
TiO2 selling prices, partially offset by lower sales volumes. The
Chemicals Segment’s TiO2 sales volumes were 20% lower in the third
quarter of 2022 compared to the third quarter of 2021 and its sales
volumes in the first nine months of 2022 were 7% lower than in the
first nine months of 2021. The Chemicals Segment’s average TiO2
selling prices were 21% higher in the third quarter of 2022
compared to the third quarter of 2021 and 24% higher in the first
nine months of 2022 as compared to the first nine months of 2021.
The Chemicals Segment’s average TiO2 selling prices at the end of
the third quarter of 2022 were 15% higher than the end of 2021.
Fluctuations in currency exchange rates (primarily the euro) also
affected net sales comparisons, decreasing our Chemicals Segment’s
net sales by approximately $31 million in the third quarter of 2022
and approximately $83 million in the first nine months of 2022 as
compared to the same periods of 2021. The table at the end of this
press release shows how each of these items impacted our Chemical
Segment’s net sales.
The Chemicals Segment’s operating income in the
third quarter of 2022 was $34.3 million as compared to $60.3
million in the third quarter of 2021 and $189.9 million for the
nine months ended September 30, 2022 compared to $145.4 million for
the same prior year period. The Chemicals Segment’s operating
income decreased in the third quarter of 2022 compared to the third
quarter of 2021 primarily due to the net effect of lower sales
volumes, higher production costs, including raw material and energy
costs, and higher average TiO2 selling prices. The Chemicals
Segment’s operating income increased in the first nine months of
2022 compared to the first nine months of 2021 primarily due to the
net effect of higher average TiO2 selling prices, lower sales
volumes and higher production costs, including raw material and
energy costs. The Chemicals Segment’s TiO2 production volumes were
5% lower in the third quarter of 2022 compared to the third quarter
of 2021 and 1% lower in the first nine months of 2022 compared to
the same period of 2021. The lower production volumes in the third
quarter of 2022 were primarily due to maintenance activities and
alignment of production and inventory levels to anticipated
near-term customer demand. The Chemicals Segment operated its
production facilities at 96% of practical capacity utilization in
the first nine months of 2022 (100%, 95% and 93% in the first,
second and third quarters of 2022, respectively) compared to 99% in
the first nine months of 2021 (97%, 100% and 100% in the first,
second and third quarters of 2021, respectively).
Fluctuations in currency exchange rates (primarily the euro) also
affected the year-to-date operating income comparison, which
increased operating income by approximately $13 million in the
third quarter of 2022 compared to the third quarter of 2021 and
increased operating income by approximately $21 million in the
first nine months of 2022 compared to the first nine months of
2021.
The Chemicals Segment’s operating income in the
third quarter and first nine months of 2022 includes an insurance
settlement gain of $2.7 million related to a 2020 business
interruption insurance claim.
The Component Products Segment’s net sales were
$42.9 million in the third quarter of 2022 compared to $34.5
million in the third quarter of 2021 and $126.6 million in the
first nine months of 2022 compared to $106.7 million in the same
period of 2021. The Component Products Segment’s increase in net
sales for both periods is due to higher marine components sales
predominantly to the towboat market and, to a lesser extent, higher
security products sales across a variety of markets. Operating
income attributable to the Component Products Segment was $6.0
million in the third quarter of 2022 compared to $5.1 million in
the third quarter of 2021 and $20.0 million for the first nine
months of 2022 compared to $16.7 million for the same prior year
period. The Component Products Segment’s operating income increased
for both comparative periods largely due to the strong performance
of its marine components reporting unit, partially offset by
increased production costs, particularly at its security products
reporting unit, including increased raw material costs, higher
shipping costs, and higher salary and employment related costs.
