Q1 2022 Olin Corp Earnings Call
Okay.
Good morning.
Welcome to the Olin Corporation's first quarter 2022 earnings conference call.
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Rest 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 first 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 Charlton CEO .
Tom in golf ball, President of Oxy and corporate strategy.
Schumacher, President Chlor alkali products, and vinyls and Todd Slater Olin's CFO .
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.
Yeah, Thanks, Steve Owen.
<unk> first quarter results met a number of expectations can deliver more.
That said the broad and global team delivered remarkable accomplishments and demonstrating that we have control over and improving our value delivery in 2022 versus 2021.
In the face of major C. A T V power asset challenges and now, including a multi month complete plaquemines site shutdowns and in our proxy market and which Owen absorbed and continues to absorb the demand shortfall.
C. A T V in Winchester delivered the highest quarterly EBITDA in our history.
We were also pleased to announce our blue water joint venture with Mitsui and company to substantially grow our participation in global liquidity and better serve as global demand.
Complementing our leading position Mitsui will bring to the joint venture both existing business and a tremendous global capability to drive long term growth.
So beginning with slide number four there are two main themes that I'll review in these remarks.
One thematic is our OLED <unk> model.
There is our own growth factors, here's the simple story.
We're the global leader in all of our businesses and seek to expand our leadership.
Our annual Levered free cash flow was $1 $7 billion and it is very repeatable.
Have a unique system value model that breaks the cycle phenomenon in other words, the Olin winning model.
And we have accretive initiatives in every business, we called them all when growth factors. So let's start with the OE winning model theme on slide number Bob.
Really respond to a very popular question that we get all the time.
The application of our new winning model prevents deeply cyclic results that olin historically inflicted upon itself.
Here's the proposed proposed trends first on the left hand side from the top down.
And kind of absorb demand shortfalls like we are doing today in a policy by the way.
And run our entire global chemical assets portfolio at 50% utilization rates for a whole year and still deliver close to $2 billion of EBITDA in that same year.
So from the bottom up on the right hand side. So we're speaking up from the $636 million of EBITDA in 2020.
We add back material changes that we don't lose in the event of a recession and could still get to at least one $5 billion of EBITDA.
So with demand growth forecasted to be larger than supply growth across all of our businesses.
We don't see the recession scenario materializes.
But even if we did fall all the way down to $1 $5 billion of EBITDA, we can still deliver more than $1 billion of levered free cash flow in that same year. So a recession your yield up 13% at today's equity price.
Continuing the old one winning model theme on slide number six.
The optionality from a high level mechanics of our model are important to understand so we have tried to summarize a day in the life of operating our model.
First we set our broad market participation to the forecasted weaker side of it you see you in other words, we don't chase the stronger side and we limit our participation on the weaker side.
Second we determined which OLED.
Boring derivative change to get preference based on their relative values third we decide how far downstream in each derivative chain, we will participate and finally as a fourth step even for the products that we do participate in it may make sense to purchase liquids.
From a global market instead of producing the product.
The operation of the model is clearly more sophisticated than the simple summary, and as you might imagine the operation is really executed across a deep and rational culture of valley.
Now, let's move to the Olin growth vectors somatic beginning on slide number seven.
Considering the backstop of our successful model, we can now cross an inflection point in growth initiatives.
And currently sits on the capability to incrementally facilitate but next world scale PVC plant.
We estimate the combined capital cost at about one third of our Greenfield project with a much shorter time to market.
This project could yield a growth and a broadening of the options available in the operation of our winning model.
In other words, we get value back to all one time number one.
So moving to slide number eight sustainable hydrogen supply is an untapped opportunity for all of them. We already have one of our smaller chlor alkali facilities supply hydrogen to the fuel cell market last night, we announced the signing of an Mou or a joint venture.
With plug power to supply sustainable hydrogen from our St. Gabriel Louisiana production facility exclusively to the growing fuel cell market as well.
Taken together these two supplies represent about 6% of our current hydrogen production. We can expand this relationship to other all one size and we have the independent option of replacing previously closed acu electrolysis cells with Warner electron.
<unk> sells as well.
And our policy on.
On slide number nine Olin is positioning its technology to take advantage of robust future demand driven by Mega trends, there are clear and specific global growth sectors that will pull on our proxy demand now.
Namely giant wind turbines lighter automobiles electrified vehicles and more sustainable construction methods.
