Participants

Brandon Ontjes; VP of IR; Chemours Co

Denise Dignam; President, Chief Executive Officer, Director; Chemours Co

Shane Hostetter; Chief Financial Officer; Chermourse Co

John McNulty; Analyst; BMO Capital Markets Equity

Mike Leithead; Analyst; Barclays

John Roberts; Analyst; Matthew Holt

Joshua Spector; Analyst; UBS Investment Bank

Hassan Ahmed; Analyst; Alembic Global Advisors

Laurence Alexander; Analyst; Jefferies

Arun Viswanathan; Analyst; RBC Capital Markets

Vincent Andrews; Analyst; Morgan Stanley

Presentation

Operator

Good morning. My name is Lovely, and I will be your conference operator today. I would like to welcome everyone to The Chemours Company Second-Quarter 2024 Results Conference Call. (Operator Instructions) I would like to remind everyone that this call -- conference call is being recorded. I would now like to hand the conference call over to Brandon Ontjes, Vice President of Investor Relations for Chemours. You may now begin your conference.

Brandon Ontjes

Good morning, everybody. Welcome to the Corus Company's second quarter 2024 earnings conference call. I'm joined today by Mr. Putnam Sycamore's, President and Chief Executive Officer, and our Chief Financial Officer, Shane Hostetter.
Before we start, I would like to remind you that comments made on this call as well as in the supplemental information provided on our website contain forward-looking statements that involve risks and uncertainties as described in more of these SEC filings.
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 the call, we'll refer to certain non-GAAP financial measures that we believe are useful to investors evaluating the company's performance. A reconciliation of non-GAAP terms and adjustments are included in our press release issued yesterday. Also, we posted our earnings presentation to our website last evening.
With that, I will turn the call over to today's Denise.

