Brennen Arndt - VP, IR Tom Casey - CEO Katherine Harper - SVP and CFO.

Des Kilalea - RBC.

Good morning, ladies and gentlemen, and welcome to the Tronox Limited Fourth Quarter 2014 Earnings Conference Call. At this time all participants are in a listen-only mode. Later we will conduct a question-and-answer session and instructions will follow at that time. (Operator Instructions) As a reminder, this conference call is being recorded.

I would now like to turn the call over to your host Mr. Brennen Arndt, Vice President of Investor Relations. Mr. Arndt, you may now begin..

Thank you, Bridget. Thank you and welcome everyone, to Tronox Limited's Fourth Quarter 2014 Conference Call and Webcast. With me today are Tom Casey, Chairman and CEO, and Kathy Harper, Senior Vice President and CFO.

Tom will review our fourth quarter performance and provide an in depth discussion of the Alkali Chemicals acquisition we announced earlier this month. Kathy will report on our financial position as well as the financing of the Alkali acquisition. Tom will conclude our call with summary comments and we'll be pleased to then address your questions.

We'll be using slides today as we move through the presentation. Those of you listening by Internet broadcast through our website should already have them. And for those of you listening by telephone, if you haven't already done so, you can access them on our website rather at tronox.com.

Let me begin with a reminder that our discussion today will include certain statements that are forward-looking and subject to various risks and uncertainties including, but not limited to, the specific factors summarized in our 2014 Form 10-K, and other SEC filings. This information represents our best judgment based on today's information.

However actual results may vary based on these risks and uncertainties. The Company undertakes no obligation to update or revise any forward-looking statements. During the conference call, we will refer to certain non-U.S.

GAAP financial terms that we use in the management of our business, including EBITDA, adjusted EBITDA and adjusted earnings of per diluted share. EBITDA represents net income before net interest expense, income tax and depreciation, depletion and amortization expense.

Adjusted EBITDA represents EBITDA as further adjusted for non-cash, unusual and non-recurring items. Adjusted earnings per diluted share represent, EPS adjusted for unusual or non-recurring items on a fully diluted basis. A reconciliation is provided in our earnings release.

One final comment, before we move into a review of the fourth quarter performance I want to address the timing of our earnings release and this morning's conference call. Their timing and that of our 10-K filing were essentially driven by three factors.

Firstly, the time and resources during the last two months, we dedicated to the acquisition of Alkali Chemicals. Secondly, our time and resources focused on arranging the financing of that acquisition. And thirdly the timing of our external auditor sign off and issuance of their 2014 report.

You may recall last May at our AGM we proposed the change in auditors to PriceWaterhouseCoopers, which was approved by our shareholders. PWC began our audit in May of last year and essentially did 12 months of work in seven. We want to thank them for their robust work in a very shorten time period in their first year of auditing Tronox.

It's now my pleasure to turn the call over to Tom Casey for a review of our operating and financing performance..

Thanks Brennen and thank all of you on the call for your interest in Tronox. Our fourth quarter results came in essentially as we had expected. They reflected normal seasonally lighter demand and an industry where selling process in both pigment and mineral sands remain at trough levels.

Despite these trough conditions however, in the fourth quarter we delivered $81 million of adjusted EBITDA on revenue of $400 million for a 20% EBITDA margin. For the full year 2014 we delivered $353 million of adjusted EBITDA on revenue of $1.737 billion, also producing a 20% adjusted EBITDA margin.

This level of performance we believe continues to reflect the benefit of vertical integration and our resulting ability to deliver a higher level of adjusted EBITDA per metric ton of pigment sold than our non-integrated peers.

And this performance was achieved before we received the revenue and almost a 100% margin from the sale of 30,000 metric tons of natural rutile and 60,000 metric tons of zircon that we will begin to sell when the Fairbreeze mine begin production.

That will be incremental sales and incremental revenue and margin and so we're confident that, that will help us drive recovery at the second half of '15 or more fully in the first part of '16 when Fairbreeze is up and fully operational.

