科慕 (CC) 2026 年第 3 季法說會：AI 需求支撐 7.75 億至 8 億美元 EBITDA 展望

科慕公司 (NYSE: CC) 公布 2026 年第三季淨銷售額年增 3%，調整後 EBITDA 為 2 億美元。鈦白科技 (Titanium Technologies) 的價格成長與性能解決方案 (Performance Solutions) 的強勁需求支撐了業績，而北美固定式空調售後市場需求放緩，則給熱能與特種解決方案 (Thermal & Specialized Solutions) 帶來壓力。

重點摘要

• 第三季淨銷售額年增 3%，調整後 EBITDA 達 2 億美元，達到管理層預測區間的上限。
• 鈦白科技全球售價實現年增 10%。各區域價格均有改善，是推動獲利與毛利率提升的主要動力。
• 在資料中心、半導體及其他 AI 基礎設施應用的需求支撐下，先進性能材料 (Advanced Performance Materials) 旗下的性能解決方案銷售額年增 26%、季增 8%。
• 受到前一年與美國《AIM 法案》轉型相關的通路預先備貨影響，熱能與特種解決方案面臨 Opteon 混合冷媒需求疲軟。
• 科慕目前預計 2026 年淨銷售額將比 2025 年成長約 2%，調整後 EBITDA 為 7.75 億至 8 億美元。
• 儘管總體經濟仍具不確定性，管理層引述價格改善、成本控管措施及高價值產品組合成長，預計 2027 年獲利將實現成長。

關鍵財務數據

業務與營運績效

鈦白科技 (Titanium Technologies)

儘管房地產市況疲軟且整體總體經濟承壓，鈦白科技的獲利仍超越管理層預期區間。北美、拉丁美洲以及不含中國的亞太地區價格與出貨量改善，足以抵銷 EMEA（歐洲、中東與非洲）及中國市場需求的疲軟。

在過去一年宣布三次漲價後，全球價格年增 10%。科慕表示，公司持續專注於生產紀律、市場選擇性、法規執行與製造成本降減。

第三季包含約 500 萬美元因第三季與第四季之間的銷售與成本時間差所帶來的獲利效益。該時間差效應將對第四季獲利造成壓抑。

先進性能材料 (Advanced Performance Materials)

APM 受益於產品定價、出貨量改善以及向高價值性能解決方案產品轉移。性能解決方案目前已佔該業務近半比重，且銷售額創下年增 26% 的佳績。

管理層指出資料中心與半導體應用的訂單狀況強勁。APM 與 TSS 在 AI 基礎設施市場的銷售曝險已達 10%。

科慕還推出了針對 AI 基礎設施的 Faizeon 雙相液冷液產品系列。管理層將液冷視為長期的策略市場，並表示專為雙相冷卻設計的資料中心架構可能會在 2027 年出現。

熱能與特種解決方案 (Thermal & Specialized Solutions)

TSS 的業績反映出北美固定式空調售後市場對 Opteon 混合冷媒的需求較弱。去年同期則受惠於與美國《AIM 法案》規範下固定式空調技術轉型相關的初期通路鋪貨。

售後市場出貨量下降及硫磺成本上漲對獲利形成壓力。科慕表示，價格調整行動抵銷了原料成本增加的影響，目前預計這些原料投入不會再有進一步變化。

在低全球暖化潛勢 (GWP) 系統安裝基數擴大、OEM 合作關係及售後通路支援下，管理層對 TSS 的長期前景保持信心。公司繼續將 TSS 定位為成長超越 GDP 的業務，長期調整後 EBITDA 毛利率高於 30%。

管理層指引

展望第四季，TSS 淨銷售額預計將比上季下降 10% 後段至 20% 出頭，調整後 EBITDA 為 1.05 億至 1.15 億美元。管理層將此下滑主要歸因於北美冷氣季節結束的正常季節性因素。

TT 淨銷售額預期將季減高個位數至 10% 低段，調整後 EBITDA 預計為 6,000 萬至 6,500 萬美元。此展望反映了終端市場疲軟、正常季節性因素以及第三季時間差收益的迴轉。預計全年度價格仍保持高個位數年成長。