Denise Dignam

Thank you, Brandon, and thank you, everyone, for joining us. Before we get into our call this morning, I'd like to begin by welcoming a new member of our executive team. I'm excited to introduce Jane host that our as our new Senior Vice President and Chief Financial Officer.
Shane brings over 20 years of experience to the leadership of our finance function. Having previously served as CFO of Quaker Houghton, blockchain had only been with us for a month is already having a positive impact. We are happy to have seen onboard with the strong talent that he brings solidifying our leadership team during this transition that Abbott, who served as our interim CFO, has been key in keeping stability and continuity within our finance team.
Matt will continue in a leadership role within commerce returning to its previous position of Chief Enterprise Transformation Officer. I would like to express my sincere gratitude to Matt for his tremendous efforts and his leadership during a critical time for our company.
In our discussion this morning, I will talk about our overall performance and some of the recent business challenges we faced and overcome. Then I'll hand the discussion over to Shane, who will go over our financial performance.
I'll conclude by sharing our outlook for the third quarter. We will then close the call with a Q&A session to address your questions.
In the first quarter, we faced many challenges and the second quarter continued along that course consistent with the demonstrated resiliency of our people. Our team didn't shy away, putting forth tremendous collaboration and leadership in the face of uncertainties, controlling what we could control as we dedicated our focus to driving business performance.
As the core leadership team faced these challenges, we did so with every new set of core values that were developed with input from across the organization. These values are the foundation of our culture reflecting who we are the company and what we believe they are a key part of our formula for long-term success.
They are simple plain spoken and our presence in every aspect of how we work safety, integrity, partnership, ownership and respect. As you're aware, we recently faced a disruption in our titanium dioxide production at our Altamira Mexico site due to a severe drought in the region.
While the drought had pronounced business implication, it was also very personal to our team. This was a sudden extreme shift in basic needs for our people and the communities where they live. In response, we worked quickly to provide substantial support for those in need.
I was amazed at how quickly our people organize and partnered to properly supply potable water, food and other essential needs to those impacted. We formed a cross-functional team that conducted an ongoing assessment of business impact through scenario planning.
Together, we determine the best way to meet customer demand. The duration of the downtime at our site was uncertain and the team met regularly to ensure we have held our commitment to our customers by optimizing our TIO. two production circuit.
These plans require collaboration and agility with our TT. employees working diligently around the clock with a deep sense of ownership. We take pride in our reputation as a highly reliable TiO2 supplier, and we believe our actions are mere reflection of that. It was through these efforts that we were able to exceed our previous volume expectations with a 16% volume increase from the first quarter.
This simply was not possible without the fast action, hard work and excellent collaboration of our TT. employees, our customers and our partners in the community, IT and region. For this, I thank our team because of this unexpected production outage.
During the second quarter, we incurred about $ 8 million of one-time costs. We anticipate this disruption will also affect our results for Q2 to Q3, which I will explain more when we talk about our outlook later. Even with these difficulties, RTT. team continues to prioritize our strategic relationships with customers and to execute our TT. transformation plan targeting 125 million in cost savings in 2024.
By the end of the second quarter, we have reached approximately 100 million in savings compared to the prior year, offsetting price declines for the rest of the year. We anticipate continuing to make strong progress against our plan was year over year comparative saving slightly less than the first half, considering that we commenced our transformation plan in the middle of the third quarter last year.
Now let's talk about TSS NTSS. We continue to experience a seasonal demand pattern, although there was a slower start to the cooling season in the northern hemisphere's it as quickly warmed up. However, even with this elevated summer season, the market is still affected by excess, discuss our results for TSS as refrigerants, we have updated our sales reporting this quarter to break our refrigerant sales from two separate product categories, Opteon refrigerants, reflecting our low global warming potential offering and three on refrigerants.
For the second quarter, Opteon refrigerants continuing to see strong adoption, reflecting double-digit quarterly sales growth both sequentially and year over year, while approaching 60% of our total refrigerant sales.
This growth shows the effects of the U.S. IndyMac and EUS. gas right violations that have progressively lowered the production and importation of high global warming potential refrigerants. Since they have gone into effect. Our Freon refrigerant sales for the second quarter were generally flat from the first quarter with year-over-year double digit declines driven by lower volumes under those regulatory step downs.
Weaker volumes in Freon refrigerants was further compounded by softer HFC pricing, primarily due to elevated at market HFC inventory levels and a slower start to the cooling season. We attribute these agency inventory levels to higher than expected pre any inventory build in the U.S. and will continue to believe that these market inventory levels will remain elevated.
To further underscore as the U.S. AIM Act enacted its regulatory phase down, we are observing strict adherence and enforcement concerning the regulation. These efforts are evident through the US Department of Commerce's ongoing work to mitigate circumvention of duties and the U.S. Customs and Border Patrol rolls continued activities to restrict illegal importation of refrigerant.
The APM, we see the continued macro recovery across APN portfolios for sequential double-digit top line growth in both the Advanced Materials and Performance Solutions portfolio in line with expectations. Our corporate expenses were generally in line with expectations as well for the second quarter provided us with various complex business dynamics.
The team has remained focused on business performance while remaining grounded in our core values. Before I hand the call over to Shane, I want to recognize our team by highlighting a couple of recent business accomplishments.
First, we recently received our permit to expand production of Teflon PFA resin at our Washington marks manufacturing site in West Virginia. This was a significant undertaking for the more steam. Our ability to secure a permit was critical as our customers rely on us as the only U.S. based supplier of this material, which is essential for the fabrication of semiconductor chips. I will speak more to the opportunities we see this Teflon PFA later.
And second, in June, we released our seventh annual sustainability report, partnering for progress, which outlines Coors progress towards meeting our 2030 Corporate Responsibility commitment goals. Our commitment to sustainability as well as responsible manufacturing is unwavering, and it's reflected in the significant progress that we continue to make in meeting or exceeding our commitments to reducing emissions, innovating to achieve more sustainable products and investing in the communities where we are great specific to our sustainability initiatives.
I'm proud to highlight the approval by SPTI., the Science Based Targets initiative of our near term target to cut our Scope one and two greenhouse gas emissions by 60%. In addition to a new scope three emissions target to reduce emissions by 25% per tonne of production by 2030. This rigorous 22 months long process required close engagement between mores and SBTI., including a thorough review of our underlying plans, calculations and methodologies.
The approval by SBTI. reflects our commitment to science, inform and guide our actions as we continue to make me meaningful impact in the global fight against climate change. And now like to hand it over to Shane to walk through our financial results.