For each of these factors Olin has developed a proprietary epocrates just don to solve a technical and enabling feature needed in the end product.
On slide number 10, Winchester is already highly engaged and material materializing benefits from growth factors in both the commercial and military arenas are shoe United initiative is exposing the positive benefits of wholesale shooting sports with family and friends.
To millions of potential new participants in this fast growing sport.
Winchester has also recently been awarded a new contract to kick off the development of the U S. Military next generation squad weapon ammunition production facility at our Lake City, Missouri Ammunitions plan.
We expect multiple new fundings to be appropriated to Winchester to manage this effort and additional aims to supply the 6.8 millimeter rounds.
Winchester is clearly on a growth path.
So that really concludes my opening comments and operator, we are now ready to take questions.
Thank you we will now.
Ill begin the question and session.
So asking questions you May press Star then one of your Touchtone phone.
There really isn't a speaker phone we ask that you. Please pickup your handset before pressing the theme.
Yes.
The majority of Washington, These plays for them too.
Today's first question.
Oh on the global please go ahead.
Thanks Scott.
Scott really appreciate you sort of you know are identifying.
These growth vectors and I'm sort of Oh, you know highlight Kingdom. My my question is around capital allocation has anything really changed from the sounds of it. It seems you know the growth you're talking about you know if I may use the phrase is asset light.
So my question I guess is you know how should we on a go forward basis think about capital allocation you know how you're thinking about you know quote unquote with an asset light strategy, you know compared to buybacks compared to maybe even potential M&A that you guys talked about historically.
Yeah, Hi, Hassan, Yeah, and you're right I mean, the growth vectors that we've identified here. So far are very capital light what I would say about capital allocation here is that what we're generating a lot of cash we have a lot of cash and.
No.
The yield on OLED right now is more than 20% as the absolute best investment in town and we will be using that cash to repurchase that equity even in the case of a recession, you know across our whole year, even at today's <unk>.
Any price, it's a 13% levered free cash flow.
Yield so we'd even makes sense in that period at todays pricing you could bucket that's the direction we're going.
Very clear and I was very intrigued by you know a line in our in and in the slide deck, where you talked about potential for each door electrolysis, especially works well, it's like a bad deal was closed.
Look I mean, obviously you guys know electrolysis you know it well you know the the whole hydrogen thing seems to be if I may use the word sexy.
These days and anyone who's into hydrogen games seems to get up on multiple re rating. So what I mean, if you could just flesh out D D hydrogen opportunity for you and how youre thinking about your ambitions there yeah, yeah, I mean, two today right.
Not getting value for that hydrogen in fact, a large part of it is strictly exhausted into the atmosphere. Another part is burnt at less than fuel value I would say and another part we have some arrangements with gas company.
Is that in the over though.
Come in coming periods. So the first objective is to take what were already producing and essentially you know monetize it at the exact same time, you develop real carbon abatement, because its going into certainly growing application. So.
This step that we took with plug power was really just the first step.
You know we had that now we have two sites delivering hydrogen fuel cells or we will have to the two sides and it's still a very small amount of the hydrogen we produce I mean, we're actually the largest producer of electrolysis grade hydrogen in the in the country at the moment.
Very helpful. Scott. Thank you so much sure.
Ladies and gentlemen, our next question comes from Mike Sison with Wells Fargo. Please go ahead.
Hey, guys Uh huh.
Nice quarter and outlook and in terms of a park C. I was just curious I think you've mentioned in the prepared remarks that you know demands a little bit.
Kind of soft and just wanted to get a little bit of color on that and how you see there a pox see performing over the next couple of quarters.
Yeah, Hey, Mike Tom You don't give us just a couple a couple of comments on that but just to make it even even clearer yeah.
Demand has come down we've absorbed that demand you know short fall and in fact, the first quarter was the lowest volume of proxy quarter in the history of this business and I think Dominic can give you a view of where demand sort of sits right now sure Mike Good morning.
Yeah, we look at three three factors are meeting demand right now versus obviously the situation the unfortunate situation going on in Europe .
The second area is the ongoing supply chain issues are that are they're making it difficult to get other materials and then combined with the epoxy to make them a finished good.
Motive is a is a clear example, there and the third example, the third area, we see in China with the ongoing you know deep locked down that are underway here in the first quarter. All of those factors are are are meeting demand. Some that said we are seeing that second quarter demand is though is a little better than the first quarter. We.
