Valhi Inc.

Company Overview

Business Model: Valhi, Inc. is primarily a holding company that operates through its wholly-owned and majority-owned subsidiaries. These subsidiaries include NL Industries, Inc., Kronos Worldwide, Inc., CompX International Inc., Basic Management, Inc., and The LandWell Company. The company's operations are structured into three consolidated reportable operating segments: Chemicals, Component Products, and Real Estate Management and Development. The Chemicals Segment, operated through Kronos Worldwide, Inc., is a global producer and marketer of titanium dioxide pigments (TiO2) and related chemicals. The Component Products Segment, operated through CompX International Inc., manufactures engineered components such as security products and marine components. The Real Estate Management and Development Segment, operated through Basic Management, Inc. and The LandWell Company, focuses on developing and selling real property in Henderson, Nevada.

Market Position:

• Chemicals Segment (Kronos Worldwide, Inc.): A leading global producer and marketer of TiO2, Kronos Worldwide, Inc. is one of the top four producers worldwide, holding an estimated 6% share of global TiO2 sales volume in 2025. It is the largest TiO2 producer and chloride process TiO2 producer in Europe, with 45% of its 2025 sales volumes in European markets. Its estimated market share in Europe was 15% in 2025 and 19% in North America in 2025. The industry is characterized by high barriers to entry due to significant capital costs, proprietary technology, and long lead times for new facilities.
• Component Products Segment (CompX International Inc.): CompX International Inc. is a North American market leader in the manufacture and sale of cabinet locks and other locking mechanisms. The segment focuses on the middle and high-end market segments, where product design, quality, durability, and service are key competitive factors.
• Real Estate Management and Development Segment (The LandWell Company): The LandWell Company's residential/planned community in Henderson, Nevada, is positioned as unique within the greater Las Vegas area due to its location and amenities, which include 490 acres of community and neighborhood parks and open space.

Recent Strategic Developments:

• Chemicals Segment (Kronos Worldwide, Inc.):
  • On July 16, 2024, Kronos Worldwide, Inc. acquired the remaining 50% joint venture interest in Louisiana Pigment Company, L.P. from Venator Investments, Ltd. for $185 million (less a working capital adjustment and an earn-out payment of up to $15 million). In 2025, Louisiana Pigment Company, L.P. was merged into Kronos Louisiana, Inc.
  • In the fourth quarter of 2025, Kronos Worldwide, Inc. implemented workforce reductions impacting approximately 226 positions, resulting in $10.3 million in restructuring charges, as part of a plan to improve its long-term cost structure.
  • In 2024, Kronos Worldwide, Inc. closed its sulfate production line in Varennes, Canada, incurring $2 million in workforce reduction charges and $14 million in non-cash charges primarily related to accelerated depreciation.
  • In 2025, Kronos Worldwide, Inc. increased the maximum availability under its revolving credit facility from $300 million to $350 million.
  • On September 15, 2025, Kronos International, Inc. issued an additional €75 million of 9.50% Senior Secured Notes due 2029 to refinance its €75 million 3.75% Senior Secured Notes due September 2025.
• Real Estate Management and Development Segment (The LandWell Company):
  • In 2025, The LandWell Company completed the sale of the last remaining land parcel within its residential/planned community.
  • Construction on several large community-wide infrastructure projects for the residential/planned community began in late 2021 and is expected to be completed in 2027.
  • In November 2023, substantially all assets of Basic Water Company, a wholly-owned subsidiary of Basic Management, Inc., were sold following bankruptcy court approval. The bankruptcy case for Basic Water Company and its subsidiary Basic Water Company SPE I, LLC closed in July 2024, with $2.6 million in remaining cash distributed to Basic Management, Inc.
  • On December 1, 2023, Basic Management, Inc. sold its subsidiary Basic Power Company and its sewer system assets.

Geographic Footprint: Valhi, Inc. has a significant international presence, with substantial operations and assets located outside the United States, primarily in Europe and Canada.

• Chemicals Segment (Kronos Worldwide, Inc.): Sells products to approximately 3,000 customers in 100 countries, with the majority of sales in Europe, North America, and the Asia Pacific region. It operates four TiO2 plants in Europe (Germany, Belgium, Norway) and two in North America (Canada, U.S.), and an ilmenite mine in Norway. Approximately 64% of the Chemicals Segment's revenue in 2025 was from non-U.S. markets.
• Component Products Segment (CompX International Inc.): Manufactures substantially all of its products in the U.S. (Mauldin, South Carolina; Grayslake, Illinois; Neenah, Wisconsin) and primarily sells them in North America. It sources certain components from Asia, including China.
• Real Estate Management and Development Segment (The LandWell Company): Operates and develops real property exclusively in Henderson, Nevada, U.S.

