Titanium dioxide (TiO2) and fluorochemicals producer
The Chemours Co. has refuted accusations made by Citron
Research, which said the company was "a bankruptcy waiting to
happen" owing to its high debt and environmental liabilities.
In a statement released by the company, Chemours said it
"strongly refutes the report by Citron Research" pointing to
its "five-point transformation plan" which was launched shortly
after it was spun-off from parent company DuPont in July last
Announced in 2013, Chemours said that, since the spin off,
the company had taken "swift and decisive action under this
plan and has already delivered significant cost reductions
while strengthening its liquidity position", adding that it was
making major investments in key growth initiatives.
However, its rebuttal failed to address a number of other
issues raised by Citron Research, including the environmental
liabilities the company may potentially face as a result of
Dupont’s previous activity in the sector.
In August last year, an Ohio woman was awarded $1.6m after
alleging that DuPont had contaminated drinking water and
contributed to the development of her kidney cancer. The
lawsuit could influence thousands of similar cases over the
discharge of perluorooctanoic acid, or C-8, a chemical used to
According to Citron, "the whole purpose of
Chemours’ existence was so DuPont could rid itself
of the black hole of environmental liabilities that will drag
down the company for years if not decades to come".
The research firm pegged Chemours’ potential
environmental costs at $5bn for medical monitoring, clean-up,
compensatory and punitive damages to victims and legal
It added that cases in the Mid-Ohio Valley are just the "tip
of the iceberg" and that damages are likely to span across 171
sites in the US in addition to worldwide locations.
Chemours, however, told IM that "while a
series of trials related to C-8 (also known as PFOA) began in
September 2015, DuPont is the named defendant in these
"Chemours may be required to indemnify DuPont based on the
separation agreement executed before the creation of Chemours
through the spin-off of DuPont Performance Chemicals," the
company added, but failed to elaborate further.
According to the company’s website, while
DuPont is the named defendant in the cases – six which
are expected to go to trial by the end of 2016 –
Chemours is now responsible to DuPont for the lawsuits going
Chemours said it is confident that DuPont acted reasonably
and responsibly at each stage in the history of C-8 and will
continue to vigorously defend against C-8 lawsuits.
Following the 2004 Leach Settlement – a class
action, Leach v. DuPont, filed in West Virginia in 2001 and
settled in 2004 – an independent Science Panel was
charged with determining whether there was any probable link
between PFOA among class members and human disease.
After years of study, the panel found probable links to six
conditions in 2011 and 2012; pregnancy induced hypertension,
kidney and testicular cancer, ulcerative colitis, thyroid
disease, and diagnosed high cholesterol.
No bull case
In its research note, Citron said it had attempted to put
together scenarios with a positive outlook for Chemours but had
"come up empty handed".
While pigment producers are struggling to implement price
increases across the board both in China and in the rest of the
world, Citron has argued that a best case scenario for 2016
would be a stabilisation in prices and that Chemours is
unlikely to see much growth in this area, as the recent price
rises by major TiO2 producers do not come close to
recouping the decline in global prices over the last two years,
which amount to more than $1,000/tonne.
Against a backdrop of declining net sales and profit
– Q1 sales fell to $1.29m, compared with $1.36m the
previous year, resulting in gross profit decreasing to $202m
from $252m the previous year – Chemours has emphasised
increasing uptake of its Opteon product as an area of
In May, Chemours announced it would be investing in new
Opteon capacity, with expected start up in the US and EU in
2018, tripling its capacity for low global warming potential
products for mobile air conditioning and refrigeration
However, Citron criticised this strategy as simply replacing
current business, while the company’s
transformation plan was described as "merely corporate
"Opteon sounds great, until you realise that
it’s simply a replacement for R134a, which is also
Chemours product, so it’s simply a cannibalisation
of existing business lines and existing EBITDA*," Citron said.
Chemours declined to comment on its outline for
TiO2, Opteon or criticism of its transformation plan
when contacted by IM.
*Earnings before interest, taxes, depreciation,