We would normally expect that with seasonality. So we are seeing that the U S continues to have a good robust oh proxy demand and and Ah we continue to but all of that said we continue to you know that our valuepoint the rail yard we don't come off.
Value point.
We moderate our production based on the demand that's there that's available to us for them from a from our customer base and last time and I'll tell you is that even with all of that Oh, we're not we're not seeing.
You know the world are able to make more L a or in that kind of reinforces our point at all right now all in is we continue to absorb.
The shortfall out there.
Yeah.
Got it and then Scott I thought I just.
Maybe get a little bit of color on on slide seven in <unk>.
You kind of your thoughts on you know finding a vinyls partner, maybe some timing and and what what what what do you think needs to happen for this to be a reality for you over the next couple of years.
Yeah, well I mean look I mean, we're we're positioned very well to make this a reality all the way up to P. B C. So really all we're looking for here. It is the right leader partner to put something together with there's probably no better.
For our economics.
Economics case for the next World scale plant then sits here with all of them.
Got it thank you.
Sure.
And that's good because oh I see.
Hello.
In capital markets. Please go ahead.
Thanks, Good morning, everyone. Scott just following up on that question can you describe how true convenience your discussions are with potential partners on.
On those P D C idea.
Well I would just say that you know we've had discussions at this point, but you know we wouldnt advertise it here if we didn't think it had a lot of possible things.
Okay.
I think it makes sense thanks for those.
You discuss plaque in men and in Freeport, maybe across you know several aspects one.
How much is it holding you back in terms of EBITDA, perhaps in in the second quarter those two outages together.
How much do you think sort of fixing freeport could cost in terms of capital or or outside of capex costs.
Yes.
I'm not sure I might use your question just to expand a little bit on you know a lot of combination factors were happen now and if you just think about the second quarter and it's where the most negative merge together for us and so you know the negatives there are.
That you know, we're running short on power and free in Freeport, and we will at least through the fourth quarter. We have the complete plaquemines site shut down its a multi month shut down and will and will affect almost all of the second quarter, we have our starter apart.
See in upstream units completely shut down as Tommy said.
You know, we're just not going to sell it into a poor quality market, we absorb all the demand shortfall essentially by doing that.
And then on top of that we've declared a system wide forced measure in our C. A P. B business. So all of that is coming together in the second quarter and yet with all of that our second quarter will be better than our first quarter and those conditions likely only improve.
As we move out of this.
Second quarter in terms of our capital and so forth. This isn't going to materially impact you know our guidance that we have where we spend between 202 hundred $50 million a year of fixed capital.
Thanks, Scott sure.
Yeah.
I don't know next Watson.
Kevin Mccarthy of vertical research partners. Please go ahead.
Yes, good morning, Scott and I appreciate your updated view on pricing prospects and both chlorine and caustic it with the plaque them insight down for a multi month period, we've seen some of your competitors put forth very aggressive or at least high a price increase proposals for the second.
Quarter could you speak to you know supply demand balances in the industry as they are and what that might mean for the price opportunity over the near term.
Well you know Patrick will give us a little a little color on you know four were forward value plays by Oh, and I would just tell you that you know it's been quite tight and all of this makes it even tighter and even on a long term.
Outlook, we tried to demonstrate in our last quarterly call.
You know demand growth certainly outstrips supply growth. So that's just setting it up and Patrick do you want to expand a little bit yeah, I would just say that you know prices.
Prices in the quarter moved up meaningfully from the fourth quarter for all of our businesses.
And the market there was if some of you noted in your notes, there's a bit of a lull in in Asia, and the middle of the first quarter and that caustic market, but those prices are moving again you guys saw with just settled in Europe for contract prices for the second quarter.
You know that is a reflection of a tightness in that caustic market.
Globally, so we see pricing momentum continuing really across across the board.
And as a follow up to that Scott I think you announced a joint venture with Mitsui. Several weeks ago can you speak to that partnership and what a formal relationship there brings to the table for Olin relative to just trading.
Our parlaying as you call. It with you know a wide variety of trading companies for international business.
Yeah I'm sure what what is what it does is dramatically expand our ability to participate in global liquidity and and training I mean, both parties are bringing existing business into the joint venture.
Sure and this will certainly enhance our capability to serve globally in a way that we haven't been able to before so it effectively brings you know a significant growth opportunity to win and to Mitsui.
Thank you.
Right.
Our next question today comes from Arun Viswanathan with RBC capital markets. Please go ahead.
