Venator Materials PLC (VNTR) Q4 2019 Earnings Call Transcript

Venator Materials PLC (VNTR -36.21%)
Q4 2019 Earnings Call
Feb 21, 2020, 8:00 a.m. ET

Contents:

• Prepared Remarks
• Questions and Answers
• Call Participants

Prepared Remarks:

Operator

Hello, and welcome to the Venator Materials fourth-quarter earnings call. [Operator instructions] Please note, this event is being recorded. I would now like to turn the conference over to your host today, Jeffrey Schnell. Please go ahead.

Jeffrey Schnell -- Chief Executive Officer

Thank you, Keith, and good morning, everybody. I'm Jeffrey Schnell, director of investor relations for Venator Materials. Welcome to Venator's fourth-quarter 2019 earnings call. Joining us on the call today are Simon Turner, president and CEO; and Kurt Ogden, executive vice president and CFO.

This morning, we released our earnings for the fourth-quarter and full-year 2019 via press release and posted the release and accompanying slides to our website at venatorcorp.com. During this call, we may make statements about our projections or expectations for the future. All such statements are forward-looking, and while they reflect our current expectations, they involve risks and uncertainties that are not guarantees of future performance. You should review our filings with the SEC for more information regarding the factors that could cause actual results to differ materially from these projections or expectations.

We do not plan on publicly updating or revising any forward-looking statements during the quarter. We will also refer to non-GAAP financial measures, such as EBITDA, adjusted EBITDA, adjusted net income, free cash flow and net debt. You can find reconciliations to the most directly comparable GAAP financial measures in our earnings release, which has been posted to our website. It is now my pleasure to turn the call over to Simon.

Simon Turner -- President and Chief Executive Officer

Thanks, Jeff, and good morning, everyone. Let's begin on Slide 3. 2019 was a challenging year as macroeconomic uncertainty led to limited visibility. Notwithstanding these headwinds, Venator delivered $194 million of adjusted EBITDA and $0.24 of adjusted diluted earnings per share.

We made significant progress on our strategic priorities in 2019 and delivered on those items within our control, including improving our cost base, strengthening our position in specialty and differentiated TiO2 and advancing our customer-tailored approach to reduce our TiO2 price and margin volatility. Turning to Slide 4 on our Titanium Dioxide segment. In the fourth quarter, our Titanium Dioxide segment generated $30 million of adjusted EBITDA, compared to $52 million in the fourth quarter of 2018. The average TiO2 selling price declined 4% in local currency compared to the prior year, but remained stable on a sequential basis for the third consecutive quarter.

This reflects our ongoing approach of matching our supply network to customer commitments to reduce price and margin volatility. Prices for functional TiO2 products were most impacted in Europe on a year-over-year basis. We exited the fourth quarter of 2019 with average prices in Europe and Asia below that of the more stable North American region on a U.S.-dollar basis. Sequentially, prices in local currency were relatively stable in our three main regions despite the historically softest quarter for demand.

Titanium dioxide volumes increased 5% compared to the prior-year period. The increase, which was in Europe and North America, was primarily a result of increased sales of new differentiated products, improved availability of certain products and higher demand compared to the same period last year, which was impacted by customer inventory reductions. On a sequential basis, TiO2 volumes declined in line with normal seasonality. Before I highlight the regional trends impacting the TiO2 industry, I'd like to update you on recent trends in specialty TiO2.

In the fourth quarter, we experienced soft demand in certain specialty applications, namely for textiles. This was primarily a result of destocking within the textile supply chain in China and elsewhere in Asia and was precipitated in part by the U.S.-China trade disputes. We estimate more than three-quarters of global industry demand for these products in Asia, including China. Notwithstanding soft demand in textiles, prices for our specialty TiO2 products remained relatively stable adjusting for the impact of mix.

Prices and demand for our specialty TiO2 products tend to be more resilient across the cycle due to the applications into which we sell. These dynamics underscore the investment in our specialty and differentiated TiO2 portfolio to strengthen our position in these higher-value applications. We expect demand for our specialty and differentiated products to progressively improve throughout 2020. That said, we continue to monitor the impact that coronavirus is having on demand and the supply chain.

It remains too early for us to provide an assessment of the ultimate impact as the situation is still evolving. Looking at our business regionally, in North America, demand increased in the fourth quarter compared to a weaker prior-year quarter and was flat sequentially. Our average TiO2 selling price in North America was stable, both on a year-over-year and sequential basis, reflecting our more stable customer mix and our customer-tailored approach. Demand and pricing in Asia stabilized in the fourth quarter.

However, as I previously mentioned, it is too early to opine on the impact of the coronavirus on growth in Asia. Europe is our largest market for TiO2. Compared to the fourth quarter of 2018, volumes in Europe increased modestly, benefiting from higher sales of new differentiated products and improved demand compared to the fourth quarter of 2018 when customers reduce their inventory levels. Our average TiO2 price in Europe declined modestly in local currency compared to the prior-year quarter and was stable on a sequential basis.

In the fourth quarter, raw material costs moved higher, primarily from high-grade ores. These headwinds, which were in line with our expectations, were partially offset by a $3 million benefit from our business improvement program. Turning to the TiO2 outlook for 2020, macroeconomic challenges are expected to remain in 2020. In the near term, we expect volumes to improve sequentially and follow normal seasonal patterns.

