The (hopefully) Hidden Earnings of Tronox
I was going to write up a short piece on Tronox as part of my monthly portfolio update but as I started to write it the length became significant. I think it justifies its own post, so here you go.
Basically what you’ve got with Tronox is a housing/economy play whose earnings are being obscured by a trough in the price of their commodity and the fresh start accounting associated with an acquisition.
What they do
Tronox produces titanium dioxide, which is used as a whitening agent in paints, plastics, and paper but of the three its application in paints are the primary end use (made up 77% of consumption in 2012). Tronox produces titanium dioxide from manufacturing facilities in The US, the Netherlands and Australia (called their pigment business). The company is the third largest producer of titanium dioxide in the world, and they sell their product to major paint suppliers like Benjamin Moore and Sherwin Williams.
Tronox was spun out of Kerr-Mcgee in 2005 with a boatload of debt. The company filed for bankruptcy after the recession in 2009 and emerged from bankruptcy in 2011. There is about one clean year of financial statements (2011) but then things start to get messy again as the company took over a miner of TiO2 feedstock, Exxaro, in the middle of 2012 in order to become a vertically integrated titanium dioxide producer. Read more
Reminiscences of a Stockblogger 