NL Industries, Inc. (NL): SWOT Analysis [Nov-2025 Updated]

You're looking for a clear, no-nonsense assessment of NL Industries, Inc.'s position in late 2025, and the reality is a tale of two companies. The steady, defintely reliable growth of the component business, CompX, where net sales hit $40.0 million in Q3 2025, is currently being completely overshadowed by the significant volatility and losses from the chemicals segment, Kronos Worldwide. This split performance drove an overall net loss of $7.8 million for NL in the same quarter, plus the firm had to handle a major $56.1 million cash outflow for the Raritan Bay Slag environmental settlement. This means the core challenge you need to understand isn't just market risk, but the deep internal tension between a stable component earner and a highly cyclical chemical giant.

NL Industries, Inc. (NL) - SWOT Analysis: Strengths

Diversified revenue from two distinct industries: components and chemicals.

You're looking for stability, and NL Industries, Inc. (NL) provides it through a classic holding company structure that diversifies risk across two highly different sectors. Its primary operations run through a majority-owned subsidiary, CompX International Inc., which focuses on engineered component products, and a non-controlling interest in Kronos Worldwide, Inc., a major global producer of titanium dioxide (TiO2) pigments. This split is a defintely a strength, as it means the company isn't solely exposed to the cyclical nature of the chemicals market or the more niche component industry. When one segment faces headwinds, the other can often provide a cushion, smoothing out overall corporate performance.

CompX segment shows consistent growth in sales and profit margins.

The CompX International Inc. segment is the operational workhorse, showing reliable growth in both its top and bottom lines for the 2025 fiscal year. This isn't just a flash in the pan; it reflects solid execution and pricing power. For the third quarter of 2025 (Q3 2025), CompX's segment profit climbed to $4.8 million, a significant jump from $3.3 million in the same quarter of 2024. Here's the quick math: that's a 45.5% year-over-year increase in segment profit. This growth is a clear indicator of operational efficiency and a strong demand for its specialized products.

CompX net sales reached $40.0 million in Q3 2025, up from $33.6 million year-over-year.

The revenue growth in the component segment is concrete and substantial. CompX's net sales hit $40.0 million in Q3 2025, marking a solid increase from $33.6 million in Q3 2024. This 19% sales growth is driven by a surge in demand across its key markets. For the first nine months of 2025, CompX's net sales totaled $120.6 million, up from $107.5 million in the prior-year period. That's a $13.1 million increase, showing sustained momentum.

The following table breaks down the CompX segment's performance, which is a core strength for NL Industries:

Component products focus on stable, niche markets like government security and marine.

The strength of CompX isn't just in the numbers; it's in the markets it serves. They don't chase volatile consumer trends. Instead, they focus on stable, niche markets that have consistent demand, which is a great strategic move.

The key drivers for their sales growth in 2025 include:

• Government Security: Increased sales in the Security Products segment, primarily to the government security market, which is less susceptible to economic downturns.
• Marine Components: Higher sales to the towboat, government, and industrial marine markets.
• Specialized Locks: Products like mechanical and electronic cabinet locks are essential components in various applications, including high-security medical cabinetry and gas station security.

These are sticky markets; once you're in, you tend to stay.

Kronos acquired 100% of Louisiana Pigment Company, L.P. (LPC), increasing control over a key asset.

In the chemicals segment, NL Industries' stake benefits from the strategic strengthening of Kronos Worldwide, Inc. Kronos completed the acquisition of the remaining 50% joint venture interest in Louisiana Pigment Company, L.P. (LPC) on July 16, 2024. This move gives Kronos, and by extension NL Industries, 100% control over a key production asset. The upfront cash payment for the stake was $185 million, with a potential earn-out of up to $15 million tied to LPC's 2025 and 2026 earnings before interest, taxes, depreciation, and amortization (EBITDA). Full ownership is expected to enhance product offerings, increase sales, and allow Kronos to realize significant synergies in commercial, overhead, and supply chain operations. It's a clear move to control their destiny in the titanium dioxide (TiO2) pigment market.

NL Industries, Inc. (NL) - SWOT Analysis: Weaknesses

Overall financial performance is highly dependent on Kronos Worldwide's volatile TiO2 market.

Your investment in NL Industries is defintely tied to the cyclical nature of the titanium dioxide (TiO2) market, which is Kronos Worldwide's core business. NL is a holding company, and its financial results are disproportionately influenced by the performance of its majority-owned subsidiary, Kronos Worldwide, Inc. (KRO), which manufactures this key pigment. When TiO2 prices and demand weaken, NL's earnings take a direct hit. This lack of true diversification means you're essentially making a bet on a single, notoriously volatile commodity market.

