Q4 2021 Olin Corp Earnings Call
Good morning, and welcome to all of them.
<unk> fourth quarter 2021 earnings self install.
All participants will be in listen only mode.
So if you need assistance please signal.
This vessel is passing the star followed by zero.
Today's presentation, there will be an opportunity to ask questions to ask a question star one on your Touchtone phone. So let's all your question. Please press Star then two.
Please note today's event is being recorded.
I would now like to turn the conference over to Steve Keenan Olin's Director of Investor Relations. Please go ahead Steve.
Thank you Rocco good morning, everyone and thank you for joining us today before we begin let me remind you that this discussion along with the associated slides and the question and answer session that follows will include statements regarding estimates or expectations of future performance.
Please note that these are forward looking statements and that actual results could differ materially from those projected.
Some of the factors that could cause actual results to differ from our projections are described without limitations in the risk factors section of our most recent Form 10-K and in yesterday's fourth quarter earnings press release.
A copy of today's transcript and slides will be available on our website in the investors section under past events.
Our earnings press release, and other financial data and information are available under press releases.
With me. This morning are Scott Sutton, Holden, CEO , and Todd Slater Olin's CFO .
All lines business Presidents will rejoin our first quarter earnings call.
Scott will begin with some brief remarks, after which we'll be happy to take your questions I'll now turn the call over to Scott.
Thanks, Steve.
21 was a solid year for all what I'm extremely proud of the complete Olin team for establishing that this company can deliver expected profitability and cash flow.
Driving that 2021 performance stake in the ground was critical to our future improvement as there were many temptations to a falling back into our historical peak peak trough experience. However, we've resisted all of those temptation and instead demonstrated their commitment to our leadership model.
Lifting olin's system value above all else.
Now and is called out on slide number three it is time to demonstrate that we have broad control over improving our value delivery in 2022 and that we have multiple 2022 and 2023 growth vectors in all three of our businesses.
As shown on slide number four we set our market participation. According to the weaker side of the E. C U and consequently, we were able to lift our value on both sides of the EC you through 2021.
We will sell into a poor quality market and in fact, we are pressing that principle more than ever heading into 2022 as shown on slide number Bob instead.
Instead of choosing to produce and sell incremental volume and negatively impact our market quality, we are instead, reducing our capacity utilization and purchasing product liquidity from the market to satisfy our participation level.
This is one tool to prevent a traditional negative cycle for Olin and bridge to the future favorable supply demand structural thematic.
Slide number six shows our increased purchase of global liquidity as our parlaying activities grow.
For the moment those parlaying activities, primarily serve to complement our leadership model of lifting our system value, but those activities will Additionally, serve all went well in the future as we grow and we require volume produced outside of our asset parameter.
The favorable supply demand structural thematic is upon us and as shown on slide number seven as the world appears to be under investing in <unk> capacity on the order of 17 World scale E. C. You plants over the next six years.
This forecasted Underinvestment comes at a time when clear positive demand megatrends solidified as shown on slide number eight.
This same scenario impacts epichlorohydrin as well as base easy to use.
Moving to slide number nine the impacts activities and outcomes for Olin are clear the forward structural thematic suggests demand growth is much greater than supply growth we.
We have taken many actions to improve our system value and we expect to become the world leader in global liquidity as well.
The result is that OLED defeats the cycle expects to deliver $8 billion of lever.
Free cash flow over the next five years approximately equal to our current market capitalization.
And it changed the improved valuation multiple we deserve.
All three of our businesses succeed and materializing there are clear growth vectors.
Chester grows shooting sports participation via the shoe United Mission and grows its military business because the demands of our next generation squad weapon.
The pox he grows its upstream value impact in both aromatics and epichlorohydrin and grows its downstream value impact the additional engineered solutions volume into clean energy composites and infrastructure.
And see a PV becomes the largest buyer of global liquidity and grows by matching our significant excess vinyls upstream capability in EDC and bcm with the right PVC players.
These and other growth vectors will become a key subject of future earnings calls.
None of this is 100% possible without a platform that is sustainable at all and we must have the right ESG program. So we have decided to raise the bar on some of our targets as shown on slide number 10 after having met many of our initial ESG goals earlier than targeted.
Yeah.
There is more to come here as our stakeholders continue to ask for enhancements in our ESG public profile and we will continue to upgrade our contemporary scorecard on slide number 11.
So that concludes my opening comments, so Rocco, we're now ready to take questions.
Thank you.
Your question please.
Touchtone phone.
Thank you.
Please pickup your handset before pressing.
Personally keys.
Your question please.
All of them too.
Today's first question comes from Hassan Ahmed.
Please go ahead.
Morning, Scott.
Well.
