NL Industries Swings to Loss Amid Kronos, Valhi Investment Declines

TL;DR

**NL's portfolio took a beating this quarter, making it a risky bet until Kronos and Valhi rebound.**

AI Summary

NL Industries Inc. reported a significant financial downturn for the nine months ended September 30, 2025, with net sales increasing to $120.588 million from $107.525 million in the prior year, but net income plummeting to a loss of $4.992 million compared to a net income of $52.142 million in the same period of 2024. This shift was primarily driven by a substantial negative swing in equity in earnings of Kronos Worldwide, Inc., moving from a $30.431 million gain in 2024 to an $8.604 million loss in 2025. Additionally, marketable equity securities, specifically Valhi common stock, contributed to the loss, shifting from a $21.775 million gain to a $9.115 million loss. Cash and cash equivalents decreased significantly from $163.154 million at December 31, 2024, to $101.923 million at September 30, 2025, and total assets declined from $578.258 million to $500.202 million. A notable reduction in accrued environmental remediation and related costs from $58.135 million to $2.666 million in current liabilities was observed, though overall liabilities decreased from $91.062 million to $35.174 million. The company also paid out $23.453 million in dividends to NL stockholders during the nine-month period.

Why It Matters

This filing reveals a sharp reversal in NL Industries' financial performance, primarily due to its significant equity investments in Kronos Worldwide, Inc. and Valhi, Inc. The shift from substantial gains to losses in these key holdings directly impacts NL's profitability and cash flow, signaling potential headwinds for investors. For employees and customers, the direct operational impact might be limited as net sales increased, but the overall financial health of the parent company could influence future strategic decisions. In a competitive context, NL's reliance on its equity investments makes it vulnerable to market fluctuations affecting its affiliates, potentially hindering its ability to invest in its core operations or return capital to shareholders.

Risk Assessment

Risk Level: high — The company's net income swung from a gain of $52.142 million in the nine months ended September 30, 2024, to a loss of $4.992 million in the same period of 2025. This significant decline is largely attributed to a $39.035 million negative swing in equity in earnings of Kronos Worldwide, Inc. and an $30.890 million negative swing in marketable equity securities (Valhi common stock), indicating high exposure to market volatility in its key investments.

Analyst Insight

Investors should carefully re-evaluate NL Industries' investment thesis, considering its high exposure to the volatile performance of Kronos Worldwide, Inc. and Valhi, Inc. Await signs of stabilization or recovery in these key equity holdings before considering new positions, and existing investors should assess their risk tolerance given the recent losses.

Financial Highlights

revenue

$120.588M

total Assets

$500.202M

net Income

($4.992M)

eps

($0.14)

cash Position

$101.923M

revenue Growth

+12.1%

Key Numbers

• $120.588M — Net sales (Increased from $107.525M for the nine months ended September 30, 2024)
• ($4.992M) — Net income (loss) (Swung from a net income of $52.142M for the nine months ended September 30, 2024)
• ($8.604M) — Equity in earnings (losses) of Kronos Worldwide, Inc. (Shifted from a $30.431M gain in 2024 to a loss in 2025 for the nine months)
• ($9.115M) — Marketable equity securities (Shifted from a $21.775M gain in 2024 to a loss in 2025 for the nine months)
• $101.923M — Cash and cash equivalents (Decreased from $163.154M at December 31, 2024)
• $500.202M — Total assets (Decreased from $578.258M at December 31, 2024)
• $2.666M — Accrued environmental remediation and related costs (current) (Significantly decreased from $58.135M at December 31, 2024)
• $35.174M — Total current liabilities (Decreased from $91.062M at December 31, 2024)
• ($0.14) — Basic and diluted net income (loss) per share (Decreased from $1.04 for the nine months ended September 30, 2024)
• $23.453M — Dividends paid to NL stockholders (Paid during the nine months ended September 30, 2025)

Key Players & Entities

• NL Industries Inc. (company) — Registrant
• Kronos Worldwide, Inc. (company) — Affiliate, significant equity investment
• Valhi, Inc. (company) — Immediate parent company, marketable securities investment
• CompX International Inc. (company) — Majority-owned subsidiary
• Lisa K. Simmons (person) — Controls Contran Corporation, indirectly controls NL Industries Inc.
• Contran Corporation (company) — Parent company of Valhi, Inc.
• NYSE (regulator) — Exchange where NL common stock is registered
• SEC (regulator) — Securities and Exchange Commission
• Louisiana Pigment Company, L.P. (company) — Joint venture acquired by Kronos
• Venator Investments, Ltd. (company) — Former joint venture partner of Kronos in LPC

