Executive Summary

Mixed Q2: revenue was stable sequentially but down year/year, while EPS plunged on Chemicals under-absorption; Real Estate tax reimbursements were a positive offset. Total net sales were $540.4M (vs $559.7M LY, $538.6M Q1), EPS was $0.03 (vs $0.70 LY, $0.59 Q1) .
Chemicals operating income fell to $10.3M from $40.5M YoY, driven by lower TiO2 prices, weaker export volumes, 81% plant utilization, and about $20M of unabsorbed fixed costs; currency helped OI by ~$14M in Q2 .
Real Estate recognized $17.2M of tax increment infrastructure reimbursements ($8.9M net, $0.31/share), boosting segment OI to $18.9M despite land revenue delays from permitting and approvals .
No earnings call transcript or formal guidance; dividend maintained at $0.08/share (payable Sep 25, 2025), indicating confidence in liquidity despite Chemicals headwinds .

What Went Well and What Went Wrong

What Went Well

Real Estate reimbursement recognition: “recognized tax increment infrastructure reimbursements of $17.2 million ($8.9 million, or $.31 per share, net of income tax and noncontrolling interest)” supporting operating income despite slower land-sale recognition .
Component Products strength: net sales rose to $40.3M (from $35.9M) with operating income up to $6.3M (from $5.1M), aided by government security and towboat markets with higher gross margins .
Corporate expense discipline: corporate expenses down 11% YoY in Q2, tied to lower litigation and remediation costs .

What Went Wrong

Chemicals compression: operating income dropped to $10.3M from $40.5M on lower TiO2 pricing, unfavorable mix, weaker export volumes, and “unabsorbed fixed production costs…approximately $20 million” as facilities ran at 81% utilization in Q2 .
Pricing and demand momentum stalled: average TiO2 selling prices declined 4% 1H25, and were 1% lower YoY in Q2, with customers hesitant to rebuild inventories amid trade/geopolitical uncertainties .
Higher interest burden: interest expense rose $1.9M YoY in Q2 from higher debt and rates tied to 2024 Kronos transactions; interest income also declined on lower rates and cash balances .

Financial Results

Metric	Q2 2024	Q1 2025	Q2 2025
Total Net Sales ($M)	559.7	538.6	540.4
EPS (Basic & Diluted) ($)	0.70	0.59	0.03
Operating Income ($M)	54.8	50.1	35.5
Operating Margin (%)	9.8% (54.8/559.7)	9.3% (50.1/538.6)	6.6% (35.5/540.4)
Net Income Attributable to VHI ($M)	19.9	16.9	0.9
Net Income Margin (%)	3.6% (19.9/559.7)	3.1% (16.9/538.6)	0.2% (0.9/540.4)
Interest Expense ($M)	11.9	13.2	13.8
Shares (Basic & Diluted, M)	28.5	28.5	28.5

Segment performance (Net Sales and Operating Income):

Segment	Net Sales Q2 2024 ($M)	Net Sales Q2 2025 ($M)	Operating Income Q2 2024 ($M)	Operating Income Q2 2025 ($M)
Chemicals (TiO2)	500.5	494.4	40.5	10.3
Component Products	35.9	40.3	5.1	6.3
Real Estate Mgmt & Dev.	23.3	5.7	9.2	18.9
Total	559.7	540.4	54.8	35.5

KPIs and drivers:

TiO2 YoY change (Q2): Volumes (1)%, Pricing (1)%, Mix (1)%, FX +2% .
1H25 pricing: average TiO2 prices -4% YTD; started 2025 +2% vs start of 2024; Q2 2025 prices -1% YoY .
Capacity utilization: 1H25 average 87% (93% Q1; 81% Q2) vs 93% 1H24 (87% Q1; 99% Q2) .
Unabsorbed fixed costs: ~$20M in Q2 2025 due to reduced operating rates .
Currency impact: Q2 net sales +$8M; Q2 operating income +~$14M .
Real Estate: tax increment reimbursements $17.2M in Q2 2025 ($8.9M net, $0.31/share) .
Corporate expenses: down 11% YoY in Q2 .
Interest expense: +$1.9M YoY in Q2; 1H25 +$3.8M YoY .

Guidance Changes

Metric	Period	Previous Guidance	Current Guidance	Change
Dividend per share	Payable Sep 25, 2025	$0.08 (prior quarter)	$0.08	Maintained
Revenue/Margins/OpEx/Tax	FY/Q3 2025	None provided	None provided	N/A

No formal revenue, margin, tax, or segment guidance was issued in the Q2 materials .

Earnings Call Themes & Trends

No Q2 2025 earnings call transcript was available; themes are drawn from Q4 2024 and Q1–Q2 2025 press materials.

