10-K: Valhi, Inc. Reports Strong 2024 Earnings, Fueled by Chemicals Segment Turnaround

Valhi, Inc. rebounds with a net income of $108 million in 2024, driven by a significant recovery in its Chemicals Segment and strategic asset management.

Summary

• Valhi, Inc. reported a net income attributable to Valhi stockholders of $108.0 million, or $3.79 per diluted share, in 2024, a significant improvement from the $9.9 million net loss in 2023.
• The turnaround was primarily driven by the Chemicals Segment, which posted an operating income of $138.5 million in 2024 compared to an operating loss of $41.1 million in the previous year.
• Kronos acquired the remaining 50% joint venture interest in Louisiana Pigment Company, L.P. (LPC) for $185 million less a working capital adjustment, further bolstering the Chemicals Segment.
• The Real Estate Management and Development Segment saw a decrease in land sales revenue to $71.5 million in 2024, compared to $92.6 million in 2023, due to delays in development activity.
• The Component Products Segment experienced a decrease in net sales to $145.9 million in 2024, down from $161.3 million in 2023, due to lower sales in both security products and marine components.
• Valhi expects consolidated operating income for 2025 to be higher than 2024, driven by improved demand in the Chemicals Segment, higher infrastructure reimbursements in Real Estate, and improved marine sales in Component Products.

Sentiment

Score: 8

Explanation: The document presents a positive outlook with a significant improvement in financial performance, particularly in the Chemicals Segment. However, there are some concerns regarding the Real Estate and Component Products Segments, as well as potential risks related to raw material costs, legal and environmental matters, and global economic conditions.

Positives

• The Chemicals Segment experienced a significant turnaround, driven by increased demand and production volumes.
• Kronos acquisition of the remaining interest in LPC is expected to enhance its product offerings and increase sales.
• The Real Estate Management and Development Segment anticipates higher infrastructure reimbursements in 2025.
• The Component Products Segment expects improved marine sales in 2025.
• The company expects raw material and other input costs will continue to moderate in 2025.

Negatives

• The Real Estate Management and Development Segment experienced a decrease in land sales revenue due to delays in development activity.
• The Component Products Segment experienced a decrease in net sales due to lower sales in both security products and marine components.
• The company expects overall demand will remain below historical levels due to continued global economic uncertainty.
• TiO2 selling prices softened in the second half of 2024 in response to sluggish demand and competitive pressures.

Risks

• Demand for TiO2 is influenced by changing market conditions and global economic factors.
• The TiO2 industry is concentrated and highly competitive, leading to price pressures.
• Higher costs or limited availability of raw materials may reduce earnings and decrease liquidity.
• The Real Estate Management and Development Segment has significant development obligations, and increases in labor or construction costs may reduce earnings.
• The company is dependent on distributions from its subsidiaries to service its liabilities.
• Changes in currency exchange rates and interest rates can adversely affect net sales, profits, and cash flows.
• The company could incur significant costs related to legal and environmental remediation matters.
• Technology failures or cybersecurity breaches could have a material adverse effect on operations.
• Global climate change laws and regulations could negatively impact financial results.

Future Outlook

Valhi expects consolidated operating income for 2025 to be higher than 2024, driven by improved demand in the Chemicals Segment, higher infrastructure reimbursements in Real Estate, and improved marine sales in Component Products.

Industry Context

The TiO2 industry is highly competitive, with the top five producers accounting for approximately 51% of the world's production capacity. Demand for TiO2 is generally driven by worldwide gross domestic product and has generally increased with rising standards of living in various regions of the world.

Comparison to Industry Standards

• Kronos had an estimated 7% share of worldwide TiO2 sales volume in 2024.
• Chemours has approximately one-half of total North American TiO2 production capacity and is Kronos principal North American competitor.
• LB Group previously announced it plans to add an additional 200,000 tons of chloride process capacity which we expect will be added incrementally over the next several years.
• Venator which announced plans in 2024 to close its Duisburg, Germany facility with an estimated 50,000 tons of sulfate process capacity.

Legal Proceedings

• NL was served with a third-party complaint in a matter titled Arrioena Beal v. Hattie Mitchell, et al., seeking contribution for any damages they may ultimately have to pay to the plaintiff.
• NL was sued in Atlantic Richfield, Co. v. NL Industries, Inc., a CERCLA cost recovery action brought by a past owner and operator of certain mining properties located in Rico, Colorado.
• NL and several other defendants were sued in California Department of Toxic Substances v. NL Industries, Inc., relating to lead contamination allegedly connected to a secondary lead smelter located in Vernon, California.
• NL was served in Philip Palmeri v. NL Industries, Inc., asserting that radioactive material allegedly originating at a former NL facility in Niagara Falls, New York, caused the wrongful death of plaintiffs spouse and diminished the value of plaintiffs residential property located in Lewiston, New York.
• CompX was served with four lawsuits by public water companies in South Carolina that seek recovery of future costs to remove perfluoroalkyl and polyfluoroalkyl substances (known as PFAS) from their water supplies.

Related Party Transactions

• The company is a party to certain transactions with related parties, including intercorporate services agreements with Contran, and loans and advances between the company and various related parties.
• Kronos entered into a $53.7 million unsecured term loan with Contran.

Stakeholder Impact

• The company's operating results depend in part on its ability to successfully manage its human capital resources, including attracting, identifying, and retaining key talent.
• The company is committed to maintaining a strong safety culture where all workers meet or exceed required industry performance standards.
• The company seeks to operate its businesses in line with sound ESG principles that include corporate governance, social responsibility, sustainability and cybersecurity.

Next Steps

• LandWell expects the development work to take two to three years to complete.
• The company will continue to monitor current and anticipated near-term customer demand levels to ensure its production capabilities and inventories are aligned accordingly.
• The company will continue to implement strategies to minimize the potential impacts of tariffs.

Key Dates