Financial Performance

Revenue Analysis

Profitability Metrics:

• Gross Margin: 14.2%
• Operating Margin: 3.1%
• Net Margin: -2.6%

Investment in Growth:

• R&D Expenditure: $17 million (0.8% of revenue)
• Capital Expenditures: $46.6 million
• Strategic Investments: Kronos Worldwide, Inc. acquired the remaining 50% interest in Louisiana Pigment Company, L.P. for $185 million in 2024. The LandWell Company expects to spend approximately $39 million on land development costs during 2026.

Business Segment Analysis

Chemicals Segment (Kronos Worldwide, Inc.)

Financial Performance:

• Revenue: $1,859.4 million (-1.5% YoY)
• Operating Margin: -1.3%
• Key Growth Drivers: The segment experienced a 2% increase in sales volumes in 2025 compared to 2024, primarily due to market share gains in European, North American, and Latin American markets following the 2024 acquisition of Louisiana Pigment Company, L.P. Incremental market share increases in the European market in the fourth quarter of 2025 were also noted due to competitor plant closures. For 2026, the segment anticipates demand improvement from 2025 levels, supported by low customer inventories and seasonal restocking, particularly in North America. European volumes are also expected to increase due to industry capacity reductions.

Product Portfolio: Kronos Worldwide, Inc. offers a broad portfolio of over 30 different TiO2 pigment grades under the KRONOS® trademark, designed for specific end-use applications. Its core TiO2 pigments represented approximately 90% of the segment's net sales in 2025. Major customers are in the paint, plastics, decorative laminate, and paper manufacturing industries. Complementary businesses, comprising about 10% of net sales in 2025, include an ilmenite mine in Norway, and the manufacture and sale of iron-based chemicals and other specialty chemicals. Since 2020, Kronos Worldwide, Inc. has introduced eight new grades for pigments and other applications.

Market Dynamics: The TiO2 industry is highly competitive and cyclical, with demand generally linked to global GDP. Kronos Worldwide, Inc. is one of the top four global producers, holding an estimated 6% of worldwide sales volume in 2025. Its principal competitors include The Chemours Company, Tronox Holdings PLC, and LB Group Co. Ltd. The segment's average production capacity utilization rate was 77% in 2025, down from 96% in 2024, with a significant reduction to 55% in the fourth quarter of 2025 to align with lower customer demand. Raw materials include titanium-containing feedstocks (natural rutile ore, chlorine slag, ilmenite), chlorine, petroleum coke, and sulfuric acid. The ilmenite mine in Norway supplied all feedstock for its sulfate process TiO2 plants in 2025.

Component Products Segment (CompX International Inc.)

Financial Performance:

• Revenue: $158.3 million (+8.5% YoY)
• Operating Margin: 14.3%
• Key Growth Drivers: The increase in operating income in 2025 compared to 2024 was driven by higher sales and improved gross margin across both the security products and marine components reporting units. Higher sales were primarily due to increased demand in the government security market and higher marine components sales to the towboat, government, and industrial markets. The segment expects modest net sales growth in 2026, driven by anticipated sales increases in most security product markets (offset by softness in transportation) and growth in the industrial market for marine components.

Product Portfolio: CompX International Inc. manufactures security products, including mechanical and electrical cabinet locks and other locking mechanisms, used in diverse applications such as mailboxes, ignition systems, and tool storage. Its marine components include wake enhancement systems, stainless steel exhaust systems, gauges, and throttle controls, primarily for ski/wakeboard and performance boats. Key trademarks include CompX®, Security Products™ National Cabinet Lock®, and CompX Marine®.

Market Dynamics: The markets served by CompX International Inc. are highly competitive and mature. Competition is based on product design, quality, durability, price, on-time delivery, service, and technical support. Raw materials, including zinc, brass, stainless steel, and aluminum, are subject to price fluctuations. Total material costs represented approximately 43% of the segment's cost of sales in 2025, with commodity-related raw materials accounting for about 14%. One customer, United States Postal Service, accounted for 26% of the segment's consolidated net sales in 2025, and the top ten customers accounted for approximately 52%.