Specialty volumes are expected to progressively improve throughout the year, subject to my comments earlier on China. We expect more modest raw material cost inflation in 2020 and are actively engaged with customers to implement price increases in all regions to the inflationary pressures on our business. Longer term, TiO2 industry fundamentals remain favorable. We remain focused on our customer-tailored approach, enhancing our specialty and differentiated TiO2 portfolio and improving our cost competitiveness throughout the TiO2 cycle.

Turning to Slide 5 on Performance Additives. Revenues declined 7% compared to the prior year period, driven by a 5% decline in volumes and a 2% unfavorable impact from foreign currency translation. Our average selling price was flat compared with the fourth quarter of 2018. I will provide some additional comments on the three main businesses within Performance Additives.

Compared to the fourth quarter of 2018, color pigments volumes were primarily impacted by lower demand for products into construction-related applications in North America and portfolio optimization as we exited some low-margin business. The impact from lower volumes was partially offset by lower raw material costs and the benefits of our cost and operational improvement initiatives. Timber treatment volumes declined compared to the prior year period, primarily due to lower construction activity. The average selling price and margins were impacted by an adverse mix of sales.

However, it was offset by lower raw material and other costs. Functional additive volumes were impacted by weaker-than-expected demand for automotive coatings and plastics. We are taking meaningful steps as part of our business improvement program to offset these market challenges and improve the profitability of this business. The Performance Additives segment generated $4 million of adjusted EBITDA in the quarter, up $1 million compared to prior-year quarter.

In 2019, performance of this segment is impacted by significant market forces, especially in the automotive coatings, plastics and construction applications. In 2020, we expect to capture additional benefits from our self-help initiatives. We continue to explore a potential sale of the color pigments business. This process is ongoing, and we have set an aggressive time line.

The color pigments business generated $17 million of adjusted EBITDA in 2019, and we expect to benefit from our targeted cost initiatives in 2020. But because we are actively involved in a process to explore the potential sale of our color pigments business, we will not be providing additional commentary or taking questions on the matter. Turning to Slide 6. We continue to be intensely focused on strengthening our business and improving our cash flow.

We accelerated our 2019 business improvement program and delivered $20 million of benefits in 2019, including $5 million in the fourth quarter, double our original full-year target. We expect to complete all the actions necessary to deliver on our full $40 million target by the end of 2020, exiting the year at the full run rate level. On an absolute basis, this program is expected to deliver $12 million of benefit in 2020. This does not include the benefits, which I highlighted as part of the color pigments review.

We are pleased with the execution to date and are confident in our ability to deliver the target benefits as promised. I will now pass the call over to Kurt to discuss our financials. I will then return to provide some additional comments. Kurt?

Kurt Ogden -- Executive Vice President and Chief Financial Officer

Thanks, Simon. Let's turn to Slide 7. In the fourth quarter, total adjusted EBITDA declined $22 million compared to the prior year. The decline is primarily attributable to the adverse price mix in our TiO2 business and partially offset by higher volumes and the benefit of our business improvement program.

Compared to the third quarter of 2019, total adjusted EBITDA declined by $27 million. Seasonally lower sales volumes in TiO2 and Performance Additives were the largest contributor to the sequential decline. Price/mix was also a headwind due to a lower contribution of specialty TiO2. We benefited in the quarter from improved fixed cost absorption in Performance Additives and our TiO2 business, as we built inventories in certain specialty and differentiated TiO2 products to assist in the transfer of the business from Pori.

Turning to Slide 8 and our capital resources. At the end of the fourth quarter, net debt totaled $695 million, and our net leverage ratio was approximately 3.6 times our trailing 12-month adjusted EBITDA. Total liquidity was approximately $307 million at the end of the year, consisting of $55 million in cash and $252 million of undrawn availability under our asset-based revolving lending facility, we do not have any significant debt maturities until 2024. We continue to enjoy relatively low cash taxes.

This is primarily a function of the countries where income is generated and the net operating losses from which we benefit. In the quarter, we recorded a $157 million tax expense in connection with recognizing a full valuation allowance against certain net deferred tax assets. Importantly, this does not prevent us from being able to utilize the associated NOLs in future periods and enjoying a low cash tax rate, which we expect to be 10% to 15%. Our outlook for capital expenditures in 2020 is $80 million to $90 million, including business transfer capex from Pori.

We will remain vigilant with our capex budget and could reduce this outflow further should market conditions warrant. We expect cash interest in 2020 to be between $40 million to $45 million. In 2020, we expect our adjusted effective tax rate to be approximately 35%, consistent with 2019 as we apply a normalized adjusted rate to better reflect the current weighted average tax rate applicable under the various jurisdictions in which we operate. We continue to expect a long-term adjusted effective tax rate to be 15% to 20%.

Cash restructuring payments in 2020 are expected to total $15 million to $20 million. This primarily includes our ongoing business improvement program, Calais and the cost savings related to our color pigments business. Other cash uses in 2020 are expected to be approximately $75 million, primarily consisting of pension obligations, joint venture capital expenditures and legal fees. We preliminarily expect the net change in working capital to be a modest source of cash in 2020.

This is subject to market conditions and other factors. Finally, our Pori-related expenses are expected to total $15 million to $20 million in 2020, down from an outflow of $64 million in 2019. We recognize the importance of returning to positive free cash flow and remain intensely focused on reducing our cash uses, including capex to transfer business from Pori. We continue to make considerable progress on the transfer of many of our specialty and differentiated products into the existing network.