APM 淨銷售額預期將季增 10% 低段至中段。在性能解決方案需求與製造改善的支撐下，預測調整後 EBITDA 為 4,000 萬至 4,500 萬美元。不過，管理層仍維持 2027 年常態化單季調整後 EBITDA 為 3,000 萬至 4,000 萬美元的預測區間。

風險與關注焦點

• 房地產及數個工業終端市場的需求依然疲軟，特別是在 EMEA 及中國地區。
• 在一次性的固定式空調技術轉型之後，TSS 售後市場的可見度依然有限。管理層預計 2027 年第一季末將出現更明確的需求訊號。
• 全球二氧化鈦 (TiO2) 市場競爭依舊激烈，歐洲產能重啟與中國出口仍存在不確定性。
• 自由現金流受到紐澤西州、北卡羅來納州與美國國家環保局 (EPA) 和解支付款、交易稅、計畫性維護以及營運資金時間差的影響。
• 管理層預計不確定的總體經濟狀況將持續至 2027 年。

分析師問答焦點

管理層表示，TSS 獲利從第三季到第四季的季減程度大致符合歷史季節性，較少歸因於經銷商去庫存。近期第四季的訂單顯示通路庫存可能正在趨於穩定，但可見度仍需等到 2027 年冷氣季節臨近時才會進一步改善。

關於 APM，管理層指出半導體與資料中心需求持續強勁，致使 2027 年可能仍難以趕上積壓的訂單需求。該公司正以高開工率運作資產以滿足客戶需求。

科慕意圖透過有紀律的商業執行來維持近期 TT 的漲價成果。管理層亦表示，將積極維護美國二氧化鈦 (TiO2) 市場的公平貿易，並預期印度的反傾銷措施在解決先前的技術問題後將長期有效。

自由現金流預測的下修主要反映了法律和解金支付、觀音廠處分收益相關稅金、計畫中的 APM 與 TSS 維護作業，以及第四季末銷售收款的時間差。管理層指出，若不計入新納入的和解金與稅金項目，自由現金流轉化率本會更接近先前預期的 25%。

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管理層陳述

Operator

Good morning. My name is Marvin, and I'll be your conference operator today. I would like to welcome everyone to Chemours Company Third Quarter 2026 Results Conference Call. [Operator Instructions] I would like to remind everyone that this conference call is being recorded.

I would now like to hand the conference call over to Brand Ontjes, Vice President, Head of Strategy and Investor Relations of Chemours. You may begin your conference.

Brandon Ontjes

Good morning, everybody. Welcome to the Chemours Company's Third Quarter 2026 Earnings Conference Call. I'm joined today by Denise Dignam, Chemours' President and Chief Executive Officer; and our Senior Vice President and Chief Financial Officer, Shane Hostetter.

Before we start, I would like to remind you that comments made on this call, as well as in the supplemental information provided 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 or new information.

During this call, we 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 is included in our press release issued yesterday evening. Additionally, we also posted our earnings presentation on our website yesterday evening.

With that, I will turn the call over to Denise Dignam.

Denise Dignam

Thank you, Brandon, and thank you, everyone, for joining us this morning. On today's call, I'll start with highlights from our third quarter performance before turning it over to Shane to walk through our fourth quarter outlook and initial perspectives on 2027. I'll then close with an update on our strategic execution under Pathway to Thrive.

Our third quarter results reflected strong year-over-year performance in Titanium Technologies and Advanced Performance Materials, paired with disciplined commercial and operational execution across the company despite weakening macroeconomic conditions across our key end markets.

Net sales were up 3% year-over-year as expected, driven by continued pricing momentum in TT and growth of 26% in APM Performance Solutions business, more than offsetting the anticipated softness in TSS due to expected weaker demand in the North American stationary AC aftermarket for Opteon blends. Adjusted EBITDA was $200 million at the high end of our guidance range with all businesses contributing above expectations.

With this update, I also want to highlight the progress that we've made under Pathway to Thrive to derisk our balance sheet through continued efforts to reduce litigation exposure and address leverage. On the litigation front, we were able to reach a settlement with the state of North Carolina and 11 local entities to resolve claims of PFAS and other discharges from our Fayetteville Works site as well as those unrelated to our site.

