Dallas, Texas, March 11, 2021 (GLOBE NEWSWIRE) -- Valhi, Inc. (NYSE: VHI) reported net income from continuing operations attributable to Valhi stockholders of $20.2 million, or $.71 per diluted share, in the fourth quarter of 2020 compared to net income from continuing operations of $10.8 million, or $.38 per diluted share, in the fourth quarter of 2019. For the full year of 2020, Valhi reported net income from continuing operations attributable to Valhi stockholders of $50.9 million, or $1.79 per diluted share compared to net income from continuing operations of $49.2 million, or $1.73 per diluted share for the full year of 2019. Net income from continuing operations attributable to Valhi stockholders increased in the fourth quarter of 2020 as compared to the fourth quarter of 2019 primarily due to higher operating results from our Real Estate Management and Development Segment. Net income from continuing operations attributable to Valhi stockholders increased for the full year of 2020 due to the net effects higher operating results from our Real Estate Management and Development Segment in 2020 and a litigation settlement charge in 2019 offset by lower operating results from our Chemicals Segment and our Component Products Segment in 2020.
The Chemicals Segment’s net sales were $414.9 million for the fourth quarter of 2020 compared to $372.7 million in the fourth quarter of 2019 and $1.6 billion for the full year of 2020 compared to $1.7 billion for the full year of 2019. The Chemicals Segment’s net sales increased in the fourth quarter of 2020 compared to the same period in 2019 primarily due to higher sales volumes partially offset by lower average TiO2 selling prices. Net sales decreased in the full year of 2020 compared to the full year of 2019 primarily due to lower sales volumes and lower average TiO2 selling prices. TiO2 sales volumes were 12% higher in the fourth quarter of 2020 as compared to the fourth quarter of 2019 primarily due to higher demand in European and North American markets and were 6% lower in the full year of 2020 compared to the full year of 2019 due to lower sales volumes in all major markets, primarily resulting from demand contraction related to the COVID-19 pandemic. The Chemicals Segment’s average TiO2 selling prices were 3% lower in the fourth quarter and 2% lower in the full year of 2020 as compared to the same periods in 2019. The Chemicals Segment’s average TiO2 selling prices at the end of 2020 were comparable to average TiO2 selling prices at the end of the third quarter of 2020 and 3% lower than the beginning of the year. TiO2 selling prices will increase or decrease generally as a result of competitive market pressures, changes in the relative level of supply and demand as well as changes in raw material and other manufacturing costs. Fluctuations in currency exchange rates (primarily the euro) also affected net sales comparisons, increasing our Chemicals Segment’s net sales by approximately $13 million in the fourth quarter of 2020 and increasing net sales by approximately $9 million for the full year of 2020 as compared to the same periods in 2019. The table at the end of this press release shows how each of these items impacted net sales.
The Chemicals Segment’s operating income in the fourth quarter of 2020 was $22.2 million as compared to $20.5 million in the fourth quarter of 2019. The Chemicals Segment’s operating income increased in the fourth quarter of 2020 primarily due to the effects of higher sales volumes and lower production costs partially offset by lower average TiO2 selling prices. The Chemicals Segment’s operating income for the full year of 2020 was $126.5 million compared to $160.1 million in the full year of 2019. The Chemicals Segment’s operating income decreased in 2020 primarily due to the unfavorable effects of lower sales volumes, lower average TiO2 selling prices and higher raw materials and other production costs. The Chemicals Segment’s TiO2 production volumes were 8% lower in the fourth quarter and 5% lower in the full year of 2020 as compared to same periods of 2019. The Chemicals Segment’s production facilities operated at overall average capacity utilization rates of 92% in the full year of 2020 (95%, 96%, 86% and 92% in the first, second, third and fourth quarters of 2020) compared to 98% in 2019 (97% in the first, second and third quarters and at full practical capacity in the fourth quarter of 2019). Early in the third quarter of 2020, the Chemicals Segment decreased production levels to correspond with a temporary decline in market demand, then increased production levels later in the third quarter and into the fourth quarter to align with improved demand and market expectations for the near term. Fluctuations in currency exchange rates also affected operating income comparisons, increasing operating income by approximately $6 million in the full year of 2020 as compared to the full year of 2019, while fluctuations in currency exchange rates had only a nominal effect on the fourth quarter operating income comparison.