As a result of the current economic environment and our financial resources, we are exploring ways to optimize the remaining transfer of business from Pori. We believe this will include a lower total expected capital outlay and a lower associated EBITDA benefit than originally estimated with a similar, if not higher, economic return. We expect to update all material elements of our 2020 cash uses as necessary on our quarterly earnings calls. With that, I'll turn it back over to Simon.

Simon Turner -- President and Chief Executive Officer

Thank you, Kurt. 2019 was a challenging year, but we remain focused on executing on those items within our control. In the near term, we expect volumes to follow a more normal seasonal pattern in both TiO2 and Performance Additives. We expect an improvement in TiO2 pricing and the benefits of our cost and operational improvement initiatives to partially offset inflationary pressures.

Additionally, we expect to continue to manage our manufacturing network, aligning production with customer commitments. We are focused on maximizing value to shareholders through the following. We're committed to our customer tailored approach, by which we actively manage our production network and inventories, along with the implementation of a more diverse range of customer agreements. The net effect reduces our price volatility.

Evidence can be seen in our more stable 2019 pricing profile. We are focused on strengthening our leadership position in specialty and differentiated TiO2, made possible by our unique mix of assets, our specialty and differentiated TiO2 portfolio provides Venator the ability to partner with customers in higher growth and higher value applications. We continue to invest in strengthening and diversifying our product slate. And it is these applications, which contributed most of our 7% volume growth in 2019.

We remain focused on enhancing our competitive position in all our businesses. We accelerated the delivery of our business improvement program and delivered $20 million of EBITDA improvements in 2019 versus the original target of $10 million. We expect to deliver the remaining cost and operational efficiencies as promised, including the incremental benefits related to our color pigments business. Additionally, we are actively evaluating opportunities to optimize our manufacturing capabilities and cost base to further improve our profitability.

We remain intensely focused on reducing our cash uses and improving our free cash flow and are taking meaningful steps in 2020. As Kurt mentioned, we expect to reduce our capex spend by approximately $30 million and our spend related to Pori closure is expected to decrease by approximately $45 million compared to 2019. We are fully committed to maximizing shareholder value through active portfolio optimization. In the near term, this includes exploring the potential sale of our color pigments business, which is ongoing.

Longer-term TiO2 industry fundamentals remain favorable. We believe TiO2 industry inventory levels improved in 2019 and are lower than they were this time last year. Capacity additions are well understood and in line with normalized industry growth rates. We believe executing on our strategic priorities will enhance our competitiveness and create long-term value for shareholders.

With that, we thank you for your continued interest in Venator. I would now like to open the call for questions.

Questions & Answers:

Operator

Yes, thank you. [Operator instructions] And the first question comes from Duffy Fischer with Barclays.

Duffy Fischer -- Barclays -- Analyst

Yeah. Good morning, guys. First question is you were talking about the changes that you're thinking about for the Pori capex? Maybe I missed it, but can you quantify how much different do you think the new plan will be from the old plan as far as end-game EBITDA drive and then the capex that we would need to spend for that?

Simon Turner -- President and Chief Executive Officer

Yeah. So let me help you on that, Jeff, it's Simon here. Look, I think September 2018, in which we announced our program for Pori, that was about 18 months back. I think we can all see those 18 months have been pretty challenging.

We had a pretty significant destock in the second half of 2018, very modest growth in 2019 at the industry level. And now, of course, as we enter the year, we see further uncertainty with coronavirus and so forth. So the circumstances have changed, I would like to point out here that by far and away, the largest part of the cash spend here at Pori is in the closure and wind down costs, and we have got most of that spend behind us. Of the $280 million we announced, we spent $180 million.

That would leave us $100 million to run. In full-year '20, we'd expect that to be around $20 million as Kurt said. So that's sort of like the lion's share of the cash. On the capex side of the ledger, which is to your question here, we've been exploring ways to optimize the remaining transfer of the business, again, and we expect that to come in at a higher economic return.

So look, we are looking at a lower capex for the remaining portion that would entail a lower EBITDA, but, of course, as I said, hopefully, with a similar or higher economic return. We're still working through that, Duffy. We don't have a number yet that we're prepared to share in that regard. We still got a little bit of a ways to run.

But I would point out that for many of our products, the transfer is complete and behind us. We spent $15 million in '19 with some more to spend in 2020.

Duffy Fischer -- Barclays -- Analyst

OK. Thank you. And then if you could maybe just walk through your large end markets? And how fast do you think consumption growth was for those end markets of TiO2 in 2019? And then what would you anticipate for 2020?

Simon Turner -- President and Chief Executive Officer

OK. So look, as I said earlier, 2018 was a terrible second half from a demand point of view. I think our view is that 2018, the industry contracted by about 6%. There was some more positive year-on-year growth in 2019 at the industry level, nominal positive growth for us, thanks mainly to our new products and we sort of outpaced that overall.

But if I think about it from a 2019, what sort of like advanced faster or slower? I think, in effect, there's probably two tiers in that answer at the applications' level rather than at the geographic level. So let's think about the applications first. I don't think that what we saw in 2019 between coatings and plastics at the aggregate level was dissimilar around the world. But of course, we would take out automotive coatings and parts of industrial, which definitely were in that second tier of lower growth.

And from what we can see, why we're not big on that in TiO2, we're exposed to it in our Additives business, that is still persisting. So that would be an example of the second tier. Predominantly, I think we saw demand for our inks and other specialties coming through in 2019 in the way we expect it to, which was at or even slightly above, larger functional markets. We would call out as a second tier, a sort of textiles application, and we had a very soft end to the year.

