Chemours Co (CC) 2016 Q1 法說會逐字稿

Good morning. My name is Carol and I will be your conference operator today. At this time, I'd like to welcome everyone to the Chemours Company first-quarter earnings call.

(Operator Instructions)

Thank you. I would now like to turn the call over to Alisha Bellezza, Treasurer and Director of Investor Relations.

Thank you and good morning, everyone. I'd like to welcome you to the Chemours Company 2016 first-quarter earnings call.

I'm joined today by Mark Vergnano, President and Chief Executive Officer, who will begin with some highlights of the quarter. Mark Newman, Senior Vice President and Chief Financial Officer will then review the Company's financial performance for the first quarter. He will then turn the call back to Mark Vergnano to discuss additional details on each segment, provide an update on our transformation plan and discuss our 2016 outlook.

Before we begin, let me remind you that comments on this call, as well as the supplemental information provided in our presentation and on our website, will contain forward-looking statements that involve risks and uncertainties, including those described in the documents Chemours has filed with the SEC. These forward-looking statements are not guarantees of future performance and are based on certain assumptions and expectations of future events that may not be realized. Actual results may differ and Chemours undertakes no duty to update any forward-looking statements as a result of future developments or new information.

During the course of this call, management will refer to certain non-GAAP financial measures that we believe are useful to investors evaluating the Company's performance. Historical results prior to July 1, 2015 are presented on a standalone basis from DuPont's historical results and are subject certain adjustments and assumptions as indicated and may not be an indicator of future performance. A reconciliation of non-GAAP terms and adjustments are included in our release and at the end of the presentation that accompanies our remarks.

I'll now turn the call over to Mark Vergnano.

Thanks, Alisha, and good morning, everyone. Really would like to thank you for joining the call with us today. To start the call, I want to highlight the solid progress we're making on our five-point transformation plan. We are executing on all facets of the plan, reducing costs, growing our market positions, refocusing our investments, improving our liquidity position, optimizing our portfolio and enhancing our organization.

Our cost reduction programs contributed over $40 million of year-over-year savings this quarter, on track to the $200 million target for the year. We are successfully streamlining our processes and simplifying our organization and you can clearly see the benefits.

Our titanium technologies team began implementing price increases this quarter following our global announcement last December. Keep in mind that we entered 2016 with TiO2 pricing more than $400 per ton lower than the average price in first-quarter 2015.

As a result of early implementation, we ended the first quarter at a higher price than we started the quarter, with North America pricing not effective until April. That said, profitability levels are still well below levels that ensure long-term quality supply to support our customer's needs. This lead us to announce an additional modest price increase in April. We are working closely with our customers to successfully implement these prices, while meeting market demands in the face of tighter market conditions.

In fluoroproducts, Opteon revenue growth was significant, both versus the previous year quarter and sequentially. As we have said, we have good visibility into demand over the next several years, given our multi-year contracts with automotive manufacturers. This demands strength, along with increasing demand for low global warming refrigerants into stationary applications, reinforced our decision to invest in our new world-class Opteon capacity at our Corpus Christi site. As you saw yesterday, this $230 million investment, over the next three years, will triple our existing capacity and support the growing demand for this innovative sustainable refrigerant.

On the liquidity front, we ended the first quarter with $435 million in cash. This strong balance was the result of the DuPont prepayment, the Beaumont Aniline sale proceeds, and most importantly, a notable improvement in seasonal working capital performance. We expect continued working capital performance improvements throughout the year that will be a source of cash for the Company.

As we bolstered our financial performance with cost reductions, supported key growth areas and improved our working capital performance, we also made significant progress on the strategic review of our chemical solutions segment. Last week, we announced that we signed a definitive agreement with LANXESS to sell our Clean and Disinfectant business for $230 million. This transition, expected to close in the second half of this year, is another example of taking the appropriate amount of time to find the right strategic buyer and results in a mutually beneficial transaction.

Finally, with the retirement of Thierry Vanlancker, our Fluoroproducts President, we are pleased to announce the addition of Paul Kirsch to our executive team. Paul brings deep commercial experience from his recent time at Henckel that will enhance our organization and help drive profitable growth in the fluoroproducts segment. We look forward to welcoming Paul to the Chemours team.

