Chemours (CC) Q2 2023 Earnings Call Transcript

Chemours (CC 1.07%)
Q2 2023 Earnings Call
Jul 28, 2023, 8:00 a.m. ET

Contents:

• Prepared Remarks
• Questions and Answers
• Call Participants

Prepared Remarks:

Operator

Good morning. My name is Jeannie, and I will be your conference operator today. At this time, I would like to welcome everyone to The Chemours Company second quarter earnings call. All lines have been placed on mute to prevent any background noise.

After the speakers remarks there will be a question-and-answer session. [Operator instructions] Brandon Ontjes, vice president of FP&A, investor relations, you may begin your conference.

Brandon Ontjes -- Vice President, Investor Relations

Hi. Thanks, Jeannie. Good morning, everybody. Welcome to The Chemours Company second quarter 2023 earnings Q&A conference call.

I'm joined today by Mark Newman, president and chief executive officer, and our recently appointed senior vice president and chief financial officer, Jonathan Lock. Before we start, I'd like to remind you that comments made on this call, as well as in the supplemental information provided in our presentation and on our website contain forward-looking statements that involve risks and uncertainties as described in Chemours' 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 of new information.

During the course of this call, Management will refer to certain non-GAAP financial measures that we believe are useful to investors evaluating the company's performance. A reconciliation of non-GAAP terms and adjustments are included in our release and at the end of our presentation. As a reminder, our prepared remarks, a full transcript, plus our earnings deck, have been posted to the investor relations section of our website along our earnings release. This morning's call will focus purely on Q&A.

With that, I'll turn the call over to our CEO, Mark Newman. Mark?

Mark Newman -- President and Chief Executive Officer

Thank you, Brandon, and thank you all for joining us this morning. In addition to reporting solid results in the second quarter, as you saw from our press release, we had an active and productive quarter. In TSS, we had another all-time record quarter. And as you'll note, in the last six quarters, we've had five record quarters in TSS, which really speaks to the momentum and growth in this business.

In APM, we had another double-digit growth quarter in our performance solutions business, and we launched the Mobility F.C. Membranes Company, which will be focused on Nafion membranes for the fuel cell requirements of the hydrogen economy. In TT, we made the difficult decision to close our Kuan Yin facility. And I just want to take this moment to acknowledge the profound impact the closure will have on our dedicated and skilled colleagues who have been valuable members of our team in Taiwan.

During this transition, consistent with the Chemours' culture, we will remain fully committed to working with our local leaders to offer support and assistance in this difficult transition. As you saw, we reached a comprehensive settlement of PFAS-related drinking water claims of a defined class of U.S. public water systems. We also published our sixth sustainability report, which shows significant progress on both greenhouse gas and fluorogenic compound emission reductions.

On capital allocation, we agreed to the sale of our glycolic acid business. which we expect to close this quarter. And we continue to return capital through dividend and stock repurchases to our shareholders. It was also a quarter marked by a number of leadership changes.

So, on April 1, Denise Dignam became the president of our titanium technologies business. In early June, we had Jonathan Lock appointed to the CFO role. And obviously, Brandon Ontjes stepping up into the investor relations slot. Matt Abbott became our chief enterprise transformation officer at the same time.

And then, earlier this week, we announced Joe Martinko as the president of our thermal and specialized solutions business. So, you know, when I look at all the changes, including Gerardo Familiar being named earlier this year behind Denise going into TT, you know, we've had a number of leadership changes, which really speaks to the strength of the talent on the Chemours bench and how well we're developing diverse and capable leaders of the future. You know, as I think of the quarter in total, I think it's a real demonstration of the Chemours brand of courageous chemistry. We did not miss a beat despite the leadership changes, and we got a lot done.

And, you know, as we face a weaker second half this year, the team is full of energy and energized to drive continued great performance and to deliver value to our shareholders from our five strategic priorities. So, with that, Jeannie, let's go to Q&A. 

Questions & Answers:

Operator

[Operator instructions] Your first question comes from the line of Arun Viswanathan from RBC Markets. Your line is open. My apologies, one moment, please. Mr.

Viswanathan, your name is -- your line is open.

Arun Viswanathan -- RBC Capital Markets -- Analyst

Thanks. Could I just ask about the TiO2 plant closure? Is that plant maybe at the upper end of the cost curve? And maybe you could speak to the regional dynamics that led to that decision. Thanks.

