Growth Catalysts

• Demand stabilization expectations in Northern Europe (management cited Northern vs Southern Europe sales mix)
• Inventory restocking expected toward end of year (producer and customer inventories trending down)

Business Development

Financial Highlights

• Segment profit (operating income) $114.2M vs $146.6M in Q2 2011 (down despite higher prices)
• Average TiO2 selling prices: +24% YoY in Q2 2012; +28% YoY for first six months 2012
• Sales volume: 123,000 metric tons in Q2 2012 (-16% YoY); 253,000 metric tons first half 2012 (-7% YoY)
• Production volume: 118,000 metric tons in Q2 2012 (-17% YoY); 258,000 metric tons first half 2012 (-6% YoY)
• Production rate: reduced to ~86% of practical capacity utilization in Q2; full-year expected 90% to 95%
• Raw material/ore costs increased ~$90M in the quarter YoY and ~$117M YTD YoY
• Company expects per-metric-ton TiO2 production cost to increase ~50% to 60% vs 2011 (specifically for tons produced in 2012)
• Net income: $64.5M or $0.56 diluted EPS vs $89.0M or $0.77 in Q2 2011
• Debt actions: new $400M term loan in June 2012; redeemed remaining $279M principal of 6.5% Senior Secured Notes
• Early debt extinguishment charge: $7.2M pretax in Q2 2012 (~$0.04 diluted EPS after tax)
• EBITDA: ~$125M in Q2 2012 vs ~$158M in Q2 2011

Capital Funding

• June 2012: entered into new $400M term loan; used proceeds to redeem $279M principal of 6.5% Senior Secured Notes due April 2013
• June 2012: entered into new $125M North American revolving credit facility (full amount available for borrowing by end of June/quarter)
• Interest expense: $6.7M in Q2 2012 vs $8.5M in Q2 2011 (-$1.8M)

Strategy & Ops

• Reduced production to align inventories with demand; Q2 production at ~86% practical utilization to drive inventory down
• Expect inventory reductions to continue in H2 (inventory already moving down sequentially from Q1 to Q2)
• Ore mix optimization: chloride plants adjusted mix based on availability/cost; expect higher slag mix vs rutile/synthetic rutile in 2012
• Operating/production disruption logic tied to demand and inventory rather than FX/schedule changes

Market Outlook

• Full-year 2012 operating rate guidance: ~90% to 95% of practical capacity utilization
• Demand outlook: expectation of some pickup in second half 2012 vs first half 2012 (Europe/Northern Europe cited)
• Inventory/supply outlook: producer and customer inventories trending down; management expects restocking toward end of year
• Price outlook (near-term): Q3 and Q4 2012 prices expected “substantially higher” than comparable 2011 quarters; high likelihood of demand pickup around end of Q3/beginning of Q4 stabilizing prices and possibly driving an up-tick

Risks & Headwinds

• TiO2 demand weakness in Europe and certain export markets; management cited lower customer demand leading to lower sales volumes in Q2 and first half
• Feedstock ore cost surge: production costs up (per ton production cost +50% to +60% for 2012 tons produced)
• Near-term availability/shortage dynamics: expect intermittent periods of TiO2 availability and shortage
• Inventory/production management challenge: finished goods inventory levels and inventory cost/working capital effects were a key constraint (management discussed elevated inventory cost levels built using lower-cost ore in 2011)
• Competitor guidance risk: question referenced some competitors expecting price declines in back half; management maintained pricing stabilization/up-tick likelihood based on demand pickup