In addition, we received final approval of the Judicial Consent Order with the State of New Jersey. This was a meaningful step toward completing our settlement and establishing previously agreed funding from our MOU partners to support settlement payments over decades. These developments reflect our continued focus on derisking the balance sheet.

With this, let me expand on the quarter's business activities. In TSS, third quarter performance reflected the anticipated softness in the North American stationary AC aftermarket. Demand for Opteon blends was lower compared with the prior year period, which benefited from the initial channel fill associated with the stationary AC technology transition under the U.S. AIM Act.

While lower aftermarket volumes and higher input costs weighed on earnings in the quarter, we remain confident in the long-term fundamentals of TSS. We believe that the expanding installed base of lower GWP systems and our advantaged position with HVAC OEMs and aftermarket distributors will provide a strong foundation for future growth. As the 2026 cooling season comes to a close in North America, we continue to build on our advantaged position, managing the business with discipline and positioning TSS to capture the attractive aftermarket opportunity in front of us.

Looking further ahead, the business' attractive growth is underpinned by our innovation-led foundation and our intellectual property portfolio, ensuring protection for the breadth of our Opteon products extending into the 2030s. In TT, third quarter performance reflected strong commercial execution against a challenging demand backdrop. Many of our customers continue to navigate a persistently weak housing market and broader macroeconomic uncertainty across most key end markets.

Even in this environment, the team delivered growth through a combination of pricing and volume improvement with strength in North America, Latin America and Asia Pacific outside of China, more than offsetting softer demand in EMEA and China. This execution helped us deliver earnings above the high end of our range. As an additional point, this quarter did include approximately $5 million of earnings benefit from sales and cost timing between the third and fourth quarter.

Importantly, global pricing increased 10% year-over-year in the third quarter, underscoring the success and discipline of the global pricing increases we executed over the past year. Pricing improved across every region and was the primary driver of the significant year-over-year increase in earnings and margin. This performance demonstrates the value of our differentiated Ti-Pure products, consistent commercial approach and the ability to execute pricing actions while continuing to deliver the quality and service our customers expect. While housing and other key end markets remain under pressure, we are confident in the actions we are taking to strengthen TT through the cycle.

Our work to optimize our manufacturing circuit to demand with a focus on pricing execution, regulatory diligence and market selectivity underpinned by cost reduction efforts have been key elements to enhance the value in a competitive TiO2 market. We will continue to control what we can control and remain ready to capture the opportunity as market conditions change.

In APM, third quarter performance reflected continued progress toward a higher-value portfolio mix. The business delivered year-over-year growth despite mixed conditions across broader industrial end markets, supported by pricing, improved volumes and strong momentum in Performance Solutions. This deliberate mix shift also contributed to meaningful year-over-year improvement in earnings and margin.

Notably, Performance Solutions sales increased 26% year-over-year and 8% sequentially, underscoring the robust demand signals we continue to see from certain end markets, inclusive of those in the AI infrastructure and semiconductor space. Continued order book strength across data center and semiconductor applications demonstrate the critical role of our differentiated products now approaching nearly half of Performance Solutions, enabling increasingly complex high-performance technologies.

As Performance Solutions becomes a larger part of APM, it reinforces our confidence in the business' path toward higher value growth and stronger earnings potential. More broadly, Chemours continues to expand its presence in attractive AI infrastructure end markets, inclusive of data centers and semiconductors with differentiated offerings across APM's Performance Solutions business and TSS. As of today, we have seen strong growth markets with our sales concentration across TSS and APM now at 10%.

With that, I'll turn it over to Shane to walk through our outlook as we move into the fourth quarter.

Shane Hostetter

Thank you, Denise, and good morning, everyone. As shared in the earnings materials available on our investor website, I would now like to discuss our expectations as we look ahead.

Beginning with TSS. For the fourth quarter, we expect TSS' net sales to decline sequentially in the high teens to low 20% range, reflecting traditional seasonal patterns as the North American cooling season concludes. We expect adjusted EBITDA to be between $105 million and $115 million, primarily reflecting the associated seasonal volume and mix impacts.