I'll now turn the call over to Mark Newman.

Thanks, Mark. Turning to slide 3, we generated nearly $1.3 billion of revenue and $128 million in adjusted EBITDA in the first quarter. We reported GAAP net income of $51 million, which includes an $89 million gain on the sale of the Beaumont Aniline facility, $57 million in interest expense and $17 million of accrued restructuring charges.

As in the past quarters, the impact of unfavorable currency movement and lower TiO2 prices were the most significant headwinds, resulting in lower sales and adjusted EBITDA versus the previous year and sequentially. However, the demonstrated cost reductions and growth from Opteon that we achieved significantly tempered those impacts.

We experienced our normal seasonal use of cash for working capital during the quarter, but, as Mark mentioned, we were pleased with the improvement in performance. We saw about $156 million of improved free cash flow versus the prior-year quarter, even after excluding the benefit of the remaining $166 million of DuPont prepayment and inclusive of cash restructuring payments in the quarter of $32 million.

Turning to slide 4, adjusted EBITDA decreased by $17 million on a year-over-year basis. Currency headwinds reduced adjusted EBITDA by approximately $22 million, with more than half of that in the fluoroproducts segment. Lower average selling prices in titanium technologies and the impact of pass-through on lower pricing of raw materials in chemicals solutions, reduced adjusted EBITDA by over $100 million. This was partially offset by higher prices on base refrigerants, undergoing mandated phase-out and the benefit of stronger Opteon sales.

While Mark will go into more detail around our cost reduction efforts in a few moments, I would like to point out that about half of our lower cost in the quarter were the result of transformation plan savings, with almost $40 million in lower SG&A costs across the Company. We also benefited from better operations in the quarter with no unexpected shut-downs and continued to see lower raw materials prices year over year as a pass-through benefit in our P&L.

Turning to slide 5, on a sequential basis, despite seasonality, adjusted EBITDA was just $4 million below that of the fourth quarter. FX headwinds reduced adjusted EBITDA by approximately $6 million, mostly related to movement in Latin American currencies and the euro. Price was still a headwind across all segments during the first quarter. More than half of the lower prices were in the fluoroproducts segment as a result of unfavorable product mix.

As I just mentioned, lower raw material pricing continues to have a pass-through impact on our chemical solutions revenue. In titanium technologies, excluding currency, we saw global average TiO2 pricing decline by less than 1%. Opteon growth and broader participation in the fluoropolymer end markets contributed positively to EBITDA in the quarter versus the fourth quarter, despite based refrigerants and TiO2 volumes being seasonally lower, as expected.

Finally, as anticipated, the technology and licensing activity that positively impacted the fourth quarter did not repeat itself to the same extent in the first quarter.

Let me now provide a brief liquidity update. On slide 6, you see that we increased our cash balance to $435 million at the end of the first quarter, reflecting the sequential impact of the DuPont prepayment, the Aniline sale proceeds and year-over-year working capital improvement.

Excluding the DuPont prepayment, we had a negative free cash flow of $219 million. On a year-over-year basis, this is $156 million improvement, primarily driven by $138 million from working capital improvements from a notable decrease in inventory, as well as lower accounts receivable balances. Cash from operations, along with the $140 million in proceeds received on March 1 from the Beaumont Aniline transaction more than supported capital expenditures of $89 million in the quarter. Overall, we believe we have adequate liquidity to support our businesses and drive our transformation plan forward.

I now will turn the call back to Mark.

Thanks, Mark. On slide 7, you can see that we generated $521 million in revenue and $54 million in adjusted EBITDA from the titanium technologies segments in the first quarter. We sold higher volumes year-over-year and we experienced minimal sequential seasonal decline. Volumes were more typical to normal first-quarter results compared with the abnormally low volumes we saw in the first quarter of 2015.

At the end of December, we announced a modest price increase across all our TiO2 product lines effective January 1 or as contracts allow. We began implementation throughout the first quarter, billing higher prices in many parts of the world. As I mentioned, we ended the quarter at a price higher than where we started.