Scott a question on 2022 EBITDA guidance, you know the $2 five to $2 8 billion that you guys have guided to.
Look as I took a look at slide 16, you know I mean, where you listed all the different products that you guys have I mean, a box from aromatic it pretty much seems that you guys have price hikes, you know on the table you know for Q4 and Q1 across the board ex Hydromagnetics of whats, So I'm sitting there thinking that.
With you guys logging 2526 type you know what the two 5 billion in EBITDA in 2021 I need that two five to do eat seems pretty conservative.
Most of those price hikes take effect, so I mean am I thinking about these things the right way.
Well Hassan I think if you look at exactly where we are today right, we're being successful at lifting price and lifting product value.
But you know there's there's been some some caution around market quality. So we're not participating as as much. So in addition to not participating as much in a little weaker market. You know, we're also not operating our facilities as much as we might as well.
So we are additionally, buying material or product liquidity out of the marketplace to satisfy our needs. So those are some current offsets to what's going on with with pricing, but you know to your point I mean, the only way that we end up at a 2.5.
Billion dollar Mark is for these golly conditions that we're in right now to continue you know the outlook looks better than that.
Yep makes makes it makes some sense and I also appreciated the sort of.
Five year Levered free cash flow guidance that you guys gave in talking about being able to buy the company within five years.
At those rates. So my question is is you know when I, followed that with the supply demand outlook that you guys gave.
Obviously, you know demand majorly outstripping supply growth rate, which to me means obviously there'll be a resilient sort of earnings trajectory on a go forward basis, you won't really see much volatility, which obviously means that that should have a positive impact on your valuation multiple reg. So my question.
Really is with the outlook the way it is with supply demand do you feel that you know.
After a quarter as you guys keeps sort of showing resilience sort of earnings you will get.
Sort of bump up in your multiple or at some stage you just sit there and get frustrated didn't say I'm just yeah.
I'm going to move away from the public domain.
No.
Well, Yeah, I think you saw.
Saw that in fourth quarter of course, you know we bought back a number of shares were leaning in to that even even harder. The scenario is set up where 2022 is likely better performance in 2021, and 2023 is likely better performance than 'twenty.
'twenty two so even in 2022, we're looking at a levered free cash flow.
<unk> of about one $6 billion, so just call that $10 a share so it's greater than a 20%.
Yield I mean.
I think the dilemma, we have is that the vet. The forward valuation set up is for an imaginary cliff that cliff just doesn't exist.
So yeah, I think we have a great opportunity. It's the best investment we have is to by ourselves.
That imaginary cliff analogy. Thanks, so much sure.
The next question today comes from.
Susan.
Wells Fargo. Please go ahead.
Hey, good morning, guys.
I guess my question.
Is can you maybe help us.
Better understand.
When it makes sense for <unk> to produce caustic or ADC versus sort of trading at procuring. It I know and maybe how much volume sort of goes into that calc I mean, obviously youre going to still produce a lot but is there sort of a swing volume that you that you will.
Sort of move around too.
To make that trade and then what do you think the benefit was in the fourth quarter in terms of either margin or EBITDA.
Yeah, sure Hi, Mike I mean look so sometimes it's just more effective to buy I mean I get your question on you know how do you know how how how much right and a lot of things go into that analysis for us, but anytime we see signs of a poor quality more.
Market developing we're likely to.
To pull back a bit and you may have noticed that we do have a slide in the deck now where we're trying to give some quantification around that so in the fourth quarter.
It was roughly about 12% of our sales volume and that is sales volume for any products that are E. C. You oriented or E. C. You based derivatives, which is most most of our volume I think that number got up to about.
12, 12% so in the fourth quarter, Mike the direct benefit of that it's just benefit right I mean that cost us a lot to do that but what it is is a benefit for the future. It's a benefit for 2022, because we're just not going to sell into.
Poor quality market and we're going to continue to improve the value of the E. C. U E. C. You derivatives and that's not a one quarter of play we still have not made those moves in the fourth quarter and produced a bigger result, but that could have led to a lower outcome in 2022.
In 2023, so theres a lot that goes into that.
Got it Okay, and then just as a follow up on your <unk> more than doubled since you've been presenting it.
Continue to say, it's undervalued at what level.
Would you say, it's fairly valued or above.
And then when we get to that level, where you think its when youre getting the right value for your.
Your volume.
Is that sort of the number where you consider.
Maybe adding some capacity given that.
Demand is going to be a lot stronger over the next couple of years.
Well, yeah, I mean, the value has has.
Become better man I would say it.
It gets even more.
Fairly valued when there is recognition that again there is no imaginary imaginary clif bar that we've set it at a value that doesn't cycle up and down then, we'll we'll feel a bit better about it as far as adding.
Cook capacity right, we don't have plans to be adding capacity through inorganic means in fact.