Real Estate Management and Development Segment (Basic Management, Inc. and The LandWell Company)

Financial Performance:

• Revenue: $59.3 million (-17.3% YoY)
• Operating Margin: 110.0%
• Key Growth Drivers: Operating income included $34.2 million in income related to tax increment reimbursement note receivables in 2025. The segment expects to recognize all remaining deferred revenue of $23.5 million (as of December 31, 2025) during 2026 from previously sold land. Approval for the remaining infrastructure reimbursement notes receivable, up to a $170 million cap, is also expected in 2026.

Product Portfolio: The segment's revenues are primarily from the development and sale of real estate in Henderson, Nevada, focusing on a 2,100-acre residential/planned community. All land in this community was sold in 2025. Approximately 8 saleable acres zoned for commercial and light industrial use remain adjacent to the community and are currently in escrow, with the sale scheduled to close by the end of the first quarter of 2026.

Market Dynamics: The LandWell Company competes with other residential communities in the greater Las Vegas area based on location, amenities, and quality of life. Land sales are typically made to established home builders. The segment's development obligations are estimated at $54 million and are expected to be completed by the end of 2027.

Capital Allocation Strategy

Shareholder Returns:

• Share Repurchases: Valhi, Inc. did not repurchase any shares of its common stock in 2023, 2024, or 2025. Approximately 0.3 million shares remain available for repurchase under existing authorizations as of December 31, 2025.
• Dividend Payments: Valhi, Inc. paid aggregate cash dividends of $9.1 million ($.32 per share) in each of 2023, 2024, and 2025.
• Future Capital Return Commitments: Kronos Worldwide, Inc. has approximately 1.0 million shares available for repurchase under its authorization. CompX International Inc. has approximately 0.5 million shares of its Class A common stock available for repurchase. Kronos Worldwide, Inc.'s board approved a quarterly dividend of $.05 per share in February 2026. NL Industries, Inc.'s board approved a quarterly dividend of $.10 per share in February 2026, and paid a special dividend of $.21 per share in August 2025.

Balance Sheet Position:

• Cash and Equivalents: $214.0 million (as of December 31, 2025)
• Total Debt: $591.7 million (as of December 31, 2025)
• Net Cash Position: $(377.7) million (Net Debt)
• Debt Maturity Profile: The majority of the company's debt matures in 2029, primarily consisting of Kronos International, Inc.'s 9.50% Senior Secured Notes.
  • 2026: $0.8 million
  • 2027: $24.5 million
  • 2028: $0.9 million
  • 2029: $556.3 million
  • 2030: $1.0 million
  • 2031 and thereafter: $6.2 million

Cash Flow Generation:

• Operating Cash Flow: $(35.5) million (use of cash) in 2025.
• Free Cash Flow: $(82.1) million in 2025 (Operating Cash Flow of $(35.5) million minus Capital Expenditures of $46.6 million).
• Cash Conversion Metrics:
  • Kronos Worldwide, Inc.'s Days Sales Outstanding (DSO) was 61 days in 2025 (down from 62 days in 2024). Its Days Sales in Inventory (DSI) was 57 days in 2025 (down from 82 days in 2024).
  • CompX International Inc.'s DSO was 33 days in 2025 (consistent with 2024). Its DSI increased to 108 days in 2025 (from 94 days in 2024).

Operational Excellence

Production & Service Model:

• Chemicals Segment (Kronos Worldwide, Inc.): Produces rutile TiO2 using both chloride and sulfate processes. The chloride process is preferred for coatings and plastics, while the sulfate process is used for specific paper products, ceramics, rubber tires, man-made fibers, pharmaceuticals, and cosmetics. The company "finishes" intermediate TiO2 pigments through proprietary processes to meet specific end-use applications. Kronos Worldwide, Inc. operates an ilmenite mine in Norway, which supplied all feedstock for its sulfate process TiO2 plants in 2025. Production levels are adjusted to align with customer demand, with reductions in 2023 and the second half of 2025 due to challenging economic conditions.
• Component Products Segment (CompX International Inc.): Manufactures engineered components, including security products (mechanical and electrical cabinet locks) and marine components (wake enhancement systems, stainless steel exhaust systems, gauges). The segment focuses on providing value-added custom engineered products.
• Real Estate Management and Development Segment (The LandWell Company): Acts as the master developer for its residential/planned community, undertaking property development and improvements after land sales.