This improvement, along with concerted cost reductions, were the first step on a path toward more sustainable margins. However, price levels are still not sufficient to support the reinvestment necessary to support our customer's long-term needs. Therefore, we announced an additional increase in early April. We remain focused on improving our profitability.

We are also looking forward to the benefits of lower costs that our new Altamira facility will deliver. We are on track to begin commercial operations in the second quarter, and we expect to operate the new line to its full capacity as we bring it fully online over the next several months. However, as we have previously said, we will dial back production at our other sites to offset the new Altamira volumes until our customer demand warrants additional production.

At the same time, we will continue our efforts to improve working capital performance, including inventory management in this segment. We reduced our raw material inventory holding by a notable amount in the quarter and are managing our operations with working capital metrics top of mind, while running at full capacity.

From a demand perspective, we see the strong early start to the North America coding season and positive demand in Europe as good signs. This combination, along with other factors, have led us to increase our order lead times for our customers by about two weeks across many regions of the world.

We are now working with customers world-wide, implementing the recent price increases and determining how best to meet their current needs. We believe our key customers understand and support these strategies as we are clearly committed to being a reliable source of high-quality TiO2 for the long-term.

Moving to slide 8, our fluoroproducts segment generated $531 million in revenue and $85 million in adjusted EBITDA in the first quarter. Revenue from our Opteon product line grew significantly year over year due to rapidly growing demand from key automotive OEMs. We continue to expect the second half ramp-up of Opteon as we support our OEM customers in meeting regulatory requirements in Europe.

Offsetting the Opteon refrigerant volume growth was a regularly mandated reduction of base refrigerant volumes. Volumes of our fluoropolymers products increased year over year, driven by greater sales into industrial applications, offsetting weak consumer electronic demand. Overall, this segment realized increased pricing, driven primarily by Opteon and higher prices for certain based refrigerants. This was partially offset by the unfavorable product mix in fluoropolymers that I just described.

As we have said, we believe that the Opteon technology offers the best sustainable refrigerant technology with low global warming impact and no ozone depletion. Opteon represents a significant opportunity for Chemours, given the expected demand growth going forward as it replaces older refrigerant technologies.

To capture this opportunity, we are going to triple our manufacturing capacity by investing $230 million over the next three years. We'll leverage the infrastructure that we already have at our Corpus Christi site with low-cost world-class process capabilities. This new facility will be able to support the exponential growth that we expect, allowing our customers to put more than an estimated $40 million cars on the road using HFO technology by the end of 2017 and $140 million cars by the end of 2020.

In addition to automotive applications, we also see strong demand in commercial refrigeration systems with about 1,000 supermarket and commercial refrigeration systems worldwide, using on Opteon XP40 by the end of 2016, growing to as many as 10,000 systems by the end of 2020.

Let me now review the chemical solutions segment on slide 9. We continued to see improving operating costs, driven by transformation initiatives across the segment in the quarter. These more than offset lower pass-through pricing impacts and delivered stronger EBITDA performance year over year.

As I previously mentioned, last week we announced the sale of our Clean and Disinfect business to LANXESS for $230 million. This represented another step toward completing our strategic review of the chemical solutions segment. With the Beaumont sale completed, cost improvements in methylamines ongoing and activities under way to close our reactive metals business by year end, the only business that remains under review is our sulfur business.

We have said in the past that we see this as a good business generating attractive EBITDA margins. We are still evaluating all the alternatives for this business, but when we do make a decision, rest assured, it will be to maximize value for the Company and our stakeholders.

On slide 10, you can see that during the first quarter, our transformation of Chemours into a higher value chemistry company continues. We realized more than $40 million of cost reductions, and we are on track to deliver the incremental $200 million for the year and a cumulative $350 million of savings versus 2015.

We have streamlined our portfolio with a strategic review of chemical solutions nearly complete. We are focusing on and investing in our key commercial opportunities, Opteon, Altamira and cyanide, and we are bringing in key leadership to help support the organizational change that this transformation requires.

On slide 11, we are reaffirming our outlook for 2016. For the full year, we continue to expect to deliver adjusted EBITDA above our 2015 performance and generate modestly positive free cash flow. We are improving our profitability in titanium technologies, on the path to acceptable profit levels through cost reductions along with modest price increases. We fully expect our new Altamira TiO2 line to begin commercial operation in the second quarter as planned.