Mark Newman -- President and Chief Executive Officer

Hi, everyone. Good morning, and thanks for your question. Yeah, as I said in my opening, this was a really difficult decision for us given the impact on our Chemours colleagues. But as we look at, you know, where that plant and other plants are on the cost curve, it has been, since day one, designed to be more of a high-grade ore plant than what's more traditional in our North American facilities, where we can use a broad spectrum of ore.

So, yes, you know, historically, great performance on uptime and safety metrics at that plant and productivity. But by design, a high-grade ore plant, which, you know, with some of the cost escalation we've seen in recent years, you know, makes it more difficult. It has historically been a swing facility within the circuit. So, you know, by taking this plant out, we get really two benefits.

We fully task, you know, the circuit. We move from a variable cost perspective to more low-grade ore usage. And as you saw in our materials, we expect a run rate cost reduction of about 15 million next year.

Arun Viswanathan -- RBC Capital Markets -- Analyst

Thanks for that, Mark. And then if I could, as a follow-up, you know, you noted some challenges in the second half. Could you just elaborate on that? Is that the TiO2, you know, volume weakness and then maybe some weakness as well in the advanced materials part of APM? You know, could you just flesh that out? Thanks.

Mark Newman -- President and Chief Executive Officer

Yeah. So, after really a very robust recovery post-COVID in 2020 and several quarters of very strong demand, when we planned this year, we expected a more gradual recovery. We know early in the year others were thinking of a very robust recovery, especially in China post-COVID. And so we've always been of the mindset that we were going to have a gradual recovery.

I think as we were getting into the second half, our view is that, you know, versus our planning, we expect more modest demand recovery and maybe being pushed even into early 2024. So, our expectations here sitting today is that in the second half, we would see volumes versus the first half, you know, flat to slightly up. And obviously, seasonally, you know, Q3 and Q4, Q4 especially, tend to be weaker quarters. So, I would say we expect to see flat to slightly up despite the fact that the second half seasonally is typically weaker.

Operator

Your next question comes from the line of Josh Spector with UBS. Your line is open.

James Cannon -- UBS -- Analyst

Hey, guys. This is James Cannon on for Josh. Just hitting on the Taiwan plant again, just wondering if that has any impact on your mix of contracts. And as you continue to talk about changing and improving the quality of that business, is there anything that you're doing to think about changing the structures you have in place?

Mark Newman -- President and Chief Executive Officer

Yeah, no impact on our contracted business at all. The way we have looked at this decision is, you know, can we serve our customer needs well going forward from our North American plants? And we've concluded we can. So, this is not -- there's really no -- this is just a change in manufacturing, not a change in contracts. As you saw in the quarter, you know, we pursued more opportunities in both our flex and distribution channels, you know, which led to sequential growth in volumes as well.

So, you know, I'll maybe ask Jonathan to comment more here on this in terms of how we see the dynamic here in the marketplace with respect to volumes.

Jonathan Lock -- Senior Vice President and Chief Development Officer

Yeah, you know, obviously, as Mark said, In the second quarter, you can see the sequential growth in volumes of approximately 13%. While it's a good result sequentially coming in first quarter, it's not necessarily in line with, you know, what we would call a recovery. And so, as we look out into the third and the fourth quarter in the second half, that causes us to take the glide path down slightly, right, from the recovery we were expecting. So, but all in all, no change, James, to your question, to kind of our approach to the market.

We've been talking about our ability to debottleneck our facilities over the past couple of years. Obviously, that was delayed, you know, inside of COVID as a result of COVID. But we're confident that through this transition, we won't miss a beat in terms of our ability to serve our customers, both in the AP region and globally.

James Cannon -- UBS -- Analyst

Got it. And just wanted to say congratulations to you, Jonathan. I have one other follow-up on the TiO2 business. And that's just, if I think about volumes being relatively stable through the rest of the year.

Does your guidance anticipate any raw material benefit?

Mark Newman -- President and Chief Executive Officer

So, clearly, you know, we're seeing some moderation in raw material costs. Some are more sticky than others. And obviously, as we retask our remaining plants in TT, that gives us an opportunity also to run at better utilization rates. So, in my view is, you know, we continue to work very hard.

Our procurement team. on input costs, clearly energy costs have come down, or as we have said earlier this year has been moderating. And then our ore mix is advantaged by the decision we've made, you know, with respect to Kuan Yin.

