Olin Corp Q3 2024 Earnings Call Transcript

The following is excerpted from the question-and-answer section of the transcript.

Question: Patrick Fischer - Goldman Sachs - Analyst : First question is just around the announcement that your competitor Shintech made back in August that they're going to build a large integrated chloro vinyl project in the US. So I just wanted to get your sense on what you think that will do to the market. And also remind us, you've got a relationship with them where you supply them chlorine today, roughly what is the scale or scope of that? And do you think that will be impacted by this plant that they're going to build?

Question: Patrick Fischer - Goldman Sachs - Analyst : Fair enough. And then if you would, maybe just give us a little preview of the Investor Day, what is it that you think investors will take away from that? Or what is it that you want to strategy-wise kind of show to investors?

Question: Hassan Ahmed - Alembic Global Advisers - Analyst : A question around your Q4 guidance. I appreciate how you guys broke out the hurricane impact. So I mean, just the way I see it is the hurricane impact was $110 million worth of an EBITDA hit in Q3 and you're guiding to a lingering $25 million sort of EBITDA hit in Q4, yet the uptick from Q3 to Q4 in EBITDA is $10 million to $40 million. So I'm just trying to understand that despite some of that EBITDA coming back on the back of sort of ramping up operations and the like. I mean, why is the EBITDA not going up more? Is it exclusively because of seasonality?

Question: Hassan Ahmed - Alembic Global Advisers - Analyst : Very fair, Ken. And I appreciate the fact that you guys have your December Analyst Day coming and I'm sure you would talk a bit about sort of '25 and beyond then. But could you just give us just an early preview into how you're thinking about 2025, just qualitatively, I mean, obviously, rates are coming down. Historically, you've talked about how you guys' operating rates were in the 60s. The industry was operating probably in the '80s. So, from the sounds of it, if at all, there was a restocking you guys would be in a pole position to obviously gain market share and the like. So any sort of beyond a seasonally weak Q4 that you've guided to any sort of qualitative guidance you could give us about 2025 and beyond?

Question: Arun Viswanathan - RBC Capital Markets - Analyst : Great. I guess I'll just ask on some of your main end markets, what you're seeing as far as supply demand, specifically for caustic soda. There was some disruptions late in or earlier maybe at a peer site, and there was maybe some tightening. It looks like there's been some stable demand. Have you seen any signs of potential pricing opportunities in caustic? And then similarly, maybe you could provide some comments on EDC and epoxy if anything.

Question: Arun Viswanathan - RBC Capital Markets - Analyst : Okay. And then if I could just ask a couple of follow-ups on that. So, I guess when you think about epoxy, it sounds like you're expecting a date in November, where I get maybe an update on the antidumping situation, I guess what are your expectations for that? And does that maybe drive some optimism about that business for '25? And I guess when you think about that, if you were to add back some of your impacts, the 135, is that the only driver that you really see adding back for '25? Or would there be some other potential uplift to '25 EBITDA?

Question: Jeff Zekauskas - JPMorgan - Analyst : In 2024, did you come close to making any acquisitions of size?

Question: Jeff Zekauskas - JPMorgan - Analyst : Great. And in the chlor alkali business in the third quarter, overall, did prices go up or down sequentially and by how much? And likewise in Winchester, how much did prices go down sequentially?

Question: Jeff Zekauskas - JPMorgan - Analyst : And at Winchester, how much did things fall?

Question: Aleksey Yefremov - KeyBanc Capital Markets Inc. - Analyst : I wanted to come back to Shintech. Is it a realistic scenario where you need to replace them as a customer after 2030? I guess or is it a pretty low probability scenario. And does the outcome of this depend on whether Shintech builds this new project or not?

Question: Aleksey Yefremov - KeyBanc Capital Markets Inc. - Analyst : Okay. Understood. And then in epoxy, you were $200 per ton price increase. Can you tell us how successful it was so far? And what do you expect from that in Q4 and Q1?