As we look ahead, we are watching the economy closely and monitoring key demand drivers across TSS, including OEM stationary HVAC unit shipments in North America as well as light vehicle builds. Given the seasonality of the business, we expect better visibility into the aftermarket as we move further into the first quarter of 2027 when seasonal restocking comes more into view. While the near-term environment remains dynamic, we remain confident in the business' long-term fundamentals, supported by our positions with OEMs and aftermarket distributors and disciplined commercial execution.

For our TT business, we expect TT's net sales to decline sequentially in the high single digits to low teens percentage range and adjusted EBITDA to range between $60 million and $65 million in the fourth quarter. These expectations reflect challenging end markets as well as normal seasonality, paired with the timing of earlier referenced sales and cost benefits in the third quarter, which will negatively impact fourth quarter earnings.

While the sequential outlook reflects these timing and seasonal factors, we continue to see weaker demand volumes across our key regions with some slight strength in Latin America, reflecting a challenging and competitive global demand environment. We also feel well positioned on pricing, anticipated to be up high single digits over the prior year, following the 3 announced increases over the past year. The traction achieved across regions reflects consistent execution, close customer engagement and our focus on protecting the value of our Ti-Pure offerings.

Longer term, we remain focused on controlling what we can control through commercial and operational agility, underpinning this value-focused approach. We are managing production to demand and advancing cost productivity across our manufacturing to strengthen earnings and cash flow through the cycle.

Turning now to our APM business. For the fourth quarter, we expect APM's net sales to increase sequentially in the low to mid-teens percentage range, driven by continued strength in Performance Solutions. We expect adjusted EBITDA to be between $40 million and $45 million, reflecting the benefit of higher sales and continued cost and operational improvements across APM's manufacturing circuit. The circuit is currently working well, and our focus remains on consistent execution and reliable customer service.

At the same time, the business is addressing broader demand tailwinds across AI infrastructure, data center, semiconductor and related end markets, where the quality and differentiated capabilities of our products continue to earn customer loyalty. These demand trends have strengthened the Performance Solutions order book and continue to support strong momentum from attractive end markets. As we fulfill that demand and shift the portfolio towards higher-value Performance Solutions products, we see a clear path to stronger earnings and sustained growth in APM.

Looking to our consolidated outlook, we now expect net sales to grow around 2% compared with 2025 and adjusted EBITDA to now be between $775 million and $800 million. As we move further into the fourth quarter, this outlook reflects broader pricing momentum in TT with seasonal volume decline, partially offset by anticipated cost improvements, continued APM demand strength in high-value end markets supported by operational improvements and stationary aftermarket weakness in TSS, which we expect will result in modestly lower earnings to close the year.

Looking at liquidity, we now anticipate free cash flow conversion to be between 15% to 20%, which reflects capital expenditures between $220 million and $230 million. This free cash flow conversion outlook reflects notable recent developments, most of which were not in our previous outlook. First, the increase in restricted cash related to the PFAS insurance proceeds MOU in connection with the finalization of the Judicial Consent Order with the State of New Jersey, which we expect to be more than offset by related legal settlement payments to the state of New Jersey and payments associated with our settlement with the State of North Carolina, both falling in the third and fourth quarters.

These dynamics, together with timing of our net working capital spend, partly related to turnaround plans at APM, have lowered our cash flow projections for the remainder of the year. Transaction taxes associated with the sale of our Kuan Yin property of approximately $25 million also impacted the third quarter with the remaining $5 million in the fourth quarter.

Our net leverage ratio is now expected to be below 4.2x adjusted EBITDA at the end of 2026. Related to our leverage position, we have continued to prioritize debt repayment. In the third quarter, we prepaid an additional EUR 50 million of our euro Term Loan B, bringing total debt reduction for the year to EUR 280 million.

Additionally, as anticipated, we closed the sale of the final parcel of land associated with our former manufacturing facility in Kuan Yin, delivering the remaining approximately $56 million of consideration from the transaction. This land sale, completed earlier than anticipated, marks the conclusion of a multiyear effort by our team and underscores our ability to rightsize our operational footprint, drive smart cost-cutting initiatives, maximize the value of our noncore assets and deploy proceeds in a responsible fashion.

Going forward, we will continue to prioritize debt reduction as a key element of our capital allocation strategy, strengthening the Chemours balance sheet and enhancing our long-term financial flexibility. The work to derisk our balance sheet is foundational to executing the 4 pillars of our Pathway to Thrive strategy.