Operator

Your next question comes from a line of Duffy Fischer with Goldman Sachs. Your line is open.

Duffy Fischer -- Goldman Sachs -- Analyst

Yeah, good morning, guys. First question is just around the PFAS potential settlement. We've all seen that a number of state AGs have kind of stood up against the 3M settlement. Would you expect something similar for your settlement where there would be people, you know, that prominent that would try to either alter it or kill it? And if not, can yours go forward, do you think, with the judge if the 3Ms doesn't?

Mark Newman -- President and Chief Executive Officer

Yeah, hey, Duffy. Now, listen, we saw the news of the AG opposition to the 3M settlement. Obviously, when you're dealing with something that's complex and that's far reaching, you know, I think we would certainly expect folks to have an opinion, right, on what they think the outcome should be. Sitting here today, we can't predict whether or not similar objections would be raised against our settlement or not.

But, you know, I think that what we do have confidence in is that, you know, the settlement that we entered into based on what the plaintiffs have asked is a very good settlement. And I think that opinion has been reinforced by the court, right, that they believe that this is a good settlement. So, we're going to continue to do what's asked of us by the court, certainly, you know, and work through the process first through preliminary approval. And then, ultimately, right, through final approval at the end.

Duffy Fischer -- Goldman Sachs -- Analyst

Great, thanks. And then, if we could turn to refrigerants, can you just update us on your latest thinking with the step-down, particularly in North America with HFO? What do you think that does to pull forward volumes the rest of this year? And then, can we still grow those volumes in the next year with the step-down? And what are we seeing on supporting HFC pricing as we're moving into that step-down for HFC?

Mark Newman -- President and Chief Executive Officer

So, Duffy, I'll ask Jonathan to comment further. But generally speaking, as we look at the second half, you know, we think -- we believe that the step-down is beneficial to our second half. Clearly, remember that this business has, you know, seasonally weaker, especially going into Q4. So, you know, bear that in mind as well.

And obviously, you know, there -- we've had a very robust first half on OEM bill rates. You know, the question is, does that continue in the second half? And with weaker construction, you know, that's also a moderating impact. So, listen, I think it's beneficial to TSS with the step down in terms of folks wanting to make sure they've utilized their quota. Clearly, with end demand being more modest, you know, in a somewhat weaker economy in the second half, you know, that could have an offsetting impact.

But net-net, you know, we factored that into our guide.

Jonathan Lock -- Senior Vice President and Chief Development Officer

Yeah, hey, Duffy, I'll just build on that comment, you know, and just remind folks on the call that the, you know, aimed step-down coming is 30%, and the f-gas step-down coming in Europe is 20%. So, that's obviously a 2024 dynamic that we're going to -- you know, that we're going to face into. And I know that Joe and his entire team are ready to serve the market to make sure that, you know, our OEM equipment customers get all of the product that they need to build out their fleets and to deliver that next generation of HFO hardware and to make sure that our distribution partners on the refill are well taken care of, you know, through that coming transition. Just to be sure, you know, as we think about the guidance for, you know, the revised guidance for the full year, we haven't really baked in a material amount of pull-forward, right? So, we're not envisioning a scenario sitting here today where you get a material amount of pull-forward in either the third or the fourth quarter.

Obviously, the things that are going to drive that, right, through the summer and through the fall are going to be, you know, how hot is it? How much of an inventory depletion do we see down the channel? And of course, what is the strength of the overall economy? Does that give folks the confidence to say, "Hey, I'm going to pull ahead some volume into '24?" So, listen, I mean, this business continues to perform, you know, very well. And, you know, obviously with the coming '24 step-downs, as you all know, we'll be ready to serve the refrigerant markets that need the product.

Mark Newman -- President and Chief Executive Officer

And maybe just one last comment, Duffy, obviously the step-down in quota drives further adoption of HFO technology. We're hard at work at our Corpus Christi site to drive the 40% expansion there, which we expect to have completed by the end of next year.

Duffy Fischer -- Goldman Sachs -- Analyst

Great, thank you.

Operator

Your next question comes from the line of John McNulty from BMO. Your line is open.

John McNulty -- BMO Capital Markets -- Analyst

Yeah, good morning. Thanks for taking my questions. So, in the TiO2 business, you seem to have some reasonable confidence that the demand picks up. Is that coming from your customers? I know you've got these longer-term contracts with customers.

