In June this year, I pitched my long call for The Chemours Company (NYSE:CC) on the basis of strong moats, strong financials, market folly by lumping Chemours as a "basic materials" stock, and an irrational pessimism on its stock price over ongoing litigation risks coupled with a weak industry cycle.
Following my call, Chemours announced weak Q2 2019 earnings results. In particular interest, Q2 2019 revenues year on year fell by 22% to $1.4b, largely due to weaker TiO2 demand. Also, EPS missed forecasts by 18 cents per share, which factored in a $7m charge in relation to its Fayetteville facility.
Moreover, new charges against chemical manufacturers (including 3M (MMM), Chemours and DuPont (DD)) have been filed for use of toxic PFAS (Per- and polyfluoroalkyl substances) in firefighting foams that might have led to contamination of potable water in the area.
Most recently, Chemours is suing DuPont in a case that alleges that DuPont had understated the valuation of maximum liabilities to be indemnified by Chemours in the 2015 Separation Agreement, and alleges that DuPont had "unilaterally" drafted the Agreement and it was "crammed down on [Chemours]." Chemours also argued that if the true value of the liabilities was stated, it would have been illegal for DuPont to spin off Chemours into a separate entity, under Delaware state law.
My thesis has not changed - in fact, it has gotten much stronger.
Nothing fundamentally has changed within the company that would materially affect Chemours' financial and operational position. With regards to the new events unfolding (and more events likely to come), I will address each challenge rationally while assigning a likelihood that Chemours can overcome them.
Weak product demand
Because of a weak economic outlook and a US-China trade war over our heads, Chemours (like all other material and chemical companies) has taken