We called out on our previous call. I think we called it again on this call. So that, again, would be sort of like lower rate. So if the question is by application, where did we notice the difference? I think we'd have to center in on automotive coatings and textiles in the TiO2 world.

And similarly, in additives, we would have seen that in autos and electronics, to some extent, and plastics and coating, depending on which market you're in. So that explains it by applications point of view. And of course, I think that, obviously, if we put the geography lens on that, of course, it was the Chinese softness in the second half that stood out for us on a geographic base. I hope that is responsive to the question of what we saw in 2019? 2020, look, absent coronavirus as we closed last year and coming off the back of a net contracted industry these past two years of, let's call it 5%, we would ordinarily expect the GDP-plus rebound in 2020.

The question is, to what degree does coronavirus affect that or delay that? And we don't have the answer to that. I'm not going to represent to you that we do, but that would be our thinking hitherto. We can't really say too much on coronavirus other than the year it started off -- the first six, seven weeks of the year, it started off our sales in the aggregate, in line with our expectations for the first start of the year. The only notable comment I could make was that I do think in the broader Asia region, there is some heightened concern around supply ability out of China for TiO2 as a result of the coronavirus.

And that we have felt that a bit and heard that and received that a little more in this first start to the year. I hope that helps.

Duffy Fischer -- Barclays -- Analyst

Great. Thank you guys.

Simon Turner -- President and Chief Executive Officer

Thanks Duffy.

Operator

Thank you. And the next question comes from David Begleiter with Deutsche Bank.

David Begleiter -- Deutsche Bank -- Analyst

Thank you. Simon, that was my focus as well. The supply issue in China, and how that might impact your operations in Europe? Are you seeing yet any constraints on Chinese imports into Europe? And could that support, do you think, some of these price initiatives that have been announced?

Simon Turner -- President and Chief Executive Officer

Yeah. So there's a number of themes in that question. I'm going to break it out a little bit there. Let's focus a little bit about the Chinese point.

Reminder, of course, to everyone, I think people are well aware that we are not seeking to be the largest importer of product into China. We take technical, specialty and differentiated products into China, one of the smaller importers. So we don't see the kind of direct head-to-head competition within China. Although, what we have noted in the second half of last year was softness within China.

We've noticed the gap in pricing kind of develop wider between local Chinese prices and more western producer prices. We've noted that the majority of Chinese producers have announced price increases, in fact. And I would point out that the smaller producers in China were already under pressure. And this latest development with coronavirus will put them under even more pressure.

So while we might be hearing sort of like concerns around the ability of China's export, we're certainly hearing that from our customers, as I said. We sort of yet to put any tangible evidence there. That's why we've been very cautious on calling it. Regarding the broader exports point, what I would say to you is, what we saw in 2019 was this sort of like repeat performance of 1 million tons of export out of China.

We continue to see that the lion's share of those exports went to emerging economies, and that was second half-loaded, notably because of the trade disputes and so forth. Importantly, though, exports from China into the combined markets of North America and Europe declined on aggregate by around 15%. So hopefully, those calibration points going to help answer your question.

David Begleiter -- Deutsche Bank -- Analyst

Very helpful. And just lastly, on feedstock or costs, why were they up in 2019, Simon? And what's your expectation for 2020?

Simon Turner -- President and Chief Executive Officer

So I think if we took a overall raws and feedstock, we said pretty early on in 2019, where we have some clarity there that we'd expect to onboard around $40 million of inflationary pressure in 2019, three quarters of which would be in the feedstock area, and that's basically how it played out in 2019. You may recall on our previous call, we said that we didn't see the same kind of justification in case for similar type inflationary pressures in 2020. Of course, that's our view. I think it's fair to say that we still expect more modest inflationary pressures in 2020 without giving a number, I think we can say that the pattern remains from feedstock.

And within that, predominantly high-grade feedstock. So the patents are quite clear. It's fair to say also, we continue to negotiate hard with our suppliers around the eventual inflation costs.

David Begleiter -- Deutsche Bank -- Analyst

Thank you.

Operator

Thank you. And the next question comes from Bob Koort with Goldman Sachs.

Dylan Campbell -- Goldman Sachs -- Analyst

Good morning. This is Dylan Campbell on for Bob. I was hoping you can provide some background on your recent price increase announcement, I guess, on the back of kind of raw material inflation? One, does that price increase cover that raw material inflation? And then I guess the second is, with lower inventory levels now and if we get into a situation where demand starts to improve again, what is kind of the TiO2's sensitivity to tightening conditions considering the value stabilization efforts done by some of your peers?

Simon Turner -- President and Chief Executive Officer

Yeah. Look, let's be clear about stabilization. We continue to be, through our customer-tailored approach, advocates and proponents of stabilization. We have stabilized our price over the last three quarters.

Unfortunately, we have onboarded some raw material costs. So as we go out to customers, we are looking at what has happened to date and what is yet to happen in 2020. As reasons why we will be adjusting prices upwards to restore margins. Of course, as we saw in the stabilization process, the rate of adjustment and movement quarter on quarter with prices was relatively small.

So we are prepared to go into what degree we cover raws because, of course, we're still negotiating with our consumers. And if you could, Dylan, remind me the last part of the question, I would be grateful.