We're practicing a bit at our parlaying activities, because when we do grow and we have a number of growth factors in place we will rely on that skill that we're developing today to go out and access liquidity in the world, but it is actually produced on others assets to support our growth.
Got it thank you.
Sure.
And our next question today comes from Joseph.
J P. Morgan. Please go ahead.
Thanks very much.
D C.
The more challenging opportunity.
2022, because of the deterioration in Asian PVC prices.
Hey, Jeff Thats a good good question and so we've seen this movie before in fact in the Middle of 2021, you know there was a point, where you saw some deterioration in PVC pricing, which tended to drag.
Deterioration in EDC, but again, when we see our core quality market developing we just don't sell into it and maybe we go out and buy some material and to satisfy needs or we redirect those molecules to other places in our EC you, China, which.
Exactly what we did in the in the middle of the year. So here you know you sort of see the same scenario happening and where the PVC in Asia is coming off some and so we have to adjust our model in real time, which we've done you don't see the same phenomenon affecting PVC.
In North America and Europe .
If PVC prices and.
North America and Europe .
Came in wouldn't that represent additional challenges and when you redirect your molecules away from E. D C, where do you direct them too.
Yeah, I mean, youre right, Jeff I mean that could present, some other opportunities right. So there.
We have to shift our model dynamically and we would reallocate to potentially other areas and there's lots of lots of other areas.
Reallocate too, but it's very possible that.
We slowed down a bit on one side of the EC you and even though we're not re directing more molecules into the marketplace. We are getting a lot more value from the other side of the EC you in fact caustic could turn out to be really good in that scenario.
Okay, great. Thank you so much.
Yeah.
Our next question today comes from.
Or is the vertical research partners. Please go ahead.
Good morning, Scott I was wondering if you could elaborate on your outlook for Winchester are along three lines volume outlook pricing and costs for 2022 versus 21.
Yeah, Yeah sure I mean.
Well of course volume is solid.
Chester business, and we have certainly a heavy commercial backlog already but on top of that right. We have an initiative called shoot United where we're going out and trying to grow the total number of participants.
And this wholesome sporting activity. If you just look at what happened in 2020.
They're effectively 8 million, new new shooters added to the rolls and if you look at what happened in 2021, there was nearly 6 million additional new shooters added to the rolls. So now we're up around 60 million people in this country enjoying.
This sport in fact, it's one of the fastest growing high school sports in the in the country. So what what we're going to do is go out and grow grow participation. So we expect volumes to stay strong right I won't say that we will have large multiples of volume expansion.
Because we're running pretty hard in that business.
All already as far as pricing goes we have another price increase on the table here in the in the in.
In the first quarter.
Part of that will go to offsetting some cost increases that we do have.
Especially across our metals portfolio.
Okay and then.
I'm tempted to ask you about the sequential trend.
E <unk>.
Prices have hung in quite well I think as the fourth quarter progress.
How are you thinking about sequential earnings taking the cost side into account.
Yeah.
Well I think we've called out that we expect net net our total chemicals earnings to be close to flat and going into one quarter versus versus fourth quarter.
In <unk>, we are facing some some cost pressures just like we are in some of our some of our other businesses, but that's the business, where we're pressing our model harder than any other any other place right. There were some signs.
Poor quality conditions temporarily developing especially in the northern hemisphere in the winter time, when there's not as many coatings.
<unk> needed. So we did slow down our rates and we did execute some parlaying activities and what we're really doing there is just trying to bridge to that golly, because really if you think about demand in 2022, it's absolutely robust and you think about the categories of that.
At Marine coatings look good.
Composite work and light weighting in automobiles wind blade activity for turbans, very very bullish there and infrastructure isn't going to hurt us at all either.
Very helpful. Thanks, a lot.
Sure.
And our next question comes from Frank Mitsch Fermium Research. Please go ahead.
Good morning, gentlemen, and nice end to the year noticed that.
There was a there was a press release that you guys shut down a bleach facility on the West Coast. Just wondering if you could talk about the factors behind that and what's your general outlook is for the bleach market.
Yeah sure, we did shut down or we've announced the closure of capacity in our facility there in northern Northern California.
The reason, we did that as just the bleachers under undervalued. There we still have a lot of bleach capability left across the country, but it's undervalued and it gives us the opportunity to allocate those he see us back into higher value applications. So that's the reason.
Four.
Got you that makes sense totally in keeping with the.
With your philosophy.
And then.
And given the undervaluation of our of your shares and clearly buybacks are going to play a nice role here in 2022 I was wondering if you guys had.
Sort of giving some thought to an accelerated share repurchase program.
Alright.
This is Todd I think as Scott mentioned earlier as you saw in the fourth quarter, we bought roughly $184 million worth of stock.
