News Release

DALLAS, TEXAS . . May 9, 2018.  Valhi, Inc. (NYSE: VHI) reported net income from continuing operations attributable to Valhi stockholders of $51.7 million, or $.15 per diluted share, in the first quarter of 2018 compared to $14.4 million, or $.04 per diluted share, in the first quarter of 2017.   Net income from continuing operations attributable to Valhi stockholders increased primarily due to improved operating results in the Company's Chemicals Segment in 2018. 

The Chemicals Segment's net sales of $430.4 million in the first quarter of 2018 were $60.6 million, or 16%, higher than in the first quarter of 2017.  The Chemicals Segment's net sales increased in the first quarter of 2018 as compared to the same period in 2017 due to higher average TiO₂ selling prices partially offset by lower sales volumes.  The Chemicals Segment's average TiO₂ selling prices were 26% higher in the first quarter of 2018 as compared to the first quarter of 2017 with higher prices in all major markets.  The Chemicals Segment's average TiO₂ selling prices at the end of the first quarter of 2018 were 4% higher than at the end of 2017 with higher prices in the European, North American and export markets, partially offset by lower prices in Latin America.  TiO₂ sales volumes in the first quarter of 2018 were 13% lower as compared to the record first quarter sales volumes of 2017 due to lower sales in all major markets. Fluctuations in currency exchange rates (primarily the euro) also affected net sales comparisons, increasing net sales by approximately $31 million in the first quarter of 2018 as compared to the first quarter of 2017.  The table at the end of this press release shows how each of these items impacted the overall increase in sales.

The Chemicals Segment's operating income in the first quarter of 2018 was $110.6 million as compared to $59.1 million in the first quarter of 2017.  The Chemicals Segment's operating income increased in the first quarter of 2018 primarily due to higher average TiO₂ selling prices partially offset by lower sales and production volumes and higher costs for certain raw materials and other production costs.  The Chemicals Segment's TiO₂ production volumes were 8% lower in the first quarter as compared to the same period in 2017.  The Chemicals Segment's production facilities operated at 95% of practical capacity in 2018 compared to full practical capacity utilization rates in 2017.  Fluctuations in currency exchange rates also affected segment profit comparisons, which increased operating income by approximately $1 million in the first quarter of 2018 as compared to the first quarter of 2017.

The Component Products Segment's net sales in the first quarter of 2018 decreased as compared to 2017 primarily due to lower security products sales volumes to existing government security customers and to a lesser extent lower sales to an original equipment manufacturer of recreational transportation products, partially offset by higher Marine Components sales for the quarter.  The Component Products Segment's operating income decreased in the first quarter of 2018 as compared to the same period of 2017 primarily due to lower security products sales.

The Real Estate Management and Development Segment had first quarter 2018 sales of $7.2 million, including $5.8 million in revenue on sales of land held for development, compared to the first quarter of 2017 sales of $5.6 million, including $3.7 million in sales of land held for development.   The Real Estate Management and Development Segment had operating income of $3.8 million in the first quarter of 2018 compared to $.5 million in the first quarter of 2017.  Operating income in the first quarter of 2018 also includes $3.1 million of income related to the recognition of tax increment reimbursement note receivables. Because the land held for development acquired was initially recognized at the estimated fair value at December 31, 2013 in connection with the previously-reported acquisition of a controlling interest in this segment, the Company does not expect to recognize significant operating income on land sales during 2018.

Corporate expenses increased to $14.3 million in the first quarter of 2018 compared to $10.5 million in the first quarter of 2017 primarily due to higher litigation and related costs and environmental remediation and related costs in 2018 compared to 2017.In the first quarter of 2018 we sold two parcels of land not used in our operating activities for an aggregate pre-tax gain of $12.5 million ($9.6 million, or $.03 per diluted share, net of income taxes and noncontrolling interest).

Our provision for income taxes in the first quarter of 2017 includes a non-cash income tax benefit of $5.0 million (or $.01 per diluted share), as a result of a net decrease in our deferred income tax asset valuation allowance related to the Chemical Segment's German and Belgian operations.

