10-Q: NL Industries Reports Q3 Loss Amid Kronos Weakness

NL Industries, Inc. reported a net loss of $7.8 million for the third quarter of 2025, primarily driven by losses from its investment in Kronos Worldwide, Inc. and unrealized losses on marketable equity securities, despite improved performance from its CompX subsidiary.

Summary

• NL Industries, Inc. reported a net loss attributable to NL stockholders of $7.8 million, or $0.16 per share, for the third quarter of 2025, a significant decline from net income of $36.0 million, or $0.74 per share, in the third quarter of 2024.
• For the first nine months of 2025, the net loss attributable to NL stockholders was $6.8 million, or $0.14 per share, compared to net income of $50.7 million, or $1.04 per share, for the same period in 2024.
• The decrease in earnings was primarily due to equity in losses of Kronos Worldwide, Inc. of $11.3 million in Q3 2025 (compared to earnings of $21.9 million in Q3 2024) and an unrealized loss of $0.5 million on marketable equity securities (compared to a gain of $18.6 million in Q3 2024).
• CompX segment profit increased to $4.8 million in Q3 2025 from $3.3 million in Q3 2024, and to $17.0 million in the first nine months of 2025 from $12.1 million in the comparable prior year period.
• Net cash used in operating activities was $32.3 million for the first nine months of 2025, a reversal from net cash provided of $16.6 million in the first nine months of 2024, largely due to a $56.7 million payment for an environmental remediation settlement.
• Kronos Worldwide, Inc. reported a 6% decrease in net sales for Q3 2025 and a 2% decrease for the first nine months of 2025, primarily due to lower average TiO2 selling prices and sales volumes.
• Kronos's income from operations turned into a loss of $19.2 million in Q3 2025, down from income of $38.9 million in Q3 2024, and its gross margin percentage significantly declined.
• Kronos refinanced $75 million of 3.75% Senior Secured Notes due September 2025 by issuing additional 9.50% Senior Secured Notes due 2029, and increased its revolving credit facility from $300 million to $350 million.
• NL Industries began the process of terminating its U.S. pension plan effective June 30, 2025, expected to be completed within six to twelve months using existing plan funds.

Sentiment

Score: 3

Explanation: The company reported a significant net loss for the quarter and nine-month period, primarily driven by substantial losses from its equity investment in Kronos Worldwide, Inc. and unrealized losses on marketable equity securities. Operating cash flow turned negative. While the CompX segment showed positive growth, it's overshadowed by the broader issues. The outlook for Kronos remains weak in the near term, despite some long-term optimism for the TiO2 market.

Positives

• CompX International Inc. demonstrated strong performance, with segment profit increasing by 42% in Q3 2025 to $4.8 million and by 40% in the first nine months of 2025 to $17.0 million.
• CompX's net sales increased by 19% in Q3 2025 and 12% in the first nine months of 2025, driven by higher sales in Security Products (government security market) and Marine Components (industrial, towboat, and government markets).
• Marine Components reporting unit achieved improved gross margin and profit percentages due to increased coverage of fixed costs on higher sales and a more favorable customer and product mix.
• Kronos Worldwide, Inc. recognized a non-cash gain of $4.6 million in Q3 2025 due to the remeasurement of an earn-out liability related to its LPC acquisition.
• Kronos successfully refinanced its $75 million 3.75% Senior Secured Notes due September 2025 by issuing additional 9.50% Senior Secured Notes due 2029, extending debt maturity.
• Kronos increased its maximum borrowing amount under its Global Revolver credit facility from $300 million to $350 million, enhancing liquidity.
• NL Industries received approximately $9.6 million in Q1 2025 as reimbursement from other private companies participating in the Raritan Bay Slag Superfund Site settlement.
• NL Industries expects to have sufficient liquidity to meet its short-term and long-term obligations.