FAQ

Risk Factors

• Deterioration in Investment Performance [high — financial]: The company experienced a significant negative swing in its investment portfolio, with marketable equity securities (Valhi common stock) shifting from a $21.775 million gain in the nine months ended September 30, 2024, to a $9.115 million loss in the same period of 2025. This represents a $30.89 million adverse change, directly impacting profitability.
• Adverse Equity in Earnings from Kronos Worldwide [high — financial]: NL Industries' equity in earnings of Kronos Worldwide, Inc. turned from a substantial gain of $30.431 million in the nine months of 2024 to a loss of $8.604 million in the comparable period of 2025. This $39.035 million negative variance is a primary driver of the company's net income decline.
• Significant Decline in Cash Position [medium — financial]: Cash and cash equivalents decreased by $61.231 million, from $163.154 million at December 31, 2024, to $101.923 million at September 30, 2025. This reduction, coupled with a decrease in total assets from $578.258 million to $500.202 million, indicates a tightening liquidity situation.
• Reduced Net Income and EPS [high — financial]: The company reported a net loss of $4.992 million for the nine months ended September 30, 2025, a stark contrast to the $52.142 million net income in the prior year. This resulted in basic and diluted net loss per share of ($0.14) compared to $1.04 in the prior year.
• Dividend Payouts Amidst Financial Downturn [medium — financial]: Despite the significant decline in profitability, NL Industries paid out $23.453 million in dividends to its stockholders during the nine months ended September 30, 2025. This payout may strain cash resources further given the current financial performance.
• Environmental Remediation Liabilities [medium — regulatory]: While current accrued environmental remediation and related costs saw a significant reduction from $58.135 million to $2.666 million, noncurrent liabilities remain at $10.469 million. These ongoing environmental obligations represent a potential financial burden.

Industry Context

NL Industries operates within sectors that are sensitive to economic cycles and commodity prices, particularly those related to titanium dioxide (via Kronos Worldwide) and potentially other industrial materials. The performance of these industries is influenced by global demand, manufacturing output, and raw material costs. Competition can be intense, with established players and potential new entrants impacting market share and pricing power.

Regulatory Implications

The company faces ongoing regulatory scrutiny related to environmental matters, as indicated by accrued remediation costs. Compliance with environmental laws and regulations is critical and can lead to significant financial liabilities if not managed effectively. Changes in environmental policies or stricter enforcement could increase future costs.

What Investors Should Do

1. Monitor the performance of Kronos Worldwide, Inc. and Valhi common stock closely, as these investments are critical drivers of NL Industries' profitability and have shown significant volatility.
2. Analyze the drivers behind the substantial decrease in cash and cash equivalents and assess the company's liquidity position and ability to fund operations and dividends.
3. Investigate the reasons for the sharp decline in equity in earnings from Kronos Worldwide and the shift in marketable securities from gains to losses to understand the underlying operational or market factors.
4. Evaluate the long-term implications of the reduced environmental remediation accruals and any remaining noncurrent liabilities.
5. Assess the sustainability of dividend payments given the current net loss and declining cash reserves.

Key Dates

• 2024-12-31: End of Fiscal Year 2024 — Represents the starting point for comparison of financial assets and liabilities for the current reporting period.
• 2025-09-30: End of Third Quarter 2025 — The reporting date for the condensed consolidated financial statements, showing a significant downturn in net income and cash position.

Glossary

Equity in earnings (losses) of Kronos Worldwide, Inc.

Represents NL Industries' share of the net income or loss of its investment in Kronos Worldwide, Inc., accounted for using the equity method. (A significant factor in NL Industries' overall profitability, as a shift from gain to loss heavily impacted the current period's results.)

Marketable securities

Investments in stocks, bonds, or other financial instruments that can be readily bought or sold in the open market. (Fluctuations in the value of NL Industries' marketable securities, specifically Valhi common stock, led to substantial gains in the prior year and losses in the current period.)

Accrued environmental remediation and related costs

Costs estimated and recorded for cleaning up environmental contamination and addressing related legal or regulatory requirements. (A significant decrease in current accrued costs was noted, though noncurrent liabilities persist, indicating ongoing environmental obligations.)

Noncontrolling interest in subsidiary

The portion of equity in a subsidiary that is not attributable to the parent company. (Represents ownership stakes in subsidiaries not fully owned by NL Industries, impacting the consolidated equity and net income attributable to NL stockholders.)