Shane Hostetter

Thank you, Denise, and good morning, everyone. First and foremost, I'm very excited to join cores as our new CFO. In my early time. Of course, I've been impressed with the unified direction and the commitment to success of our people, and I'm eager to help move our strategic goals for to create more value for our shareholders.
I joined more because of its industry leading portfolio is operational expertise and it's resilient culture. I'm proud to say that my expectations are aligned with what is being executed. I'm confident that the driver of our people, along with our vast portfolio of industry leading performance chemicals, will ensure the successful delivery of our long-term growth initiatives.
Moving into our financial results. Our consolidated net sales for the second quarter or approximately $1.5 billion of which were down 6% year over year. This sales decline was largely driven by lower pricing of 6% and portfolio impacts of 1% of which were partially offset by 1% increase in volumes.
Our consolidated adjusted EBITDA decreased from 324 million in the prior year to $206 million for the current quarter. This decline was driven by lower pricing cost absorption, free on production and currency impacts. These headwinds were partially offset by ongoing TT. transformation plan benefits, which strategically aligned with our focus on enhancing to the earnings and mitigating cyclical impacts. Second quarter. Adjusted EBITDA also includes a 6 million unallocated items related to third party costs associated with the TT. transformation plan.
We anticipate this amount to approximately the same amount in the third quarter. Our consolidated adjusted net income was $57 million in the current quarter compared to $167 million in the prior year. And our adjusted net income per diluted share was $0.38 in the current quarter compared to $1.10 in the prior quarter. Our corporate expenses were $77 million in the second quarter, which aligns with our exports.
Increased corporate expenses compared to the prior year was primarily due to costs associated with addressing our material weaknesses in internal controls over financial reporting and the implementation of recommendations from the audit committee's internal review.
In total these costs approximated 11 million in the quarter, with the remaining increase in corporate expenses were largely driven by additional litigation costs. Turning to our business segment performance, starting with TT. second quarter TV net sales decreased 5% year-over-year to $673 million.
This decline was primarily driven by a 7% decrease in price and a 1% impact from foreign exchange, which were partially offset by 3% increase in volumes despite the unplanned downtime at our Altamira Mexico manufacturing site due to the extreme drought in the region, our volumes still grew ahead of expectations.
This was largely due to robust demand in the Asia Pacific and North America compared to the prior year, while T. second quarter adjusted EBITDA decreased 8% to 80 million compared to the prior year. The segment's adjusted EBITDA margin remained flat at 12%.
Treaties experienced the local pricing declines that I mentioned earlier, as well as currency impacts. But this was partially offset by reduced costs from the TT. transformation plan, which continues its strong execution and is outpacing expectations on a sequential basis to tease net sales increased by 14%, which was driven by 16% of Verizon.
Our volumes, a strong result given the headwinds we faced due to the ultimate downtime I mentioned before, cities, pricing and foreign exchange impacts each posed a 1% headwind sequentially. Moving now to our TSS segment for the second quarter versus net sales were approximately $513 million, a 2% decrease from the prior year.
This decline in net sales was driven by lower pricing of 4%, which was partially offset by 2% increase in volumes I shared earlier. Surfaces decrease in pricing was driven by our Freon refrigerants portfolio, which was influenced by elevated HFC inventory levels from excess pre-owned inventory builds prior to 2022, as well as the slower start to the currencies. And to a lesser extent, we did experience lower price in our phone, propellants and other portfolio.
This is volume growth was driven by our Opteon refrigerants portfolio book, which was fueled by continued adoption in stationery as well as transition in the automotive aftermarket. Also, our RPO and volume growth was complemented by robust propellant demand in our phone, Propel's and other portfolio.
In the second quarter. Eps as adjusted EBITDA decreased 25% year-over-year to $161 million, resulting in a lower adjusted EBITDA margin of 31% of this decline was primarily driven by lower pricing, increased costs to secure additional near-term CO2 allowances in connection with the US EPA's technology transitions ruling and reduced fixed cost absorption at our Freon refrigerants.
Production in connection with lower HFC demand due to regulatory step downs in the United States and the EU on a sequential basis versus a net sales rose by 14%, which was driven by 17% increase in volumes, partially offset by 3% decline in pricing.
The increase in volumes reflects seasonal trends in refrigerants as well as stronger propellant demand in the phone, propellant and other portfolio sequentially. Now turning to APM. Net sales for APM were $339 million in the current quarter was down 12% compared to the prior year.
This decline was due to decreases in price volume and currency of 7%, 4% and 1%, respectively. The price decline was primarily influenced by salt market dynamics across the Advanced Materials portfolio as well as shifts in product mix within the Performance Solutions portfolio compared to the prior year, APMs volume decline was concentrated in the Advanced Materials portfolio, which reflected weaker demand in economically sensitive end-markets.
APM achieved adjusted EBITDA of $ 45 million in the second quarter, which marks a significant decline compared to the prior year. The decrease was primarily driven by lower pricing, currency and impacts from other anchor.
These additional items also impacted APMs adjusted EBITDA margin, which decreased eight percentage points to 13% sequentially. Apm net sales increased by 13%, which was driven by 16% rise in volumes, but tempered slightly by 2% decline in pricing and a 1% currency headwind.
APM higher volumes were largely driven by a modest recovery in economically sensitive in markets across the portfolio. Separately, the company's other segment had net sales and adjusted EBITDA of $13 million and 3 million, respectively in the current quarter.
Turning now to our balance sheet and liquidity as of June 30th, 2024, from food, $604 million in unrestricted cash and cash equivalents of $852 million in revolver capacity, our net leverage ratio increased to 4.4 times in the second quarter, while our net leverage ratio remains elevated due to the market cycle, we remain in compliance with our covenants, and we did not draw on our revolver during the quarter.
The Company used $620 million of operating cash flow in the second quarter of 2024 was $687 million more than the same quarter last year. As we anticipated this higher cash usage was due to the release of 600 to 6 million in restricted cash and cash equivalents, which was reflective of the company's 2023 contribution to the water district settlement fund, including interest.
The settlement became effective in May 2024, where the Company no longer made and it's reversionary interest in the fund for the company spent $73 million on capital projects in the second quarter of 2024, generally in line with expectations compared to $58 million in the prior year, with a difference in spending being driven by overall payment time and also the company distributed 38 million of dividends to shareholders in the quarter.
We anticipate our unrestricted cash and cash equivalents will remain at similar level for the rest of the year. We project some working capital inflows in the second half as we work to reduce inventory and we focus on timely payments from our customers.
Overall, we're confident in our current liquidity as well as our future cash flow capabilities, which will assist with creating further balance sheet capacity. As we look ahead to the rest of 2024, we do not anticipate any liquidity concerns that would impact compliance with our banking covenants related to capital allocation.
Consistent with our values and sustainability goals. I wanted to take a moment to highlight our key priorities remain focused on driving shareholder value. First, we will pursue focused investments in growth initiatives to enhance our portfolio.
Second, we are committed to improving our leverage profile. Third, we will responsibly resolve contingent legal and or accrued environmental liabilities on terms and bases deem to be in the best interest of the company and our stakeholders.
And finally, and equally important, we will provide cash to our shareholders through our quarterly dividends. Separately as an update to the remediation of our material weaknesses, we have provided disclosure and Item four of our Form 10 Q, though I want to highlight a couple of items. During the second quarter, we completed the modification of processes and procedures with respect to managing ethics complaints. A
lso, we implemented enhancements to our controls over the verification of vendor master file changes to prevent unauthorized cash disbursements. These enhancements require a sufficient period of time to evaluate and test for those controls are operating effectively. Overall, we continue to dedicate significant resources towards these efforts. We remain committed to their timely remediation.
To conclude, while the quarter's results were not what we wanted, I am encouraged by several aspects of our performance to be had solid demand and continues to have strong execution against this transformation plan. Pss saw double digit growth in Opteon year over year, and macro recoveries in APM are providing solid business momentum with this foundation.
On top of our focus on sustainability growth initiatives, I am confident that our approach is the right foundational strategy to create shareholder value. Denise, back over to you.