As previously reported, on January 26, 2018 we completed the sale of our Waste Management Segment, the results of operations of which have been reclassified to discontinued operations for all periods presented.  Discontinued operations in the first quarter of 2018 consists principally of a pre-tax gain on the disposal of this Segment of $58.4 million ($38.2 million, or $.11 per diluted share, net of income taxes). 

The statements in this press release relating to matters that are not historical facts are forward-looking statements that represent management's beliefs and assumptions based on currently available information.  Although the Company believes the expectations reflected in such forward-looking statements are reasonable, it cannot give any assurances that these expectations will be correct.  Such statements by their nature involve substantial risks and uncertainties that could significantly impact expected results, and actual future results could differ materially from those predicted. While it is not possible to identify all factors, the Company continues to face many risks and uncertainties.  Among the factors that could cause our actual future results to differ materially include, but are not limited to, the following:

• The extent of the dependence of certain of our businesses on certain market sectors;
• The cyclicality of certain of our businesses (such as Kronos' TiO₂ operations);
• Customer and producer inventory levels;
• Unexpected or earlier-than-expected industry capacity expansion (such as the TiO₂ industry);
• Changes in raw material and other operating costs (such as ore, zinc, brass, aluminum, steel and energy costs) and our ability to pass those costs on to our customers or offset them with reductions in other operating costs;
• Changes in the availability of raw materials (such as ore);
• General global economic and political conditions (such as changes in the level of gross domestic product in various regions of the world and the impact of such changes on demand for, among other things, TiO₂ and component products);
• Competitive products and prices and substitute products, including increased competition from low-cost manufacturing sources (such as China);
• Possible disruption of our business or increases in the cost of doing business resulting from terrorist activities or global conflicts;
• Customer and competitor strategies;
• Potential difficulties in integrating future acquisitions;
• Potential difficulties in upgrading or implementing new accounting and manufacturing software systems (such as the Chemicals Segment's new enterprise resource planning system);
• Potential consolidation of our competitors;
• Potential consolidation of our customers;
• The impact of pricing and production decisions;
• Competitive technology positions;
• The introduction of trade barriers;
• The ability of our subsidiaries to pay us dividends;
• The impact of current or future government regulations (including employee healthcare benefit related regulations);
• Uncertainties associated with new product development and the development of new product features;
• Fluctuations in currency exchange rates (such as changes in the exchange rate between the U.S. dollar and each of the euro, the Norwegian krone and the Canadian dollar) or possible disruptions to our business resulting from potential instability resulting from uncertainties associated with the euro or other currencies;
• Operating interruptions (including, but not limited to, labor disputes, leaks, natural disasters, fires, explosions, unscheduled or unplanned downtime, transportation interruptions and cyber attacks);
• Decisions to sell operating assets other than in the ordinary course of business;
• The timing and amounts of insurance recoveries;
• Our ability to renew, amend, refinance or establish credit facilities;
• Our ability to maintain sufficient liquidity;
• The ultimate outcome of income tax audits, tax settlement initiatives or other tax matters, including future tax reform;
• Our ultimate ability to utilize income tax attributes, the benefits of which may or may not presently have been recognized under the more-likely-than-not recognition criteria;
• Environmental matters (such as those requiring compliance with emission and discharge standards for existing and new facilities, or new developments regarding environmental remediation at sites related to our former operations);
• Government laws and regulations and possible changes therein (such as changes in government regulations which might impose various obligations on former manufacturers of lead pigment and lead-based paint, including NL, with respect to asserted health concerns associated with the use of such products);
• The ultimate resolution of pending litigation (such as NL's lead pigment litigation, environmental and other litigation and Kronos' class action litigation);
• Our ability to comply with covenants contained in our revolving bank credit facilities;
• Our ability to complete and comply with the conditions of our licenses and permits;
• Changes in real estate values and construction costs in Henderson, Nevada;
• Water levels in Lake Mead; and
• Possible future litigation.

Should one or more of these risks materialize (or the consequences of such development worsen), or should the underlying assumptions prove incorrect, actual results could differ materially from those currently forecasted or expected.  We disclaim any intention or obligation to update or revise any forward-looking statement whether as a result of changes in information, future events or otherwise.

Valhi, Inc. is engaged in the titanium dioxide pigments, component products (security products and high performance marine components), and real estate management and development industries.

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