In fluoroproducts, Opteon adoption and transformation savings will be the cornerstone of growth for the segment. Overall, we remain confident in our transformation plan and are very pleased with our progress.

Now we'll open up the call for your questions.

Thank you.

(Operator Instructions)

And again, we ask that you limit yourself to one question and one follow-up per queue. Your first question today comes from the line of Bob Quartz from Goldman Sachs. Your line is open.

Good morning, guys. This is Chris Evans on for Bob. Strong volumes again in the quarter. Just kind of wondering, you highlighted this as returning to seasonal historic levels, but just kind of wondering how you are seeing volumes, or how you expect volumes to trend for the remainder of the year, if you expect a similar spring-back that you saw in the quarter.

Chris, I assume you are talking about TiO2 volumes. They were up 12%. But if you go back to 2014, the first quarter, they are similar kind of volumes. So we have sort of regained that kind of volume.

If you look at first quarter 2015, there was some funky stuff that happened in 2015. We took some volume earlier, or at the end of 2014. We also have regained share throughout the year last year, so this is a normalized volume for us. It's at the right place.

Got you. Maybe switching to Opteon, I was impressed by some of the numbers you threw out there, sizing the opportunities through 2020. You have given us some guidance in terms of what earnings you think you can get from Opteon by 2017.

What's kind of the long-term plan you have? Those are pretty big numbers in terms of the stationary and auto markets here you're looking at, so how do you think we should be thinking about Opteon for the long-term?

We really haven't sized it past the mobile air-conditioning opportunity and that's really in the horizon through 2018 because that's, you know, all regulated. We're working with our customers, we're working across the world to see the stationary opportunity as that develops and it's developing well.

We're working hands-in-hand with our customers, whether they're train or jobs and controls, as they put in and they announce their new equipment using this kind of a novel refrigerant. I think it's early for us to be able to tell you what it looks like out to 2020, but we continue to gain confidence that we're continuing to drive that refrigerant through, not just mobile air conditioning, but stationary as well.

Thanks, Mark. Nice quarter.

Thanks.

Your next question comes from the line of Lawrence Alexander from Jefferies. Your line is open.

Good morning. I guess first of all, on the divestitures that you are giving, can you aggregate the impacts on EBITDA for 2017 compared to 2016 run rate?

Lawrence, are you talking about Aniline and Clean and Disinfect or -- I want to make sure we're answering the --

Yes. Everything that has already been announced, so including sulfur.

Sure.

I think what we had said previously on Aniline was this was low-single digits EBITDA. I think, on C&D, based on the LANXESS announcement, they are indicating a number of about $22 million in adjusted EBITDA, but that's excluding corporate allocations. So on a fully costed basis, the numbers I think are relatively small year-over-year, and we can take that offline in terms of the specifics there.

Okay. And then for the CapEx, for the Opteon announcement, just to clarify, that's additive to the 325, 350 run rates?

No, that's inclusive. As we have said, we are driving down our CapEx spend from where we were last year and through this year over the next couple years, but what's inclusive of that is the -- of the Opteon investment, as well as our cyanides investment.

Perfect. Thank you.

Sure.

Your next question comes from the line of Jeff Zekauskas from JPMorgan. Your line is open.

Hi. This is Yoyo Yin for Jeff. I think China TiO2 exports is up 12%, year-to-date, year-over-year. Does that correlate with global volume growth or does that mean that Chinese exporters are taking market shares?

It's a good question. If you look at fourth quarter of last year, they were down. They seem to have rebounded a bit, as you said, in the first quarter. As we look at that, it looks like that's happening in Asia, Europe, and it's always been in Latin America for the most part. I think it's just filling some voids of volume.

We're haven't been able to do a pure market share look yet, but I think it's primary filling in as volume. We have seen volume or demand increase in Europe. We have seen a demand increase in Asia, a little bit stronger than we thought, so I think it's more aligned with demand poll than it is about market share gains. That's at least our assessment at this point.