As we look ahead to 2027, we expect uncertain macroeconomic conditions to persist. We remain focused on controlling what we can control and are confident in the cost measures we have taken and the improvements we are driving across our operational circuit through the Chemours Business System to strengthen our resilience and execution. Even in this challenging environment, we expect Chemours to deliver earnings growth in 2027.

With that, I'll turn the call back over to Denise for her closing remarks.

Denise Dignam

Thank you, Shane. As we move into the second half of our Pathway to Thrive strategy, we continue to make progress across all 4 pillars: operational excellence, enabling growth, portfolio management and strengthening the long term. Run rate cost savings, improved operational stability and strong growth in TSS' Opteon low GWP refrigerants, TT and APM Performance Solutions all reflect our focus on execution over the course of Pathway to Thrive. We also recently completed the sale of our former Kuan Yin site, strengthened our balance sheet through debt reduction and reduced our litigation exposure through the North Carolina settlement and the final approval of the New Jersey Judicial Consent Order supported by our MOU partners.

Importantly, the related payments are expected to occur over decades under the MOU framework. We will continue to take a disciplined approach to addressing legacy matters in a way that protects our balance sheet. Additionally, we have strengthened the long term of Chemours through sustainability actions.

As highlighted in our 2025 sustainability report published this past August, we have reduced air and water process emissions of fluorinated organic chemicals by 80% since 2018, keeping us on track toward our goal of 99% or greater reduction by 2030. This progress reflects our continued investment in advanced emissions detection and abatement technologies and our commitment to responsible manufacturing, which protects our privilege to operate and positions Chemours to thrive for the long term.

Over the same period, we have also reduced our Scope 1 and 2 greenhouse gas emissions by 57%, nearing our goal of a 60% reduction by 2030, which highlights our innovation. I also would like to highlight the launch of the Faizeon product portfolio, our two-phase liquid cooling fluids designed to help meet the rapidly growing cooling requirements of AI infrastructure in a new valuable end market for Chemours. We created the Faizeon brand to give our growing portfolio a clear, dedicated identity in the liquid cooling data center market, bringing together years of fluid development, technical expertise and industry collaboration under one brand.

Looking ahead, I remain excited about our trajectory and the future value we will create. Our strength lies in our 3 market-leading businesses, differentiated solutions and attractive end markets. Building on the progress we have made under Pathway to Thrive, we are well positioned to deliver the long-term shareholder returns while extending our leadership in data center, semiconductor and related AI infrastructure markets and realizing our potential in growth markets such as liquid cooling and critical minerals.

Finally, we believe the future for Chemours is one of growth and exciting possibilities, and none of it will be possible without our employees around the world who live our values every day. I want to thank them for their continued focus, humility, transparency and tenacity.

With that, I'd like to open the line for your questions.

Operator

[Operator Instructions] Our first question comes from the line of John McNulty of BMO.

分析師問答

Caleb Boehnlein

This is Caleb on for John. Denise, you mentioned earlier that you saw higher input costs in TSS. Was that higher R-32? Or was that something else? And then maybe just looking to next year, what are your expectations for TSS input costs through the year and what that looks like with R-32 pricing in China and India looking like it's stepped up decently throughout the year?

Denise Dignam

Sure. I mean, the primary input cost increase that we see is really sulfur. That's the beginning of the supply chain for our TSS business. But we've been really able to overcome that with our pricing efforts with the excellent commercial work of the team. We don't see any further changes in those raw material inputs.

Caleb Boehnlein

Got you. Okay. And then for APM with the Q4 guide at $40 million to $45 million, that's above like the historical range you've talked about for business at $30 million to $40 million. Should we assume that, that $40 million to $45 million range is kind of like the fair normalized run rate that we expect in '27?

Shane Hostetter

Caleb, thanks. As we look at Q4, there is definitely strength in the Performance Solutions that's driving that business. And there's a little pent-up demand given some of the operational items that happened in Q2 and Q3. Looking ahead, right, we still feel confident in that $30 million to $40 million range per quarter going into next year.

Operator

Our next question comes from the line of Aleksey Yefremov of Barclays.