Negatives

• NL Industries reported a net loss attributable to NL stockholders of $7.8 million in Q3 2025 and $6.8 million in the first nine months of 2025, a significant reversal from net income in the prior year periods.
• Equity in losses of Kronos Worldwide, Inc. was a major negative factor, contributing a loss of $11.3 million in Q3 2025 and $8.6 million in the first nine months of 2025, compared to substantial earnings in 2024.
• Unrealized losses on marketable equity securities amounted to $0.5 million in Q3 2025 and $9.1 million in the first nine months of 2025, contrasting with significant gains in the prior year.
• Net cash used in operating activities was $32.3 million for the first nine months of 2025, a substantial decline from $16.6 million provided in the same period of 2024.
• Kronos Worldwide, Inc. experienced a 6% decrease in net sales in Q3 2025 and a 2% decrease in the first nine months of 2025, primarily due to lower average TiO2 selling prices and sales volumes.
• Kronos's gross margin as a percentage of net sales decreased significantly to 10% in Q3 2025 (from 21% in Q3 2024) and 15% in the first nine months of 2025 (from 19% in 9M 2024) due to lower selling prices and unfavorable fixed cost absorption from reduced operating rates.
• Kronos operated its production facilities at 85% of practical capacity utilization in the first nine months of 2025, down from 93% in the first nine months of 2024, in response to lower demand.
• Kronos expects Q4 2025 operating results to be lower than Q3 2025 and full-year 2025 operating results to be lower than 2024 due to weak demand, continued pricing pressure, and lower fixed cost absorption.
• CompX is incurring tariff-related surcharges on certain components, primarily electronic components from Asia, and expects these cost pressures to continue through the remainder of 2025.
• Corporate expenses increased in Q3 2025 primarily due to higher litigation fees and related costs.
• Dividends received from Kronos decreased significantly from $15.1 million in the first nine months of 2024 to $5.3 million in the first nine months of 2025.

Risks

• Future supply and demand for products, particularly the cyclicality of Kronos's TiO2 operations.
• Kronos's ability to realize expected cost savings from strategic and operational initiatives and to integrate acquisitions like Louisiana Pigment Company, L.P.
• Dependence of certain businesses on specific market sectors and the impact of customer and producer inventory levels.
• Unexpected or earlier-than-expected industry capacity expansion, especially in the TiO2 industry.
• Changes in raw material and other operating costs (e.g., energy, ore, zinc, aluminum, steel, brass), including additional or changed tariffs on imported raw materials, and the ability to pass these costs on to customers.
• Changes in the availability of raw materials, such as ore.
• General global economic and political conditions that could harm the worldwide economy, disrupt supply chains, increase costs, or reduce demand (e.g., GDP levels, tariffs, natural disasters, global conflicts, public health crises).
• Operating interruptions including labor disputes, leaks, fires, unscheduled downtime, and transportation disruptions.
• Technology-related disruptions such as cyber-attacks, software implementation issues, or processing failures impacting operations or supply chains.
• Competition from competitive products, substitute products, and Chinese suppliers with less stringent regulatory and environmental compliance requirements.
• Potential consolidation of Kronos's competitors or customers.
• The impact of pricing and production decisions and competitive technology positions.
• Ability to protect or defend intellectual property rights.
• Potential difficulties in integrating future acquisitions or upgrading/implementing accounting and manufacturing software systems.
• Introduction of new, or changes in existing, tariffs, trade barriers, or trade disputes.
• Fluctuations in currency exchange rates (e.g., U.S. dollar against the euro, Norwegian krone, and Canadian dollar).
• Decisions to sell operating assets other than in the ordinary course of business.
• Kronos's ability to renew or refinance credit facilities or other debt instruments in the future and to comply with covenants in its revolving bank credit facility.
• Changes in interest rates.
• Ability to maintain sufficient liquidity.
• The timing and amounts of insurance recoveries.
• The ability of subsidiaries or affiliates to pay dividends.
• Uncertainties associated with CompX's development of new products and product features.
• The ultimate outcome of income tax audits, tax settlement initiatives, or other tax matters, including future tax reform, and the ability to utilize income tax attributes.
• Environmental matters, including compliance with emission and discharge standards, new developments regarding remediation or decommissioning obligations, and the difficulty in assessing and estimating obligations due to various factors (e.g., regulatory complexity, PRP solvency, cost allocation).
• Government laws and regulations and possible changes therein, such as those imposing obligations on former manufacturers of lead pigment and lead-based paint or seeking to limit or classify TiO2.
• The ultimate resolution of pending litigation, including lead pigment and environmental matters, and the possibility of new cases being filed.
• Inability to reasonably estimate a range of costs for approximately five environmental sites where investigations are in early stages.
• Potential for future legislation to permit civil liability for damages on a market share basis or revive actions barred by the statute of limitations related to lead pigment and lead-based paint.

Future Outlook

CompX expects its Security Products net sales to improve in 2025, driven by the government security market, though partially offset by softness in transportation and tool storage. Its gross margin and profit percentages are anticipated to be slightly below prior year due to higher-cost inventory and tariff-related surcharges. Marine Components net sales are projected to increase in 2025, leading to improved gross margin and profit percentages. CompX anticipates raw material price increases and tariff surcharges to persist through the year. Kronos expects customer demand to remain weak in the near term, leading to further reductions in operating rates in Q4 2025 to manage inventory. It projects Q4 operating results to be lower than Q3 and full-year 2025 results to be lower than 2024 due to weak demand, pricing pressure, and lower fixed cost absorption. However, Kronos believes industry capacity reductions and anti-dumping duties could lead to pricing upside in 2026 and is implementing significant cost reduction initiatives, including workforce reductions. NL Industries expects its net general corporate expenses in 2025 to be higher than in 2024.