The recent downturn in the chemical segment shows this risk clearly. Kronos Worldwide reported a net loss of $37.0 million in the third quarter of 2025 alone, driven by lower TiO2 selling prices and reduced sales volumes in key markets like Europe.

Reported a net loss of $7.8 million in Q3 2025, a sharp decline from the prior year's net income.

The headline number for the third quarter of 2025 is a clear red flag: NL Industries, Inc. reported a net loss attributable to stockholders of $7.8 million. To be fair, this is a sharp reversal from the net income of $36.0 million reported in the same period of 2024. This is not a minor dip; it's a significant swing into the negative, driven by the combination of poor performance at Kronos and mark-to-market losses on its investment portfolio.

Here's the quick math on the quarterly comparison:

A $43.8 million negative shift year-over-year tells you the fundamental earnings power is under pressure right now.

Significant cash outflow of approximately $56.1 million for the Raritan Bay Slag environmental settlement in 2025.

Environmental liabilities continue to be a major drain on NL's cash flow. In the first half of 2025, the company had a substantial cash outflow of approximately $56.1 million, plus an additional $0.5 million in interest, to cover its portion of the Raritan Bay Slag (RBS) Superfund Site global settlement. This massive, one-time payment materially impacted the company's operating cash flow, which swung to a use of $40.2 million for the first six months of 2025.

What this estimate hides is the ongoing nature of environmental risk. Even after this major settlement, NL still has contingent liabilities. Management noted that approximately 29 sites have reasonably estimable remediation costs, with the upper-end reasonably possible range being around $38 million. That's a persistent, non-operational risk that needs to be factored into any valuation.

Kronos faced $8.6 million in equity losses for NL in the first nine months of 2025.

The weakness at Kronos Worldwide directly translates into losses on NL's income statement through the equity method of accounting. For the first nine months of 2025, NL recognized equity in losses of Kronos totaling $8.6 million. This is a complete flip from the $30.4 million in equity earnings NL recognized from Kronos during the comparable period in 2024.

This negative contribution is a primary driver of NL's overall performance deterioration. The key issues at Kronos that caused this loss include:

• Lower titanium dioxide selling prices.
• Reduced sales volumes in certain export markets.
• Unfavorable fixed cost absorption due to lower production rates.

Unrealized losses on marketable equity securities totaled $9.1 million in the first nine months of 2025.

Beyond the operational struggles at Kronos, NL's financial results are also exposed to stock market volatility through its portfolio of marketable equity securities. For the first nine months of 2025, NL's results included an unrealized loss of $9.1 million related to the change in value of these securities.

This is a non-cash charge, but it still hits the bottom line and demonstrates a lack of control over a significant portion of reported earnings. This is a huge swing from the $21.8 million unrealized gain reported in the first nine months of 2024. The volatility in this portfolio introduces an unpredictable element to NL's quarterly earnings, making it harder to forecast true underlying operational profitability.

NL Industries, Inc. (NL) - SWOT Analysis: Opportunities

NL Industries, Inc. has clear opportunities to improve its consolidated financial performance by capitalizing on the strength of its CompX International Inc. subsidiary and executing on operational efficiencies at Kronos Worldwide, Inc. The core strategy is to maximize the stable, high-margin component business while waiting for the inevitable cyclical upturn in the volatile titanium dioxide ($\text{TiO}_2$) market.

Potential for a cyclical rebound in global titanium dioxide ($\text{TiO}_2$) pricing and demand.

The $\text{TiO}_2$ market is notoriously cyclical, and while 2025 has seen headwinds, the long-term fundamentals suggest a rebound is an opportunity, not just a hope. Kronos Worldwide, Inc.'s performance has been a drag on NL Industries' results in 2025, largely due to market oversupply and customer hesitancy to build inventory. For example, NL recognized equity in losses of Kronos totaling $\mathbf{\$11.3\text{ million}}$ in the third quarter of 2025.

Still, the market is poised for a recovery, particularly as global economic activity improves. The long-term forecast for the global $\text{TiO}_2$ industry projects a Compound Annual Growth Rate (CAGR) of $\mathbf{4.86\%}$ between 2025 and 2033. The key drivers for this eventual demand surge are the construction and automotive sectors, which are major end-users of $\text{TiO}_2$ in paints and coatings. When the cycle turns, the impact on Kronos's profitability will be substantial, reversing the current pressure from unabsorbed fixed production costs, which were approximately $\mathbf{\$20\text{ million}}$ in the second quarter of 2025 alone.