Dylan Campbell -- Goldman Sachs -- Analyst

Yeah, I guess, the price increase and whether that's kind of recovering the raw material inflation that you expected to see?

Simon Turner -- President and Chief Executive Officer

Yeah. Look, I mean, as I said earlier to my earlier answer, we would ordinarily expect to see growth in this TiO2 industry above GDP and a year after we'd had -- two years after we had net contraction and where we progressively lowered year end inventories. So I think we're well set there. We've taken the decision to go out because we want to tackle the margin pressures, of course.

And as part of stabilization initiatives, it remains to be seen. What will happen with the tightness on the go-forward basis for the rest of 2020 because we've got this near-term lack of clarity around the coronavirus. But ordinarily, we would expect it to outpace GDP and that, of course, would provide better conditions for price increase in 2020.

Dylan Campbell -- Goldman Sachs -- Analyst

Got it. That's helpful. And I guess, on sales mix, looks like that was down 2% on a year-over-year basis, can you provide some color there and whether we can expect similar trends into 2020 for TiO2, specifically?

Simon Turner -- President and Chief Executive Officer

Yeah, I think that relates predominantly, Dylan, to the Specialty segment. And I think as you're aware, we closed last year with a soft Specialty segment, predominantly in our Asia-centered and China-centered Textiles application.

Dylan Campbell -- Goldman Sachs -- Analyst

Got it. Thank you.

Operator

Thank you. And the next question comes from P.J. Juvekar with Citi.

Eric Petrie -- Citi -- Analyst

Good morning, Simon. It's Eric Petrie on for P.J.

Simon Turner -- President and Chief Executive Officer

Hey, Eric.

Eric Petrie -- Citi -- Analyst

Do you think we're at a trough with fourth-quarter EBITDA margins in TiO2? Or do you think there's still risks in first half at least attributed to coronavirus and the like?

Simon Turner -- President and Chief Executive Officer

Well, certainly, the risk, yes, I think there's risk, but of course, that could play out in unexpected ways, and that's quite hard to predict here. I've heard various people advance various reasons why it could be sort of like a net positive. But from our point of view, what we would say is, of course, it was a seasonal soft quarter in fourth quarter. So of course, you have absorption issues typically there, we had some softness in Specialty.

But we expect to see some stability of pricing as we cross the year from 2019 into 2020. And of course, you've heard our earlier comments about price increases.

Eric Petrie -- Citi -- Analyst

Thanks. And secondly, a competitor announced that they could close EU sulfate capacity at the end of this year or next, could you do the same or talk about the competitive dynamics at Duisburg and Uerdingen.

Simon Turner -- President and Chief Executive Officer

Yeah. I mean, look, of course, could you go down the path of closing out? Yes, you could. And I think over this past many years, we have faced up to those difficult decisions when plants have become older and subeconomic. So yes, you could, of course.

Our view, though, is you have to look at both the competitiveness of the plant and the net revenue stream that is included in each of those plants. And I think as we alluded to in our call earlier in our prepared remarks in TiO2, we will continue to further look for optimization and efficiency opportunities within our broader circuit, reflecting the fact that 2019 will see the end of our currently running BIP. We found $10 million of color-based improvement. And it's a way of life in this business we expect to go back, look for further opportunities and as we identify those, we will share those with you.

Eric Petrie -- Citi -- Analyst

Thank you.

Operator

Thank you. And the next question comes from John McNulty with BMO Capital Markets.

John McNulty -- BMO Capital Markets -- Analyst

Yeah. Thanks for taking my question. Can you give us a little bit of color at least as to what insights you have as to the customer inventory levels and kind of where they stand relative to kind of the normal seasonal time for this?

Simon Turner -- President and Chief Executive Officer

If I go through it by region, I don't think we'd see anything out of the ordinary in the United States. I'd characterize those inventories at this time of year as normal. Similarly, in Europe, we do not see any evidence and as I said to you earlier, we have seen lower Chinese exports on a net basis into Europe and the United States combined in 2019. But I think that it's fair to say, at the industry level, that our calculations and estimates in Venator, suggest that the closing year-end inventories at the industry level, we're at least 10% lower than where they stood at the back end of 2018.

So I think that's about as good as a metric we can give you.

John McNulty -- BMO Capital Markets -- Analyst

Great. That's helpful. And then just with regard to the color pigments business, I know you can't comment on the asset sale. Can you give us some color as to the cost-cutting program is working there? And then kind of what you've pulled out at this point? And how that's progressing as you're kind of looking through 2020?

Simon Turner -- President and Chief Executive Officer

Yeah. I mean, look, we've identified 10. It's not a front-end loaded program. Similar to the TiO2 area, it's a mixture of projects, a smaller running projects, some of which don't require capex around a multiple instance of sites.

So it's not dissimilar in terms by way of phasing and fragmentation to its larger kind of TiO2 cousin, if you want to think about it that way.

John McNulty -- BMO Capital Markets -- Analyst

Great. Thanks very much for the color.

Operator

Thank you. And the next question comes from Josh Spector with UBS.

Josh Spector -- UBS -- Analyst

Yeah. Hey, guys. Just in terms of thinking about potential China impacts in 1Q. Can you help us understand how much of your sales go directly into China? And how much of Europe and kind of rest of Asia goes into products that you think ultimately end up in demand in China?