Management Comments

• "Although we believe the expectations reflected in forward-looking statements are reasonable, we do not know if these expectations will be correct. Such statements by their nature involve substantial risks and uncertainties that could significantly impact expected results. Actual future results could differ materially from those predicted."
• "CompX's sales for the first nine months of 2025 reflect sustained demand across both of its reporting units, with year-to-date results exceeding those for the same period in 2024."
• "CompX expects these cost pressures [raw material price increases and tariff-related surcharges] to continue through the remainder of the year."
• "Overall, we currently expect that our net general corporate expenses in 2025 will be higher than in 2024 primarily due to income recognized in 2024 related to the settlement of a liability for an environmental remediation site in the fourth quarter of 2024."
• "The first nine months of 2025 have seen unprecedented global uncertainty related to U.S. trade policies and geopolitical tensions. Kronos customers have been hesitant to build inventories, given these uncertainties, which has prolonged the market downturn and impacted its sales volumes and pricing momentum."
• "Given the current depressed demand environment and margins, Kronos believes it is prudent to reduce its operating rates in the fourth quarter to reduce inventory and position its plants to improve operating costs at lower utilization rates."
• "Kronos believes it may gain market share from these developments [TiO2 capacity reductions] both from current and potential customers primarily in Europe."
• "Kronos current profit margins are unsustainable, and it will need to achieve price increases, targeted market share gain opportunities, and successfully execute on its cost reduction efforts noted above to achieve reasonable profit margins."
• "With no near-term debt maturities, significant borrowing availability under Kronos revolving credit facility and cash on hand, Kronos believes it is well-positioned to finance its working capital and capital expenditure needs."
• "Based upon our expectations of our operating performance, and the anticipated demands on our cash resources we expect to have sufficient liquidity to meet our short-term obligations (defined as the twelve-month period ending September 30, 2026) and long-term obligations (defined as the five-year period ending September 30, 2030)..."

Industry Context

NL Industries operates as a holding company with interests in the component products industry through CompX International Inc. and a non-controlling interest in the global titanium dioxide (TiO2) pigment market through Kronos Worldwide, Inc. The component products sector, particularly government security and certain marine markets, shows sustained demand for CompX, but faces challenges from raw material cost increases and tariffs. The TiO2 market, where Kronos operates, is experiencing a significant downturn characterized by weak customer demand, cautious inventory building due to global uncertainty, U.S. trade policies, and geopolitical tensions. This has led to declining selling prices and reduced production volumes for Kronos. However, industry-wide capacity reductions and anti-dumping duties are anticipated to create pricing upside in 2026, suggesting a potential future recovery for the TiO2 market.

Comparison to Industry Standards

• Kronos faces competition from Chinese suppliers with less stringent regulatory and environmental compliance requirements, which is noted as a risk factor.
• The TiO2 market has seen significant capacity reductions, including facility closures in China and certain European jurisdictions in Q3 2025, from which Kronos believes it may gain market share.
• Kronos's current profit margins are deemed 'unsustainable,' indicating performance below industry health benchmarks, necessitating price increases and cost reductions.

Corporate Governance

Legal Proceedings

• NL Industries is involved in various environmental, contractual, product liability, patent, employment, and other claims and disputes incidental to current and former businesses.
• There are currently no pending lead paint class action cases or lead paint cases brought by housing authorities, school districts, or other government entities against NL Industries.
• The final installment payment of $16.7 million for the County of Santa Clara v. Atlantic Richfield Company, et al. global settlement was paid in October 2025 and fully reimbursed by funds on deposit.
• In February 2025, a consent decree was approved for the Raritan Bay Slag Superfund Site (RBS Site), requiring NL and other parties to pay $151.1 million plus interest. NL paid $56.1 million plus $0.5 million interest in Q1 2025 and received $9.6 million from other private companies.
• NL Industries has accrued approximately $13 million related to approximately 29 environmental remediation sites, with the upper end of the reasonably possible cost range estimated at $38 million.
• Approximately five environmental sites exist for which NL Industries is currently unable to reasonably estimate a range of costs due to early investigation stages and lack of information.
• NL Industries is involved in legal proceedings with former insurance carriers regarding coverage for lead pigment and asbestos lawsuits, and has agreements for reimbursement of a portion of defense costs.
• Other litigation (environmental, contractual, product liability, patent, employment) is not expected to have a material adverse effect on consolidated financial position, results of operations, or liquidity beyond current accruals.

