Chemours Company — FY2023 Form 10-K
Reporting period: Year ended December 31, 2023; filed March 27, 2024. The filing reports full-year results and unaudited quarterly data, including fourth-quarter results. Chemours makes performance chemicals across three main segments: Titanium Technologies, Thermal & Specialized Solutions, and Advanced Performance Materials.
Financial performance
| Metric | 2023 | 2022 |
|---|---|---|
| Net sales | $6.027 billion | $6.794 billion |
| Gross profit / gross margin | $1.306 billion / 21.7% | $1.616 billion / 23.8% |
| Net income (loss) attributable to Chemours | $(238) million | $578 million |
| Diluted EPS | $(1.60) | $3.65 |
| Operating cash flow | $556 million | $755 million |
| Capital expenditures | $370 million | $307 million |
| Adjusted EBITDA, consolidated segments | $1.266 billion | $1.573 billion |
Sales fell 11%, mainly due to a 13% volume decline, partly offset by 2% higher prices. SG&A rose to $1.290 billion, including $764 million in litigation-related charges. Net interest expense increased to $208 million from $163 million, principally due to higher rates and debt levels. The 2023 tax benefit was $81 million.
Fourth-quarter net sales were $1.361 billion versus $1.338 billion in fourth-quarter 2022; Chemours recorded a net loss attributable to the company of $18 million, compared with $97 million.
Segments and changes versus 2022
- Titanium Technologies: Sales declined 21% to $2.680 billion; Adjusted EBITDA fell 52% to $290 million, with margin down to 11% from 18%. Weak market demand and lower volumes weighed on results.
- Thermal & Specialized Solutions: Sales rose 8% to $1.819 billion; Adjusted EBITDA increased 14% to $685 million, with margin up to 38% from 36%. Higher volume and pricing, including adoption of Opteon products, supported growth.
- Advanced Performance Materials: Sales declined 11% to $1.443 billion; Adjusted EBITDA fell 26% to $273 million, with margin down to 19% from 23%. Lower demand in economically sensitive markets and reduced fixed-cost absorption were key factors.
Liquidity, debt, and capital allocation
At year-end, cash and cash equivalents were $1.203 billion; an additional $604 million was restricted, principally for the U.S. public water system settlement fund. Revolver availability was $852 million, net of letters of credit. Total debt principal was $4.084 billion, and long-term debt, net, was $3.987 billion. The company reported compliance with applicable credit-facility covenants at December 31, 2023.
Management stated that available liquidity was expected to support operations and obligations through at least March 2025. It expected cash and cash equivalents to decline by approximately $600 million in the first half of 2024, largely reflecting seasonality and the reversal of fourth-quarter working-capital timing actions. Expected 2024 capital expenditures were approximately $400 million. The company declared a first-quarter 2024 dividend of $0.25 per share; future dividends and repurchases remain subject to board discretion and financial conditions.
Outlook, material events, and risks
- Management anticipated modestly higher global TiO2 demand in 2024 compared with 2023. It also cited growth opportunities in lower-GWP refrigerants and advanced materials, alongside market, regulatory, and execution uncertainty.
- The Audit Committee’s 2024 internal review found that the former CEO, CFO, and Controller sought to delay vendor payments and accelerate receivable collections in late 2023, partly to meet publicly communicated free-cash-flow targets and incentive metrics, without adequate transparency to the board. The company estimated these actions increased fourth-quarter 2023 operating cash flow by about $360 million, with an expected corresponding decrease in first-quarter 2024; estimated net impact on 2023 operating cash flow was $145 million. Similar, smaller timing actions occurred in 2022.
- Management and the auditor concluded that internal control over financial reporting was ineffective at December 31, 2023, due to four material weaknesses, including tone at the top, information communication, ethics-hotline escalation, and vendor-master-file controls. Disclosure controls were also deemed ineffective. Remediation was underway. The auditor gave an unqualified opinion on the financial statements but an adverse opinion on internal control effectiveness.
- The filing describes immaterial revisions to prior-period financial statements, including reclassification of certain supplier-finance obligations and related cash flows, plus corrections to 2023 interim results. Management concluded the errors were not material to previously issued periods.
- PFAS and environmental exposures remain significant uncertainties. The company accrued $786 million for litigation at year-end, including its $592 million share of the U.S. public water system settlement, and recorded $590 million in environmental remediation liabilities, including $383 million for Fayetteville. Management estimated environmental liabilities could be up to approximately $730 million above the accrued amount under adverse changes; this is not presented as a maximum exposure. Losses from several PFAS claims and regulatory matters were not estimable.
- The U.S. settlement had received final court approval and judgment, but an appeal by one water system remained pending. Other opt-outs and claims are not resolved by that settlement. The company was cooperating with SEC and U.S. Attorney’s Office requests concerning the internal review; two securities class actions were filed in March 2024.
- The company shut down its Kuan Yin, Taiwan TiO2 facility and expects decommissioning and dismantling to continue into 2025. Two contractor fatalities occurred during decommissioning work in 2023. The company also abandoned implementation of a new ERP platform.
- S&P downgraded Chemours’ issuer credit rating to BB- and placed ratings on negative CreditWatch in March 2024; Moody’s placed ratings under review for downgrade. Variable-rate debt, refinancing needs, PFAS regulation and litigation, and cyclical demand are additional risks.
Investor facts to verify
- Whether first-quarter 2024 cash flow reflects the anticipated reversal of the working-capital timing actions, and how management reports free cash flow thereafter.
- Progress and independent testing of the material-weakness remediation, including ethics-hotline escalation and vendor-payment controls.
- Final status and payment treatment of the public water system settlement, remaining opt-outs, and other PFAS claims; whether recorded reserves change.
- Liquidity and covenant headroom after settlement-related payments, seasonal cash use, debt costs, and the credit-rating actions.
- Execution, costs, and expected savings from the Kuan Yin closure and Titanium Technologies transformation plan.