Great. Thanks for taking my question I guess I just wanted to you know you noted some soft demand in epoxy. So I guess first I just wanted to ask about if you kind of go through your markets a little bit.
Let us know what you're seeing are you know I know also you said there's.
Some weakness in Asia caustic in Q1, but structurally speaking I guess, how do you see your your different end markets. So maybe if we can get.
Focus on chlorine caustic and epoxy and Winchester that'd be great. Thanks.
Yeah, I mean from from from a high a high level I mean in markets are generally fine, except where we pointed out that you know it part C dot a bit slow for reasons you know Dom he went through.
You know Asia auto Europe , and a little bit of a lull even in wind blade production that does come back that has actually stabilized and that was the nature of Dom you just comment where he said that look second quarter looks just a bit better in the first quarter at <unk>.
<unk> demand I mean demand is fine every everywhere else of course, you know supply is quite tight also it take it to our Winchester business, which we haven't talked about yet on on this call demand looks long term good.
In fact with all the events going on with you know Russia is war effectively they were the largest importer of ammunition into the U S. In fact about 12% of the market.
You know I suspect the U S is that long for continuing to import that ammunition. So that's just one more item that enhances the demand profile looking forward for Winchester.
Yeah.
Okay. Thanks for that and maybe if I could ask another question on <unk>.
And you know the vinyls market in general so you've laid out a kind of a compelling value proposition for our partnership with M. D C.
Is it also the case that returns are at the point, where you expect a more kind of brownfield expansion within core a vinyls you know we've gone through.
There's a significant amount of pricing here in the last.
A couple of years and committed to preserving a lot of that but you see more supply coming into the market and you know.
On a brownfield or even greenfield bases are in for vinyls.
Near future.
Well I would say right now you don't hardly see any Fang right now so for the next four to five years looks looks pretty good but I mean, there's going to have to be a capacity additions right I mean old ones not a player in big capacity additions, though when we bought.
Already <unk> already said that we have other ways to grow by using global liquidity that might already already exists, but yeah look I mean, some someone's going to have to expand in fact, it's more than some one right. The number of plants that need to come on line.
So core growth in the future considering how tied it already is pretty pretty significant it's just that the complete economics just don't exist yet.
Got a little bit more to get to real reinvestment economics, considering the risk profile.
Thanks.
Sure.
Our next question comes.
Come from Steve Byrne with Bank of America. Please go ahead.
Yeah. So it was a curious about your multiple pathways on slides six and you're clearly moving downstream.
To a park C and.
Vinyls I was just curious if there might be some other pathways you could consider.
And one that seems.
Possible would be you know would be the isocyanate into polyurethane.
You sell phosgene into the isocyanate industry unit.
Other potential paths for you.
Yeah I mean, thanks for the question look there's lots of past that are possible and are in the E. C. You world right and we're already a supplier.
Either chlorine molecules or chlorine derivative of intermediates and many different different chain thrive the ones. We put on that slide six with a change that you know we effectively operate today.
Today, right, we were always considering different acquisitions mergers whenever that is the.
The case is and there's a number of derivative change that could make a lot of sense, especially as always equity value gets lifted as well it is challenging to do a big move today, considering where we trade at not impossible just challenging.
And just wanted to ask a little bit about the play.
Plans to to produce of the the green hydrogen with plug in Saint Gabriel.
It seems like you could go a variety of paths you could just simply source renewable power into your existing electrolyzed or is that the plan or are you planning to add you know are a 30 or 40 megawatt electrolyze or.
Or could you just change the hydrogen production right now by changing the influent brine concentration.
Yeah.
Of course today, we already produce hydrogen right. It's being produced is just being spent into the atmosphere essentially right or used at some lower value application. So all we're doing is taking that hydrogen essentially requests on it and then.
Power is taking it you know to their their hydrogen distribution service centers fuel cell application.
Customers. So it's already there as soon as we start using it for a more appropriate application. We achieved carbon eight met you know if we need to get the definition to green, which we will there's multiple ways to do it a simple way to do it is to use you know rex available on the market or.
Rex available from plug through their other operations.
Thank you.
Yeah.
And our next question today comes from Jos Zekauskas with JP.
Please go ahead.
Thanks very much.
You said that you expected to earn more and your Chlor alkali business in the second quarter than the first.
Why is that given all of the difficulties that you've got.