This is a waiting game, but the potential upside is huge.

• Capitalize on the $\mathbf{4.86\%}$ projected market CAGR through 2033.
• Reverse Q2 2025's $\mathbf{\$20\text{ million}}$ in unabsorbed fixed costs with higher utilization.
• Benefit from stabilizing prices, which started 2025 at $\mathbf{2\%}$ higher than the beginning of 2024.

CompX can expand its sales in the growing government security and marine component markets.

CompX International Inc., the majority-owned subsidiary, continues to be a standout performer and a primary source of stability. The company has successfully targeted high-growth, non-cyclical end-markets, specifically government security and industrial marine components.

This focus is clearly paying off in 2025. CompX's net sales for the first nine months of 2025 reached $\mathbf{\$120.6\text{ million}}$, a significant increase from $\mathbf{\$107.5\text{ million}}$ in the same period of 2024. Management expects the Marine Components segment to see continued net sales growth in 2025, driven predominantly by higher expected sales to the government and industrial markets.

Here's the quick math on CompX's 2025 momentum:

The $\mathbf{45.5\%}$ jump in segment profit in Q3 2025 shows the power of sales growth combined with improved gross margins in both the Security Products and Marine Components segments.

Full ownership of the Louisiana Pigment Company, L.P. allows Kronos to drive greater operational efficiencies.

The acquisition of the remaining $\mathbf{50\%}$ interest in Louisiana Pigment Company, L.P. (LPC) on July 16, 2024, for $\mathbf{\$185\text{ million}}$ (less a working capital adjustment) is a major structural opportunity for Kronos. Prior to this, LPC was a 50/50 joint venture, which limited Kronos's ability to fully integrate its operations and realize cost savings.

With full ownership, Kronos can now drive greater operational efficiencies and synergies across its global manufacturing footprint. This includes optimizing production schedules, integrating supply chains, and fully implementing its proprietary process technology at the Louisiana facility. The first quarter of 2025 already showed a positive impact, with Kronos reporting decreases in per metric ton production costs (including unabsorbed fixed costs) due to improved operating rates. This full control is defintely the right long-term move to improve margins when the $\text{TiO}_2$ market stabilizes.

Strategic acquisitions in the component space could further diversify earnings away from Kronos.

NL Industries' primary challenge in 2025 has been the extreme volatility of its non-controlling stake in Kronos Worldwide, Inc. The strategic opportunity for NL is to use its strong balance sheet to acquire additional component businesses, further diversifying its earnings stream and reducing its reliance on the cyclical $\text{TiO}_2$ market.

The case for this diversification is compelling, as CompX's consistent growth is currently masking the losses from Kronos. For the first nine months of 2025, NL recorded an equity in losses of Kronos of $\mathbf{\$8.6\text{ million}}$, compared to equity in earnings of $\mathbf{\$30.4\text{ million}}$ in the same period of 2024. The strong, resilient performance of CompX's component business provides the model and the cash flow to pursue similar, non-cyclical component acquisitions. Expanding the component portfolio would stabilize consolidated earnings, enhance the overall valuation multiple, and provide a more reliable stream of cash flow for capital returns, such as the special dividend of $\mathbf{\$0.21}/\text{share}$ and the Q3 2025 quarterly dividend of $\mathbf{\$0.09}/\text{share}$ that NL declared.

NL Industries, Inc. (NL) - SWOT Analysis: Threats

Continued global economic slowdown could depress $\text{TiO}_2$ prices and volumes, worsening Kronos's losses.

The biggest near-term threat to NL Industries, Inc. is the continued cyclical downturn and global economic uncertainty impacting its majority-owned subsidiary, Kronos Worldwide, Inc. (Kronos). Kronos's financial performance is tightly linked to the demand for titanium dioxide ($\text{TiO}_2$) pigment, a commodity used in everything from paint to plastics.

Honestly, the numbers show a significant reversal. For the third quarter of 2025, Kronos reported a net loss of $\mathbf{\$37.0 \text{ million}}$, a massive swing from the net income of $\$71.8$ million reported in the third quarter of 2024. This isn't just a blip; it reflects lower demand and pricing pressure. NL Industries, Inc.'s own results felt this directly, recording an equity in losses of Kronos of $\mathbf{\$11.3 \text{ million}}$ in Q3 2025.