Early in 2022.
You should expect Poland, you know Todd.
You're getting a key use of our free cash flow toward share repurchases and probably leaning in a little heavier than what you saw in the fourth quarter.
Okay got you understood. Thank you.
Our next question today comes from this move.
There's no Nathan with RBC capital markets. Please.
Please go ahead.
Okay.
Great. Thanks for taking my question Congrats on all the progress.
I guess I'm just curious maybe you can just walk us through.
Some of your statements earlier, you said that there were 17, these new plants that potentially.
Amanda Wood.
Necessary over the next several years.
Where are we on on replacement cost economics, right now does it make sense that.
Some of those plants start to get announce pretty soon.
Not would you expect maybe some brownfield operations do alright expansions.
To get announced as well how are we thinking about use of back of the year.
Hey, Hey, Arun, Yeah, I mean.
If you could build an isolated E. C. You plan right, we're starting to get closer to reinvestment economics, but the reality is that doesn't make a lot of sense to do that just because of the challenges around elemental Corey. So you really have to.
Catcher two or build a complete integrated.
Complex and right now an integrated complex unwisely to match reinvestment economics, but I would just say that's not even the biggest the biggest driver here now I mean, there's so many ESG GE consider considerations on.
Where are the energy being the biggest input for our Chlor alkali plant comes from and so it's challenging to make a decision to increase you know your carbon carbon footprint. So now you've got the added cost of renewable energy as well that goes in into those investment decisions.
So I would say, it's not improbable I guess that there could have been some expansions on the table that might not be on the table anymore, just because of the ESG trends.
Great. Thanks.
As a follow up maybe I can just ask a question on the proxy.
There has been a notable improvement in epoxy margins over the last year or two.
I guess do you see this.
This level is kind of the new structural level of earnings power within that business should we expect margins to remain north of 20%.
On an EBITDA basis and from.
From here on or are you kind of implementing similar ratchet strategy.
<unk> value in that business as well.
Yeah, our expectation for margins in epoxy is for them to expand from where we are.
In the fourth quarter.
There's just there's just so many upsides.
And that business we haven't.
Fully implemented our model across the upstream part of that business, but.
The great fundamentals around some of the demand factors that I talked about before especially as we bridge this fourth quarter and first quarter golly.
We're working ourselves through.
Expect you know mid year that business to be rock.
Okay. Thanks.
And our next question today comes from Steve Byrne of Bank of America.
Go ahead.
Yes, Scott. This is comments you just made about the challenges to building an integrated VCU complex.
We seem to be even greater for your customers.
And thus they are interest in back integrating into Corey.
It would be extremely low.
That's what seems to enable you to use your your FTE business. Since you also downstream indoor Foxy you leverage that.
To drive these tolling agreements.
A proxy of customers.
Could you not also do that.
With EDC.
You got into the PVC business you could.
You could leverage that EDC position with a non integrated PVC.
Customers.
Potentially MDI since you're also in the aromatics.
Cool assignment or do you see opportunities to do this and leverage that chlorine business you have.
And your customers lack of interest in back integrating.
Yes, Thanks, a lot for the question, Steve Yeah look you're exactly right. I mean, this is an upside for the company and Youre going to hear us shift more of our discussion.
These growth factors and one of the growth factors that we will be talking about is the one I mentioned in some of my opening opening comments, where this is this is an area in other words upstream vinyls B and E. D. C. N V C M where we.
Have you know significant extra capability, and certainly incremental capability, where we might could match up very well with the right PVC leaders and that same thing can apply potentially.
Other chlorine derivatives and this is a great way to grow the company.
Okay.
Also wanted to get your update on some of these legacy chlorine contracts that you've talked about not renewing on expiry did some of those roll off.
End of the calendar year.
And are there more to go on that.
Yes, some of them did did roll off so we set those back to free freely freely negotiated and there is still some more of it we have to continue throughout 2022, but now it's the minority of our business.
Is still attached to sort of the Nonfunctioning type of index out there.
Yeah.
Thank you.
And then the next question today comes from John Roberts of UBS. Please go ahead.
Thanks.
On slide six.
Volume tracker.
Supply is that today across the opportunities or is it relatively concentrated.
Could you talk a little bit more about what Winchester doing their thing.
I think it's largely Russian.
Imports into the U S of ammo was that what Theyre doing is it something else.
Well.
Your first question right, how diversified army across the chemicals business were quite.
<unk> there may be one or two of our products, where we don't necessarily do parlaying activities, but it's actually very broad broad base, there and we had just put a few examples on the on the slot as far as Winchester for goes the phenomenon going on.
Russian imports right in Russia has been the largest importer of.
Ammunition of course their import additional.