In pigment, our revenue was $264 million and our adjusted EBITDA was $46 million, a $37 million improvement over the prior year. Adjusted EBITDA in the pigment sector was 17%.

Lower feedstock selling prices contributed to greater margins in our pigment business and this will continue to happen as long as the pigment made from lower price feedstock is sold which is going to be five or six months after we buy that feedstock.

In mineral sands, adjusted EBITDA margin for the segment was 30%, again despite essentially trough conditions in the feedstock market and without the high margin material I already mentioned coming from Fairbreeze.

We expect feedstock market conditions to gradually improve, its pigment plant operating rates have returned to normal and as feedstock inventories continue to be work down. With respect to overall global pigment and feedstock markets, as we begin in 2015 we are somewhat more conservative than others who have spoken on the subject.

As we reported in our release, our prices soften in Q4 and that trend continues in some markets in Q1.

We believe this is attributable to several factors, among which are the seasonally lower Q1 demand patterns and therefore they resulting imbalance in supply and demand, the occurrence of the Chinese New Year in the first quarter, which was part of the seasonal demand, the continued economic stagnation in Europe and in certain South American countries.

Moreover the euros weakness against the dollar makes it more attractive to export European production into stronger markets, including North America because many of these factors are temporary and because many pigment providers are already experiencing negative margins.

We expect prices to begin their recovery this year bottoming out in the second -- in the middle part of the year and recovery in the second half of the year.

On an unrelated matter, earlier this month we took a significant step towards building a stronger more stable and higher margin and free cash flow generating company with the signing of a definitive agreement to acquire the Alkali Chemicals business from the FMC Corporation.

This transaction is expected to close this quarter and will be accretive to earnings and cash flow immediately upon closing. Alkali Chemicals brings strong operational and financial performance to our portfolio.

Over the past five years, it has consistently delivered EBITDA margins in excess of 20% and converted approximately 75% of its EBITDA to free cash flow. It is a low cost, vertically integrated producer of a functionally irreplaceable chemical component in products that are used globally and that grow at GDP rates.

Thus they're just like Tronox, who also is a low cost vertically integrated producer of a functionally irreplaceable chemical component in paint and plastics that are used globally and grow at GDP rates.

Together, we'll be a leading inorganic chemicals company with more stable revenue, more stable cash flow and EBITDA streams as well as higher net income.

We expect to generate approximately $2.6 billion in revenue after this acquisition closes on a run rate basis and we will significantly greater scale, greater stability and greater financial strength as a result of it.

To further underscore our commitment to build value for our shareholders, for the 11th straight quarter our Board declared a quarterly dividend of $0.25 per share payable on March 23rd to shareholders of record of our A and B shares at the close of business on March 9th. This dividend level constitutes a yield of more than 4%.

Turning now to our fourth quarter operating results, beginning with pigment and for those of you who are following on the slides, this is on Slide 4. Pigment segment revenue of $264 million was 5% lower than $277 million in the prior-year quarter, as sales volumes declined 1% and selling prices declined 4%.

Sales volume gains were realized in North America but they were offset by declines in Europe, Asia and Latin America. Selling prices were lower in North America and in Europe on a local currency basis, modestly lower in Asia and higher in Latin America compared to the year-ago quarter.

Compared to the seasonally strong third quarter, sales volumes declined 7% to normal seasonal levels and selling price declined 4%. At the end of the fourth quarter, finished pigment inventory was at seasonal normal levels for us and our average plant utilization rate was more than 90%.

Pigment adjusted EBITDA of $46 million increased by $37 million compared to the adjusted EBITDA of $9 million in the year-ago quarter. On a sequential basis adjusted EBITDA of $46 million compared to seasonally stronger third quarter adjusted EBITDA of $57 million. Pigment adjusted EBITDA margin in the fourth quarter was 17%.

The average feedstock cost reflected in the pigment segment in the fourth quarter was $796 per metric ton, compared to $794 per metric ton in the third quarter. During the fourth quarter, a 100% of feedstock purchases made by pigment were from our Mineral Sands business and those purchases were at an average cost of $765 per metric ton.