Unknown Analyst

This is [ Ryan Weiss ] on for Aleksey. I just wanted to maybe dig into TSS a little bit more. I just get an understanding of -- you talked about less favorable seasonality. How much of that kind of reflects normal seasonality that you see kind of 3Q to 4Q versus like the distributor destocking that you're seeing? And then when do you kind of expect the channel inventory to clear?

Denise Dignam

Yes. So I mean, I think, first of all, I'll just remind that this is a onetime transition. It's really the first time this has been done and kind of transitioned overnight. When we look into -- as you get into the fourth quarter, that's when the market seasonality really starts to see the aftermarket is a pretty low demand.

We have seen signs -- some positive signs of orders have been coming in, in the fourth quarter, which gives us some confidence that the market has stabilized. The inventory has stabilized, but it's really going to take us until we get into the first quarter, I would say, towards the end of the first quarter as we see the cooling season, in particular, in the Northern Hemisphere for us to really understand and get a better line of sight of demand, in particular, in the aftermarket.

Shane Hostetter

And just to add on from a financial perspective, we received your question around seasonality. If you look at legacy seasonality in past quarters from third quarter to fourth quarter, the drop in earnings is really aligned to what we're seeing here. And as Denise mentioned, I think it's less on the destocking, more just seasonality.

Unknown Analyst

Great. And then, Denise, a question for you. Just one of the trade rags kind of flagged increasing Chinese imports of TiO2 flowing into the U.S. following some of the antidumping duties that have maybe been placed in other countries. Have you guys seen any pressure from this to date? And then do you think that pursuing an ADD in the U.S. would be something if current tariff protections aren't enough?

Denise Dignam

Sure. Thanks for the question. I mean it's still -- I mean, imports into the U.S. are still pretty modest relative to places around the world. But I can tell you, we take a very, very serious stance on protecting our fair trade -- the fair trade markets. There's been -- and I think it's been very successful. I mean you see when the trade barriers come up, the Chinese exports into the regions really weaken.

So -- and there's just a lot of trade actions going on. Japan and Australia have put an ADD investigation in. We -- the India ADD rates have been approved. There's strong ADD in the U.K. EU is reevaluating the effectiveness, and we have production in Mexico, and that's certainly an area where we are focused. The Trump administration in 2019 put in trade tariffs on the imports of TiO2 into the U.S. And just to kind of reinforce, we will aggressively defend the U.S. market.

Operator

Our next question comes from the line of Pete Osterland of Truist Securities.

Peter Osterland

So first, just on the formal launch of the liquid cooling portfolio, curious as to the timing for announcing that now. Is this an indication that you're expecting a meaningful ramp for sales of these products near term? And maybe across the 5 products that you outlined on Slide 11, where are you seeing the most customer interest right now? And how do you see that evolving over time?

Denise Dignam

Thanks for the question. First of all, we're really excited about the launch of this brand. This is the first brand that Chemours has launched. So we see this as a very strategic new market for us with significant long-term growth. We definitely see the momentum building as you see more advanced chips.

As you look at what's going on in the market, there's definitely been a transition to single-phase direct-to-chip, but as you get higher rack densities, that's going to become an inefficient solution for the more advanced chips. You're going to need more water, more treatment of water, different size tubing. It's not going to be the most efficient. So we think that there is in -- possibly in 2027, it's something clearly that we're working on with the -- our customers that there could be a data center architecture designed for two-phase in 2027.

Peter Osterland

Very helpful. And then just as a follow-up, I wanted to ask on Pathway to Thrive. Could you share the run rate of the $250 million that you expect to have achieved exiting '26? And for the rest of it, what are the major areas where you still have work to do to get to that target by the end of '27?

Shane Hostetter

Appreciate the question. We feel very confident in achieving those savings and believe we're ahead on that side. And as you think about what's driving that, it's really operational excellence. We introduced the Chemours Business Systems, which I think is really being helpful from a lean mindset and driving out costs locally at the manufacturing sites, but also this is a global company-wide area where we've done a lot of perspectives around cost cutting and thinking through making sure from a lean perspective, it's not just in manufacturing, but it's across all BUs of the company.

Operator

Our next question comes from the line of John Roberts of Mizuho.