Permits are terminated so there's a phase down of imports that would be allowed to come in from Russia. That's actually not the volume that that we purchase for our needs. We purchase some other imports for our needs so out in the future.
We're likely to be a little bigger player and purchasing imports and there's likely to be total less imports as well because of you know the country not accepting Russian imports out in the future.
Okay, and then what's the strategy for the aromatics.
I'm guessing there were among the lower return assets in your portfolio.
Well I mean aromatics is an important upstream business for us in.
In fact, we have one of the largest cuming plants in the world produce phenol and acetone, Anne and DPA and some amount of all of those we sell into the merchant market. You know some other amount we use in our downstream businesses and we just have.
<unk> talked a lot about of it a lot about it.
The production of phenol and asked the town is very interesting and it's a lot like the EC you ride their co produced and we haven't applied our co production commercial model.
Fully yet to phenol and acetone of course, we're not near as large of a player and we're not the leader in that business, but we do expect to get some upside out of advancing that.
Alright, Thank you sure.
Sure.
And our next question comes from Eric Petrie with Citi. Please go ahead.
Hi, Good morning, Scott and Pat.
Right.
Can you talk a little bit about the opportunity that you'd have to sell caustic soda in the evs and battery the cathode.
How large of an opportunity is that and are those customers asking for a greener caustic soda.
Okay.
Well yeah.
The opportunity continues continues to grow and.
A lot of the opportunity has to do with you know mining activities or extraction activities.
For lithium and other metals that go into it to batteries. So that's on a fast upward trajectory today, it's not a massive part of our business, but more than likely if you look in the range of five years ish, maybe a little bit longer it's actually going to be.
Speaker 1: not a massive part of our business, but more than likely, if you look in the range of five years-ish, maybe a little bit longer, it's actually going to be one of the larger consumers of costing in the world. And it's one of the items that is driving ECU demand growth and why demand growth is certainly climbing faster than supply growth. It's an important area for us.
One of the larger consumers of.
Caustic in the World and it's one of the items that is you know driving E. C. You demand growth and why demand growth is certainly climbing faster than supply growth is an important area for us.
Okay helpful. And then as you run your models for this year, how much could your volumes to be down.
Speaker 2: Okay, hopeful. And then as you run your models for the shear, how much could your volumes be down? And similarly, do you expect kind of your parlay volumes to stand this low to mid-teens?
And similarly, do you expect kind of your partly volume to stay in this low to mid teens range.
Speaker 1: So, yeah, we haven't. Of course, given a number on whether volumes will go down. Net net net across 2022 versus 2021, you know, you shouldn't think that our self-production volumes are going to decline, because that's actually unlikely that that happens. I think in our par lane, our purchasing activities, you know, third party liquidity.
Well, we haven't of course, given a number on whether volumes will go down net net net across 2022 versus 2021.
You shouldn't think that ourself production volumes are going to decline because that's actually unlikely that that happens.
I think in our parlaying, our purchasing activities.
Third party liquidity that that will change quarter to quarter, depending on how we're running our model I'm doubtful that it goes much above this sort of 10% to 15% range that you see it in and now but in any quarter, where there was some weak.
Speaker 1: that that'll change quarter to quarter depending on how we're running our model. I'm doubtful that it goes much above this sort of, you know, 10 to 15% range that you see it in now. But in any quarter where that some weakness shows up, that's when you'll see it peak to those levels.
It shows up that's when you'll see it peak to those levels.
Thank you.
Sure.
And the next question today comes from Alex Zukin with Keybanc. Please go ahead.
Speaker 3: And then, an expression today comes from our Supermob with Keybay. Please go ahead.
Speaker 4: Thank you. Good morning, everyone. Scott, you earlier talked about EPI.
Thank you good morning, everyone Scott.
Scott you earlier talked about E P I.
I'm sorry.
Speaker 4: Sorry, on one of the slides, you show EPI continuing to rise. DECI continuing to rise. DECI will be up in the first quarter, and then should we expect a plateau or continued to increase in the PCI and the rest?
Sorry, I was on one of the slides you show Epi continue to rise do you think sorry, PCI continuing to rise.
Do you think Dci will be up in the first quarter and then should we expect a plateau or continued increases in the PCI and the rest of the year.
Speaker 1: Alex, this is Todd. We would expect the CUPCI to continue to improve in the first quarter of 2022 from the fourth quarter. And obviously as we're running our model, it is all about value. And so you should expect that that is going to be the key area of focus as we move from where we are today on into the rest of 2020.
Alexia. This is Todd we would expect to see in PCI that continue to improve in the first quarter of 2022 from the fourth quarter.
And obviously as we're running our model. It is all about value and so you should expect that that is going to be the key area of focus.