Denise Dignam

Thank you, Shane. Let's look ahead to the next quarter. Consistent with recent quarters, we are providing a view of the upcoming quarter on a consolidated basis. We expect a sequential low to mid single digit decline in net sales continuing into the third quarter with a consolidated adjusted EBITDA anticipated to be down high single digits.
Our sales forecast reflects the impact of unplanned downtime at our TT. site in Altamira, Mexico seasonality, paired with weaker Freon refrigerant pricing and TSS and partial offset from a continued modest recovery in APM for the third quarter.
These sales assumptions anticipate that continued strong adoption of Opteon refrigerants projecting double digit year over year growth and APM Performance Solutions portfolio showed strong year-over-year growth in TT.
While we haven't seen major catalyst indicating a broad TiO2 recovering, demand remained stable as we enter the third quarter had we not experienced downtime in the second quarter due to the severe drought and Altamira. We believe our third quarter sales will be flat to the prior year, considering adjusted EBITDA for TT.
We also anticipate that one-time costs associated with the production downtime are expected to range between $15 and $20 million in the third quarter. We do not expect the impact of the Altamira downtime to extend beyond the third quarter. We anticipate a sequential reduction in corporate expenses in Q3 as we make thoughtful choices on spending and as we made demonstrable progress on the remediation of our material weaknesses in internal controls over financial reporting and the adoption of other recommendations from the audit committee's internal review.
Yes, moving to the second half of 2024, I want to reiterate my priorities to drive shareholder value. one take cost out and APM building on what we have done in TT. as well as our functional and corporate overhead and to invest in our businesses where we have significant opportunities to grow.
We believe that these priorities are essential for more future success, leveraging our operational expertise and innovation edge to our advantage of our businesses. Leaning into our advantages in innovation. one of the key growth markets in front of us is in supporting the advancement in artificial intelligence and high performance computing.
Both our TSS, Opteon refrigerant and APM performance solution portfolios have opportunities in this space, which is Dr In our focused investment in the businesses last quarter. In my prepared remarks, I mentioned the advantages of Opteon to P50 in new fluid for use in two phase emerging coil with liquid cooling being more effective means to pull data center hardware than air-quality.
We believe Opteon to P50 is an innovative solution back to Al Unitive liquid cooling technology. Opteon to P50 emerging cooling provides clear benefits the potential to reduce the space needed for data centers facilities by approximately 60%, enabling calling energy savings of up to 90% and nearly eliminating water console function in most climate.
These benefits delivered tangible cost savings, which was evident in a recent study that we participated in with liquid stack and Cisco Hennessy, which showed that Opteon to P50 immersion cooling solution at the low total cost of ownership compared to the other calling options Opteon to T. 50 at a cost advantage of up to 40% of the next best liquid cooling alternatives.
We continue to plan the launch of Opteon two P 50 by mid 2026 and see this as an opportunity to meaningfully participate in the overall data center liquid cooling market. As we progress towards commercialization, we remain focused on ensuring that our product is safe for use throughout its lifecycle and make the appropriate regulatory registration requirements in the markets that we wanted.
Mr. We are in the qualification process with key hyperscalers, server and chip manufacturers. We see uptown to P50 as an essential solution for efficiently and effectively pulling server chip hardware, specifically high-performance chips and GPU hardware that will be instrumental in supporting artificial intelligence competing sources, which are more energy intensive nature. These qualification period take time to complete.
We look forward to providing updates as we progress in future periods . Our performance solution portfolio and our APM segment is also enabling the high-performance computing market with our Teflon PFA resin of critical material for semiconductor manufacturing, which has expanded opportunity in the US enabled by the US chips and science act as the only US-based PSA resin manufacture a secure domestic semiconductor supply chain is not complete without our high-grade Teflon PFA resin.
Teflon PFA is an absolute requirement to avoid contamination in the chip manufacturing process. It's used throughout of fabs infrastructure from fluid delivery in filtration system to flow meters and wafer handling. In other words, it is our high purity resin that enables the ultra clean environment needed for advanced chip production.
Teflon PFA helps to ensure fab reliability and up time as well as the safety high yield production of semiconductor chips to emphasize our focus on investing for growth in this area. As I mentioned earlier, we recently obtained a permit for our muni finished Teflon PFA production expansion at our Washington works manufacturing site in West Virginia.
This has been a key priority for APM leadership team over the last year, and I want to acknowledge those on the core team who worked hard to complete this project and the strong support we received throughout the value chain.
Our Teflon PFA product continues to be sold out and we look forward to starting operations, which we anticipate will commence by early September. We're excited about being able to serve our customers in this market and the long term growth prospects for Teflon PFA.
At Morris, we are passionate about driving shareholder value through innovation, specifically contributing to advancement in artificial intelligence and high performance computing. These innovative advances are just a few of the developments in TSYS's Opteon refrigerants and APM of home and solutions portfolio LEOs.
They're driving growth. In closing, while we exit a challenging quarter, we continued to build upon strong business fundamentals by solidifying our management team, continuing to drive costs out of the business, investing for growth, pursuing disciplined capital allocation and building upon a corporate culture that reflects the core values that I highlighted earlier.
It is our people that make more who we are, and I want to thank our dedicated global team of 61 hundred employees for their commitment to our customers and executing with operational excellence.
We will now open the lines to take your questions.