John Ezekiel Roberts

On APM, have you caught up with the delayed orders from the outage that you had earlier in the year? Or when do you think you'll get caught up? And how is that affecting your mix in that segment?

Denise Dignam

Yes. I mean the -- I'm just going to say across the semicon space and data center space, the demand is so robust. I think it's -- for most people, it's hard to get caught up, right? It's just a tremendous demand. So what we see is that we're running our assets extremely well and that we're taking advantage of every opportunity.

And we have a lot of strategic partners in this area, and it's incredibly important for us to meet their needs and to fulfill the demand. So this idea of catching up, I don't think that going into '27, there's just a huge pent-up demand. As you think about these AI chips and the need for memory, it's just -- it really is kind of out of control. So I don't really see us necessarily catching up in some of these spaces next year. It's going to be continued strong demand.

Operator

Our next question comes from the line of Duffy Fischer of Goldman Sachs.

Patrick Fischer

First question, just if you could help us with what you think the right baseline is for TSS in the back half. So last year, you did $322 million of EBITDA, which obviously has some oversell in it. This year, at the midpoint for your Q4, you're $246 million, which has some undersell. As we go forward, what's the right baseline of EBITDA do you think that we should build off of into '27 and '28 for the second half of TSS?

Shane Hostetter

Duffy, appreciate that. As we think of the baseline stepping off of this, we think about the year ahead of us into '27, we're looking at the markets from an underlying perspective, we feel very confident in the chillers market with significant growth.

Denise just mentioned kind of the AI demand in areas there. I see modest growth in the auto side, just given just overall light vehicle sales and then flattish residential and commercial. So as we look ahead to '27, we see this as more kind of a modest top line growth on that side. But longer term, we feel very confident. We continue to put forward that this is a GDP plus type business with margins above the 30% type range. And so really feel confident as we think about the aftermarket growth story as well as the stable base that we have within the OEMs rather.

Patrick Fischer

All right. And then if we jump to TiO2, 2 questions. Do you think the India ADD will be durable this time? And some of your peers are quite a bit larger in that market than you are. If it is durable, is that a market that becomes more interesting to you? And will you push harder into that market?

Denise Dignam

Yes. I mean, I do think that the antidumping will be durable. It really was taken off just because of a technicality that they've resolved. So I do think it will be durable. Although when you look at global pricing, India is kind of the lowest pricing in the world. So we have a very disciplined commercial approach where we are focused on fair trade regions, but also making sure we maximize the value for the company. So if opportunities arise, absolutely. But I think that, that remains to be seen if that's a place where we decide to put more volume.

Operator

Next question comes from the line of Josh Spector of UBS.

James Cannon

You got James Cannon on for Josh. I wanted to take another one just on kind of what the underlying run rate in TSS is? And if I think about the moving pieces between a stronger first half, weaker second half this year, where do you guys think the full year nets out compared to the underlying stationary HVAC market?

Denise Dignam

Thanks, James. Maybe I'm going to turn it over to Shane for some of the detail, but I just really want to kind of take us back and really the strength of the TSS business and our longer-term view of this being a GDP-plus business with greater than 30% EBITDA margins. This is a business that's driven by regulatory transition. We have an advantaged position.

There's significant growth still ahead. You can look at the aftermarket, but as well as you look at the continued trends that are needed in cooling, we talked about liquid cooling in data centers, but there's also just the cooling needs in areas and the chillers in the data center. So we're very, very confident in the long-term trajectory of this business.

But I'll turn it over to Shane to give a little bit more detail on the next year.

Shane Hostetter

Yes. I appreciate it, James. I know you mentioned kind of the run rate in TSS. I think as we look to '27, right, we talked about growth in Chemours as this is on the script, but we feel very confident in some tailwinds as we look at each one of the businesses. I mean, TT, if you look at the second half, right, it's $85 million this quarter and then $60 million to $65 million. We think that second half is more representative going to '27, specific to really strong pricing that we think is going to hold into the year.

And then APM, we talked earlier about it being run rate of $30 million to $40 million. So really a good tailwind as we get in. That, coupled with modest growth, as I described, given the overall macro changes between significant growth in chillers, slight auto growth and flattish residential, we feel very confident that Chemours is going to grow next year.