Supply Chain Architecture: Key Suppliers & Partners:

• Chemicals Segment (Kronos Worldwide, Inc.):
  • Titanium-containing feedstock (chloride process): Rio Tinto Iron and Titanium Ltd (chloride process grade slag, upgraded slag) and Iluka Resources Limited (rutile ore). Contracts with Rio Tinto Iron and Titanium Ltd auto-renew every two years, extending in some cases through 2028.
  • Chlorine and Sulfuric Acid: Available from a number of suppliers.
  • Petroleum Coke: Available from a limited number of suppliers.
• Component Products Segment (CompX International Inc.):
  • Raw Materials: Zinc, brass (for security products); stainless steel, aluminum (for marine components). These are purchased from several suppliers and are generally readily available.
  • Components: Primarily electronic components sourced from suppliers in Asia, including China.

Facility Network:

• Manufacturing:
  • Chemicals Segment (Kronos Worldwide, Inc.): Four TiO2 plants in Europe (Leverkusen, Germany; Nordenham, Germany; Langerbrugge, Belgium; Fredrikstad, Norway) and two in North America (Varennes, Quebec, Canada; Lake Charles, Louisiana, U.S.).
  • Component Products Segment (CompX International Inc.): Three principal operating facilities: Mauldin, South Carolina (security products); Grayslake, Illinois (shared for security products and marine components); Neenah, Wisconsin (marine components). All are ISO-9001 registered.
• Research & Development: Kronos Worldwide, Inc. conducts R&D activities in Leverkusen, Germany.
• Mining: Kronos Worldwide, Inc. operates an ilmenite mine in Norway.

Operational Metrics:

• Chemicals Segment (Kronos Worldwide, Inc.):
  • TiO2 Production Volumes: 480,000 metric tons in 2025 (down from 535,000 metric tons in 2024).
  • Average Production Capacity Utilization Rates: 77% in 2025 (down from 96% in 2024). The fourth quarter of 2025 saw a rate of 55%.
  • Unabsorbed fixed production costs: $111 million in 2025, significantly higher than $12 million in 2024, due to reduced operating rates.
  • Global Total Frequency Rate (employees and contractors): 0.57 in 2025 (improved from 0.70 in 2024).
• Component Products Segment (CompX International Inc.):
  • Total Material Costs: Approximately 43% of cost of sales in 2025.
  • Commodity-Related Raw Materials: Approximately 14% of cost of sales in 2025.
  • Lost Time Incidents: 2 in 2025 (up from 1 in 2024).

Market Access & Customer Relationships

Go-to-Market Strategy: Distribution Channels:

• Direct Sales:
  • Chemicals Segment (Kronos Worldwide, Inc.): Sells a majority of its products through its direct sales force in Europe, North America, and other markets.
  • Component Products Segment (CompX International Inc.): A majority of sales are direct to large OEM customers through factory-based sales and marketing professionals.
• Channel Partners:
  • Chemicals Segment (Kronos Worldwide, Inc.): Utilizes sales agents and distributors in specific geographic areas, with agents exclusively selling KRONOS® branded products.
  • Component Products Segment (CompX International Inc.): Employs independent manufacturer’s representatives and a North American distribution network for locksmith and smaller OEM distributors (STOCK LOCKS® program).

Customer Portfolio: Enterprise Customers:

• Chemicals Segment (Kronos Worldwide, Inc.): Serves a diverse customer base of approximately 3,000 customers in 100 countries. No single customer represented 10% or more of the segment's net sales in 2025. The largest ten customers accounted for approximately 35% of the segment's net sales in 2025.
• Component Products Segment (CompX International Inc.): Serves a diverse customer base. One customer, United States Postal Service, accounted for 26% of the segment's consolidated net sales in 2025. The largest ten customers accounted for approximately 52% of the segment's consolidated net sales in 2025.
• Real Estate Management and Development Segment (The LandWell Company): Land sales are generally made to established home builders. In 2025, three customers (DR Horton, Richmond American Homes, and Lennar Homes) each exceeded 10% of the segment's net sales.

Geographic Revenue Distribution:

• Chemicals Segment (Kronos Worldwide, Inc.):
  • Europe: 45% of total sales volume in 2025.
  • North America: 40% of total sales volume in 2025.
  • Asia Pacific: 8% of total sales volume in 2025.
  • Rest of World: 7% of total sales volume in 2025.

Competitive Intelligence

Market Structure & Dynamics

Industry Characteristics:

• Chemicals Segment (TiO2 Industry): The TiO2 industry is highly competitive and concentrated, with the top four producers accounting for approximately 42% of the world's production capacity. Demand for TiO2 is generally linked to worldwide gross domestic product, having grown at a compound annual growth rate of approximately 2-3% since 2000. The industry is characterized by high barriers to entry, including high capital costs, proprietary technology, and significant lead times for new facilities.
• Component Products Segment: Many of the markets served are mature and highly competitive, leading to pricing pressure and a continuous need for cost reduction.
• Real Estate Management and Development Segment: The real estate market in the greater Las Vegas, Nevada area is competitive, with multiple new construction residential communities.