Question: Joshua Spector - UBS - Analyst : I wanted to ask on the fourth quarter guide relative to what you delivered in first quarter in chlor alkali vinyls. If you exclude the hurricane impacts, it's kind of similar, fourth quarter and first quarter are sometimes up, sometimes down. But I think if we look at the moving parts, caustic prices have moved higher. Your goal was to bring operating rates up, maybe that hasn't happened to the hurricane or other pieces. But are there other factors that we should be considering why fourth quarter earnings would be lower kind of in the context that I frame out there?

Question: Joshua Spector - UBS - Analyst : Yes. I guess I apologize. I was asking specifically about chlor alkali vinyls and excluding the hurricane. So, I guess your volume comment answers a piece of that caustic prices are higher. So, I guess, to some extent, we'd expect earnings to be higher. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. OCTOBER 25, 2024 / 1:00PM, OLN.N - Q3 2024 Olin Corp Earnings Call It seems like there's something else offsetting, but I'll ask related to that, my follow-up around chlorine pricing. You talked about it flat and more mix effects, but in your slide in the appendix, you show it as a negative sequentially. So is that really small and it's just noise? Or is there any other maybe change in strategy or approach to maybe chlorine prices and related to that volumes that you'd highlight?

Question: Patrick Cunningham - Citi - Analyst : So, Winchester third quarter EBITDA is down about $20 million versus the first quarter, the Winchester was supposed to benefit from the project to build capacity on behalf of the US government. Does this mean that core EBITDA in Winchester is down more than $20 million?

Question: Patrick Cunningham - Citi - Analyst : Understood. And then somewhat related, how should we be thinking about the 2025 implications for some of these headwinds you're seeing in Winchester?

Question: Kevin McCarthy - Vertical Research - Analyst : Ken, I'd appreciate your updated thoughts on chlorine and maybe over the medium term. If I look at the bottom right of your slide 10, it's been the weaker side of the ECU for about a year now, and that's expected to continue in the fourth quarter. What needs to happen for the chlorine market to retighten? At a high level, I think a lot of managers would argue that we've been in an industrial recession. I normally think of caustic demand as being more industrial in nature. And yet caustic has been the stronger side and action overseas, as you pointed out, has been encouraging in caustic, I think. So it seems to me we need chlorine to retighten and turn around. Is it the case that's happening, but it's being masked by seasonality, do we need vinyls to be more vibrant going into next spring? How would you characterize the potential for inflection in chlorine over the next few quarters?

Question: Kevin McCarthy - Vertical Research - Analyst : Okay. And then I had a few hurricane housekeeping questions. So, of your $110 million hit in the third quarter, how did that split between chlor alkali and epoxy segments? And maybe you could comment similarly for the anticipated $25 million in the fourth quarter.

Question: Steve Byrne - BofA Securities, Inc. - Analyst : Yes. Thank you. Just want to drill into Winchester a little bit. The EBITDA margin was 14% in the quarter. How wide is the spread on that between commercial versus military? Do you have the ability to push price in military ammunition and high level are you the best owner of this business? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. OCTOBER 25, 2024 / 1:00PM, OLN.N - Q3 2024 Olin Corp Earnings Call

Question: Steve Byrne - BofA Securities, Inc. - Analyst : All right, Ken. And maybe just one more portfolio-related question, and that is in a year from now when the contract with Dow ends ¡ have you given more thought and have a conceptual interest in what to do with that chlorine capacity and low-cost ethylene. Do you have some thoughts on that?

Question: Mike Leithead - Barclays - Analyst : I wanted to go back to the Hurricane Beryl impact, and I apologies if I missed it, but what exactly was incremental in terms of what actually played out relative to what you expected in your operations a few months ago that's driving the incremental, say, $35 million cost?