So sequentially TiO2 volume is down 11%. Is that a normal trend or does that mean fourth quarter 2015 is stronger than the normal pattern?

I think it's a pretty normal trend in terms of when you look at the cycle throughout the year. I would say that's within the realm of normality of this business.

Okay. Thank you.

Your next question comes from the line of Roger Spitz from Bank of America. Your line is open.

Thanks. Good morning. On TiO2 prices, can you say what prices did actually, on May 1, since that's now behind us?

Obviously, Roger, we don't give specifics on price from that standpoint, but what I will say is we've been invoicing our customers in the first quarter around the world at the new prices as our contracts allowed us to do that.

As April has come through and North America 90-day roll-off occurred, we're invoicing at the new prices with all our customers as we ship them today, so the new prices are basically in effect basically all around the world right now from the first increase that we put in. Obviously, we announced the second increase and that will play out over the next several months, but the first increase is now fully implemented across the world.

And you got most of what you were looking for, I take it? From the sound of what you're saying.

We got a good yield from price. Again, we don't go specific in terms of our pricing to customers but we feel very confident on the yield that we were able to get.

Thank you. And the second question is, there were reports on your PTFE business in the news. Can you give us any sense of the sales and EBITDA of your PTFE business?

We don't break that out, Roger. And let me just make it clear to everybody, PTFE is an integral part of our fluoro business. It's a precursor for so much that we have. So I'm really not sure how reports happen. Rumors are rumors and we don't comment on rumors, but the PTFE business is an important business to us.

You mean it's not separable easily?

It's connected into the chain. The beauty of our fluoro business is we go from fluoro chemicals all the way through to fluoropolymers and that's what gives us a competitive advantage across the board. So it isn't something that we would naturally look at hiding off.

Thank you very much.

Your next question comes from the line of Don Carson from Susquehanna. Your line is open.

Good morning. This is actually Emily Wagner on for Don. We were wondering, based on the current price momentum, do you still see TiO2 as a $200 million EBITDA headwind year-over-year?

Emily, obviously, as prices increase, that headwind decreases. As we have said, and I said in my opening comments, we are very determined to improve the profitability of this business, both on the pricing side as well as on our cost side.

The only way to do this properly is you have to work hand in hand with your customers and that's what we're doing as we're implementing the two sets of price increases, we're working hand in hand with our customers to make sure they're getting the volumes that they need. We're getting them so that they can handle the pricing through their channel in the right way. So I would say that headwind will decrease as we're more and more successful with the price increases.

Thanks. And as a follow-up -- okay.

Bear in mind that we're starting the year with price increase -- the price delta year-over-year, more than $400 a ton. So $200 is an average for the full year.

Got it. Just on Latin American volumes within TiO2, could you just comment on what happened in the first quarter and maybe an outlook for 2016?

Yes. Latin America continued to be a weak area. If we go around the world, we see very strong volumes in North America, with a good solid coating season. We're very encouraged in Europe, strong volumes. Asia, surprisingly a little bit stronger than we had even planned for, but Latin America continues to be difficult across the board.

Thank you.

Your next question comes from the line of John Roberts from UBS. Your line is open.

Good morning, guys. Can you hear me?

Yes. We got you. How are you?

Good. Thank you. I believe you plan to run Altamira from maximum margin and not maximum volume initially. But do you have to run it at maximum volume for a period to prove it out?

Yes, John, actually, we're going to do both. We're going to operate Altamira full-out. It takes a while to ramp up, so that full-out will be different volumes in the beginning versus 18 to 24 months later, but we are going to basically utilize that full facility because it is our lowest-cost facility.

But as we said, we're going to ramp down the other parts of the circuit so that we're not adding more capacity into the marketplace beyond what our customers need. I know that sometimes confuses folks when we talk about that, but we just have this unique opportunity to do that with our ore blends, to be able to really scale down some of our facilities.

And if you look at our inventory levels in the first quarter, we're actively managing our working capital. We brought inventories down, but it's also getting our inventories in the right place on these other facilities that will be ramped down as Altamira comes up.

So this is all the planned out very well. We think Altamira is still on track for this quarter's start-up, but we'll operate that full and it will ramp up as we get more confidence in the facility.