The Component Products Segment’s net sales were $30.0 million for the fourth quarter of 2020 compared to $29.6 million in the fourth quarter of 2019 and $114.5 million for the full year of 2020 compared to $124.2 million for the full year of 2019. Net sales increased in the fourth quarter of 2020 compared to the same period in 2019 as lower sales of security products were more than offset by increased sales of marine components, with the towboat market representing most of the increase in marine sales. Net sales decreased for the full year of 2020 compared to the full year of 2019 due to lower sales of security products primarily resulting from reduced demand as certain markets were slower to recover from the COVID-19 pandemic, somewhat offset by higher sales of marine components. Operating income attributable to the Component Products Segment was $2.3 million for the fourth quarter of 2020 compared to $3.5 million for the fourth quarter of 2019 and $11.8 million for the full year of 2020 compared to $17.8 million for the full year of 2019. The Component Products Segment’s operating income for the fourth quarter and the full year of 2020 compared to the same periods in 2019 was negatively impacted by higher fixed cost per unit of production as the result of lower production volumes in the second and third quarters which increased the cost of inventory produced in these quarters and sold in the second half of 2020. Additionally, operating income for the full year of 2020 compared to prior year was negatively impacted by increased medical costs. In the second half of 2020, the Component Products Segment’s sales began to recover from the historically low levels experienced during the second quarter, with sales steadily improving for the remainder of the year. In the second half of the year, manufacturing operations returned to more normal production rates as demand from customers began to return, although security products operations did not recover to pre-pandemic levels.
The Real Estate Management and Development Segment had sales of $71.9 million in the fourth quarter of 2020, including $70.2 million in revenue on sales of land held for development, compared to sales of $11.8 million in the fourth quarter of 2019, including $9.2 million in sales of land held for development. For the full year of 2020 the Real Estate Management and Development Segment had sales of $96.4 million, including $87.0 million in revenue on sales of land held for development, compared to sales of $42.1 million, including $33.5 million in sales of land held for development in the full year of 2019. During the fourth quarter of 2020 our Real Estate Management and Development Segment closed on a single parcel for proceeds of approximately $55 million. The contract for this parcel contained no post-closing obligations therefore we recognized the full $55 million in revenue in 2020. Excluding the fourth quarter 2020 land sale, land sales revenues declined slightly in 2020 as compared to 2019 primarily due to lower land development spending. Land sales revenue is generally recognized over time based on cost inputs, and land sales revenues are dependent on spending for development activities as we balance development requirements with home builder output during the year. As a result of the COVID-19 pandemic, in the second quarter of 2020 we reduced infrastructure development spending to only those expenditures necessary to fulfill our contractual obligations and we returned to more normalized infrastructure development spending late in the year. The Real Estate Management and Development Segment had operating income in the fourth quarter of 2020 of $22.4 million compared to operating income of $1.0 million in the fourth quarter of 2019 and operating income of $47.8 million for the full year of 2020 compared to $14.8 million for the same period of 2019. Operating income in the full year of 2020 includes income related to the recognition of tax increment reimbursement note receivables of $19.1 million ($9.9 million, or $.35 per diluted share, net of income taxes and noncontrolling interest) compared to $8.8 million ($4.6 million, or $.16 per diluted share, net of income taxes and noncontrolling interest) of such income recognized in 2019. Operating income in 2020 also includes $4.0 million ($2.0 million, or $.07 per diluted share, net of income taxes and noncontrolling interest) of income related to proceeds BMI received associated with a prior land sale.