As we move from where we are today on into the rest of 2022.
Speaker 4: Thanks Todd and the second question is on at the you know you've earlier talked about potentially big repricing opportunity or value enhancement you talk about progress here and also if you have any legacy contracts here similar to chlorine that may go beyond 2020
Thanks, Todd and the second question is on <unk>.
Earlier talked about essentially big re pricing opportunity or value enhancement could you talk about progress here and also if you have any legacy contracts here similar to chlorine.
Go beyond 2022.
Speaker 1: Yeah, sure. I mean, on Epicora Hydrant, you know, I'll just start with the fact that, yeah, we do have some legacy contracts. And just like Corrine, we're working our way through that. We're not as far down the path as we now are on Corrine with the calendar year turning, turning over. But what I will say about Epicora Hydrant, right?
Yeah sure I mean on on Epichlorohydrin.
I'll just start with the fact that yeah, we do have some some legacy contracts and just like coring, we're working our way through that we're not as far down the path as we now are on chlorine with the calendar year.
Turning turning over but what I will say about pepper epichlorohydrin right.
We are likely to participate less in the merchant market.
Speaker 1: We're likely to participate less in the merchant market, you know, relative to our chlorine merchant market participation. I mean, it really is about using that Epicora hydrin as a scarce resource that's really valuable to Owens downstream operations. And that's where most of us...
Relative to our chlorine merchant market participation I mean, it really is.
About using that epichlorohydrin as a scarce resource that's really valuable to Owen's downstream operations, and that's where most of it gets directed.
Speaker 3: Thank you and our next question today comes from Matthew Blair, the Twitter, Pickering and Vault. Please go ahead.
Thank you and our next question today comes from Matthew Blair from Tudor Pickering Holt. Please go ahead.
Hey, good morning, Thanks for taking my question circling back to the discussion do you have a number on how many pounds or product you could eventually put them on the VEB compared to how many pounds that you currently put on an ice vehicle.
Speaker 4: Hey, good morning. Thanks for taking my question. I'm stepping back to the EV discussion. Do you have a number on how many pounds of oil and products you could eventually put on an EV compared to how many pounds that you currently put on an ice vehicle?
Yeah.
Speaker 1: So I don't have the, it's a good question. I don't have the exact number, but you know, the, what, what, what, one consideration there, right? Is it,
I don't have the it's a good question I don't have the exact number but you know what.
One one consideration there right is that you know even in internal combustion vehicles. The amount you know.
Speaker 1: you know, even an internal combustion vehicles, the amount of controls and electronics has continued to grow. So even on those, the need for printed circuit boards, IE going back to copperclad laminate, going to epoxy.
Controls in electronics has continued to grow so you've been on those the need for printed circuit boards, you know I E going back to copper clad laminate going to part C has continued to grow the good news is that on Evs is probably double.
Speaker 1: has continued to grow. The good news is that on EVs, it's probably double that as well. So, you know, the trend is positive in both areas. There's nothing but good news there for epoxy that goes into, call it, printed circuit boards. You know, the only limitation we really have now is driven by supply chain issues, and it's supply chain issues around chips that go on printed circuit boards.
That as well so the trend is positive in both areas. There is nothing but good news there for a part C that goes into call. It printed circuit boards. The only limitation, we really have always driven by supply chain issues that have supply chain issues around chips.
They go on printed circuit boards.
Right right. Okay, and then is there any update on your chlorine sale.
Speaker 4: Right, right. Okay. And then is there any update on your chlorine sales into the TO2 market? Have you shifted away from that market? Or are you starting to get higher values into that market?
Do market have you shifted away from that market or are you starting to get higher value due to that market.
Well, we've changed our supply mix, some where you know that's still an area, where it's a lower value outcome for us. So we have changed our mix a bit but we've also been successful being able to get more value.
Speaker 1: Well, we've changed our supply mix some where, you know, that's still an area where it's, you know, a lower value outcome for us. So we have changed our mix a bit, but we've also been successful being able to get more value there as well.
There as well.
Great. Thank you.
And our next question today comes from Andrew.
Speaker 3: And on next question today, comes from Enzo Castillo with Morgan Stanley . Please go ahead.
<unk> with Morgan Stanley . Please go ahead.
Good morning, and thanks for taking my question Scott.
Speaker 5: Good morning, thanks for taking my question. Just a question on what we've been seeing around epoxy. I think trace versus it may be talked a little bit more about potential risk of imports. And you talked about a poor or I guess a weak quality market and maybe more activation around the epoxy business. So curious, do you think about the go forward?
Scott just a question on.
We've been seeing around epoxy I think craig's questions that maybe you talked a little bit more about potential risk of imports and you talked about a poor or I guess, we could quality market.