And then secondly, have you had any discussions yet to sell this sulphuric acid regeneration business?

We are looking at the whole sulfur business, evaluating what we want to do with that sulfur business and all aspects of the look are there in terms of selling, keeping and partnering with others. So all that is in play right now, John.

Okay. Thank you.

Your next question comes from the line of PJ Juvekar from Citibank. Your line is open.

Hi, good morning, Mark. This is Eric Petrie on for PJ.

Hi, there.

Base on the current TiO2 pricing environment, where is the highest net-back for your incremental Altamira volumes and should we expect that the sales mix geographically would follow suit with 2016 volumes?

Yes. Altamira specifically, you've got to remember that Altamira, as we mentioned, always has been -- we've always said that it's our lowest cost production facility, but on top of that, it gives us a lot of flexibility in terms of how we ship. Because we have duty-free status so many places in the world. It just gives us a lot of flexibility in how to utilize that facility in terms of whether we shipped it into NASA, whether we ship it into Europe, whether we shipped it into China or Latin America.

So a lot of flexibility from that standpoint, so we'll maximize that opportunity as we see fit and the asset just allows us that total flexibility.

As we look at the globe right now, I would say as sort of I mentioned in the previous comments to Emily, we're seeing very strong demand in Europe and in North America, and good demand over in Asia. So I think we'll continue to work with our customers to ensure they have the product that they need wherever it is in the world and our assets really give us the flexibility to be able to deliver that when and where they need it.

Okay. And then my follow-up question, you noted that you are reducing the raw materials that plant. How many typical days of supply of ore do you hold? Then what is your current TiO2 inventory days?

On the finished product side we like to operate somewhere around 60 days, where we're probably slightly under that right now. But on the ore side, that in the past has been dependent on the opportunity we have for ore buys. So I would say we haven't been that stringent on what ore inventories we would have because we've always looked at where is the opportunity to buy because of the flexibility we have in different types.

We have just put a bit more discipline in the system over the past couple months of trying to get those a little bit tighter and that's why you have seen our ore inventories come down over the last quarter.

Thanks.

Your next question comes from the line of Lauren Gallagher from Credit Suisse. Your line is open.

Hello, guys. I'm wondering if you wouldn't mind dialing in a little bit more on the Opteon. I believe you said the Opteon spending for 2016 is included in the CapEx guidance, but I was wondering if you could kind of talk about one, that the magnitude or how it ramps up over 2016, 2017, and 2018, and then kind of how you will go about funding that going forward.

Yes. So the $230 million overall is split between those three years. The heavy part of that is going to be 2017 and 2018, versus 2016, 2017 probably being the heaviest. So think of the majority of that spend being in the last two years. But, again, as we've been talking, we've been working on how to ramp down our total CapEx throughout the next couple years.

And that fits all within our plan. So as we look at the Opteon spend, it's in the total context of what we're trying to do with CapEx and taking it down from the very high levels it was last year as we slowly ramp that down to the levels that we think are sustainable in the future.

So 350-ish going forward is still fair to assume even with this project?

Yes, Lauren. I would say that's really where we're trying to get the Company. It really has to do with where we're going with run and maintain CapEx, it has to do with where we are on our portfolio. Chemsal assets were, in many cases, very CapEx heavy.

I would say our focus continues to be first on being free cash flow positive, which is part of our outlook for the year and to have CapEx ramp down over time. So all of these growth initiatives on cyanide and in Opteon were contemplated in getting our CapEx down to 350 over time.

Okay. Perfect. Thanks for the confirmation.

Sure.

(Operator Instructions)

Your next question comes from the line of Bill Hoffmann from RBC Capital Markets. Your line is open.

Just want to talk a little bit about the fluoropolymer headwinds and just maybe if you can help us sort of how to think about that, as you look towards the back half of the year, how much offset that provides to the Opteon improvement.

Bill, I would say, just speaking specifically about fluoropolymers, we have a -- what we're seeing is a little bit of a mix shift. We're selling more in the industrial side than we have been in the consumer electronic space. The consumer electronic space, because of the slowdown there is really the reason that demand is a little bit down. Higher margin opportunities then on the industrial space. So that's the mix change we're seeing there.