Corporate expenses were 12% lower in the fourth quarter and 9% lower for the full year of 2020 as compared to the same periods in 2019 primarily due to lower litigation and related costs. The full year of 2019 includes a litigation settlement charge of $19.3 million mostly recognized in the second quarter ($12.6 million, or $.44 per diluted share, net of income taxes and noncontrolling interest) for a settlement agreement at NL that was approved by the court in July 2019. Insurance recoveries aggregated $7.7 million ($4.5 million, or $.16 per diluted share, net of income taxes and noncontrolling interest) in the full year of 2019 and substantially all of the insurance recoveries we recognized in 2019 relate to a settlement NL reached with a single insurance carrier that agreed to reimburse NL for a portion of its past and future litigation defense costs. In the first quarter of 2020, Kronos recognized a $1.5 million insurance settlement gain ($.8 million, or $.03 per diluted share, net of income taxes and noncontrolling interest) related to a property damage claim. In the third quarter of 2019, NL recognized a $4.4 million gain ($2.9 million, or $.10 per diluted share, net of income taxes and noncontrolling interest) related to the sale of excess property. Income from discontinued operations in the fourth quarter and full year of 2020 was $4.3 million, or $.15 per diluted share, and relates to proceeds received in the fourth quarter of 2020 in final settlement of an earn-out provision related to the 2018 sale of our former Waste Management Segment.
Our results of operations for the full year of 2020 were significantly impacted by the COVID-19 pandemic, primarily in the second and third quarters. The extent of the impact of the COVID-19 pandemic on our future operations will depend on the time period and degree to which the COVID-19 pandemic persists in the global economy, including the timing and extent to which our customers’ operations continue to be impacted, our customers’ perception as to when consumer demand for their products will return to pre-pandemic levels and on any future disruptions in our operations or our suppliers’ operations, all of which are difficult to predict.
The statements in this press release relating to matters that are not historical facts are forward-looking statements that represent management's beliefs and assumptions based on currently available information. Although we believe the expectations reflected in such forward-looking statements are reasonable, we cannot give any assurances that these expectations will be correct. Such statements by their nature involve substantial risks and uncertainties that could significantly impact expected results, and actual future results could differ materially from those predicted. While it is not possible to identify all factors, we continue to face many risks and uncertainties. Among the factors that could cause our actual future results to differ materially include, but are not limited to, the following:
Should one or more of these risks materialize (or the consequences of such development worsen), or should the underlying assumptions prove incorrect, actual results could differ materially from those currently forecasted or expected. We disclaim any intention or obligation to update or revise any forward-looking statement whether as a result of changes in information, future events or otherwise.
Valhi, Inc. is engaged in the titanium dioxide pigments, component products (security products and high performance marine components) and real estate management and development industries.
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VALHI, INC. AND SUBSIDIARIES | ||||||||||||||||||||
CONDENSED SUMMARY OF INCOME | ||||||||||||||||||||
(In millions, except earnings per share) | ||||||||||||||||||||
Three months ended | Year ended | |||||||||||||||||||