Competitive Positioning Matrix:

Direct Competitors

Primary Competitors:

• Chemicals Segment (Kronos Worldwide, Inc.): The Chemours Company, Tronox Holdings PLC, and LB Group Co. Ltd. The Chemours Company has approximately half of total North American TiO2 production capacity. Tronox Holdings PLC closed a 90,000-ton chloride capacity facility in the Netherlands in 2025 and plans to close a 46,000-ton sulfate facility in China in January 2026. LB Group Co. Ltd. had an estimated 14% of worldwide production capacity in 2025 and plans to add 200,000 tons of chloride process capacity. Venator Investments, Ltd.'s U.K. parent company entered bankruptcy in 2025, idling facilities with approximately 400,000 tons of capacity.
• Component Products Segment (CompX International Inc.): The security products unit competes against numerous domestic and foreign manufacturers. The marine components unit competes with small domestic manufacturers.
• Real Estate Management and Development Segment (The LandWell Company): Competes with other new construction residential communities in the greater Las Vegas, Nevada area.

Emerging Competitive Threats:

• Chemicals Segment (Kronos Worldwide, Inc.): Increasing competition from Chinese TiO2 producers, who generally have lower operating costs due to less stringent regulatory and environmental compliance requirements and less expensive energy prices. Chinese producers are also developing chloride process technology.

Competitive Response Strategy:

• Chemicals Segment (Kronos Worldwide, Inc.): Focuses on providing differentiated pigments and specialty grades to meet specific customer requirements. It continuously reviews and optimizes its customer and product portfolios. The company is implementing measures to reduce operating costs and improve its long-term cost structure, including workforce reductions, restructuring supplier agreements, and enhancing processes. It is also pursuing targeted market share opportunities in regions where competitors have reduced capacity or where tariffs/duties mitigate low-cost imports.
• Component Products Segment (CompX International Inc.): Continuously seeks to diversify into new markets and identify new applications and features for its products. It emphasizes the introduction of innovative new product features that target customer-specific opportunities. The company aims to mitigate raw material cost increases through production efficiencies or other operating cost reductions and, where possible, by increasing selling prices or applying surcharges.

Risk Assessment Framework

Strategic & Market Risks

Market Dynamics:

• Chemicals Segment: Demand for TiO2 is cyclical and highly dependent on global, regional, and local gross domestic product and discretionary spending. Fluctuations in selling prices significantly impact profitability. Customer inventory levels are influenced by expectations for future price changes and product availability.
• Component Products Segment: Many markets are mature and highly competitive, leading to pricing pressure and the need for continuous cost reduction.
• Technology Disruption:
  • Chemicals Segment: Risk of substitution by products from Chinese producers if they increase chloride process technology and improve quality.
  • Component Products Segment: Sustaining and growing sales is critical to the development of innovative features for current products. There is a risk of not recovering development costs if custom product innovation efforts are rejected or abandoned by customers.
• Customer Concentration:
  • Component Products Segment: The largest ten customers accounted for approximately 52% of consolidated net sales in 2025, with one customer (United States Postal Service) representing 26%. A reduction in purchases or changes in relationships with significant customers could materially affect revenues.
  • Real Estate Management and Development Segment: Three customers accounted for over 10% of net sales in 2025.

Operational & Execution Risks

Supply Chain Vulnerabilities:

• Chemicals Segment: Titanium-containing feedstocks are available from a limited number of global suppliers. Political and economic instability or increased regulations in supplier countries could adversely affect raw material availability and costs. Many raw material contracts contain fixed quantities or minimum purchase requirements, which could adversely affect financial results if production is significantly reduced.
• Component Products Segment: Certain components, primarily electronic, are manufactured by foreign suppliers. Global economic and political conditions, including natural disasters, conflicts, or trade wars, could disrupt the supply of these components.
• Capacity Constraints: The Chemicals Segment's ability to increase capacity without additional investment may be limited, making its profitability more dependent on selling prices.