So, you maybe have a little bit better peek behind the curtain in terms of what they're thinking the real demand pull is. So, is it coming from that? Or is it more just, "Look, we can't run at this low of a level for that long. There's just not that much inventory to realistically destock?" I guess, how would you characterize your confidence on it?

Mark Newman -- President and Chief Executive Officer

Yeah. So, John, as I said earlier, we had several quarters of very robust demand before things started to soften last year in Q3 and really much more so in Q4. Our view typically is a typical TiO2 cycle is somewhere between 12 and 18 months. So, obviously, this one feels like it's more toward 18 than 12.

And as you've seen recently by some of the commentary by some of the U.S. coding companies, I think it's been a lot more favorable than it has been previously. So, again, our view is, hey, this is taking a little longer. Yes, we continue to have a robust book of contracted business and really very active dialogue with key customers around the world, including, you know, the folks I've mentioned earlier here in the U.S.

Jonathan, if you have any additional color.

Jonathan Lock -- Senior Vice President and Chief Development Officer

Yeah, no, I mean, the only thing I'd add to that is that, you know, I think coming into the year, we thought that we would find the bottom kind of here in the early in the first half, and the order book would speak to a turn in the second half. And that hasn't been the experience that we've had here in the second quarter. I think we continue to look out at the order book and feel like, you know, we're at the bottom, but the inflection is not turning. You know, we're at the inflection point, but it's not turning as hard.

As we think about what could happen, you know, next year in '24, we're not here to give a '24 guide. But certainly, you know, the North American -- northern hemisphere coding season in 2024 is what we're all playing for in terms of when we think the restock happens. It's just difficult for us to sit here today and think that ultimate end-market demand has really declined, in line with how we've seen the destock, right? So, what we're trying to do right now in the very near term as evidenced by what we're doing with our manufacturing circuit is to reduce cost and improve our overall circuit utilization so that we're well set up for 2024.

John McNulty -- BMO Capital Markets -- Analyst

Got it, OK, no, that's helpful. And then, I guess just on the TSS business, so kind of a look at like the cooling degree data and that type of thing, we would actually say 2Q, despite all the press about the hottest day in the world and all that kind of stuff, it was actually kind of a light start to the air conditioning season. But it looks like 3Q has really ramped up aggressively. Do you feel that pull? Is it something that -- I hesitate to say it's spot because that almost implies it's a commodity.

But do you feel that pull when it gets hotter? And I guess, how should we think about how that plays out if the current trends continue throughout the rest of this year?

Mark Newman -- President and Chief Executive Officer

Yeah, so John, as you alluded to, we had a relatively cool first part of the summer, which, which delayed the start of the season. And obviously, with the more recent warm weather, we will see higher utilization rates or higher consumption of refrigerants, you know, as folks need to service their equipment to deal with the current weather patterns we're seeing, especially here in the U.S. and Europe. And so, our view has always been that any pull ahead related to the step-down would come later in the year, dependent on how much quota folks had used throughout the year.

A lot of the refrigerant product -- what was really great about our TSS business is that a significant portion of it is a replacement or a service business. And so, you know, there's not a lot of transparency in terms of where distributors are in terms of consumption of inventory. And so, you know, yes, it creates demand when you have hot days, like we're seeing recently. But there's also quite a bit of inventory in the system, you know, held by distributors.

And there's typically not a lot of line of sight as to where that inventory level is and whether folks will need to consume more to use up their quota. So, you know, as we reflected on the second half, we believe there will be some pull ahead as it relates to the step-down. Folks will want to make sure they've used their quota, but a lot depends on utilization through the end of the year, especially through the cooling season this summer. And we'll just kind of have to watch it as we go.

John McNulty -- BMO Capital Markets -- Analyst

Got it, appreciate the color.

Operator

Your next question comes from the line of Matthew DeYoe of Bank of America. Your line is open.

Unknown speaker

Yes, hi. Good morning. This is [Inaudible] filling in for Matt. The first question I want to ask is a little bit longer term, but there's been a lot of press about the emerging cooling for data centers and how this could benefit companies like Chemours.

What are you seeing there, and how far are we from this actually being a decent-sized business for your company?

Mark Newman -- President and Chief Executive Officer

Yeah, so it is a great question. So, we continue to work very diligently on developing and commercializing immersion cooling. We had talked about this several months ago in one of our investor updates on our thermal and specialized solutions business. And as we look at the explosion in AI and, you know, the need for high-speed data and data centers, we're very excited about what this technology will offer.