Question and Answer Session

Operator

At this time, if you would like to ask a question, press star then the number one on your telephone keypad. We ask that you please limit your questions to one and one follow-up. Our first question will come from the line of John McNulty with BMO Capital Markets. Please go ahead.

John McNulty

Good morning. Thanks for taking my taking my question and again, congratulations on the roll it forward to working with you on those jobs. Bill, had a question on the TSS business on obviously the free on drag in terms of pricing around some of the inventory.
I don't know figures pre-stocking ahead of I know it's kind of dealing with the destock clearly putting some some real pressure on the on the profitability, the business. I guess it sounds like you have some conviction that this is going to end at the end of the year. I guess. Can you help us to understand that a little bit better and how to think about the inflection point coming?
And then I guess in addition to that, maybe just a follow-up question would be worth in the past, we've been pretty low used to seeing, of course, sell your allocations of. And yet at this time around, you actually ended up having to buy extra allocation and there was a cost to wait for you. So I guess can you help us to understand that dynamic and what the magnitude of that actually was?

Denise Dignam

Yes, for sure. Thanks, John, for the questions on. First of all, yes, we are seeing in significantly depressed pricing in HFC. on your inventories that are at a high level. And you know, we are on with the quota step downs that are you said you asked do we have confidence in this is going to end with the quota step downs that are occurring that will be occurring.
We definitely see that happening. We have experience with that with our 22. And we're also seeing in Europe, it's a smaller part of our markets or you don't see that as dramatically, but it's absolutely happening in Europe. It's really it's really part of the mechanism. The phase-down is really working.
And I want to bring us back to, you know what our strategy is really about driving our Opteon growth. And we had year over year double digit growth and also sequential double-digit growth, and we've had no price deterioration.
And so we think about that, right? We've already we've always said that we have stepped down in pricing when it comes to auto OEMs. So you can see the impact of other segments and like stationary and automotive aftermarket, which I think is, you know, I really a big statement on you. See Your other question was around just quote and why this this year. And I would say this is a this year issue.
No, we quota is always a part. As you said, you know, we sell, we also buy. We have by we have bought in the past this year is different and it really is caused by the technology on. So when you think about what our plan was coming into the year, that really flipped because we don't while we're still seeing tremendous growth, the growth actually would have been stronger.
But we're seeing that there is still demand for HFCs. And for everybody for every unit of Opteon, you actually need to you can own for every for every unit of Opteon, it actually is one unit of Freon. So it's a massive impact. So in order to meet customer demand, we're out in the market and we bought quota in the second quarter and we will during this year. But again, it's really tied to this delay in the technology transition.
Got it. Okay. No, that's that's helpful. And then on maybe we can just shift over to the to go to platform. So um, obviously a lot of noise around Altamira, but it does seem like the the overall TiO2 market. Directionally, if you took out from your out of the equation, we actually did a little bit better than maybe expected.
So I guess can you speak to the markets that you're seeing right now and how you think they progress over the next 12 months, just given which should be improving coatings market as we look out over the next 12 months, potential tariffs in certain regions? I guess, can you can you help us to think about how you see that market playing out over again the next 12 months?
Sure. Yes. I mean, right now I would but I would say is we see stable demand and actually going into the third quarter, we could have sold more and we believe we could have some similar as sales as we did in the third quarter of '23.
We definitely we've seen the bottom. The bottom is here on. We have confidence with on the potential for a Fed interest rate cuts in September, and we think that can then bring in some of your confidence to consumers as we end the year on.
We don't see a major catalyst right now. But as I said, the potential interest rate drop in also on the tariffs in Europe are also going to be going to going to help us as well. There is a lot of inventory that was the imported ahead of those. But we definitely see as we ended the year, we're going to start seeing some money Benton in Europe as well.