Financial & Regulatory Risks

Market & Financial Risks:

• Foreign Exchange: The company is exposed to market risk from changes in currency exchange rates, primarily the U.S. dollar relative to the euro, Canadian dollar, and Norwegian krone. This affects the translated value of non-U.S. sales and operating results, as well as the U.S. dollar equivalent of euro-denominated debt, such as Kronos International, Inc.'s 9.50% Senior Secured Notes due 2029.
• Credit & Liquidity: The company has a significant amount of consolidated debt, approximately $591.7 million at December 31, 2025. Its ability to service liabilities and pay dividends depends on distributions from its operating subsidiaries, which may be subject to restrictions under debt agreements. Variable interest rates on some debt (e.g., Valhi, Inc.'s Contran credit facility) expose the company to increased costs if market rates rise.
• Construction Costs: The Real Estate Management and Development Segment has significant development obligations (estimated at $54 million) for its residential/planned community. Increases in labor or construction costs could reduce earnings and liquidity.

Regulatory & Compliance Risks:

• Industry Regulation:
  • Chemicals Segment: Operations are governed by complex and frequently changing environmental laws and regulations. Increased regulatory scrutiny could affect consumer perception of TiO2, limit marketability, and increase manufacturing and compliance costs.
  • NL Industries, Inc.: Faces significant costs related to historical lead pigment litigation and environmental remediation matters. NL Industries, Inc. has accrued approximately $13 million for 27 environmental sites, with a reasonably possible upper range of $26 million, and has five sites for which costs cannot yet be reasonably estimated.
  • CompX International Inc.: Is a defendant in four lawsuits seeking recovery of costs to remove perfluoroalkyl and polyfluoroalkyl substances (PFAS) from water supplies.
• Trade & Export Controls: The implementation of new tariffs or increases in existing tariffs by governments could increase supply costs or reduce demand for products.
• Data Privacy: Not explicitly detailed as a specific risk, but cybersecurity risks are mentioned.

Geopolitical & External Risks

Geopolitical Exposure: Operating as a global business, particularly the Chemicals Segment, exposes the company to risks from global and regional economic, political, and regulatory environments. These include global or regional economic downturns, changes in tariffs and trade barriers, protectionist laws, armed conflicts (such as the current conflict in Ukraine), and natural disasters. Climate Change: Physical impacts of climate change, such as increased frequency and severity of extreme weather conditions, could increase costs, damage facilities, disrupt operations, and delay shipments. Technology Failures & Cybersecurity Breaches: The company relies on integrated information technology systems and is susceptible to outages, disruptions, and cybersecurity breaches. While no material losses have occurred to date, obtaining insurance coverage for these risks is becoming increasingly difficult.

Innovation & Technology Leadership

Research & Development Focus: Core Technology Areas:

• Chemicals Segment (Kronos Worldwide, Inc.): Focuses on improving chloride and sulfate production processes, reducing production costs, enhancing product quality, and developing new products and applications. Since 2020, Kronos Worldwide, Inc. has introduced eight new grades for pigments and other applications.
• Component Products Segment (CompX International Inc.): Concentrates on refining, improving, and adapting existing products for new customers and applications, with an emphasis on innovative new product features. Investment Level:
• R&D Expenditure: Kronos Worldwide, Inc. spent $16 million on R&D in 2025 and expects to spend approximately $13 million in 2026. R&D expenditures for CompX International Inc. are not significant, as many innovation efforts are not classified as R&D under GAAP.

Intellectual Property Portfolio:

• Chemicals Segment (Kronos Worldwide, Inc.): Maintains a comprehensive intellectual property protection strategy, including patents (primarily in the United States, Canada, and Europe, with remaining terms from one to 18 years), trademarks (e.g., KRONOS®), and trade secrets (e.g., proprietary chloride production process).
• Component Products Segment (CompX International Inc.): Holds a number of patents related to its component products, with remaining terms ranging from less than one year to 15 years. It also protects its trademarks (e.g., CompX®, Security Products™ National Cabinet Lock®) and relies on unpatented proprietary knowledge and trade secrets.

Leadership & Governance

Executive Leadership Team

Board Composition: The board of directors oversees management's processes for identifying and mitigating risks, including cybersecurity. The audit committee facilitates the board's oversight of the overall risk management approach, while the full board retains oversight of cybersecurity. Non-employee directors are subject to share ownership guidelines.

Human Capital Strategy

Workforce Composition:

• Total Employees: As of December 31, 2025, the Chemicals Segment employed 2,263 people (a 10.5% decrease from 2024), the Component Products Segment employed 549 people, and the Real Estate Management and Development Segment employed 14 people.
• Geographic Distribution (Chemicals Segment): Europe (1,650), Canada (302), United States (311).
• Skill Mix: The company's businesses have a well-trained labor force with a substantial number of long-tenured employees.