The lower feedstock prices that we have seen over recent quarter contributed to grater margins in our pigment business and will continue to do so as pigment made from that feedstock is sold which I mentioned is five or six months after the purchase was made.

Margin was also enhanced by higher fixed cost absorption and operating efficiencies produced during the quarter.

Moving to our Mineral Sand segment, which is Slide 5, mineral sands revenue of $183 million was 26% lower than the $248 million in the year-ago quarter, reflecting our decision to withdraw from the external CP slag market in the second half of 2014.

Excluding external CP titanium slag sales of $24 million in the prior year, revenue declined 18% compared to the year-ago quarter. External sales volumes were up 15%, excluding the prior-year titanium slag volumes. Selling prices for titanium feedstocks declined into the 10% to 20% range versus the prior-year quarter.

Sales volumes for zircon were level to the year-ago quarter and selling prices declined 8%. Compared to the third quarter of 2014, segment revenue declined 11%, driven primarily by a sales volume decline of 7% and lower selling prices for natural rutile.

Sales volumes for zircon declined 3% and selling prices remained level, compared to the prior quarter. Revenue from intercompany sales was $77 million in the quarter. Revenue from external sales was $106 million in the quarter, including $81 million from zircon and pig iron.

Mineral Sands continue to sell 100% of its synthetic rutile production to Pigment on an intercompany basis. The Mineral Sands segment operating loss of $8 million compared to operating income of $33 million in the year-ago quarter and $8 million in the prior quarter.

Adjusted EBITDA was $54 million versus $93 million in the year ago quarter and $71 million in the prior quarter. The adjusted EBITDA margin was 30% versus 38% in the prior year and 34% in the prior quarter.

A reminder, that Mineral Sands segment adjusted EBITDA is calculated before the elimination of gross profit on sales to the Pigment segment that occurs in consolidation at the Company level.

In the fourth quarter, $6 million of Mineral Sands gross profit was eliminated in consolidation and $10 million of previously eliminated gross profit was reversed, for a net adjusted EBITDA increase in consolidation of $4 million. Construction continues to progress on schedule at our Fairbreeze mine in South Africa.

The Fairbreeze mine will supply feedstock to our slag furnaces at KZN and is expected to begin operations by the end of 2015 and be fully operational in 2016.

Capital expenditures related to the Fairbreeze mine from commencement of the implementation phase through 2016 are estimated to be approximately $225 million, with $52 million spent during 2014 and $30 million spent through 2013. So that is $82 million spend up to year end 2014.

As I mentioned, when the Fairbreeze mine begins operation, we will benefit from the zircon and natural rutile volumes that it will produce as byproducts from the mining of ilmenite.

You will recall that we close the Hillendale mine at the end of 2013 which meant we no longer produce zircon and rutile out of that mine and when we open Fairbreeze that will be new and incremental production. We have not have these byproduct volumes to sell during 2014 and 2015.

On annual basis we estimate that Fairbreeze will produce 60,000 metric tons of zircon and 30,000 metric tons of natural rutile. The marginal cost to produce these products is very low and their addition to 2016 performance is expected to add as much as $90 million to adjusted EBITDA on a full year basis.

Moving now to a more detailed review of the Alkali acquisition, which we cover on Slide 6, we took as I said a significant step towards building a stronger, more stable and higher margin and higher free cash flow generating company with the signing of our definitive agreement to acquire Alkali Chemicals.

It's the low cost, vertically integrated producer. It produces a functionally irreplaceable component of glass and some other chemical end products. These products are used globally and they grow at GDP plus rates. That means the organization of this business very similar to Tronox and gives us an ability to understand the dynamic in their markets.

Together we will form a leading inorganic chemicals company with more stable revenue, cash flow and EBITDA streams and higher net income. Some of you are familiar with the Alkali Chemical business and understand the many attractive qualities of its leading position in the global market.