You know, we'll have more to say in the future in terms of an official announcement. But, you know, I remain confident that immersion cooling is another significant growth franchise for thermal and specialized solutions, and in a very direct way will tie to, you know, the growth of AI in the U.S., especially, and around the world. So, more to come on that, but we remain confident that this is a technology that we can commercialize. Probably, you know, not in the immediate future, but certainly something that will be part of our planning as we look out between here and certainly the middle of the decade.

Unknown speaker

OK, perfect. And I also want to ask a little bit about illegal refrigerant imports. There have been some articles and some mentions by the American HFC coalition about the high amount of R-401B refrigerant coming to the U.S. from China.

And I don't believe it was an issue for your second quarter results, but is it something that you're concerned about in the second half of the year?

Jonathan Lock -- Senior Vice President and Chief Development Officer

Yeah, so, hey there, it's Jonathan. You know, as we think about illegal imports, you know, we learned a lot of lessons out of Europe, right? So, you know, as we were launching HFO technology in Europe on the stationary side, you know, specifically we learned a lot of lessons from the illegal imports that came across from Eastern Europe and Southern Europe and, you know, changed the quota dynamic in that market. So, we took a lot of those learnings around you know, inventory management, border control checks, and working with authorities and layered that into our approach to the U.S. market and worked a lot with EPA, Homeland Security, and a number of other agencies in order to make sure that as AEM was getting stood up, we had some of the right enforcement mechanisms in place, and we created some awareness right around the issue.

So, you know, obviously, we need to remain vigilant on illegal imports. It's not something we're ever going to take our eyes off of. To your question specifically about 410B, you know, we wouldn't necessarily view that as an illegal import issue, but more of a composition of product issue. And the, you know, importation of that being used to kind of skirt -- to skirt other regulations around the import of 410A.

So, our teams are all over this. Joe and his entire team, they work hand in hand with federal, state, and local authorities here in the U.S. to ensure that there isn't a problem going forward. So, we'll keep an eye on it.

But for now, we remain confident that the law can be well enforced here in the U.S.

Operator

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

Dan Rizzo -- Jefferies -- Analyst

Hi, this is Dan Rizzo on for Lawrence. Given what you've done with the TiO2 plant, are there other facilities you're taking a look at that might be higher costs that might be shut down?

Mark Newman -- President and Chief Executive Officer

No, not at this time. And obviously, our expectation would be all of our remaining facilities. utilize low-grade ores in a wide spectrum of ores which, you know, improves their cost competitiveness. So, not at all.

Dan Rizzo -- Jefferies -- Analyst

And then, so, have you stated what the utilization rate is now for TiO2, post the closing of the facility?

Mark Newman -- President and Chief Executive Officer

No, we haven't. You know, we typically update our nameplate capacity in our 10-K disclosure once a year. The way I think you should think about this is, you know, the immediate impact of the Kuan Yin closure will obviously reduce our nameplate capacity. But we continue to work on deep bottlenecking of our remaining facilities such that I would expect, over time, the change in our nameplate capacity to be quite modest.

So, the immediate impact, obviously, is both a fixed cost reduction and a better utilization of our circuit. But again, part of our analysis in making this tough decision was looking ahead to customer demand and being confident that, you know, with some of the work on the way to debottleneck our three facilities here in North America, that we could serve our customers well.

Dan Rizzo -- Jefferies -- Analyst

And last question, if the coatings of season next year are strong or stronger than expected, I guess you could easily flex up to meet any anticipated demand surge?

Mark Newman -- President and Chief Executive Officer

Yes, sir. And obviously, as Jonathan said, you know, we really wanted to take advantage of the continued weak demand to get our manufacturing footprint, right, in anticipation of a more robust 2024 so that, A, we can serve our customers well. And obviously, from a profitability perspective, you know, we would get our TiO2, our two business, back into sort of the 20% to 25% EBITDA range. So, you know, again, we're thinking ahead to 2024 and how we serve that market well.

Dan Rizzo -- Jefferies -- Analyst

Thank you very much.

Operator

Your next question comes from the line of Mike Leithead from Barclays. Your line is open.

Mike Leithead -- Barclays -- Analyst

Great, thanks. Good morning, guys. First question, on APM, could you maybe drill down into what areas you're seeing the demand weakness in the second half? And then, separately, could you just update us on how you're seeing demand specifically developed for Nafion and your semi-con PFA currently?