The Real Estate Management and Development
Segment had sales of $53.8 million in the third quarter of 2022,
including $52.8 million in revenue on sales of land held for
development, compared to sales of $44.6 million in the third
quarter of 2021, including $41.9 million in revenue on sales of
land held for development. For the first nine months of 2022 the
Real Estate Management and Development Segment had sales of $105.5
million, including $100.9 million in revenue on sales of land held
for development, compared to sales of $63.1 million, including
$57.0 million in sales of land held for development in the same
period of 2021. Land sales revenue is generally recognized over
time based on cost inputs, and land sales revenues are dependent on
spending for development activities. Land sales revenues are also
impacted by the relative timing of when new land parcel sales are
closed. Land sales revenues increased in the third quarter and
first nine months of 2022 as compared to the same periods in 2021
primarily due to an increase in development activity in 2022
compared to the same periods of 2021. Recognition of tax increment
infrastructure reimbursement of $10.0 million ($5.2 million, or
$.18 per share, net of income taxes and noncontrolling interest) in
the first nine months of 2022 and $6.2 million ($3.2 million, or
$.11 per share, net of income taxes and noncontrolling interest) in
the first nine months of 2021 are included in the determination of
operating income. Due to historically low levels at Lake Mead,
Nevada at the end of the second quarter of 2022, our Real Estate
Management and Development Segment’s subsidiary Basic Water Company
(“BWC”) ceased operations at its water intake facility and on
September 10, 2022 BWC and its subsidiaries voluntarily filed for
Chapter 11 bankruptcy protection in the United States Bankruptcy
Court for the District of Nevada. Our Real Estate Management and
Development Segment recognized aggregate charges of $19.7 million
related to BWC during 2022, including $16.4 million ($8.2 million,
or $.29 per share, net of income taxes and noncontrolling
interest), primarily in the second quarter, related to the
impairment of the water delivery system fixed assets and, as a
result of the bankruptcy filing of BWC in the third quarter, a $2.0
million ($1.0 million, or $.04 per share, net of income taxes and
noncontrolling interest) loss on the deconsolidation of BWC and bad
debt expense of $1.3 million ($.6 million, or $.02 per share, net
of income taxes and noncontrolling interest) related to an
intercompany receivable with BWC. These charges are all included in
the determination of our Real Estate Management and Development
Segment’s operating income.
Corporate expenses were comparable in the third
quarter of 2022 and 5% higher in the first nine months of 2022
compared to the same periods of 2021. Corporate expenses increased
in the year-to-date period due to higher litigation and related
costs in 2022 compared to 2021. In the first nine months of 2021 we
sold excess property not used in our operations for net proceeds of
approximately $23.4 million and recognized a pre-tax gain of $16.0
million ($12.3 million, or $.43 per share, net of income taxes and
noncontrolling interest). Interest expense of $7.0 million in the
third quarter of 2022 and $20.9 million in the first nine months of
2022 decreased compared to the same prior year periods primarily
due to lower average balances and the effects of changes in
currency exchange rates somewhat offset by higher interest rates on
variable-rate indebtedness in 2022.