December 31, | December 31, | |||||||||||||||||||
2019 | 2020 | 2019 | 2020 | |||||||||||||||||
(unaudited) | ||||||||||||||||||||
Net sales | ||||||||||||||||||||
Chemicals | $ | 372.7 | $ | 414.9 | $ | 1,731.2 | $ | 1,638.8 | ||||||||||||
Component products | 29.6 | 30.0 | 124.2 | 114.5 | ||||||||||||||||
Real estate management and development | 11.8 | 71.9 | 42.1 | 96.4 | ||||||||||||||||
Total net sales | $ | 414.1 | $ | 516.8 | $ | 1,897.5 | $ | 1,849.7 | ||||||||||||
Operating income | ||||||||||||||||||||
Chemicals | $ | 20.5 | $ | 22.2 | $ | 160.1 | $ | 126.5 | ||||||||||||
Component products | 3.5 | 2.3 | 17.8 | 11.8 | ||||||||||||||||
Real estate management and development | 1.0 | 22.4 | 14.8 | 47.8 | ||||||||||||||||
Total operating income | 25.0 | 46.9 | 192.7 | 186.1 | ||||||||||||||||
General corporate items: | ||||||||||||||||||||
Securities earnings | 2.3 | 1.2 | 11.2 | 4.7 | ||||||||||||||||
Insurance recoveries | 2.6 | - | 7.7 | 1.6 | ||||||||||||||||
Gain on sale of business | 3.0 | - | 3.0 | - | ||||||||||||||||
Gain on land sales | - | - | 4.4 | .5 | ||||||||||||||||
Other components of net periodic pension and OPEB expense | (4.2 | ) | (5.2 | ) | (16.5 | ) | (20.1 | ) | ||||||||||||
Changes in market value of Valhi common stock held by subsidiaries | (.1 | ) | .5 | (.2 | ) | (1.7 | ) | |||||||||||||
Litigation settlement expense, net | - | - | (19.3 | ) | - | |||||||||||||||
General expenses, net | (9.4 | ) | (8.3 | ) | (37.5 | ) | (34.3 | ) | ||||||||||||
Interest expense | (10.1 | ) | (8.8 | ) | (40.8 | ) | (36.2 | ) | ||||||||||||
Income from continuing operations before income taxes | 9.1 | 26.3 | 104.7 | 100.6 | ||||||||||||||||
Income tax expense (benefit) | (5.3 | ) | (5.3 | ) | 26.5 | 15.9 | ||||||||||||||
Net income from continuing operations | 14.4 | 31.6 | 78.2 | 84.7 | ||||||||||||||||
Income from discontinued operations | - | 4.3 | - | 4.3 | ||||||||||||||||
Net income | 14.4 | 35.9 | 78.2 | 89.0 | ||||||||||||||||
Noncontrolling interest in net income | ||||||||||||||||||||
of subsidiaries | 3.6 | 11.4 | 29.0 | 33.8 | ||||||||||||||||
Net income attributable to Valhi stockholders | $ | 10.8 | $ | 24.5 | $ | 49.2 | $ | 55.2 | ||||||||||||
VALHI, INC. AND SUBSIDIARIES | ||||||||||||||||||||
CONDENSED SUMMARY OF INCOME (Continued) | ||||||||||||||||||||
(In millions, except earnings per share) | ||||||||||||||||||||
Three months ended | Year ended | |||||||||||||||||||
December 31, | December 31, | |||||||||||||||||||
2019 | 2020 | 2019 | 2020 | |||||||||||||||||
(unaudited) | ||||||||||||||||||||
Amounts attributable to Valhi stockholders: | ||||||||||||||||||||
Income from continuing operations | $ | 10.8 | $ | 20.2 | $ | 49.2 | $ | 50.9 | ||||||||||||
Income from discontinued operations | 4.3 | 4.3 | ||||||||||||||||||
Net income attributable to Valhi stockholders | $ | 10.8 | $ | 24.5 | $ | 49.2 | $ | 55.2 | ||||||||||||
Basic and diluted net income per share | ||||||||||||||||||||
Income from continuing operations | $ | .38 | $ | .71 | $ | 1.73 | $ | 1.79 | ||||||||||||
Income from discontinued operations | - | .15 | - | .15 | ||||||||||||||||
Net income attributable to Valhi stockholders | $ | .38 | $ | .86 | $ | 1.73 | $ | 1.94 | ||||||||||||
Basic and diluted weighted average shares outstanding | 28.5 | 28.5 | 28.5 | 28.5 | ||||||||||||||||
VALHI, INC. AND SUBSIDIARIES | |||||||||||
IMPACT OF PERCENTAGE CHANGE IN CHEMICALS SEGMENT'S NET SALES | |||||||||||
(unaudited) | |||||||||||
Three months ended | Year ended | ||||||||||
December 31, | December 31, | ||||||||||
2020 vs. 2019 | 2020 vs. 2019 | ||||||||||
Percentage change in TiO2 net sales : | |||||||||||
TiO2 product pricing | (3 | ) | % | (2 | ) | % | |||||
TiO2 sales volumes | 12 | (6 | ) | ||||||||
TiO2 product mix/other | (2 | ) | 2 | ||||||||
Changes in currency exchange rates | 4 | 1 | |||||||||
Total | 11 | % | (5 | ) | % | ||||||