We believe it's an excellent addition to our portfolio and for those of you who may not be as familiar, let me provide a little detail. Alkali Chemicals is the leading global producer of natural soda ash which has a sustained structural cost advantage versus producers of synthetic soda ash.

The global market is dividend essentially 75% approximately into synthetic producers and 25% into natural soda ash producers and cash cost for a U.S. natural producer of soda ash are more than 40% less than the most economic synthetic soda ash producer. This enables U.S.

soda ash producers that use the natural production method to have a sustaining competitive advantage on a delivered basis in Asia outside of China, in Latin America and in many other attractive markets in the world. It also significantly limits the degree that U.S. producers are subject to competition from imports in the domestic market.

Global end market dynamics are favorable with growing demand. Growth in consumption of soda ash is driven primarily by steady growth in the global glass demand which is soda ash's primary application, constitutes about 50% of its volume and that's projected to grow at 3.9% CAGR through 2020.

The domestic market operates under a multi-year contract structure that provides significant visibility into sales and revenue. Essentially 100% of Alkali Chemicals domestic pricing structure is set for 2015, a significant majority is already set for 2016, and approximately half is set for 2017.

Alkali Chemicals will increase our participation in higher growth developing economies around the world as well. It has a strong market position in developing regions that have yet to reach the soda ash consumption potential.

Soda ash consumption per capita in developing economies is less than 50% of domestic levels, much like the case with titanium dioxide. Alkali Chemicals specialty products business has leading market positions in smaller but fast growing food, healthcare, industrial and feed markets.

Sales of specialty products have grown approximately 9% CAGR over the past decade and generate gross margins in excess of 40%. As a result of the Alkali Chemicals low cost leadership position and its sustained structural advantage it brings strong operational and financial performance to our Company.

Over the past five years as I mentioned, it has consistently delivered EBITDA margins in excess of 20% and converted approximately 75% of its EBITDA to free cash flow. Alkali Chemicals will operate as a separate business and reporting segment within our business.

Joining Tronox will be more than 1,000 new colleagues and a senior management team that averages 23 years' experience in the chemicals industry and 13 years' experience with Alkali Chemicals specifically.

Our combination as I said will form a leading inorganic chemicals company expected to generate approximately $2.6 billion in revenue with significantly greater scale, greater stability and greater financial strength.

It is full first year fall in closing, we expect the acquisition to be more than $0.50 accretive to earnings per share to generate approximately $130 million of incremental operating cash flow and to realize after-tax cash savings of more than $30 million.

By year three, the acquisition is expected to generate after-tax cash savings of more than $60 million annually. In the first year approximately 10% of the $30 million after tax cash savings is expected to come from global supply chain savings. By year three the savings are expected to grow represent approximately 45% or $60 million of savings.

I would characterize the savings as the accumulation of many small to medium sized cost reductions from along the supply chain. The reductions can generally be grouped into three broad areas, transportation including rail trucking and ocean, distribution efficiencies and procurement such as energy, chemicals, packaging, contracted services and MRO.

Tax savings are expected to represent the majority portion of the total savings, essentially 100% of Alkali Chemicals revenues booked in the U.S. enabling us to utilize our U.S. tax attributes to offset Alkali Chemicals pre-tax income, thereby raising both our net income and our cash flow.

The total expected value of tax savings in this transaction is in excess of $300 million. As you will see on the slide, 90% of first year savings accrue from this tax benefit and it grows in absolute terms to where it represents 55% of the $60 million I talk about in year three.

The acquisition will be funded through approximately $1 billion of cash that we have on our balance sheet and approximately $600 million of new debt which we have lined up pursuing to signed commitments from multiple banks.

Kathy will review the financing in more detail but I’d like also to review with you our plan for de-levering our balance sheet over the near term, specifically to reduce our net debt to EBITDA ratio to less than four times in 12 to 15 months.

Presuming that we’ve closed the acquisition in the first quarter, we’re talking about the 15 month period from April 25th to June 26th. The deleveraging will come from approximately equal parts of EBITDA growth and debt balance reduction.

