Chemours Co CC guided to a sharp year-on-year decline in titanium dioxide volumes in the second quarter. This not only marks the fourth consecutive quarter of decline, but also follows a massive 35-percent downturn recorded in the first quarter, according to JPMorgan.
The Analyst
Jeffrey Zekauskas downgraded Chemours from Overweight to Neutral and reduced the price target from $40 to $34.
The Thesis
The extent of the decline in first-quarter volumes reported by Chemours is something that would be expected during a massive recession, but not in a growing economy, even if there is meaningful product de-stocking, Zekauskas said in the Monday downgrade note. (See his track record here.)
No other chemical company reported such a massive decline in volume in the first quarter, the analyst said. Chemours issued its first-quarter report on Thursday.
Chemours said its volumes were hurt by contraction in Europe and China, according to JPMorgan.
Titanium dioxide is used in auto OEM coatings, and demand may have been hit by softness in the European and China auto OEM markets, Zekauskas said.
Product prices have jumped 1 percent year-on-year, which means that the Western titanium dioxide companies maintained pricing discipline even against a tough operating environment, the analyst said.
Chemours has also lost market share — mostly to Cristal, in its final days as an independent entity, he said.
Cristal was acquired by Tronox Holdings PLC TROX in a deal that closed last month.
Chemours suggested another sharp downturn in titanium dioxide volumes in the second quarter, Zekauskas said, leading JPMorgan to lower its EBITDA estimate for 2019 from $1.57 billion to $1.43 billion.
Price Action
Chemours shares were down 1.84 percent at $33.55 at the time of publication Monday.
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