Or are the operational issues in the second quarter less than they were in the first half.
How big were the operational issues in the first quarter.
Hi, Hi, Jeff no the operational issues in the second quarter are more significant than the first quarter. In fact, it's when all of the negatives sort of barge together, but the path that we're on Jeff to continue.
Enhancing the value of an E C U and derivatives from the E. C. U has a lot of continuing momentum that continuing momentum overwhelms those negative issues I think in the press release, you know we called out but just the plaque on them.
A bed itself has a direct negative up to $75 million to our earnings in our C. A P V business. The other events have negatives as well, but we overcome all of those based on the momentum that we have enough business to improve the value.
Okay and in your Winchester business.
I imagine that you can track shipments of ammunition, they come out of Russia.
Have those shipments yet begin begun to diminish.
How do you view the ship.
Shipments out of Russia exclusive.
Yeah, well theres, a lag effect and being able to do that Jeff. So we don't have complete you know view to diminishing shipments what we do have some level of U. Two is the fact that there are certainly.
Mass import permits back might be zero import permits be it be an issue.
And we also have some level of you as to what may be originating.
In Euro Asia, there as well and all of those things have come down we will have better a better view to some actual reductions likely on our next earnings call.
Okay, great. Thank you so much sure.
Ladies and gentlemen, our next question today comes from Josh <unk> with Wolfe Research. Please go ahead.
Hey, Thanks, Good morning, guys Scot you talked about.
The need for more o'clock supply into the market.
Thinking about the P. B C plant opportunity would this be your potential expansion to add more supply into it or would this be a shift of supply from where you sell today into this new facility.
Yeah, Yeah, no we would not add any more E. C. U production capability to do this we already have it and theres, some timing impacts as well where more materializes in that two to three year window that we put on.
The scale of this project.
Got it thanks for that and then just on the two facility outages.
Thinking any differently about how youre going to operate the facilities when the repairs are fixed and kinder repairs actually prove the operational capabilities of the two facilities.
Well I would say that we wont change our operating philosophy and our operating philosophy is effectively set by the principles that underlie our our model and those principles are that we won't be selling into a poor quality mark yet and we.
We'll be bond liquidity out it out in the market instead in certain cases, so it won't it won't change that.
Thanks, guys.
Ladies and gentlemen, our next question today comes from Josh Spector of UBS. Please go ahead.
Yeah, Hi, Thanks for taking my question just a follow up on your recession scenario analysis I'm, just curious that so it looks like you're taking operating rates down, but you're assuming that you can maintain pricing at least on the chlorine side I was wondering if you could comment on what your pricing assumptions there on the caustic side as well.
Going back to chlorine what gives you confidence on being able to maintain that pricing is there something contractually set that locks. It in place for you guys or are you just assuming you could deselect where weekend. Thanks.
Yeah, Yeah, yeah. Thanks for the question I mean, it's really like a chicken or egg question right. I mean this is of course, a hypothetical case just trying to demonstrate the extent that we're willing to go to to preserve our product pricing I mean, the reason you weren't tied to a complete global chemicals.
Assets down to about 50% utilization rate for a whole year is to preserve product pricing right. So we control our own destiny, there and we're positioned to do that even in the case of a global recession, particularly on.
You brought up merchant chlorine you know that for many years sort of priced in the low $100 a ton and we're directionally moving it towards a thousand dollars a ton on a pricing ratchet that you know we won't we won't have to just move back from even in a.
A recession when you think about the applications that are left with merchant chlorine is things like water treatment and wastewater treatment and pharmaceuticals that are Agra chemicals those demands continue.
Yeah.
Okay. Thank you.
Most of them today.
Peachtree City. Please go ahead.
Hi, Good morning, Scott and Todd.
Hi.
Can you just talk about the timing and scalability of our.
Furthering your green hydrogen ambitions and do you need to see stationary and industrial end markets developed to do that off take and then how much in the EBITDA uplift would you expect from that business.
Yeah.
Yeah. Thanks, I mean, we really.
Didn't quantify the complete EBITDA uplift here, but in terms of timing one of the biggest limiting factors and you know the hydrogen evolution is actually not necessarily the hardware to use the hydrogen but it is the reliable.
Supply of hydrogen molecules, because you just can't store much so as soon as we get this joint venture operational with St. Gabriel it'll effectively be 100% utilized the next one could probably be 100 person.
<unk> utilized to its just that you know it's going to take another period.