Operator

Our next question comes from the line of Hassan Ahmed of Alembic Global Advisors.

Hassan Ahmed

A question around TT. Obviously, pricing was decently strong. I mean, you guys were up 10% year-on-year and 4% sequentially. Could you comment a bit about just the sustainability of those sort of pricing moves that you've taken? I know you guys are guiding to sort of high single digits to low sort of teens revenue declines in Q4. But as we look at 2027, how sustainable are these pricing levels?

Denise Dignam

Thanks, Ahmed. As you know, we don't give forward guidance on pricing, but I will say we've been very successful with our pricing execution, which we started really December of '25. So we've been very successful, and we are very much focused on protecting the progress that we made. We're very deliberate and disciplined in our commercial efforts.

And as you pointed out, you can see that in our results. We're also kind of looking around the world and actually pleased to see that the Chinese producers have just recently done another price increase. So we're just confident in our actions and what we do to deliver value for the business.

Hassan Ahmed

Understood. And as a follow-up, can you comment a bit on the cost curves? I know you guys, obviously, in 3Q within TT expanded your margins. But how is -- how are the marginal guys doing, particularly with sulfur still being an issue, sulfuric acid prices still being high? And part and parcel with that, are you guys seeing any further signs of rationalization in the global TiO2 space?

Denise Dignam

I would say from a cost curve perspective, certainly, the sulfur producers have moved to the right, and we continue to move to the left with all of our efforts. This has been our strategy as we kind of launched all of our efforts in TT in 2023, and we continue to drive and be on that on that trajectory, we think that's critically important for the business. As far as permanent shutdowns, I mean, we're not really sure you see things coming back, in particular in Europe.

What I will say is it still remains to be seen how successful those restarts will be. Customers are cautious about relying on those assets and is it long-term sustainable. So we just focus on our production and some of those assets, they were shut down because they're high cost. That's not going to change. So we really think the winning strategy is to continue to -- on the current trajectory of driving our cost to the left-hand side of the curve.

Operator

Our next question comes from the line of Vincent Andrews of Morgan Stanley.

Justin Pellegrino

This is Justin Pellegrino on for Vincent. I was just hoping you could kind of discuss the drivers of the free cash flow guidance reduction a little bit more. You mentioned the items that are new for 3Q and 4Q, but 3Q came in a bit ahead of guidance. So I was just hoping you could kind of parse out the split between 3Q and 4Q timing and specifically when the North Carolina settlement is expected if that was in 3Q and 4Q? And just any other drivers that we should be considering within that guidance?

Shane Hostetter

Yes. Thanks for the question. A couple of specifics, right? So the North Carolina settlement is expected in the fourth quarter on that side. And so as I think about just taking a step back and where we're guiding, we're guiding to above 15% free cash flow. That is a reduction given we had settlements for New Jersey with the JCO signing, we have the North Carolina settlement which would be in the fourth quarter. We have the EPA settlements, which will be in the fourth quarter as well.

And then we also paid tax on the proceeds in the third and fourth quarter. The way I look at this is without those items, we'd be closer to that 25% that we guided to in the third quarter. So notably, we are seeing a little bit of reduction from free cash flow in the latter part. That is due to really timing as it relates to APM, TSS planned maintenance activities as well as later sales in the fourth quarter, which we anticipate to collect, call it, in the first quarter. So all in all, just lead us -- we really feel confident in the free cash flow characteristics of this business, and we'll look to build off the free cash flow conversion into the next year that we've established this year.

Justin Pellegrino

Fantastic. And then just one more on CapEx, just given the $40 million reduction in guidance, can you just kind of fill us in on where we are relative to sustaining CapEx? And then if you have any preliminary expectations for 2027, that would be great.

Shane Hostetter

Yes, I appreciate the question. As we think about CapEx, right, we are obviously looking at what needs to be spent to run and maintain the related assets and operations, and we're not impacting that, right? There are some items around maybe strategic areas that are not yet ready that we might have to spend next year or the years after. As I think about '27, we won't give specific guidance on CapEx, but I do not believe that it will be a large amount of increase into the given year into next year.

Operator

We have reached the end of our question-and-answer session. Thank you for joining the Chemours Third Quarter 2026 Results Conference Call. You may now disconnect.