Year-Over-Year Comparison

Compared to the nine months ended September 30, 2024, NL Industries has seen a revenue increase of 12.1% to $120.588 million. However, this top-line growth has been overshadowed by a dramatic shift in profitability, with net income plummeting from a $52.142 million gain to a $4.992 million loss. Key drivers for this downturn include a significant negative swing in equity in earnings from Kronos Worldwide and losses on marketable equity securities, which had previously contributed positively. Total assets have also declined, and cash reserves have been substantially reduced.

Filing Documents

• nl-20250930x10q.htm (10-Q) — 2222KB
• nl-20250930xex31d1.htm (EX-31.1) — 11KB
• nl-20250930xex31d2.htm (EX-31.2) — 12KB
• nl-20250930xex32d1.htm (EX-32.1) — 9KB
• 0001104659-25-107766.txt ( ) — 8046KB
• nl-20250930.xsd (EX-101.SCH) — 49KB
• nl-20250930_cal.xml (EX-101.CAL) — 74KB
• nl-20250930_def.xml (EX-101.DEF) — 171KB
• nl-20250930_lab.xml (EX-101.LAB) — 414KB
• nl-20250930_pre.xml (EX-101.PRE) — 318KB
• nl-20250930x10q_htm.xml (XML) — 1387KB

Financial Statements

Financial Statements Condensed Consolidated Balance Sheets - December 31, 2024; September 30, 2025 (unaudited) 3 Condensed Consolidated Statements of Operations (unaudited) - Three and nine months ended September 30, 2024 and 2025 5 Condensed Consolidated Statements of Comprehensive Income (Loss) (unaudited) - Three and nine months ended September 30, 2024 and 2025 6 Condensed Consolidated Statements of Equity (unaudited) - Three and nine months ended September 30, 2024 and 2025 7 Condensed Consolidated Statements of Cash Flows (unaudited) - Nine months ended September 30, 2024 and 2025 8 Notes to Condensed Consolidated Financial Statements (unaudited) 9 Item 2.

Management's Discussion and Analysis of Financial Condition and Results of Operations

Management's Discussion and Analysis of Financial Condition and Results of Operations 20 Item 3. Quantitative and Qualitative Disclosure About Market Risk 38 Item 4.

Controls and Procedures

Controls and Procedures 38 Part II. OTHER INFORMATION 38 Item 1.

Legal Proceedings

Legal Proceedings 38 Item 1A.

Risk Factors

Risk Factors 38 Item 6. Exhibits 39 Items 2, 3, 4 and 5 of Part II are omitted because there is no information to report. 2 Table of Contents NL INDUSTRIES, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (In thousands) December 31, September 30, 2024 2025 (unaudited) ASSETS Current assets: Cash and cash equivalents $ 163,154 $ 101,923 Restricted cash and cash equivalents 20,545 21,272 Accounts and other receivables, net 23,739 18,138 Inventories, net 28,366 30,951 Prepaid expenses and other 2,154 2,016 Total current assets 237,958 174,300 Other assets: Restricted cash and cash equivalents 491 375 Note receivable from affiliate 9,300 8,100 Marketable securities 28,015 18,900 Investment in Kronos Worldwide, Inc. 250,278 246,496 Goodwill 27,156 27,156 Other assets, net 1,034 893 Total other assets 316,274 301,920 Property and equipment: Land 5,390 5,390 Buildings 23,262 23,272 Equipment 75,605 77,757 Construction in progress 589 540 104,846 106,959 Less accumulated depreciation 80,820 82,977 Net property and equipment 24,026 23,982 Total assets $ 578,258 $ 500,202 3 Table of Contents NL INDUSTRIES, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (CONTINUED) (In thousands) December 31, September 30, 2024 2025 (unaudited) LIABILITIES AND EQUITY Current liabilities: Accounts payable $ 3,758 $ 3,246 Accrued litigation settlement 16,431 16,667 Accrued and other current liabilities 12,032 11,645 Accrued environmental remediation and related costs 58,135 2,666 Payables to affiliates 706 950 Total current liabilities 91,062 35,174 Noncurrent liabilities: Long-term debt from affiliate 500 500 Accrued environmental remediation and related costs 11,143 10,469 Deferred income taxes 53,391 59,430 Accrued pension costs 76 78 Other 6,183 1,279

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View this 10-Q filing on SEC EDGAR