Related Party Transactions

• Valhi, Inc., NL's immediate parent company, held approximately 83% of NL's outstanding common stock at September 30, 2025.
• A wholly-owned subsidiary of Contran Corporation held approximately 91% of Valhi's outstanding common stock, with Lisa K. Simmons and family stockholders controlling Contran, thereby indirectly controlling Valhi and NL.
• NL Industries owned approximately 1.2 million shares of Valhi common stock, accounted for as available-for-sale securities, and receives dividends from Valhi.
• NLKW Holding, LLC, a wholly-owned subsidiary of NL, had $0.5 million outstanding under its $50 million secured revolving credit facility with Valhi at September 30, 2025.
• Valhi repaid a net $1.2 million under a promissory note from NL during the first nine months of 2025.
• NL's long-term ability to meet parent company-level corporate obligations is largely dependent on the receipt of dividends or other distributions from its subsidiaries and affiliates, including Kronos, CompX, and Valhi.
• Cash flows from financing activities include CompX dividends paid to its stockholders other than NL.

Stakeholder Impact

• Shareholders: Experienced a significant net loss and reduced dividends from Kronos, offset partially by improved CompX performance and NL's own dividends. Unrealized losses on marketable securities negatively impacted equity.
• Employees: Kronos is implementing targeted workforce reductions across manufacturing and selling, general, and administrative costs, which will impact employees. NL's U.S. pension plan termination will involve the purchase of annuity contracts for benefit distribution.
• Customers: CompX customers may face price increases due to rising raw material costs and new tariffs. Kronos customers are hesitant to build inventories due to global economic uncertainty, leading to lower demand and production curtailments.
• Suppliers: CompX is incurring tariff-related surcharges on certain electronic components from Asia. Kronos is reviewing costs with all its partners, suppliers, and vendors, which may lead to cost reductions impacting suppliers.
• Creditors: Kronos successfully refinanced debt and increased its credit facility, improving its liquidity position for debt servicing. NL is in compliance with its debt covenants, indicating stability for its creditors.

Next Steps

• NL Industries expects to complete the U.S. pension plan termination process within six to twelve months.
• NL Industries is evaluating the impact of the One Big Beautiful Bill Act (OBBBA) on future years as additional provisions take effect.
• NL Industries is evaluating additional disclosure requirements for ASU 2023-09 (effective 2025 Annual Report) and ASU 2024-03 (effective 2027 Annual Report).
• CompX will continue to monitor current and anticipated near-term customer demand levels to ensure its production capabilities and inventories are aligned.
• Kronos will take additional actions in Q4 2025 to reduce its inventory levels by further lowering its operating rates to better align with current demand levels.
• Kronos is implementing targeted workforce reductions across its operating locations and reviewing costs with all its partners, suppliers, and vendors.
• Kronos is investing in technological and manufacturing improvements to the LPC facility during its planned Q4 curtailment.
• Kronos expects its cash on hand to improve as it reduces inventory levels over the next several quarters.
• NL Industries may in the future seek to raise additional capital, incur debt, repurchase indebtedness, modify its dividend policies, or consider the sale of its interests in subsidiaries, affiliates, businesses, marketable securities, or other assets.
• NL Industries intends to consider future acquisition activities and may consider issuing additional equity securities and increasing indebtedness.
• NL Industries periodically evaluates the restructuring of ownership interests among its respective subsidiaries and related companies.

Key Dates

Recommendation

The company reported a significant net loss for the quarter and nine-month period, primarily driven by substantial losses from its equity investment in Kronos Worldwide, Inc. and unrealized losses on marketable equity securities. Operating cash flow turned negative. While the CompX segment showed positive growth, it was insufficient to offset the broader financial deterioration. The outlook for Kronos remains challenging with weak demand, pricing pressure, and reduced operating rates expected to continue, despite some long-term optimism for the TiO2 market. The overall financial performance and near-term outlook suggest significant headwinds, making the stock a 'sell' for a seasoned investor.

Keywords

NL Industries, Kronos Worldwide, CompX International, 10-Q, Quarterly Report, Net Loss, Titanium Dioxide, TiO2, Component Products, Security Products, Marine Components, Environmental Litigation, Lead Pigment Litigation, SEC Filing, Earnings, Cash Flow, Dividends, Debt Refinancing, Tariffs, Supply Chain, Corporate Governance, Risk Factors, Valhi Inc.