Mark Newman -- President and Chief Executive Officer

Yeah, Mike, that's a great question. Remember, we've always described 2023 as a transition year for APM. What do we mean by that? We're really ramping up our capacity in our performance solution space to serve both clean energy and advanced electronics markets. And so, in terms of where we're seeing weakness, it's in our advanced materials business.

Think of that as either broad industrial in some specific segments like land cables, which are tied to construction, we're seeing some weakness there as well. So, I'd say, generally speaking, the weakness we're seeing is in our advanced materials business. On our performance solutions business, we remain sold out. And so, what we're witnessing is our growth rate here this year is really capped by how much capacity we can liberate.

So, you know, as we look at the second half, we expect advanced materials to be weaker from a volume perspective. And obviously, there's only so much you can do in the second half to relieve capacity. And that's just the timing it takes to implement capital projects, or in some cases, to get permits to expand at some facilities. So, the team's really hard at work in doing everything possible to maximize throughput in our performance solutions area.

But there's just practical limits in what we can achieve in the second half while we're seeing, you know, a weakening of the advanced materials, which today, is the larger portion of the total revenue of that business. Jonathan, if you have any additional color.

Jonathan Lock -- Senior Vice President and Chief Development Officer

Yeah, no, the only other thing I'd add is that, obviously, if you look at APM as a business regionally, our exposure to Asia Pacific is pretty high. It's 35%, 40% of the overall business. And so, as we think about that and the lack of a strong recovery in China and whatever spread that has the rest of Asia, that's certainly impacting the business. The only other thing I'd remind folks on the call of is that, you know, Q3 of 2022 is going to be a tough comp, right, for Q3 of 2023.

So, as we look ahead, we do expect a drop-off there on a year-over-year basis in addition to something that's going to happen sequentially in terms of both top line and bottom.

Mike Leithead -- Barclays -- Analyst

Great. That's super helpful. And then, just second on TiO2, could you maybe talk about your pricing assumptions as we go into the second half? And second, I think you previously talked about getting the business back to about 20% EBITDA margins to exit the year. Where do you think the bar is now just given all the moving pieces we're seeing here?

Mark Newman -- President and Chief Executive Officer

Yeah. We don't provide pricing guidance on a forward-looking basis. As you saw in the recent quarter, you know, our price was down 1% and so that reflects both regional and customer mix that also reflects channel mix with more volume relatively speaking going through flexing and distribution. So, again, our view is the second half, you know, we've guided that volume, we expect to be flat to slightly up.

We're clearly working on rationalizing capacity, which will be beneficial starting in the second half, but really will show real benefit as we go into 2024.

Mike Leithead -- Barclays -- Analyst

Great, thank you.

Operator

Your next question comes from the line of John Roberts with Credit Suisse. Your line is open.

John Roberts -- Credit Suisse -- Analyst

Thank you. Two questions. First, a short one. Do you plan to do a debt offering to fund your share of the PFAS settlement? And then, the longer question is, how do you reoptimize the TiO2 network? Do you have some export -- you mentioned it's a swing plant.

So, do you have some exports into Europe that you can serve from North America now? And do you just drop your customers in Asia?

Jonathan Lock -- Senior Vice President and Chief Development Officer

Yeah, hey, John. It's Jonathan here. On your question about the fan thing. You know, we're obviously always looking at, you know, different mechanisms to drive liquidity here.

Obviously, we have the sale of the glycolic acid business, which we project will close at the end of the month. So, we're always looking at liquidity to make sure that our balance sheet is in order today. We feel good about the capital structure that we have, the go-forward liquidity of the business. So, we'll approach that opportunistically.

Obviously, we have the 2025 term loan B. I think that's what you're referring to, the two term loans in front of us. So, we'll continue to take a look at that. And if there's an open window, maybe think about doing something there.

Mark Newman -- President and Chief Executive Officer

And then, John, on the question with respect to our TiO2 facilities, no, we don't plan to drop "any customers." You know, we're very focused on very high levels of customer service. And today, actually, we leverage, you know, all of our plants to serve our customers' needs globally. Clearly, we'll have to readjust in terms of what plants are tasked with specific customer requirements. But that's something the team's very capable and has done before.

So, I don't expect any meaningful interruption here in terms of customer service or meeting customer requirements as a result of this decision.

