Shares of Valhi, Inc. VHI have increased 13.5% since reporting results for the second quarter of 2026, outperforming the S&P 500 index’s 0.3% decline. Over the past month, the stock has advanced 16.6% compared with the benchmark index’s 1.8% return.
Sales & Earnings Performance
Valhi reported second-quarter net sales of $606.1 million, up 12.2% from $540.4 million a year earlier. Net income attributable to Valhi stockholders rose to $22.3 million from $0.9 million, while earnings per share increased to 78 cents from 3 cents. Consolidated operating income nearly doubled to $67.7 million from $35.5 million, led by stronger results in the Chemicals segment. The latest earnings per share included 21 cents from a tax-increment infrastructure reimbursement and 10 cents from the gain on an office building sale; the prior-year quarter included 31 cents from an infrastructure reimbursement.
Segment Results & Operating Metrics
Chemicals net sales increased 13% year over year to $558.1 million, while operating income surged 292% to $40.4 million. Titanium dioxide sales volume rose 16% to 153,000 metric tons, and production volume increased 8% to 135,000 metric tons. The gross margin expanded to 18% of sales from 13% and the operating margin improved to 7% from 2%.
Component Products sales rose 8% to $43.6 million, including 8% growth in security products and 7% growth in marine components. Segment operating income climbed 41% to $8.9 million, with the operating margin widening to 20% from 16%. Real Estate Management and Development sales fell to $4.4 million from $5.7 million, reflecting a slower pace of development on previously sold parcels. Its operating income edged down to $18.4 million from $18.9 million.
Management Commentary
Management said that Chemicals maintained positive momentum as market-share gains lifted volumes across all major markets, particularly Europe. Demand improved from 2025 but remained below the historical levels, especially in North America, where elevated interest rates, economic uncertainty and subdued consumer spending persisted. Constrained industry TiO2 inventories, geopolitical instability and shipping disruptions lengthened order lead times, leaving the segment with a favorable backlog entering the third quarter.
Component Products benefited from higher security-product sales to healthcare, transportation, distributors and tool-storage customers, along with increased marine-component sales to industrial customers. Management expects those favorable demand and product-mix trends to continue, although tariffs, shipping expenses and inflation in domestically sourced materials could pressure second-half margins.
Factors Behind the Quarter
Chemicals’ 16% volume growth added approximately $79 million to sales and currency movements added about $10 million. Those benefits were partly offset by a 3% decline in average TiO2 selling prices, which reduced sales by roughly $15 million and a weaker mix in complementary businesses. Lower feedstock costs, fixed-cost underabsorption and restructuring benefits supported profitability. Unabsorbed fixed costs were immaterial versus approximately $20 million a year earlier. Currency changes nevertheless reduced Chemicals’ operating income by about $12 million.
Real estate results included $11.3 million in infrastructure reimbursement income and a $5.8-million office-building gain. Meanwhile, quarterly interest expenses increased $0.9 million to $14.7 million because of higher debt levels and average rates, partly tempering the operating improvement.
2026 Outlook
Valhi expects full-year consolidated operating income to exceed that reported in 2025, driven by higher Chemicals volumes and lower operating costs, partly offset by declining Real Estate activity as development winds down. Chemicals expects 2026 sales, gross margin and operating margin to exceed last year’s reported levels, supported by price increases, surcharges and lower-cost inventory. Component Products also projects higher full-year sales and margins.
The company expects substantially all of LandWell’s $24 million of remaining deferred revenues to be recognized during 2026, though timing depends on development progress. It forecasts about $66 million in capital expenditure, plus roughly $20 million in land-development spending. General corporate expenses and interest expenses are expected to rise year over year.
Other Developments
LandWell sold its operating office building for $6.8 million in cash, producing the $5.8-million gain. With that transaction, all saleable Henderson land and acreage had been sold by the quarter-end. Kronos also continued executing its fourth-quarter 2025 workforce restructuring. It paid $4.8 million in severance in the first half of 2026, leaving a $3.8-million accrual, and expects no further material charges.
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Valhi, Inc. (VHI): Free Stock Analysis ReportThis article originally published on Zacks Investment Research (zacks.com).
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