John McNulty

Great. Thanks very much for the color.

Operator

Our next question comes from the line of Mike Leithead with Barclays. Please go ahead.

Mike Leithead

Great. Thanks. Good morning, team. And as soon as they appreciate the increased disclosure around the TNFs US product breakouts earned this quarter. That's very helpful. On first question, I wanted to follow up on the HFC market. Can you just help us better contextualize HFC pricing? It's obviously tracking lower. Com was the more people thought.
But just where are we in pricing if you were to look over the past couple of years, so where are we relative to the historical context? And how comfortable are you that this starts to bottom out here as we go to the back half of this year?

Denise Dignam

Yes. I mean that pricing is elevated, I'll say, versus where it's been in prior year, but significantly lower than our expectations on. As I said, in response to John's questions, we definitely see that there's going to be a turnaround there.
I mean, the whole on a philosophy around the quota reduction is going to drive more scarcity when the quotas are we do. So we definitely see that turning around. It's been a pattern, and we sold our '22. We're seeing in Europe now where Europe is more advanced based on inflows in this in the phase down.

Mike Leithead

Great. That's helpful. And then I just wanted to ask on debt leverage, maybe for Sean and good. Can you speak to the cash you expect to generate in the back half of this year? Just where do you big picture? I want to get was leverage before on utilizing cash received some more discretionary earnings?

Shane Hostetter

Yes, thanks, Mike. As I've indicated in the script, we see cash balances being stable in the latter half year. Similar to that side, you're indicating some cash inflows from working capital as we work to improve collections as well as working down some of the inventory on that side as a long-term target, we are targeting to get below three times sustainably, but such will take some time as we improve our earnings coming out of where I would say it is your trough levels and hopefully the markets improve appear in the near future.

Operator

Great. Our next question comes from the line of John Roberts with Matthew Holt. Please go ahead .

John Roberts

Thanks. Congrats on getting me or Teflon permit environment, governmental permits here before you launch up to your on p. to 50 in, I guess, mid 2026 for you're going to need a similar permanent. We're going to go through a similar type process for that from the PSA permitted.
Definitely really exciting for us on related to on the Opteon p. to 50. And clearly, we're going to any comments on where ever wherever we want to sell on. We're going to need to get that product registration and permit. So there are things that we're working on in, you know, all the countries where we want to sell and then Altamira is a pretty important asset. Is there anything you can do to make that plant more resistant to further drops?

Denise Dignam

Yes. Good question. I mean, hey, we never take a good crisis to miss a great process to improve. So we actually did substantial work as we entered this crisis to look at how we can reduce our need and our water usage. So to really great effort by our engineering team. So that's one thing, and we are continuing to work on that. On the other thing is we have some other engineering solutions that we're pursuing locally ourselves and also with some the local government.
And then thirdly, we do have options relative to supply chain, what kind of inventory we keep on during those periods, several going to be on deploying all of those strategies. It's certainly a key focus for us as to never have that situation.

John Roberts

Thank you.

Operator

Our next question comes from the line of Josh Spector with UBS. Please go ahead.

Joshua Spector

Hi, good morning. A couple of questions to follow up on TSS. I guess I'm somewhat confused with the commentary around fixed cost absorption being a headwind and Freon to hum. Basically you're saying demand is slightly higher than you expected and you're buying quota on the other hand and inventories are higher.
And I guess your comments seem to indicate that you're saying it's down because of the step down. I guess we're going to have been a planned impact that you could tried to mitigate or work through. So can you talk through what's going on there and maybe help us size what that impact is 2Q, 3Q, the fixed cost absorption for free on and why that is a headwind?

Denise Dignam

That's correct. Yes. I mean, just because when we say that demand demand for it's up year over year, it's actually down on rate, as you think about the quota step down is actually down. So that's really what's driving the fixed cost absorption issue in that product line.
Okay. Yes. I guess my expectation would be that was expected, and I guess maybe we should have expected it. And I don't know if my line is breaking up for yours, but maybe you're not able to hear me completely, but I'll try again at a high level just asked around TSS, but within two 2Q 3Q, that a number of unique things going on this year through and pricing side, I guess whatever issues you recall though, in terms of one-time costs impacting you guys you said the quarter by I don't know if this fixed cost absorption thing is more of a 2024 a longer-term issue.