Talent Management: Acquisition & Retention: The company provides competitive compensation and benefits, which vary by segment and region, including annual bonuses, pension plans, healthcare, and tuition assistance. Diversity & Development: Valhi, Inc. embraces diversity and collaboration, operating as an equal opportunity employer. It promotes a respectful, diverse, and inclusive workplace.

Health & Safety: Protecting the health and safety of its workforce is a core value. The company maintains a strong safety culture, with site-specific safety programs and disaster response plans at all operating facilities. Kronos Worldwide, Inc.'s global total frequency rate (aggregating employees and contractors) improved to 0.57 in 2025 from 0.70 in 2024. CompX International Inc. reported two lost time incidents in 2025, compared to one in 2024.

Environmental & Social Impact

Environmental Commitments: Climate Strategy: Kronos Worldwide, Inc. is focused on energy efficiency, with five of its six TiO2 production facilities maintaining ISO 50001:2018 Energy Management standard certifications. Local energy teams are responsible for reviewing energy consumption and recommending capital projects to reduce energy consumption and associated Greenhouse Gas (GHG) emissions. Supply Chain Sustainability: Kronos Worldwide, Inc. has a history of reducing consumption and waste by converting byproducts to co-products through its KRONOS ecochem® products. Social Impact Initiatives: The company promotes social responsibility and volunteerism through programs designed to support local communities.

ESG Governance: Valhi, Inc. aims to operate its businesses in line with sound ESG principles, encompassing corporate governance, social responsibility, sustainability, and cybersecurity. Kronos Worldwide, Inc. periodically publishes an ESG Report on its public website, detailing its policies and programs in these areas. The company is evaluating the applicability of the EU Corporate Social Responsibility Directive (EU CSRD) and will establish a compliance program for any applicable requirements.

Business Cyclicality & Seasonality

Demand Patterns:

• Chemicals Segment (Kronos Worldwide, Inc.): Demand for TiO2 is considered a "quality-of-life" product, historically linked to global GDP and overall economic conditions. The market has experienced alternating periods of increasing and decreasing demand. Sales are generally higher in the second and third quarters due to increased coatings production in the northern hemisphere's spring and summer painting seasons.
• Component Products Segment (CompX International Inc.): Commodity market prices for raw materials (zinc, brass, aluminum, stainless steel) are cyclical, influenced by worldwide supply and demand, as well as speculative investor activity. Recreational marine sales appeared to have largely stabilized in 2025.
• Economic Sensitivity: The Chemicals Segment's demand can be negatively impacted by regional and world events or economic conditions. The Component Products Segment's operating margins can be negatively affected by commodity-related raw material cost pressures.

Planning & Forecasting:

• Chemicals Segment (Kronos Worldwide, Inc.): Generally builds inventories to meet expected customer demand. In 2025, production operating rates were adjusted downward in the second, third, and fourth quarters to align with softening demand and reduce finished goods inventory levels.
• Component Products Segment (CompX International Inc.): Monitors customer demand levels to align production capabilities and inventories. Inventory levels increased in 2025 due to higher raw material and production costs, as well as actions to support anticipated customer demand.

Regulatory Environment & Compliance

Regulatory Framework: Industry-Specific Regulations:

• Chemicals Segment (Kronos Worldwide, Inc.): Operations are governed by various environmental laws and regulations in the U.S. (e.g., RCRA, OSHA, Clean Air Act, Clean Water Act, CERCLA) and a common regulatory framework provided by the European Union. The General Court of the European Union annulled the classification of dry TiO2 as a suspected carcinogen in November 2022, a decision upheld on appeal in August 2025. Capital expenditures related to environmental compliance were $26 million in 2025 and are expected to be approximately $30 million in 2026.
• Component Products Segment (CompX International Inc.): Operations are subject to federal, state, and local laws and regulations concerning hazardous substances, wastes, and worker health and safety.
• Real Estate Management and Development Segment (The LandWell Company): Must comply with federal, state, and local laws and regulations, including zoning, density, development, building, environmental, advertising, labor, and real estate sales rules. International Compliance: Kronos Worldwide, Inc. is evaluating the applicability of the EU Corporate Social Responsibility Directive (EU CSRD) and will establish a compliance program.

Trade & Export Controls: The U.S. federal government has implemented tariffs on certain foreign goods, and additional tariffs could impact the company's ability to sell products or increase costs. CompX International Inc. began incurring tariff-related surcharges on certain raw materials in late 2025.