And maybe more activations around the epoxy business. So curious as you think about the go forward and reducing the cyclicality of this segment than the business overall, how do you prevent from becoming.
Speaker 5: of the segment and the business overall. How do you prevent from becoming a little bit more, where I guess, acting more like a marginal producer where you're reducing your operations and incentivizing others to import more product into any given.
Little bit more I guess acting more like a marginal producer, but you're reducing your operation.
Incentivising others too.
More product into it any given region.
Speaker 1: Now, in Epoxy, I mean, what's happening now, I wouldn't want you to sort of extend that into a permanent pattern for the future, right? There's been, you know, a large...
Yeah.
And our policy I mean, what what.
What's.
What's happening now I wouldn't want you to sort of extend that into a permanent pattern for the future right. There's been a large value chain change in the park. She chain and then you sort of run into the end of the end of the year.
Speaker 1: value change, change in the epoxy chain, and then you sort of run into the end of the year, winter in the northern hemisphere scenario, and that's what we had called out in our birth quarter, and that would happen in fourth quarter. And it did. So when these things happen, you do have the opportunity to go get slugs of material that come out of Asia. But those are all always temporary, and they're going to be temporary.
Sure you know winter in the northern Hemisphere scenario and that's what we had called out in our third quarter earnings is that that would happen in fourth quarter and it did so so when these things happen you do have the opportunity to go get.
Logs of material bad debt that would come out of Asia, but those are all always temporary and they're gonna be temporary again, and we are getting ourselves partnered up with the right customers for for the future and it's not about just a pox see resin I mean no.
Speaker 1: And we are getting ourselves partnered up with the right customers for the future. And it's not about just epoxy resin. I mean, no doubt demand for epoxy resin...
Demand for our Pax you resin.
Speaker 1: certainly growing and there can be some supply expansions, you know, in the epoxy world as well, but it all goes back to Epicora hydrants. Most of those supply expansions, you know, are limited by Epicora hydrant, which is where we focus a lot of our landscape activities on.
Certainly growing and there can be some supply expansions you know in the Apache seaworld as well, but it all goes back to epichlorohydrin most of those supply expansions.
Im limited by Epichlorohydrin, which is where we focus a lot of our landscape activities on.
Speaker 5: That's very helpful. Thank you. And then one thing that struck me, I guess, was they mentioned, you know, becoming the largest ECU buyer. So, as we think about your ratchet strategy and continuing to, you know, increase the value of your ECU, I guess, how do we balance that with, you know, if I think about Olin as a buyer or the largest buyer of...
That's very helpful. Thank you and then one thing that struck me again.
You mentioned, you know, becoming the largest U buyer. So as we think about your racket strategy and continuing to increase the value to.
See you.
I guess, how do we balance that with you know if I think about it.
Or are the largest buyer of U I would imagine that to some degree then you benefit from lower value, whereas the balance of <unk>.
Speaker 5: I would imagine that to some degree, then, you benefit from lower value. So where is the balance of continuing to drive higher value but also becoming a larger buyer of the product globally?
And to drive higher value, but also becoming a larger and larger buyer of the product globally.
Speaker 1: Well, sometimes it's just more effective to buy. And you know, I wanna repeat something that I had tried to clarify earlier. I mean, today we're in that position of buying or harling because it supports our model and it certainly helps us bridge a bit of a goalie.
Well, sometimes it's just more more effective.
By and.
Repeat something that I tried.
Tried to clarify earlier.
They were in that position of buying our parlin because it supports our model and it certainly helps us bridge a bit of a golly here, but in the future. That's a great way to grow the company without spending.
Speaker 1: here. But in the future, that's a great way to grow the company without spending excessive capital.
Excessive capital.
Understood. Thank you.
And then a question for Mike.
Speaker 3: And our next question today comes from Mike Lighthead with the Barclays, please go ahead.
With Barclays. Please go ahead.
Speaker 2: Great. Thanks. Congrats on the quarter. Just one for me today. I wanted to follow up on Hassan's earlier question maybe a bit more directly. So, Scott, in the slides now, you're confident you're going to get $8 billion in free cash over the next five years, which is more than your market cap today. And I think you lay out a fairly compelling rationale for that.
Thanks, Congrats on the quarter.
Just one from me today I wanted to follow up on <unk> earlier question, maybe a bit more directly so Scott in the slides now youre confident youre going to get 8 billion in free cash over the next five years, which is more than your market cap today, and I think you lay out.
Fairly compelling rationale for that and.
Speaker 2: And for whatever reason, when I look at your share price, trading at a 20% cash yield for each of the next five years, I think the market valuation is saying they don't believe you or you're wrong. So if the public market won't give you credit, and I don't mean this to be flippant, but why not just take yourself private? I mean, the back of the envelope LBO math is extremely compelling with that level of cash flow if you're confident you're going to deliver that.