The statements in this press release relating to
matters that are not historical facts are forward-looking
statements that represent management’s beliefs and assumptions
based on currently available information. Although we believe the
expectations reflected in such forward-looking statements are
reasonable, we cannot give any assurances that these expectations
will be correct. Such statements by their nature involve
substantial risks and uncertainties that could significantly impact
expected results, and actual future results could differ materially
from those predicted. While it is not possible to identify all
factors, we continue to face many risks and uncertainties. Among
the factors that could cause our actual future results to differ
materially include, but are not limited to, the following:
- Future supply
and demand for our products;
- The extent of
the dependence of certain of our businesses on certain market
sectors;
- The
cyclicality of certain of our businesses (such as Kronos’ TiO2
operations);
- Customer and
producer inventory levels;
- Unexpected or
earlier-than-expected industry capacity expansion (such as the TiO2
industry);
- Changes in raw
material and other operating costs (such as ore, zinc, brass,
aluminum, steel and energy costs);
- Changes in the
availability of raw materials (such as ore);
- General global
economic and political conditions that harm the worldwide economy,
disrupt our supply chain, increase material and energy costs,
reduce demand or perceived demand for TiO2, component products and
land held for development or impair our ability to operate our
facilities (including changes in the level of gross domestic
product in various regions of the world, natural disasters,
terrorist acts, global conflicts and public health crises such as
COVID‑19);
- Operating
interruptions (including, but not limited to, labor disputes,
leaks, natural disasters, fires, explosions, unscheduled or
unplanned downtime such as disruptions in energy supplies,
transportation interruptions, cyber-attacks and public health
crises such as COVID‑19);
- Competitive
products and substitute products;
- Customer and
competitor strategies;
- Potential
difficulties in integrating future acquisitions;
- Potential
difficulties in upgrading or implementing accounting and
manufacturing software systems;
- Potential
consolidation of our competitors;
- Potential
consolidation of our customers;
- The impact of
pricing and production decisions;
- Competitive
technology positions;
- Our ability to
protect or defend intellectual property rights;
- The
introduction of trade barriers or trade disputes;
- The ability of
our subsidiaries to pay us dividends;
- The impact of
current or future government regulations (including employee
healthcare benefit related regulations);
- Uncertainties
associated with new product development and the development of new
product features;
- Fluctuations
in currency exchange rates (such as changes in the exchange rate
between the U.S. dollar and each of the euro, the Norwegian krone
and the Canadian dollar and between the euro and the Norwegian
krone) or possible disruptions to our business resulting from
uncertainties associated with the euro or other currencies;
- Decisions to
sell operating assets other than in the ordinary course of
business;
- The timing and
amounts of insurance recoveries;
- Our ability to
renew, amend, refinance or establish credit facilities;
- Potential
increases in interest rates;
- Our ability to
maintain sufficient liquidity;
- The ultimate
outcome of income tax audits, tax settlement initiatives or other
tax matters, including future tax reform;
- Our ability to
utilize income tax attributes, the benefits of which may or may not
have been recognized under the more-likely-than-not recognition
criteria;
- Environmental
matters (such as those requiring compliance with emission and
discharge standards for existing and new facilities, or new
developments regarding environmental remediation or decommissioning
obligations at sites related to our former operations);
- Government
laws and regulations and possible changes therein (such as changes
in government regulations which might impose various obligations on
former manufacturers of lead pigment and lead-based paint,
including NL, with respect to asserted health concerns associated
with the use of such products) including new environmental health
and safety regulations such as those seeking to limit or classify
TiO2 or its use;
- The ultimate
resolution of pending litigation (such as NL’s lead pigment and
environmental matters);
- Our ability to
comply with covenants contained in our revolving bank credit
facilities;
- Our ability to
complete and comply with the conditions of our licenses and
permits;
- Changes in
real estate values and construction costs in Henderson, Nevada;
and
- Possible
future litigation.
Should one or more of these risks materialize
(or the consequences of such development worsen), or should the
underlying assumptions prove incorrect, actual results could differ
materially from those currently forecasted or expected. We disclaim
any intention or obligation to update or revise any forward-looking
statement whether as a result of changes in information, future
events or otherwise.
Valhi, Inc. is engaged in the chemicals
(TiO2), component products (security products and recreational
marine components) and real estate management and development
industries.