Legal Proceedings:

• Lead Pigment Litigation (NL Industries, Inc.): NL Industries, Inc. was a defendant in County of Santa Clara v. Atlantic Richfield Company, et al., which was dismissed with prejudice in July 2019 following a global settlement where NL Industries, Inc. paid $101.7 million in installments, with the final payment in October 2025. A third-party complaint in Arrioena Beal v. Hattie Mitchell, et al. was served on NL Industries, Inc. in January 2024.
• Environmental Matters and Litigation (NL Industries, Inc.): NL Industries, Inc. is involved in various civil litigation, administrative proceedings, and investigations under federal and state environmental laws (e.g., CERCLA). In February 2025, a consent decree was approved for the Raritan Bay Slag Superfund Site, requiring NL Industries, Inc. and others to pay $151.1 million, with NL Industries, Inc. paying $56.1 million (plus interest) in the first quarter of 2025. Other pending cases include Raritan Baykeeper, Inc. d/b/a NY/NJ Baykeeper et al. v. NL Industries, Inc. et al., ASARCO LLC v. NL Industries, Inc., et al., EPEC Polymers, Inc., v. NL Industries, Inc., Atlantic Richfield, Co. v. NL Industries, Inc., and California Department of Toxic Substances v. NL Industries, Inc. NL Industries, Inc. has accrued approximately $13 million for 27 sites, with an upper range of reasonably possible costs of $26 million, and cannot reasonably estimate costs for five other sites.
• Other Litigation (NL Industries, Inc.): NL Industries, Inc. is a defendant in 120 pending lawsuits alleging personal injuries from occupational exposure to asbestos, silica, and/or mixed dust, with an additional 8,715 claims administratively dismissed.
• Litigation (CompX International Inc.): CompX International Inc. was served with four lawsuits in 2024 by public water companies in South Carolina seeking recovery of future costs to remove PFAS from water supplies.

Tax Strategy & Considerations

Tax Profile:

• Effective Tax Rate: The company's effective tax rate was -27.6% in 2025, compared to 33.9% in 2024 and 126.2% in 2023.
• Geographic Tax Planning: Valhi, Inc. and its qualifying subsidiaries are members of Contran Corporation's consolidated U.S. federal income tax group. The company also files income tax returns in various non-U.S. jurisdictions, including Germany, Canada, Belgium, and Norway. Repatriation of cash from non-U.S. subsidiaries is not expected to result in material income tax liability due to the 2017 Tax Act.
• Tax Reform Impact:
  • The 2024 Final Regulations (currency) required the computation of a pretransition gain or loss for currency translation related to non-U.S. qualified business units. A pretransition gain of $77.1 million was calculated, resulting in a non-cash deferred income tax expense of $16.5 million in 2024, which is being amortized into taxable income over a ten-year period starting in 2025.
  • The One Big Beautiful Bill Act (OBBBA), signed into law in July 2025, did not have a material impact on 2025 consolidated financial statements, and the company is evaluating its future impact.
  • German legislation enacted in July 2025, including a reduction of the corporate tax rate from 15% to 10% by 2032, resulted in a non-cash deferred tax expense of $19.3 million in the third quarter of 2025.
• Deferred Tax Assets: At December 31, 2025, the Chemicals Segment had German corporate and trade net operating loss (NOL) carryforwards of $510.8 million and $46.3 million, respectively, and Canadian corporate and provincial NOL carryforwards of $30.9 million and $33.5 million, respectively. U.S. federal NOL carryforwards were $58.1 million. A non-cash deferred income tax asset valuation allowance of $8.6 million was recognized in 2025 for Belgian deferred tax assets due to cumulative losses. A valuation allowance of $8.5 million was also recognized for non-deductible interest expense carryforwards.
• Uncertain Tax Positions: The company reported $3.5 million in uncertain tax positions at December 31, 2025.

Insurance & Risk Transfer

Risk Management Framework:

• Insurance Coverage: Valhi, Inc. and its affiliates participate in a group insurance program with Contran Corporation for certain insurance policies and risk management services. Tall Pines Insurance Company, a subsidiary, underwrites certain policies and purchases reinsurance from highly rated third-party carriers. The company also has agreements with former insurance carriers for reimbursement of a portion of future lead pigment and asbestos litigation defense costs.
• Risk Transfer Mechanisms: The company periodically uses currency forward contracts to manage a nominal portion of currency exchange rate risk. For example, a euro currency forward contract in 2025 resulted in a $2.8 million transaction gain. No currency forward contracts were outstanding at December 31, 2025.
• Cybersecurity Insurance: The company is experiencing increasing difficulty in obtaining insurance coverage on reasonable pricing terms to mitigate risks associated with technology failures or cybersecurity breaches.