Simon Turner -- President and Chief Executive Officer

Yeah. I mean that second one is pretty tough because if you think about ourselves into Europe and North America into the larger established sort of like applications like coatings and plastics, well, a, coatings, that of course, particularly generally don't travel very well having lots of liquids associated with the final product. So the answer there is minimal. I guess there's probably some special product coatings that does make.

It is so plastics in the sense that you tend to see a more -- specialty plastics aside, you tend to see the more commoditized plastics flowing out of China into the rest of the world. So I think that the second part of the question is really, from our point of view, there's not that much we sell into Western markets that ends up being sold to consumers in China. There will be some, but not much. In terms of the first part of the question, the way I think about it is that we are one of the smaller exporters into China, and I will be surprised if our sales of the fraction of the imports is greater than 10% of all imports.

So again, they go to specialized and differentiated applications predominantly.

Josh Spector -- UBS -- Analyst

OK. Thanks. And just in terms of your volume growth year over year, you talked about that being led by new products, so I assume volume loss last year, you're not filling those same volumes? I guess I'm trying to think about that dynamic of maybe where you're selling those new products into? And what are the kind of end markets where you're getting some additional traction?

Simon Turner -- President and Chief Executive Officer

Well, I'm certainly happy to talk a little bit about that 7% year-on-year increase. The bulk of that came from new products. And the way to think about that, I think, is in three buckets. It's about new type functional products and grades that we've launched, which have been extremely well taken up in plastics and industrial coatings types of segments.

And another way to think about that is from a diversification play point of view. You'll recall that we took on the laminate's business, which is a diversification play for us, but again, it was absent from prior year sales. So that's the way we think about those new product sales.

Josh Spector -- UBS -- Analyst

OK. Thanks.

Operator

Thank you. And the next question comes from Steve Byrne with Bank of America.

Unknown speaker

[Inaudible] on for Steve. Thanks for taking my question. I wanted to talk about the Middle East debottleneck projects. Do you see any product coming from the Middle East and hitting Europe from these projects?

Simon Turner -- President and Chief Executive Officer

We are not in a position to comment on that, but we haven't seen anything of that type.

Unknown speaker

OK. Sure. And just a little bit more high level, are you seeing any further reductions of TiO2 content by global paint manufacturers? And conversely, are there any new developments in R&D regarding new applications or products that you think could benefit from increased TiO2?

Simon Turner -- President and Chief Executive Officer

I think fundamentally, the answer to your first part of your question is no, we're not seeing any, it's quite stable. Prices have been stable, and we have some turbulence in that regard some 10 years back almost now. But no, we don't see that as a fundamental driver. And the second part of your question, there's nothing near-term that we see that would lead to any sort of even material radical improvements in overall TiO2 consumption.

I wouldn't want to never say never, of course, there can be some embryonic applications that could lead to that in out years, but that's really not a near-term issue.

Unknown speaker

Sure. Thank you.

Operator

Thank you. And the last question comes from Laurence Alexander with Jefferies.

Laurence Alexander -- Jefferies -- Analyst

Hi. Could you benchmark what the current sales run rate is for the assets under a potential divestiture? And as you've seen sort of the mix of your business change, has there been any significant change in seasonality first half versus back half compared to what was the run rate before the most recent downturn?

Simon Turner -- President and Chief Executive Officer

Laurence, this is Simon. Can I just clarify the point of your question? Both of those parts of the question relates to the Performance Additives business?

Laurence Alexander -- Jefferies -- Analyst

No. Sort of second one is just across the entire portfolio. And then you referred earlier to sort of normal seasonality. Just want to be clear that that has not changed in any structural ways you've shifted your portfolio mix?

Simon Turner -- President and Chief Executive Officer

Yeah. So to be clear, then the second part of your question is seasonality. We do not see any fundamental shift in seasonality across TiO2 or the Performance Additives business. That's not to say necessarily, though, of course, the sales would mimic that at all cases because as we've seen over the past couple of years, we've had soft spots, automotive, I talked about earlier and our Textiles segment at the back end of 2019.

So of course, there can be reasons that is apparently look like seasonality, but we don't think the base seasonality has changed. That's the second part of the question. Sorry, could you repeat the first part about color?

Laurence Alexander -- Jefferies -- Analyst

On just on the sales run rate that you're looking to divest. You mentioned the EBITDA. I just want to double check if what the sales run rate is looking like?

Kurt Ogden -- Executive Vice President and Chief Financial Officer

Laurence, this is Kurt. We'll follow up with you on the sales number. We did want to provide greater transparency around the EBITDA. So you had a sense for what the contribution was from that color pigments business.

But because we haven't broken out the sales, I don't have that with me right now. Happy to follow-up with you later.

Laurence Alexander -- Jefferies -- Analyst

OK. Thank you.

Operator

Thank you. And the next question comes from Arun Viswanathan with RBC Capital Markets.

Arun Viswanathan -- RBC Capital Markets -- Analyst

Hey, thanks. Good morning. I just wanted to go back to the China issue. Is there a way you could kind of share what you generated in sales and EBITDA in China in 2019?

Simon Turner -- President and Chief Executive Officer

Broadly, no. I don't think we'd be prepared to share that information.

Arun Viswanathan -- RBC Capital Markets -- Analyst

OK, then and then also, you commented on the export situation out of China and into Europe as being potentially more benign. Could you share more details on that?

Simon Turner -- President and Chief Executive Officer

Yeah, I didn't actually say it's potentially more benign. Well, I may have inferred that. Let me back up and be as clear as I can be about it. What I said is, if we look back over these past period.