*****
VALHI, INC. AND
SUBSIDIARIESCONDENSED SUMMARY OF
INCOME(In millions, except earnings per
share)
|
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Three months ended |
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Nine months ended |
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September 30, |
|
September 30, |
|
|
2021 |
|
2022 |
|
2021 |
|
2022 |
|
(unaudited) |
Net
sales |
|
|
|
|
|
|
|
|
|
|
|
|
Chemicals |
|
$ |
499.8 |
|
$ |
459.6 |
|
$ |
1,443.4 |
|
$ |
1,587.8 |
Component products |
|
|
34.5 |
|
|
42.9 |
|
|
106.7 |
|
|
126.6 |
Real estate management and development |
|
|
44.6 |
|
|
53.8 |
|
|
63.1 |
|
|
105.5 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Total net sales |
|
$ |
578.9 |
|
$ |
556.3 |
|
$ |
1,613.2 |
|
$ |
1,819.9 |
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|
|
|
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|
|
|
|
|
|
|
|
Operating income |
|
|
|
|
|
|
|
|
|
|
|
|
Chemicals |
|
$ |
60.3 |
|
$ |
34.3 |
|
$ |
145.4 |
|
$ |
189.9 |
Component products |
|
|
5.1 |
|
|
6.0 |
|
|
16.7 |
|
|
20.0 |
Real estate management and development |
|
|
15.8 |
|
|
29.1 |
|
|
26.0 |
|
|
32.1 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Total operating income |
|
|
81.2 |
|
|
69.4 |
|
|
188.1 |
|
|
242.0 |
|
|
|
|
|
|
|
|
|
|
|
|
|
General corporate
items: |
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|
|
|
|
|
|
|
|
|
|
|
Interest income and other |
|
|
.9 |
|
|
3.3 |
|
|
2.9 |
|
|
5.6 |
Gain on land sales |
|
|
10.4 |
|
|
— |
|
|
16.0 |
|
|
— |
Changes in market value of Valhi common stock held by
subsidiaries |
|
|
(.2) |
|
|
(4.9) |
|
|
2.0 |
|
|
(.9) |
Other components of net periodic pension and OPEB
expense |
|
|
(4.3) |
|
|
(3.2) |
|
|
(13.2) |
|
|
(9.8) |
General expenses, net |
|
|
(8.7) |
|
|
(8.6) |
|
|
(26.1) |
|
|
(27.3) |
Interest expense |
|
|
(7.9) |
|
|
(7.0) |
|
|
(25.2) |
|
|
(20.9) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before income taxes |
|
|
71.4 |
|
|
49.0 |
|
|
144.5 |
|
|
188.7 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Income tax
expense |
|
|
16.9 |
|
|
8.2 |
|
|
35.2 |
|
|
42.1 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income |
|
|
54.5 |
|
|
40.8 |
|
|
109.3 |
|
|
146.6 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Noncontrolling
interest in net income of subsidiaries |
|
|
15.5 |
|
|
14.6 |
|
|
34.1 |
|
|
47.0 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income attributable to Valhi stockholders |
|
$ |
39.0 |
|
$ |
26.2 |
|
$ |
75.2 |
|
$ |
99.6 |
|
|
|
|
|
|
|
|
|
|
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|
|
Amounts
attributable to Valhi stockholders: |
|
|
|
|
|
|
|
|
|
|
|
|
Basic and diluted
net income per share |
|
$ |
1.36 |
|
$ |
.92 |
|
$ |
2.64 |
|
$ |
3.49 |
|
|
|
|
|
|
|
|
|
|
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Basic and diluted
weighted average shares outstanding |
|
|
28.5 |
|
|
28.5 |
|
|
28.5 |
|
|
28.5 |
VALHI, INC. AND SUBSIDIARIES
IMPACT OF PERCENTAGE CHANGE IN CHEMICAL SEGMENT'S NET
SALES (unaudited)
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|
Three months ended |
|
Nine months ended |
|
|
|
September 30, |
|
|
|
September 30, |
|
|
|
|
2022 vs. 2021 |
|
|
|
2022 vs. 2021 |
|
Percentage change in TiO2 net sales: |
|
|
|
|
|
|
|
|
TiO2 product pricing |
|
|
21 |
% |
|
|
24 |
% |
TiO2 sales volumes |
|
|
(20) |
|
|
|
(7) |
|
TiO2 product mix/other |
|
|
(3) |
|
|
|
(1) |
|
Changes in currency exchange rates |
|
|
(6) |
|
|
|
(6) |
|
|
|
|
|
|
|
|
|
|
Total |
|
|
(8) |
% |
|
|
10 |
% |
SOURCE: Valhi, Inc.
CONTACT: Janet G. Keckeisen, Vice President - Investor Relations, 972.233.1700
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