Time to develop another asset so you might imagine that you know every six months to a year. There is an opportunity to do something to expand our hydrogen you know going into carbon abatement applications.
Todd I mean, what do you think is that okay.
Absolutely this is remember.
We are only utilizing.
With this joint venture and the other application we have another plant you know 6% of our hydrogen so there's a significant opportunity as we move forward.
Okay.
And then my second question is on could you just refresh your thinking on E C U in Chlor vinyls.
Cost curve like I think there's a new Greenfield 2 billion.
Chlor Vinyls plan in the middle East to supply South East right. So what's the economics of exporting from the U S versus exporting from middle East to those demand centers.
Well I guess I would just I would just say that you know, we're making the right cause her.
Irrelevant.
These materials are gonna be about value and use and you know the ability to service customers and regions at the right.
At the right time.
The cost curves are an effective or consequential player.
Oh it is forward strategy.
Thank you.
And our next question today comes from Matthew Blair of Tudor Pickering Holt.
Right.
Hey, good morning, Thanks for taking my questions. The first is just on your you parlay volumes came down to 8% in the first quarter could you talk about the drivers. There you know was that just due to higher caustic prices and in Asia and then what's your outlook for parlay volumes and Q2.
Yeah, Yeah, well pads Patrick O.
And on this you know a bit I mean, you know sort of the set up for that as you know, we just didn't need as many parlay volumes in the in the first quarter, but you want to yeah. Yeah, I mean, I would say there is less available anywhere.
Always looking for caustic and EDC in particular.
You know, we talked a few minutes ago about caustic prices in Asia.
A look at that key index of northeast Asia F O B.
<unk> the quarter.
High four hundreds low four hundreds got into the six fifty's.
Had a little bit of a golly that I mentioned in my earlier comment maybe went to the you know lower six hundreds, but now it's 700 plus.
Price talk is 800.
So and that's on the back of what's happening in Europe that marginal supplier into Europe is coming out of Asia and those prices in Europe are.
And 1100 or higher so that's where that age of materials to the extent. It's available is going so strong move in prices in aggregate means you know less supply available. So we tried you know we lost a bunch of a bunch of auctions were trying to get liquidity for our customers, but it's.
Tougher to come by.
Great. Thank you and then I'm sorry, if you already covered this but could you explain why why is it taking so long to repair the the units at Freeport is that like supply chain issues or part availability.
Yeah, I mean, we didnt expand on the details there, but please recognize that you know we have six major power generation assets there.
Two of them are.
Significant failures and no new equipment has lead time two to three years, we're not after new equipment, but even you know rebuilding yeah. You know we have to access you know difficult to access.
Parts and get them in so these are small projects, they're very large projects.
Great. Thanks for the color.
Sure.
Ladies and gentlemen, our next question comes from Annabel <unk> with Morgan Stanley . Please go ahead.
Hi, Thanks for taking my question and just to help us better understand the recession scenario I was hoping to get a little bit more color on kind of a top down look.
And as we think about operating rates, perhaps maybe two parts could you just give us a sense for where operating rates are today in roughly kind of what that moved to 50% would be and then also on top of that I guess, a part of the strategy as you've kind of been noting here in terms of the discussion is there and maybe parlaying buying it and buying some cause.
City out of the market and so could you give us also a sense of where your inventories are today and maybe what would those go to and that kind of scenario and if it is kind of baked into that.
Yeah.
In turn we won't we don't normally share you know current operating rates, but what I will give you. Some color on is you know that we're practicing yes and are a part C business to today right, there's been a demand shortfall.
Oh and you know it has absorbed that demand short short fall and so we had put our our global assets you know somewhere around or just above that 50% you know.
Right plan, that's why we made the decision to take starter off offline for for a while and by doing that you know you see the type of numbers that we're able to deliver in the first quarter just rounding it about $160 million.
Our EBITDA as you know under pretty poor conditions, yet, where we have not and will not you know back off the principles that underpin our model in that $160 million in one quarter as you know more than the business previously.
Delivered in years.
So I think maybe that is the best practical example of saying that if we did that more broadly across our larger assets. If we had to do back in the case of a recession.
You know we could hold their spring you know around the 2 billion dollar EBITDA Mark. So I don't know if that helps you know in terms of inventory probably inconsequential Todd do you want to comment on that or you didnt see inventories from a dollar perspective move up a little bit in the first quarter compared.
