TROX

Tronox is a vertically-integrated TiO2 pigment producer caught in a deep cyclical trough that the balance sheet is no longer built to absorb. FY2025 revenue fell 5.7% to $2.90B and the company swung to a -$470M net loss (-16.2% net margin), with gross margin compressing to 9.3% and operating margin turning negative at -8.7%. ROE of -33.1% and a $422M drawdown in retained earnings (from $556M to $30M) in a single year signal that equity is being actively eroded, not just dented.

The filing's own MD&A frames the problem starkly: management discloses 'total debt was $3.2 billion and net debt to trailing-twelve month Adjusted EBITDA was 9.0x' as of Dec 31, 2025 — a leverage ratio that is distress-adjacent for a cyclical chemicals issuer. Volumes are recovering (Q4 TiO2 volumes +13% YoY, zircon +27%) but average selling prices fell 8% in TiO2 and 23% in zircon, and gross profit still declined sequentially and YoY. This is the worst kind of cycle: management can sell more tons but cannot get paid for them, while production and freight costs are rising. Operating cash flow collapsed 80% to $60M against $341M of capex — meaning the company is burning roughly $280M of free cash flow while still paying a $48M dividend it cannot fund organically.