The best way I could tell you to look at our fluoroproducts business as a whole is the upside in that business is really Opteon and our cost reductions from the transformation plan. Think of the rest as sort of balancing each other out.

And that's how we manage the business. We obviously try to improve that as going forward. But that's the best way to think of it. Think of the upside is Opteon growth and the transformation plan cost reductions.

Can you help us get there, just on the ramp on the Opteon this year, just to give us a sense sort of point A to point B where you think you end up quarterly by the end of the year on an EBITDA basis?

What we said is $100 million of EBITDA over 2016/2017 period. It's hard for us to call that any tighter for you right now just because it's so dependent on the ramp-up that occurs between now and the end of the year. It's real clean for us to see that in January of next year, but hopefully as the quarters progress here, we'll be able to give you a little bit better picture of that as the ramp-up occurs.

Thanks. And if I could just ask one more. Working capital, it looks like you started off in a managed [disilent fact] in sort of ex the DuPont contribution, but how do you think about working capital from here? Is there much more release that you can get out of the working capital this year?

Bill, it's Mark. We had indicated on our last call that we thought there was probably a couple hundred million dollar working capital opportunity and obviously, we expect seasonality to still have an impact, which it did in the quarter. But being free cash flow positive this year really ties to the improvements we plan to make in working capital that we'll see throughout the year on a secular basis.

Hopefully what you are seeing, Bill, and others are seeing is this is being managed. So this working capital work that Mark and the team are leading is really driving working capital down on a consistent, sustainable basis and that's really what we're trying to do within the Company.

Great. Thank you.

Our final question today comes from the line of James Finnerty from Citi. Your line is open.

Thank you. Good morning. Great quarter. Quick question on the CapEx just one last time. How much CapEx is going away with the assets that are being sold just so we can get a feel for the change?

So if you look at the three businesses: C&D, Aniline, and sulfur, the bulk of the CapEx spend of those three is probably in our sulfur business, and just because it's a high-maintenance type of a capital business, so all in all, I'm not sure we have sized them out. Let me ask Mark, James.

James, if you look at our entire chemsal business, including everything last year, it was about a little over $100 million, maybe about $117 million, if I remember the numbers correctly. So that is really the starting point and, as Mark said, we take CapEx out as we move forward. Obviously, sulfur is one of the larger businesses in the portfolio, and also a fairly CapEx-heavy business.

Okay. And then with regards to sulfur, just in terms of potential transactions, is the industry a consolidate enough that it's hard to actually do a transaction when it's strategic? Any commentary there would be helpful.

Yes, we're looking at both. We're talking about strategics as well as sponsors around this. It's an attractive business. It's a very profitable business, and as I mentioned in the opening comments, it's something that we're happy to continue to run.

We're just looking for the maximum value for all of our shareholders and stakeholders here. So from that standpoint, if we don't get the maximum value through a divestiture, we'll get the maximum value by operating these extremely well.

So I think there's interest in these because they are very high-quality assets. And we'll see in the next few months exactly where we go here.

Okay. And last question, just in terms of the price increases that you have implemented so far, could you, in a generic sense, give us an idea of is there more success with smaller consumers of TiO2 relative to the larger consumers? Just relative to the commentary that's been out there from the coatings companies?

I would say that we are working with every one of our customers to implement the price increase and, as I mentioned, all invoicing going forward, or all of our pricing going forward is with the new prices. So we're working with everyone through this, independent of the size.

Great. Thanks so much.

The only thing I would add to that, James, is we're seeing net price improvement everywhere and that's how we're measuring this is our net pricing improvement.

So listening. Thank you all very much for all your questions and always the interest you have in the Company. In closing, I just want to say we continue to work really hard on transforming Chemours into what we're calling a higher-value chemistry company. Our focus remains squarely on continuing our flawless execution of our transformation plan, which we have all shared with all of you and delivering $500 million of improved EBITDA in 2017 over 2015, while we significantly improve our free cash flow and reduce our net leverage.

So again, thank you all for the questions. Thanks all, for your interest in Chemours.

This concludes today's conference. You may now disconnect.