Topic	Previous Mentions (Q4 2024)	Previous Mentions (Q1 2025)	Current Period (Q2 2025)	Trend
TiO2 demand/volumes & pricing	Demand improved; volumes +4% YoY in Q4; pricing +2% YoY Q4; 2024 volumes +20%, pricing -5%	Volumes +5% YoY; pricing +2% YoY; FX -3 pts; strong OI on higher production and lower costs	Volumes -1% YoY; pricing -1% YoY; mix negative; export weakness; North America stronger	Softening from Q1 to Q2; pricing momentum stalled
Capacity utilization/absorption	2024 at 96% utilization; big improvement vs 2023; unabsorbed costs down sharply	Q1 2025 at 93%; strong absorption aided OI	Q2 2025 at 81%; ~$20M unabsorbed fixed costs	Deteriorated QoQ
FX	Nominal Q4 impact; +$10M to 2024 OI	FX -$11M to Q1 net sales; -$5M to OI	FX +$8M to Q2 sales; +~$14M to OI	Beneficial in Q2
Real Estate execution	2024 land revenue affected by permit timing; reimbursements recognized $30.3M in 2024	Land revenue slower on permits/environmental approvals	$17.2M reimbursements recognized; land revenue slower due to permits/approvals	Mixed: reimbursements offset slower land sales
Interest/Leverage	Higher rates and debt post-2024 transactions lifted interest expense	Interest expense +$1.9M YoY in Q1	Interest expense +$1.9M YoY in Q2; lower interest income	Persistent headwind
LPC acquisition integration	Remeasurement gain recognized in 2024; integration benefits anticipated	Results include LPC as wholly-owned subsidiary	Continued integration; aim to realize synergies/innovations (forward-looking)	Ongoing

Management Commentary

Chemicals dynamics: “Operating income decreased… primarily due to… unfavorable fixed cost absorption due to reduced operating rates…, higher cost inventory produced in the first quarter and included in cost of sales in the second quarter and currency fluctuations…” with “unabsorbed fixed production costs…approximately $20 million” and utilization at 81% in Q2 .
Market conditions: “Global uncertainty related to U.S. trade policies, geopolitical tensions and… hesitancy by customers to build inventories… deferred any anticipated market recovery… impacted sales volumes and pricing momentum.” .
Segment positives: Component Products growth with higher sales and gross margin in both reporting units ; Real Estate recognized $17.2M in reimbursements despite delays from permits and environmental approvals .
Cost control and financing: Corporate expenses -11% YoY; interest expense higher due to 2024 debt transactions and balances; interest income lower on rates and cash .

Q&A Highlights

No Q2 2025 earnings call transcript or Q&A was available in the document set. We will update if a transcript is published.

Estimates Context

S&P Global consensus: No published consensus for Q2 2025 EPS or revenue was available; coverage appears limited. Values retrieved from S&P Global.*
Actuals vs estimates: Not applicable this quarter as consensus was unavailable; we do not characterize a beat/miss without a published consensus baseline.
Implications: In absence of estimates, revisions will likely focus on Chemicals’ margin trajectory (utilization/absorption) and cadence of Real Estate reimbursements rather than top-line surprises .
*Values retrieved from S&P Global.

Key Takeaways for Investors

Chemicals weakness is the core issue: utilization stepped down to 81% with ~$20M of under-absorption, compressing operating margin to 6.6% despite FX benefits; recovery hinges on pricing stabilization and higher run rates .
Mix/region matter: North America volumes held up better than exports; pricing declined 1% YoY with momentum deferred by inventory caution and macro/trade uncertainty .
Offsets help but are non-recurring/episodic: Real Estate reimbursements delivered a notable one-time boost; investors should model timing variability given permitting dependencies .
Cash discipline intact: corporate expense control and dividend maintenance at $0.08/share suggest confidence in liquidity even as interest costs run higher .
Watch 2H levers: normalization of plant utilization, lower-cost inventory flow-through, and any TiO2 pricing stabilization are catalysts for margin repair; conversely, prolonged export weakness would extend under-absorption .
Component Products provides steady ballast: sustained growth and higher gross margin across security and marine units offer earnings diversification .
Near-term trading setup: absent guidance and consensus, stock moves likely key off Chemicals volume/pricing datapoints and any signs of utilization lift; Real Estate reimbursement timing could introduce volatility around earnings prints .

Appendix: Additional Context (Prior Two Quarters)

Q1 2025: Net sales $538.6M; EPS $0.59; Chemicals OI $41.2M on higher volumes/prices and lower per-ton costs with 93% utilization; interest expense +$1.9M YoY .
Q4 2024: Net sales $480.9M; EPS $0.80; Chemicals OI $32.6M with improved volumes/prices and lower costs; full-year 2024 utilization 96%; significant environmental settlement and LPC remeasurement gain boosted FY results .

VALHI INC /DE/ (VHI)·Q2 2025 Earnings Summary