John Roberts -- Credit Suisse -- Analyst

Great. Thank you.

Operator

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

Jeff Zekauskas -- JPMorgan Chase and Company -- Analyst

Thanks very much. I've always thought that the capacity of the Taiwan plant was 160,000 tons. Is that right? And you talked about the cost savings from closing the plant. Is the plant making any money, or is it losing money? You know, is -- what's the trade-off there?

Mark Newman -- President and Chief Executive Officer

Yeah, Jeff, you've asked two questions that we probably wouldn't answer in the sense of we don't disclose individual plant capacities. And we certainly don't report out, other than at a segment level, our profitability. As I mentioned, it is a higher-cost plant in our fleet because of its use of high-grade ore. And therefore, you know, the benefits of the closure is to more fully test the remaining plants and to reduce our dependence on high-grade ore.

So, I think those together will have, you know, a meaningful benefit, as we've disclosed. It's a $50 million run rate cost savings, again, which we would expect to start to see in a [Inaudible] form in the second half here, but obviously on a run rate basis starting next year.

Jeff Zekauskas -- JPMorgan Chase and Company -- Analyst

So, is the 50 million a net cost savings? Is that net or there's an off --

Mark Newman -- President and Chief Executive Officer

Yes, sir. Yes, sir, that's the net cost savings.

Jonathan Lock -- Senior Vice President and Chief Development Officer

That's the net cost savings on the EBITDA, Jeff. And then, obviously, as we disclosed in our -- you know, our press release and in our materials, there will be a $25 million cash impact during '23 and similar number in 2024 in order to effectuate those are cash costs associated with things like severance.

Jeff Zekauskas -- JPMorgan Chase and Company -- Analyst

OK, and for my follow-up, imports of titanium dioxide into China, as of about August last year, fell off a cliff. That is, maybe imports into China were something like 15,000 tons a month, and they fell to, I don't know, 4,000 tons a month. And they've stayed low since that time. Is that something which affected your decision? That is, is China now being more supplied by TiO2 companies in China? And secondly, in your comments, you said that the subsequent cost savings will be substantially closing the plants.

What is that about that is -- is there a cost savings that's above that 50 million starting in '24 that's meaningfully above?

Mark Newman -- President and Chief Executive Officer

So, Jeff, clearly there is a fixed cost savings by eliminating a plant. Obviously, there will be a continued focus on optimizing the remaining circuit. And obviously, the remaining circuit will use a wider variety of ores. But What we've disclosed for now is the fixed cost savings, you know, which we believe we will achieve as a result of that.

Just to comment on China. You know, again, I think there was a lot of euphoria earlier this year with the change in COVID-19 and the expectation that the China economy would come roaring back. And obviously, that hasn't happened. High-grade pigments into China are tied to some degree on high-end local consumption, but a lot to do with exports from China and things like furniture and other durable goods, which, you know, have also been down.

Our view is high-grade imports into China are not necessarily being substituted by Chinese producers, but the demand is being impacted by where those products go into in terms of high-end furniture and laminates for export, which are also tied to both a weaker economy in Europe and weaker construction in North America.

Jeff Zekauskas -- JPMorgan Chase and Company -- Analyst

Thank you very much.

Operator

There are no further questions at this time. Mark Newman, I turn the call back over to you.

Mark Newman -- President and Chief Executive Officer

Jeannie, thank you, and thanks, everyone, for your interest. Again, we continue to be very active in terms of driving our five key strategic priorities. And I just really want to take this opportunity to thank our entire team of employees who are passionate and focused about moving the company forward. So, thanks again, and we'll look forward to catching up with some of you on the road.

Operator

[Operator signoff]

Duration: 0 minutes

Call participants:

Brandon Ontjes -- Vice President, Investor Relations

Mark Newman -- President and Chief Executive Officer

Arun Viswanathan -- RBC Capital Markets -- Analyst

James Cannon -- UBS -- Analyst

Jonathan Lock -- Senior Vice President and Chief Development Officer

Duffy Fischer -- Goldman Sachs -- Analyst

John McNulty -- BMO Capital Markets -- Analyst

Unknown speaker

Dan Rizzo -- Jefferies -- Analyst

Mike Leithead -- Barclays -- Analyst

John Roberts -- Credit Suisse -- Analyst

Jeff Zekauskas -- JPMorgan Chase and Company -- Analyst

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