Joshua Spector

You have some high your costs materially, you're buying on Opteon to fill the gap until you get Corpus. So no demand improvement that go from 24 to 25, how much is EBITDA helped from some of these things? The beta for is not the right way to think about this?

Denise Dignam

Yes. I mean that there are a number, as we've talked about before, there's a number of things that are impacting our cost in TSS. Some of them are one-time on some of them will be ongoing. So no, from a corporate expansion perspective, you are aware, we are we have as additional all of the costs associated with capital that we are incurring this year.
We also have some additional volume that we're buying from our JV partner in China, which when we have this product online, you'll see that drop in price I'm sorry, costs going into 2025. We expect it two year ramp of that plan. We're adding 40% capacity on the the fixed cost absorption on depending on what happens.
I mean, we had incident we had inventory of our Freon product. And depending on what happens with demand, it's either going to be a tailwind or a dollar remain a headwind. But as you on and trying to think of the other, the other one is quota, we believe that that is going to be more opportunistic versus on this year. It was a headwind, and that was specifically related to the technology transition. Does that answer your question, Josh?

Joshua Spector

Yes, except the quantitative side of it, but a follow up offline.

Operator

Thank you. Our next question comes from the line of Hassan Ahmed with Alembic Global Advisors. Please go ahead.

Hassan Ahmed

Wanting Denise and congratulations, John, on the new role on you know, my first question is on the TI side of things on the and I was pleasantly surprised seeing the sequential uptick in volumes of around 16%, particularly with what transpired in Altamira.
Can you just talk a bit about on may be potentially what you saw across the regions where you're gaining market share despite the out is that you guys saw?

Denise Dignam

Thanks for the question on up the way I would characterize it is that we have we see our share. Our share is stable and we kind of see across the regions we saw on a little bit of uplift in North America and Asia ex China on.
But I would characterize it as as as stable demand and stable stable share. Fair enough. And just continuing with the sort of the duty side of things that I mean, obviously, you know, the whole anti-dumping side of things in the European Union, you know, up recently booked up and, you know, we all know that historically 15 to 20,000 tons a month of product is it is transported from China to do the EU.
And you know, it just seems that regionally some of these anti-dumping measures are actually expanding. So I mean, how should we think about the profitability impact, maybe the EBITDA impact for you guys? I agree with you. I mean, are these the EU. anti dumping is definitely an opportunity for us. It's an opportunity for us to gain share.
And there are these things are increasing and you probably are aware of Brazil action that is currently happening and I probably wouldn't stop it at that from, you know, I would just say that we have on really no, no, I would quantify it per se, but you know, the impact of volume would that has on our EBITDA and it definitely will accelerate our EBITDA growth.

Hassan Ahmed

Very helpful. Thank you so much.

Operator

Our next question will come from the line of Laurence Alexander with Jefferies. Please go ahead.

Laurence Alexander

Good morning. two questions. I guess, Shane, just from would love to hear your thoughts on differences in culture or how you see sort of you how close is operating from a working capital perspective or any other observations you like to share on?
And I guess separately, on the data center opportunity, given how fast that industry appears to be scaling up, you have these long-term targets for TSS in the high single digits. Would we be looking out through being higher than that on the income of 20 early 2030s? From your products get approved and adopted.

Shane Hostetter

Thanks, Lawrance. I'll start off on Doug. I will compare and contrast anything I would just say, you know, as far as Scott Morris goes and just my expectations of the Company, I am very excited to be here for, you know, I mentioned in my script of the I came to the Company for its innovation and some just its commitment to the world and group.
And it's new emerging technologies as well as some people. And for that matter, just the resiliency of all the people around here and really excited to be here. And my 1st month, it's exactly what I expected coming in. I think about your specific question on working capital, obviously, just initial view use of, but I mentioned in the script, we will work to appropriately collect from our customers on that side as well as reduce inventories. And that's owed to us to tried to push improvements on our overall working capital going forward is to enhance cash flows.

Denise Dignam

Yes. Maybe I' ll add on to the even that first segment, I know you didn't ask me about culture, but I'd love to I'd love to just add on. As I mentioned in my prepared remarks, we did a complete to, um, values refresh for the Company. We did it extremely collaboratively. We had over 1,200 people, submit surveys.
We did over 50, our focus groups. We had participation from over 22 countries. We have a really sound and solid some concern in this company, and I'm really proud of the team are moving on to our data centers and and what we project could it be higher than than high single digits as we get to the end of the decade?
I think, you know, we're not going to at this point. This is what we're saying on. one thing that again, we have to recognize with this technology is this is not a new drop-in replacement. This is going to require some time debt to four for retrofits or as you build new, it's really as you're building on new data centers that you use this on this technology. So it's going to take some time to develop. We definitely see it as a meaningful contributor as we get to 2030.