Over this period adjusted EBITDA is expected to grow by approximately $130 million and be sourced from all three businesses; pigment, mineral sands and soda ash. The debt reduction amount of approximately a $115 million will be driven by positive cash flows from all three businesses.

The deleveraging plan is achieved without any change to our capital expenditure forecast or any change to our dividend payment intentions. I want to turn the call over now to Kathy who will review our financial position and the acquisition finance.

Kathy?.

Thanks Tom. I’ll be reviewing -- begin with a review of the corporate and other segments and then move to major line items in our financial statement. Revenue in Corporate and other, which includes our electrolytic operations, was $30 million, compared to $31 million in the year-ago quarter.

Corporate and other loss from operations of $20 million in the quarter, which has $15 million loss from operations in the prior year quarter. Adjusted EBITDA in corporate and other was negative $23 million, which is principally related to corporate operations.

Selling, general and administrative expenses for the Company in the fourth quarter were $54 million versus $50 million in the prior year quarter. Interest and debt expense net was $32 million versus $36 million in the year-ago quarter. We re-priced in this range.

On December 31, 2014, gross consolidated debt was $2.4 billion and debt net of cash was $1.114 billion. For the quarter, capital expenditures were $81 million, and depreciation, depletion and amortization was $70 million. For the full year capital expenditures were $187 million, depreciation, depletion and amortization were $295 million.

As you may have seen in our Form 10-K, our external auditors provided us with a clean opinion relating to our financial statements for 2014. However, management identified material weaknesses with respect with our internal control environment.

Controls over information and communication with our South African Operations were not effective, which led to inadequate control over our calculation for crude royalty expense relating to our mining operations in Namakwa, South Africa. This resulted in adjustments to royalty expense and depreciation, depletion and amortization expense.

Additionally, controls over logical access and segregation of duties within our SAP systems were inadequate at December 31. This did not result in any adjustments to our financial statements and related disclosure. We have been actively engaged in developing and implementing our remediation plan to address the material weaknesses.

We expect to complete the remediation as soon as practical which will take no less than two quarters given the need to demonstrate sustained execution of control. Please see our 10-K for further discussion on material weaknesses and remediation plan.

Given the recent significant changes in foreign currency rates, a comment on our foreign exchange exposure. Our primary exposure to changes in exchange rates is in Australia, South Africa and the Netherland. The exposure is more material in South Africa and Australia as the majority of revenues are in U.S.

dollars while expenses are primarily incurred in local currency. Foreign exchange risk in Europe it partially mitigating as a majority of revenues and expenses are in the same local currency, creating a natural partial hedge. Moving to slide 10, Alkali acquisition financing.

Regarding the financing of the Alkali Chemicals acquisition, as Tom said the $1.64 billion purchase price will be funded with approximately $1 billion of available cash on hand and $600 million of new debt. The new debt is pursuant to signed commitments from UBS Investment Bank, Credit Suisse, and RBC Capital Markets.

This financing structure preserves our liquidity. We have adequate cash on hand and undrawn revolvers to meet the need for the business. We will retain approximately $200 million cash on the balance sheet and have significant undrawn capacity under revolving credit facilities.

We placed a high value on maintaining our existing credit rating and believe that the attractive deleveraging profile of the combined entity will reduce the net leverage ratio to less than four times in 12 to 15 months as Tom mentioned.

We will continue to be financially prudent in evaluating future opportunities and be focused on maintaining and improving our existing credit ratings. With that I thank you. I turn the call back to Tom..

Thanks very much, Kathy. So just to summarize before we open up for questions, the fourth quarter is a quarter that came in pretty much as we expected and reflect some trough conditions, seasonally lower volumes and as a result, those factors roll through the entire income statement.

For us, we take note of the fact that in the fourth quarter we delivered $81 million of adjusted EBITDA and $400 million working at a 20% EBITDA margin.

We think that this – and the same numbers are true for full year basis, as I mentioned $353 million on a $1.7 billion revenue also for 20% margins and we think this positions us extremely favorably relative to our competitors in the market.