Last year, for instance, or even prior to that, what we have been saying about China is the trajectory of supply and build rate in China has been slowing. Of course, we saw inspection, environmental issues. There's been a number of setbacks faced predominantly by but not exclusive by smaller Chinese producers. And the net effect of that, coupled with the fact that Western customers are extremely concerned to get supply reliability and quality consistency has meant that Chinese exports to Western markets of North America and Europe, while they have grown in last year specifically, were actually lower than the prior year.

So there has been this notion that Chinese products would go onwards and upwards into Europe and North America and that has not happened. I believe that fundamentally relates to the two factors I mentioned: supply reliability for whatever reason and quality consistency.

Arun Viswanathan -- RBC Capital Markets -- Analyst

And then just lastly, if I may? Just on the price increase announcements. I guess what would you characterize as your chances of success for these increased announcements? And what would drive kind of success there? Maybe you can just contextualize that with your raw material outlook as well?

Simon Turner -- President and Chief Executive Officer

Yeah. So look, at a high-level basis, we are convicted to these price increases. We have worked very closely to listen to our customers around managing their pricing and they have predictability for us. Our margins got compressed, it looks like there's going to be a bit more of it.

So we're going to move our prices, and we're aiming to offset our raw material inflationary pressures. It remains to be seen as to how that plays out. But I think that we are certainly convicted to support those in all major regions.

Arun Viswanathan -- RBC Capital Markets -- Analyst

Thanks.

Operator

Thank you. And the next comes from Vincent Andrews with Morgan Stanley.

Steve Haynes -- Morgan Stanley -- Analyst

Hi, this is Steve on for Vincent. Just wanted to come back to the segment margin discussion in TiO2. So if you guys did about 12% this year and if that's kind of what we're going to call trough then in 2017 and 2018, you were more in the mid 20%. Clearly, you're probably not getting back to that level, but can you kind of help us frame kind of what the expectation is this year kind of with that being in the bottom and the top kind of ends of the range?

Kurt Ogden -- Executive Vice President and Chief Financial Officer

Yeah, this is Kurt. I'm happy to take that. I think that our success in 2020 will largely be predicated on how successful we are with the sales price initiatives that we have. We think that it was the prudent thing to do to pass along the raw material inflation that we've seen in 2019.

And as you have heard us outline, we are aggressively tackling our costs, which would also serve to improve our margins. But difficult to put a number or even a range out there for you, where we're still early in those price negotiations. And so I think we'll wait and see how those come in.

Steve Haynes -- Morgan Stanley -- Analyst

OK. Thanks, Kurt.

Operator

Thank you. And the next question comes from Hassan Ahmed with Alembic Global.

Hassan Ahmed -- Alembic Global Advisors -- Analyst

Morning, Simon and Kurt. I just want to go back to the TiO2 pricing, also some of the dynamics going on, on the ore side of things. Obviously, you guys talked about wanting to offset higher ore costs. From what I've been hearing, it seems high-grade ore, the availability of high-grade ore seems to be questionable, meaning high-grade ore seems to be very tight, supply demand wise.

So my question really is, could we sort of enter 2020 with a situation where high-grade ore is tighter than titanium dioxide and the industry actually struggles to pass-through those higher-ore costs and maybe you guys, being far more sort of leveraged to ilmenite benefit from those dynamics?

Simon Turner -- President and Chief Executive Officer

Well, thanks for the question, Hassan. I mean I think that this point about higher-grade, lower-grade ores is a continuation of a theme that has developed over multiple years. And of course, you're right to point out the high-grade markets are more sort of less sort of like vendor choices in those markets. And it's true that we have seen in the higher grade buckets, particularly in rutiles.

And to some extent, some of the sort of operational ups and downs in chloride slags that that has become tighter. I think we can see us sort of way through this near part of 2020. Typically, as we've said before, we would sort of like try to bolt down requirements and prices in the front half and then come back with second half, typically six-month-type negotiation. So I'm not sure we're at the stage yet, which you imply.

I would also say on the low grade that despite the fact that there are still inflationary pressures at the low-grade level, it's just they have not eventuated in a pattern that we've seen on the high grade.

Hassan Ahmed -- Alembic Global Advisors -- Analyst

Understood, understood. Helpful. And as a follow-up, completely appreciate the fact that coronavirus ongoing, tough to sort of figure out what demand impact it may have. But obviously, the supply side tends to be a bit more visible.

What are you guys seeing in terms of supply curtailments for TiO2 in China on the back of the coronavirus?

Simon Turner -- President and Chief Executive Officer

I think, as I said, I take our comments here appropriately, Hassan, in the sense that we're not the big window on the world for China in the world of TiO2 because of the limited amount part we take in. So we have seen and heard of the type of dynamics over the Lunar New Year, where holidays were extended and whether that affected the workforce, logistics, infrastructure, chem park and geography, of course, there were broader impacts that meant that supply got interrupted. The question is, does that rumble on and continue? And that's the part we do not know. The part we've seen is curtailments and disruption over so like limited time window at and somewhat beyond the Lunar New Year.

We've yet to see anything more fundamentally different from that.

Hassan Ahmed -- Alembic Global Advisors -- Analyst

Very helpful Simon. Thanks so much.

Operator

Thank you. And the next question comes from Jim Sheehan with SunTrust.

Jim Sheehan -- SunTrust Robinson Humphrey -- Analyst

Morning, Simon. What is your ultimate plans for the Pori site? Is there any opportunity to monetize the remaining assets there? And how would your exploring of options for capex and so forth affect that decision-making?

