NL Industries (NL) Sophon Profile

A high-yield, high-cash holding company with cyclical constraints

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Disclaimer: Not financial advice

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Sophon Score: 52/100

NL Industries is a cash-rich holding company with a niche industrial subsidiary and a minority stake in a cyclical commodity business. Its earnings and dividend streams are heavily dependent on TiO₂ market swings, making cash flow unpredictable despite a strong balance sheet. Governance is concentrated under Valhi/Contran, limiting independent strategic action and creating potential conflicts. For these reasons, NL does not fit our active coverage criteria focused on durable growth, compounding potential, and aligned shareholder incentives.

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NL Industries is an unusual holding company. It owns 87% of CompX International, a niche manufacturer of cabinet and ignition locks, electronic access systems, and marine hardware, and a 31% equity stake in Kronos Worldwide, a mid-tier producer of titanium dioxide pigment. The remainder of NL’s assets consists of cash, negligible debt, and long-standing environmental and legal accruals.

The consolidated financials can be misleading. Revenue is generated almost entirely by CompX, which produced ~$146M in FY24. Locks account for the majority of sales (~80%), with marine hardware making up the remainder.

CompX is a steady, profitable business, but too small to materially move NL’s earnings. The company reported $6M in net income for 2024, implying margins of ~50%, but this is driven by equity income and dividends from Kronos rather than the operating subsidiary. Kronos is cyclical, commodity-exposed, and unconnected to the revenue line, yet it drives a large portion of reported earnings.