So where we ended the year, but that really relates to higher hydrocarbon costs, especially overseas with being on FIFO. So that's why you saw inventory move up on in the financial statements.
That's helpful. Thank you and then I just wanted to revisit I guess the partnership opportunity that you discussed them part of it I guess you know as I think about these typical <unk>.
Type of agreements or the contract structure that they tend to have it's usually kind of a long term supply agreements with maybe fixed Oh, you know or just some some degree of pass through cost, but some kind of fixed profitability on it. So how do you balance that with your you know winning model in the ratchet.
Pricing model as well as the desire to have you know that.
Flexibility to take product from one from one kind of downstream opportunity to another.
Perhaps it's a partnership opportunity that could be kind of a long term strategy.
Well, we yeah, we wouldnt enter into something that didn't allow us to grow value and grow profitability over time, I mean, we wouldn't be looking for the right P. B C Park.
Just keep in mind, you know the things that Owen brings to this as you know all of the upstream Brian you know ethylene power, even the Chlor alkali plants E C capability and we possess the incremental capability to expand V C.
As well right, what we need from a partner is essentially just the P. B C and just be outlet from that so yeah, we're not going to use the extreme capability that we bring to end up having it locked up in something that fixes our margin.
Yeah.
Very helpful. Thank you and congrats again on the quarter.
Right.
And our next question thing that's what my mother.
What has happened with Barclays. Please go ahead.
Great. Thanks, Good morning, guys.
Congrats on the JV announcement was a slug of just two quick ones on that one I think in the slides you kind of talked about expanding or improving own sites as part of this law firms do you have a sense of how much capex or capital spending you would need to do that and then second how should we think about the economic structure of the JV is it 50 50 ownership.
Or are you still kind of hammering out all those details to that.
And I'm sorry, what joint venture were you speaking of speaking about was it the blue water alliance or the hydrogen joint venture with plug.
The plug a hydrogen joint venture.
Yeah, Yeah, yeah, Okay. Yeah, I mean, that's gonna be set up is 50 50 joint joint venture going going forward.
And that's where the improve.
The improved or expanded on their capital rough figure that you would have.
Kind of a tribute to those projects.
No sorry, we didnt, we didnt put out the capital cost, but all of this is included in our forward forecast and plans.
Okay, and maybe just lastly, the slide six where you showed the decision tree is super helpful. I'm, just when you look at those different chlorine derivative pathways any of those products that you'd flag exceptionally favorable or just which of those products have in your mind kind of the best fundamental balance over the next.
A year or two.
So I would say in each and every train demand growth is likely to exceed exceed supply growth right. We've already commented on the fact that in and vinyls, we have a lot of untapped K taper.
Billety there you know a pox see we're able to sort of idle down the business at the level, we're running at today with expectations of Mega trends actually materialize and so you have pretty good fundamentals there as well you know maybe the best fundamentals.
On the page or on the merchant chlorine space.
Yeah.
Great. Thanks, guys sure.
Ladies and gentlemen, our next question comes from Roger Spitz with my humor. Please go ahead. Thank you. Good morning, so for partnering with a P. D. C player would you rather be shipping them E D C or bcm and presumably if you contract with them.
I you know.
Could that potentially have you produce more classic and it's good for the global industry.
Well I I would say that we have options there Ryan we have options.
To do to stop at ATC to stop at V. C M or to go all the way through through P. V. C. Yeah, and you know we use with regard to the byproduct caustic I mean, it's still going to fall within the parameters of.
Our model, but the complete participation of Olin through all of these chains and across all of these ventures and investments.
Will be set by whatever is the weak side of the market between caustic and chlorine. So these kind of things like that PVC venture that you see on slide number seven has to fit under the umbrella of that model and they will fit under the.
Umbrella of that model.
Got it the other thing is on the slide in the appendix you talked about $200 million of debt reduction should we assume that you plan to address the 200 million a five and a half due August 2022, I simply repaying that debt.
When due.
Yeah. Roger This is Todd Yes, we would expect in August to repay that debt.
Thank you very much.
Okay.
This concludes our question and answer session I wasn't prime revolvers back over to Scott Sutton for closing comments.
Yeah, No I would just say thanks to everybody for the questions today, and thanks to everybody else for joining us today.
Yeah.
Thank you Sir This concludes today's conference call.
Thank you all for attending today's presentation you may now.
I was going through loans and have a wonderful day.
Yeah.
Yeah.