And for whatever reason when I look at your share price trading at a 20% cash yield for each of the next five years I think the market valuation is saying they don't believe you are wrong. So if the public market won't give you credit it I don't mean to be flippant, but why not just take yourself private I mean, the back of the envelope LBO math is extremely.
Compelling with that level of cash flow, if youre confident youre going to deliver that.
Yeah, Yeah I appreciate your question and Yeah. That's that's exactly right I mean in theory, you know you can buy ourselves back either immediately or over oversaw.
Speaker 1: Yeah, I appreciate your question. And yeah, that's, that's exactly right. I mean, in theory, you know,
Speaker 1: by ourselves back either immediately or over some time. Look, I mean the only way that I could really answer that question is just to say that we are the best value for the use of our own cash at the moment and we've been leaning into that and we're going to lean into that a bit harder.
Some time look I mean, the only way that I can really answer that question is just to say that you know we are the best value for the use of our own cash at the moment and we've been leaning into that and we're going to lean into that a bit harder.
Great. Thank you.
Sure.
Speaker 3: Our next question today comes from Roger Smith with Bank of America. Please go ahead.
Our next question comes from Roger Smith.
Please go ahead.
Speaker 6: Thank you very much. Do you have a target of how short you'd like to be in ECUs or target range?
Thank you very much do you have a target of how sure you'd like to be an easy use or a target range.
Speaker 1: You said how short we want to be in ECUs. Well, I would just say this, that, you know, just because we have ECU capacity, you know, doesn't mean that we necessarily.
You said you said, how short we want to be an easy as well I would just I would just say save this but no just just because we have E. C. You capacity.
Doesn't mean that we necessarily.
Speaker 1: running, right? We have reduced our ECU capacity, in fact, by about 850,000 ECU tons a year because it was undervalued. We'll always have the ability, at the right value,
Run it right we have.
Reduced R. E. C. You capacity in fact by about 850000 E C U tons a year.
Does it was it was undervalued, we will always have the ability at the right value to move around by 5% or so, but we were you know not.
Speaker 1: to move around by 5% or so, but we're not necessarily.
Certainly.
Speaker 1: you know, gonna use that capability to service a market unless that's a growth market. But I think getting at your question, because we'll be the largest buyer, net buyer, there's a point in our future where the combination of what we produce and buy is larger than our capacity. And that's likely to be a permanent feature going forward. So I hope I answered your question.
Good are going to use that capability to service a market unless that's that's a growth market.
But I think getting at your question because it will be the largest buyer net buyer, there's a point in our future where the combination of what we produce and Phi is larger than our capacity and that's likely to be a permanent feature going forward. So I hope I answered your question.
Yeah.
I mean, you did but I'm trying to figure out whether that debt.
Speaker 6: I mean, you did, but I'm trying to figure out whether that production and buying is
Production in buying is that.
Speaker 6: know, are you 5% short or you want to be 25%?
How are you 5% sure.
Are you wanting to be 25% short.
Speaker 6: Well, we haven't given a number on where we are today, but in our future, we want to lean toward being more short. The other question I have is,
Yeah, well, we havent given a number on where we are today, but in our future we want to lean toward being more short.
Okay. The other question I have is.
Yeah.
Selling to tier two for getting serious.
Speaker 6: You may have heard on some of their calls say, well, we'll just build chloralkali.
You may have heard on some other calls say well, we'll just chlor alkali.
Does that have a risk to start if I can.
Speaker 6: Could, does that have a risk to start sliding the global market with caustic if they start building?
Martin with classic if they start building chlor alkali for their own.
Process needs.
Speaker 1: Well, I would just say that the world's gonna need more core alkali and it's not on the world's agenda right now to build more, more plans. So, you know, somebody's gonna, gonna build. We'll see.
Well I I would just say that the world's going to need more chlor alkali and it's not on the world's agenda right now to build four more plants. So somebody's got a got a bill we'll see.
Thank you very much sure.
Speaker 3: And as there are no further questions, this concludes our question and answer session. I'd like to turn the conference back over to Scott Sutton for closing comments.
Yeah.
Further questions. This concludes our question and answer session I'd like to turn the conference back over to Scott Sutton for closing comments.
Yeah, No I would just say thanks to everybody for joining us today appreciate it.
Speaker 1: Yeah, no, I would just say thanks to everybody for joining us today. Appreciate it.
Speaker 3: Thank you. This concludes today's conference call. We thank you all for attending today's presentation. You may now disconnect your lines and have a wonderful day.
Thank you. This concludes today's conference call. We thank you all for attending today's presentation. You may now disconnect your lines and have a wonderful day.
Thanks.
Yeah.