Valhi, Inc. — Second Quarter 2026 Earnings Summary

Financial Performance

• Net income attributable to Valhi stockholders was $22.3 million ($0.78 per share) for the second quarter of 2026, compared to $0.9 million ($0.03 per share) in the second quarter of 2025.
• For the first six months of 2026, net income attributable to Valhi stockholders was $24.3 million ($0.85 per share), compared to $17.8 million ($0.62 per share) in the same period of 2025.
• Total net sales were $606.1 million for the second quarter of 2026, up from $540.4 million in the second quarter of 2025.
• Total net sales were $1,166.2 million for the first six months of 2026, up from $1,079.0 million in the first six months of 2025.
• Total operating income was $67.7 million for the second quarter of 2026, compared to $35.5 million in the second quarter of 2025.
• Total operating income was $100.6 million for the first six months of 2026, compared to $85.6 million in the first six months of 2025.
• Interest expense increased $0.9 million in the second quarter and $2.4 million in the first six months of 2026 compared to the prior year periods, primarily due to higher overall debt levels and higher average interest rates.
• Corporate expenses were 2% lower in the second quarter and 5% lower in the first six months of 2026 compared to the prior year periods.
• Income tax expense for the first six months of 2026 included $2.0 million related to an uncertain tax position at the Chemicals Segment.

Business Segments and Product Lines

• Chemicals Segment:
  • Net sales were $558.1 million in the second quarter of 2026, an increase of $63.7 million (13%) from the second quarter of 2025.
  • Net sales were $1.1 billion for the first six months of 2026, an increase of $83.7 million (9%) from the first six months of 2025.
  • Operating income was $40.4 million in the second quarter of 2026, compared to $10.3 million in the second quarter of 2025.
  • Operating income was $54.9 million for the first six months of 2026, compared to $51.5 million for the first six months of 2025.
  • Sales growth was driven by market share gains and favorable currency exchange rates (primarily the euro), which increased net sales by approximately $10 million in the second quarter and $41 million in the first six months.
  • These gains were partially offset by lower average TiO2 selling prices and unfavorable impacts from lower selling prices and volumes in complementary businesses.
  • Average TiO2 selling prices increased 4% during the first six months of 2026.
  • The segment implemented price increases and surcharges in the second quarter of 2026 in response to higher operating costs.
  • Operating income improvements were driven by higher sales volumes, lower production costs (including feedstock), lower unabsorbed fixed costs, and cost reduction initiatives from Q4 2025.
  • Currency exchange rates decreased operating income by approximately $12 million in the second quarter and $18 million in the first six months of 2026.
• Component Products Segment:
  • Net sales were $43.6 million in the second quarter of 2026, up from $40.3 million in the second quarter of 2025.
  • Net sales were $84.2 million for the first six months of 2026, up from $80.6 million for the first six months of 2025.
  • Operating income was $8.9 million in the second quarter of 2026, compared to $6.3 million in the second quarter of 2025.
  • Operating income was $16.0 million for the first six months of 2026, compared to $12.2 million for the first six months of 2025.
  • Growth was driven by higher security products sales across healthcare, transportation, tool storage, and distributor markets, and higher marine components sales to the industrial market.
  • Operating income increases were due to higher sales and gross margins, predominantly at the security products reporting unit.
• Real Estate Management and Development Segment:
  • Net sales were $4.4 million in the second quarter of 2026, down from $5.7 million in the second quarter of 2025.
  • Net sales were $14.1 million for the first six months of 2026, down from $14.2 million for the first six months of 2025.
  • Sales decreases were due to a slower pace of development activity for previously sold parcels within the residential/planned community.
  • The first six-month decrease was offset by the first quarter sale of a final commercial parcel for $7.3 million.
  • The segment recognized tax increment infrastructure reimbursements of $16.7 million ($8.7 million net) in the first six months of 2026 and $17.2 million ($8.9 million net) in the first six months of 2025.
  • The segment sold its operational office building in the second quarter of 2026, recognizing a gain of approximately $5.8 million ($3.0 million net).

Risks and Challenges

• Potential risks include future supply and demand fluctuations, inability to realize expected cost savings, and difficulties integrating acquisitions into Kronos' operations.
• Risks include dependence on specific market sectors, cyclicality of businesses (specifically TiO2 operations), and customer/producer inventory levels.
• Risks include unexpected industry capacity expansion, changes in raw material and operating costs (ore, zinc, brass, aluminum, steel, energy), and implementation of tariffs.
• Risks include changes in raw material availability, general global economic and political conditions, and operating interruptions (labor disputes, natural disasters, fires, explosions).
• Risks include technology disruptions (cyber-attacks, software failures), competitive products, and competition from Chinese suppliers with less stringent regulatory requirements.
• Risks include customer and competitor strategies, potential consolidation of competitors or customers, and inability to retain key customers.
• Risks include fluctuations in currency exchange rates (USD, euro, Norwegian krone, Canadian dollar), decisions to sell operating assets, and timing of insurance recoveries.
• Risks include ability to renew or refinance credit facilities, maintain liquidity, and manage income tax audits or settlements.
• Risks include environmental matters, government laws and regulations (including lead pigment and TiO2 regulations), and resolution of pending litigation (NLI Holdings lead pigment and environmental matters).
• Risks include ability to comply with covenants, licenses, permits, and changes in construction costs in Henderson, Nevada.
• Risks include pending or future litigation related to CompX's use of permitted chemicals.

Other Key Points

• The Chemicals Segment's net sales growth included a favorable impact from currency exchange rates (primarily the euro) estimated at $10 million for the second quarter and $41 million for the first six months of 2026.
• Currency exchange rates negatively impacted the Chemicals Segment's operating income by approximately $12 million in the second quarter and $18 million in the first six months of 2026.
• The Real Estate Management and Development Segment recognized a $7.3 million revenue from the sale of a commercial parcel in the first quarter of 2026.
• The Real Estate Management and Development Segment recognized a $5.8 million gain on the sale of its office building in the second quarter of 2026.
• The Chemicals Segment implemented price increases and surcharges in the second quarter of 2026 to address higher operating costs.
• Cost reduction initiatives implemented in the fourth quarter of 2025 contributed to improved cost structure and operational efficiency in the Chemicals Segment.