Question: Mike Leithead - Barclays - Analyst : Got it. That's helpful. And then second, Dow initiated a strategic review yesterday of some of the European assets, and I believe that includes their Stade complex. I guess, one, are there any Dow assets there that would be of interest in fit to Olin? And two, if they decide another outcome there, how, if at all, does that impact your Stade operations?

Question: Bhavesh Lodaya - BMO Capital Markets - Analyst : Maybe first on the on the Winchester side of things, you mentioned the destocking impact to end on the first quarter, are you also expecting some easing of the higher propellant costs given some of the weaker demand from the commercial side of the industry right now? And I guess the broader question is, do you expect margins to go back to the 19%, 20% after the first quarter?

Question: Bhavesh Lodaya - BMO Capital Markets - Analyst : Got it. And then maybe circling back to the chlor alkali. If we add back the Beryl impact you highlighted during the quarter, that would suggest EBITDA would have been up sequentially around 10%. That seems to contrast with your ECU index on slide 10, which actually moved down during the quarter. So, was it what stronger volumes that you saw maybe stronger exports or some other dynamics that you can share and maybe how those are trending in the current quarter?

Question: John Roberts - Mizuho Securities - Analyst : Are the Vista Outdoor activities having any impact on the competitor or customer dynamics at Winchester?

Question: John Roberts - Mizuho Securities - Analyst : Okay. And then why do you think the higher glycerine costs in China aren't having any impact on pricing?

Question: John Roberts - Mizuho Securities - Analyst : Right? We have higher glycerine costs for the Chinese exporters. It doesn't seem to be having any impact on pricing. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. OCTOBER 25, 2024 / 1:00PM, OLN.N - Q3 2024 Olin Corp Earnings Call

Question: John Roberts - Mizuho Securities - Analyst : Why don't you think the pricing is even lower then, if glycerine costs don't matter?

Question: David Begleiter - Deutsche Bank - Analyst : Staying on epoxy. How do imports in '24 into the US compare versus '23?

Question: David Begleiter - Deutsche Bank - Analyst :

Question: David Begleiter - Deutsche Bank - Analyst : Understood. And just in chlor alkali, once everything is back up and running, where do you expect where you want your operating rates to be? And how would that compare to where they were at the beginning of the year? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. OCTOBER 25, 2024 / 1:00PM, OLN.N - Q3 2024 Olin Corp Earnings Call

Question: Mike Sison - Wells Fargo - Analyst : So, Sherwin-Williams mentioned that they felt the first half of '25 would mirror the second half of '24. And I guess maybe a decent gauge for housing. So, if that's the case for you, it could be the longest trough ever, but how do you think EBITDA sort of improves or doesn't improve sequentially? Obviously, we add back Beryl what other things can you do in the first half of '25 to show improvement if the environment is unfortunately not much better?

Question: Mike Sison - Wells Fargo - Analyst : Got it. And then one quick follow-up. A lot of companies use their Analyst Days to make some sort of pivot or change to the strategy, you've been there quite some time now. Any thoughts? Are there any major changes or pivots you think you might have in the strategy? Or are we going to hear a little bit more just like tweaks here or there or highlights of what you want to do?

Question: Mike Sison - Wells Fargo - Analyst : It depends on the giveaway. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. OCTOBER 25, 2024 / 1:00PM, OLN.N - Q3 2024 Olin Corp Earnings Call

Question: Frank Mitsch - Fermium Research - Analyst : I want to come back to the PCI on slide 10, you know Ken you said that the decline was largely due to mix and so forth. I was wondering if you could add a few more details on it. What specifically led to that decline. And we're at levels now back to 2021. And if it is mix and so forth, what would that normally be? What are your expectations for 4Q?

Question: Frank Mitsch - Fermium Research - Analyst : Okay. Terrific. So flattish is where it would have been, and that's probably not too far off from where you think 4Q might be?

Question: Frank Mitsch - Fermium Research - Analyst : All right. Terrific. And given where the share price is today, just curious as to how we should think about the pace of buybacks in 4Q?