Simon Turner -- President and Chief Executive Officer

Well, look, I think an important point here to note is, as we've already transferred several of those specialty products, we're still committed to further transfer of specialty business. Let's be very clear about that. That is a strategic imperative for us within Venator. So of course, what we're doing here is we have to be prudent with cash for well understood reasons and that forces us to examine each and every part of our cash usage, including all parts of the current and anticipated capex build, and that's what we're doing.

It's about prudency with cash, it's no reflection on our commitment to specialty. I want to be very, very clear about that. That's something we still deeply believe in. Are there opportunities to potentially sell the sites or part the sites? Yes, there are.

Are we exploring? Yes, we are. So we will leave no stone unturned there to see if there's alternative usage for that site. We have been successful on several occasions in our past as we've closed various sites and turn those into opportunities, rather. So I think that's a path we'll continue.

We'll give you a lot of focus on that in 2020. And of course, we're going to work through our best option for being prudent with the cash and optimizing our return from other specialty business transfers, and we'll update you when we get to that point. We don't have that number here today.

Jim Sheehan -- SunTrust Robinson Humphrey -- Analyst

OK. Thank you. And on your TiO2 business, what level of volume growth is realistic in 2020 given the improvements you've made in your specialty production network and also new products? Do you expect to outgrow the market again in 2020?

Simon Turner -- President and Chief Executive Officer

I think it goes back, Jim, to my earlier comment about coronavirus. I think that there are times when this industry on the demand profile, where things are more or less clear. Unfortunately, we are in one of those latter periods where the demand is less clear near term. So it really does heavily depend on how that evolves, and it is evolving day to day, week by week.

And all we can point you to is we would expect industry rebound at GDP-plus in 2020, ordinarily, and we'd like to think that still happens. And of course, you have to factor in the fact that we are broadening, diversifying and strengthening our product slate. And of course, that also plays into our ability to manage our volumes.

Jim Sheehan -- SunTrust Robinson Humphrey -- Analyst

Thank you.

Operator

Thank you. And the next question comes from Roger Spitz with Bank of America.

Roger Spitz -- Bank of America Merrill Lynch -- Analyst

Thank you. Good morning. Your TiO2 price was down 7% for the full-year 2019 versus '18. But can you comment on what the 2019 price movement was bifurcated between chloride process, TiO2 and sulfite process? For instance, another large TiO2 producer who has only chloride process TiO2 reported, its price was only down 1% for the full year of '19.

Simon Turner -- President and Chief Executive Officer

Yeah. I think, look, this is not a chloride sulfate situation, per se, at all. This is, first and foremost, a regional footprint discussion because in 2018, with us having a 50% of our revenues in Europe and the European dollar selling price being some $300-plus greater than North America. That is what plays into a year-on-year price decline.

That is the driver, not the application. What I would say is that, generally speaking, our specialty TiO2, which just happened to be exclusively sulfate, of course, those prices are more stable. So they did not drop in that period in any material sense. What I would say about the remainder of our business, our functional sales, we've got a mixture of chloride and sulfate into those businesses.

And the way pricing evolved, was more a function of customer size than it was of technology.

Roger Spitz -- Bank of America Merrill Lynch -- Analyst

I see. I believe you said that global TiO2 demand declined for the industry by 6% early in the call, if I heard that correctly, your volumes were up 7% in 2019, would that imply that you took market share?

Simon Turner -- President and Chief Executive Officer

So what I'm saying is that let me back track again, I said that in 2019, we estimate that the industry shrunk by 6% over -- sorry, '18 shrunk over '17 by 6% and '19 grew by a modest amount, let's call it, 1%. And so over that period, that's 6% is related to the prior year. But coming back to your 7% number, it's a very straightforward assessment here. If you pro forma out the extra diversified laminate acquisition and the introductions of specific new products, we grew in line with the market.

Roger Spitz -- Bank of America Merrill Lynch -- Analyst

Got it. Thank you very much.

Operator

And this concludes our question-and-answer session. I would like to turn the conference to Simon Turner for any closing comments.

Simon Turner -- President and Chief Executive Officer

Thank you. Thank you for your interest in Venator. And we look forward to speaking to and meeting with many of you throughout the quarter. In the interim, if you do have any issues, please reach out to Jeff with additional questions.

Thanks, again, for joining the call, and have a great weekend.

Operator

[Operator signoff]

Duration: 61 minutes

Call participants:

Jeffrey Schnell -- Chief Executive Officer

Simon Turner -- President and Chief Executive Officer

Kurt Ogden -- Executive Vice President and Chief Financial Officer

Duffy Fischer -- Barclays -- Analyst

David Begleiter -- Deutsche Bank -- Analyst

Dylan Campbell -- Goldman Sachs -- Analyst

Eric Petrie -- Citi -- Analyst

John McNulty -- BMO Capital Markets -- Analyst

Josh Spector -- UBS -- Analyst

Unknown speaker

Laurence Alexander -- Jefferies -- Analyst

Arun Viswanathan -- RBC Capital Markets -- Analyst

Steve Haynes -- Morgan Stanley -- Analyst

Hassan Ahmed -- Alembic Global Advisors -- Analyst

Jim Sheehan -- SunTrust Robinson Humphrey -- Analyst

Roger Spitz -- Bank of America Merrill Lynch -- Analyst

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