The core problem is simple: lower prices and less product moving. Kronos's net sales fell 6% in the third quarter of 2025, driven by a 7% lower average $\text{TiO}_2$ selling price compared to the prior year period. A weak global economy means customers are hesitant to build inventory, which defintely defers any market recovery.

• Average $\text{TiO}_2$ selling prices declined 6% over the first nine months of 2025.
• Lower sales volumes hit European and export markets hardest in Q3 2025.
• The segment loss for $\text{TiO}_2$ in Q3 2025 was $\mathbf{\$15.3 \text{ million}}$.

Here's the quick math on the profit swing:

Ongoing environmental liabilities with an unaccrued, reasonably possible range of up to $\mathbf{\$38 \text{ million}}$.

NL Industries, Inc. continues to carry significant legacy environmental risks, primarily related to past operations involving lead and other hazardous substances. This is a perpetual balance sheet overhang that can create sudden, non-operating costs.

As of June 30, 2025, the company had accrued approximately $\mathbf{\$13 \text{ million}}$ for environmental remediation and related costs across about 29 sites. That's the amount we are reasonably certain about. But the real threat lies in the upper end of the estimated range for these reasonably possible costs, which is approximately $\mathbf{\$38 \text{ million}}$, including the accrued amount. This means an unaccrued, reasonably possible exposure of up to $\mathbf{\$25 \text{ million}}$ (the $\$38$ million high-end minus the $\$13$ million accrued) could materialize and hit the income statement.

To be fair, the company did resolve a major piece of litigation in February 2025 concerning the Raritan Bay Slag Superfund Site. NL Industries, Inc.'s share of the settlement was $\mathbf{\$56.1 \text{ million}}$ plus interest. However, the net effect was actually positive for Q1 2025 net income, as it allowed for the release of prior accruals and escrowed funds, resulting in an estimated income of about $\$31.4$ million. Still, the constant stream of new and ongoing environmental lawsuits, like the one clarified by the Tenth Circuit in February 2025 regarding cleanup contribution claims, shows this risk is a permanent fixture.

Volatility in the value of marketable equity securities creates unpredictable swings in net income.

A significant portion of NL Industries, Inc.'s net income is non-operating and comes from the fluctuation in the value of its marketable equity securities portfolio. This portfolio acts like a financial wild card, introducing substantial volatility that masks the performance of the core operating businesses (Kronos and CompX International Inc.).

The swing in 2025 is stark. For the first nine months of 2025, NL Industries, Inc. reported an unrealized loss of $\mathbf{\$9.1 \text{ million}}$ related to the change in value of these securities. This contrasts sharply with the same period in 2024, which saw an unrealized gain of $\mathbf{\$21.8 \text{ million}}$. That's a $\mathbf{\$30.9 \text{ million}}$ negative swing in a single year from non-core assets.

In Q3 2025 alone, the company booked an unrealized loss of $\mathbf{\$0.5 \text{ million}}$, compared to a gain of $\$18.6$ million in Q3 2024. This volatility is a threat because it makes the company's reported net income unreliable as a measure of underlying business health. You can't build a strategy on market movements you can't control.

Currency fluctuations, especially in European markets, negatively impact Kronos's export sales.

Kronos operates globally, with production facilities in Europe and North America, and a large portion of its sales are export sales denominated in various foreign currencies. This exposes the company to foreign currency translation risk (FX risk), especially with the euro.

While currency movements can be favorable, the risk is the unpredictability. In the third quarter of 2025, fluctuations in currency exchange rates, primarily the euro, actually increased Kronos's net sales comparisons by approximately $\mathbf{\$14 \text{ million}}$. For the first nine months of 2025, the net sales increase from currency translation was approximately $\mathbf{\$11 \text{ million}}$. What this estimate hides is the underlying instability.

The threat is that a strengthening U.S. dollar against the euro, or other local currencies where Kronos has significant costs, could quickly erode margins. Plus, the overall sales volume decline in the third quarter of 2025 was specifically noted in the European and export markets, showing that the underlying business is struggling in those regions, regardless of the translation effect. Any sudden, sustained appreciation of the dollar would reverse the recent positive translation effect, potentially compounding the losses from the $\text{TiO}_2$ price decline.

Finance: draft a 13-week cash view by Friday that models a $\text{TiO}_2$ price drop of an additional 5% coupled with a 10% euro depreciation.