And as I mentioned also it comes before $90 million of revenue and almost that much of margin which will come when we open up Fairbreeze without a lot of extra effort on our part, just simply because they are co-products of the ilmenite that we'll be mining there. The Alkali Chemical acquisitions to summarize, we expect to close it this quarter.

We expect it to be significantly accretive to earnings and free cash flow right from the closing. We are very excited about this business.

We think it will substantially add to our financial strength and the stability of our financial results and particularly starting with $0.50 earnings per share accretion and $130 million of incremental operating cash flow. Kathy has already reviewed the financing structure. So we're confident that, that is under control and in hand.

And again to repeat that our board has approved the 11 straight quarterly $0.25 dividend payable next month. So, with that operator, we'd be happy to answer any questions that anybody may have..

(Operator Instructions) Our first question comes from John Roberts from UBS. Your line is open. If your phone is on mute, please unmute your phone..

Operator, I can't hear anything..

Yes, it looks like he may have been disconnected. Our next question comes from Des Kilalea with RBC. Your line is open..

A couple of questions, but first looking at pigment, looking at just three different producing operations, are you finding material differences in sales prices between the U.S.

Holland and Australia? And then also, looking at the zircon that you're going to be getting from Fairbreeze, are you currently selling all your zircon from the macro product stream right now? And are you taking material, the [indiscernible] stuff still across the country to KZN?.

Hi Des, okay. There are three questions. Are there different prices in the regional markets in which we do business? The answer to that question is yes. The European and Asian market prices and the Latin American market prices are relatively closely bunched with the North American price staying somewhat higher.

The question of whether or not we’re still moving product from the Namakwa sands to KZN for funding or for fueling the KZN slag smelters, the answer to that question is, yes. Obviously we’ll stop doing that when Fairbreeze comes on and starts producing. So that material will be available to be sold into the market if we’d like to.

And the third question was what?.

You are selling all..

Yes, we are selling all of our zircon right now. In fact we extended the northern mine in Australia, our Cooljarloo mine in Australia, and that amount of extended production essentially allowed us to match the production we had when Hillendale was coming in.

And so when I look at 2016 or we look at 2016, we see this incremental Fairbreeze zircon in rutile production coming on top of production that was already relatively strong.

So for example on our earnings release if you look at Page 6 and Page 7 of the release, we put in production and sales volumes statistics that show you that in 2014 we produced a 183,000 tons of zircon and sold a 195,000 tons of zircon. So we actually sold more than we produced..

Okay. Just a quick one before getting off. Are you seeing any evidence of a slowdown in Chinese [indiscernible] exports? We hear that some of the treatment comes in China might either be closing or being shut down because they’re not making money.

Are you seeing any evidence of that?.

We see the active exports coming down, but even more importantly perhaps I don’t know how much -- I don’t know whether this is confidential information but I'm told -- I have read various observers reports of the status of the Chinese market in which these observers have indicated that in between this year through ‘16 and maybe even into ‘17, somewhere between 1,200,000 tons production and 1,500,000 tons of production will be either shut down, mothballed, if its existence or if it’s under planning or under construction not be completed.

So a very, very dramatic size of slowdown in the Chinese domestic market and that's because the Chinese price is simply not able to support the cash cost of operation until many of these smaller environmentally more or less rigorously managed environmental consequence plans are shutting down.

So we expect, and as I said on the call, we think the market is going to turn the second half of this year. In part we see Huntsman taking a 100,000 tons of production out of Europe, and we see Chinese taking over 1 million tons of production out, either in business or plan.

So this clearly -- this diminution in supply is material on a global level and its material on a regional level and we think it’s going to absolutely affect price..

Thank you. I’m not showing any further questions at this time..

All right. Then thank you very much. We appreciate your interest and we’ll talk to you next quarter. Bye..

Ladies and gentlemen, thank you for participating in today’s conference. This does conclude the program and you may all disconnect. Everyone have a great day..