Laurence Alexander

Thank you.

Operator

Our next question comes from the line of Arun Viswanathan with RBC Capital Markets. Please go ahead.

Arun Viswanathan

Great. Thanks for taking my questions. Congrats. If I am saying those roles and I appreciate the comments, I guess just wanted to ask first on TNT. So it sounds like utilization rates are probably still in the 50% to 70% range. I don't know if that's accurate, but maybe you can just characterize or give us some kind of range on where you affect both industry and towards zone utilization rates are on KT. and if they are in that range, do you think that any footprint rationalization will be necessary? Obviously, you guys sit on the lower end of the cost curve and we appreciate your flexibility on orients. But are there any structural oversupply issues of any markets that we should think about?

Denise Dignam

Maybe I'll start with that. Okay. Thanks around. Thanks for the question. We don't we don't comment on utilization rates on, but dumb certainly, as you know, I think about some pricing stabilization. And I don't think of utilization rates in that range on.
And I'm not going to I'm not going to come comment on on on any footprint rationalization. But only to your point, it's really important in a commodity business to be the left side of the cost curve. And that's where we're focused.
And we see with our TT. transformation plan that we are we're ahead of plan through June were already and that towards that achievement of the $125 million cost savings that we have laid out the end of last year.

Arun Viswanathan

Okay. That's great. And then some well, maybe I'll ask another question as well. The immersion cooling opportunity. We had heard, I guess in the past that the size of that is maybe on the order of Opteon or or it could be a similar kind of you have driver of future earnings for you guys. So I know that it could be different between PS. and PSS., but how are you thinking about the or how should we frame the opportunity for for tomorrow's in emerging countries?

Denise Dignam

Yes, they are the TAM for the liquid cooling market by 2028 is like $2.5 to $3.2 billion. So as I said, our technologies, all different requires a different equipment, but on We expect it to be meaningful on by 2030. So I think you can draw the conclusion that a very significant opportunity for us and will be a big part of that future.

Arun Viswanathan

Great. Thanks.

Operator

As a reminder, to ask a question, press star one on your telephone keypad. And our next question will come from the line of Vincent Andrews with Morgan Stanley. Please go ahead.

Vincent Andrews

Thank you. Good morning. I want to clarify a couple of things on the QP. 50 product. Denise, I think if I heard everything you said correctly, and I may not have when you spoke earlier about the I believe you said it was 40% to 40% cost savings for the customer.
I assume based on your later comments, that's if I'm building a brand new data center, your product versus the incumbent offers that versus if I already have a data center, that math wouldn't apply because it's not a drop-in replacement and adapted by some other equipment that is that the correct way to think about it?

Denise Dignam

Yes, hadn't and thank you for the question. Yes, that is the right way to that is the right way to think about it. And that's why it is going to take some time to develop. It's going to take no the adoption. And but then, but we're super excited about it.
I mean, this is such a compelling value proposition, especially in a way we are in this point in time in the world when it comes to water and power and space and the and the needs of computing power in the future. But just to follow-up on the two other things you mentioned. one was that you're in a qualification process with all the sort of large folks you would like to use it.
And then you yourself, if I heard you correctly, wouldn't have the product available till 2026 is a function of production or perimeter? Or what have you sort of those I assume are two separate processes. Were you have the stuff you have to do on your own opinion is actually qualify them.

Vincent Andrews

So could you just walk us through sort of what's the homes Biggs, the mileposts are on on both sides of that equation so that we can be can be following along and understand what's happening as it happens?

Denise Dignam

Yes, sure. So that for the qualification on you, we actually mean in substantial volumes in order to do the qualification. So we're in the process of that right now. It's going to take six to nine months on more in the middle of those process. That process with them various hyperscalers. So that, Tom, that that's that piece in parallel, we're working on a commercial scale quantities, and that was what we're saying. We will have available in 2026.

Vincent Andrews

Okay. Thank you very much.

Operator

Our next question comes from the line of John McNulty with BMO Capital Markets. Please go ahead.

John McNulty

Yeah, good morning. Sorry, just one follow-up. I had a question just on the balance sheet. I think you spoke that you've made the cash payment out to the water districts as part of the cleanup of that liability. You still have $600 million or so of restricted cash sitting on the balance sheet, I guess that strikes me as higher than I guess I would have thought post that payout. So can you help us to understand what that kind of is holding as far as a placeholder or why it is sitting in restricted cash?

Shane Hostetter

Hi, John, related to the restricted cash payment, it was settled in this quarter for about $600 million when the outflow. If you look on the balance sheet, our restricted cash balance is not $600 million. You might be reflecting what it was last quarter or last year that side. So you would see a significant decline in our restricted cash, I think it is around $60 million in this quarter. I’m sorry, $50 million.

John McNulty

Thanks for the color.

Shane Hostetter

Sure. Thank you

Operator

We have reached the end of our question-and-answer session. Thank you for joining The Chemours Company Second-Quarter 2024 Results conference call. You may now disconnnect