Q1 2023 Olin Corporation Earnings Call

Speaker 2: Good morning and welcome to Olin Corporation's first quarter 2023 earnings conference call. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's brief opening comments, there will be an opportunity to ask questions.

Speaker 2: To ask a question, you may press star then one on your touchtone phone. To withdraw your question, please press star then two. Please note this 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. Please take your photos ashhh…

Speaker 3: 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...

Speaker 3: will include statements regarding estimates or expectations of future performance. Please note these are forward looking statements and that actual results could differ materially from those projected.

Speaker 3: Some of the factors that could cause actual results are different from our projections are described without limitations in the risk factors, risk factors section of our most recent form 10K and in yesterday's first quarter earnings press release.

Speaker 3: A copy of today's transcript and slides will be available in our website in the investors section under past events.

Speaker 3: Our earnings press release and other financial data and information are available under press releases.

Speaker 3: With me this morning are Scott Sutton, Olin's CEO , and Tom Slater, Olin's CFO .

Speaker 3: I'll now turn the call over to Scott Sutton to make some brief remarks, after which we will be happy to take your questions.

Speaker 4: All right, thank you, Steve, and good morning, everybody. The Olin team is deeply engaged in doing what we said we would do, which is to establish a new 12-month, trough, Ibital level that is significantly higher than previous peaks and additionally supports a higher equity valuation.

Speaker 4: We are halfway through that demonstration after back-to-back quarters where our IBITO delivery was $442 million in the fourth quarter and $434 million in the first quarter.

Speaker 4: Market conditions are quite poor, and the forward outlook of those conditions is for more of the same. But Olin is busy adjusting our market participation across the ECU to support product values.

Speaker 4: fixing our prior shortfall of not recession-proofing the epoxy business while simultaneously growing epoxy systems and correcting commercial ammunition channel loads and landing new military business in Winchester.

Speaker 4: Referring to slide number five in our earnings presentation, the initial evolution of Olin to a higher level value state is also about halfway along.

Speaker 4: Leadership behavior in all three of our businesses through this recessionary environment will lead to more value growth opportunities that in turn deliver more firepower for share repurchases.

Speaker 4: We are currently on a run rate to repurchase 10% of the company's outstanding equity this year after repurchasing 16% in 2022.

Speaker 4: So Vincent, that concludes my opening remarks. Now let's go ahead and get to questions.

Speaker 3: Jason will take questions now.

Speaker 2: We will now begin the question and answer session. To ask a question, you may press star then 1 on your touch tone phone. If you're using a speakerphone, please pick up your handset before pressing the keys. And to withdraw your question, please press star then 2.

Speaker 2: Our first question comes from Kevin McCarthy from Vertical Research Partners.

Speaker 5: Good morning. Scott, you've taken a number of actions toward restructuring your epoxy business. Can you talk through what you've done already and what lies ahead? I think there was a reference in your materials to some additional restructuring actions.

Speaker 4: some recent actions to really recession proof the epoxy business. So in March, we announced that the Ternuz and Cumin plant and our solid epoxy resins facilities in Korea and Brazil are to be closed. And you see that we took a restructuring charge of almost 60...

Speaker 4: Decisions to make and then we're going to also change the way that we go to market in the epoxy business as well So that's going to happen through the course of this year.

Speaker 5: Okay, thank you for that. And then secondly, perhaps for Todd, can you speak to the inventory levels on your balance sheet? Optically, it looks like they're up 20% year-to-year. How much of that is underlying escalation of inventory? I wanted to

Speaker 5: versus other factors, I'm not sure if your Blue Water joint venture establishment affects any of those numbers.

Speaker 4: Kevin, thanks for the question on inventory. We normally build inventory and working capital during the first part of the year and liquidate that late in the third and fourth quarter. The inventory levels are higher than that normal seasonal activity this year.

Speaker 4: because of a major turnaround that's planned, that we built some inventory in advance of that turnaround, you should expect those levels to decline as the year unfolds with a step down you'll see in June .

Speaker 5: I see. Thank you very much. I'll pass it along.

Speaker 2: The next question comes from Steve Byrne from Bank of America. Please go ahead. The next question comes from Steve Byrne from Bank of America.

Speaker 4: Yes, thank you. You switched back and forth between which is the the weaker side, costic or chlorine, and now you're making another change there. And I'm just curious whether when you when you've operated in the past with costic as the weaker side has that given you.

Speaker 4: maybe more collective pricing power for the ECU because you have so many end markets you can go into with chlorine.

Speaker 4: Yeah, hi Steve. And so that is the nature of our leadership model, right? We set our market participation according to the weaker side of the ECU, and we don't chase a strong market in this co-production world, because when you do that, you depress the strong market.

Speaker 4: set the four quarter peak earnings of the company at $2.8 billion. So it certainly presents opportunities but what I'll say is you have to take into account many factors and when you have sort of a global...

Speaker 4: you know, recession going on, it doesn't necessarily mean that at this moment in time we can repeat those levels of earnings, but it certainly will support higher merchant chlorine pricing and higher pricing and value in other chlorine derivatives as well.

Speaker 4: You made a comment in your slides about potential other inorganic opportunities.

Speaker 4: And I just wanted to drill into that a little bit. I mean, your downstream businesses are essentially tied back to chlorine, and there are numerous chemical pathways that have a very essential chlorine component in it, like whether it's polyurethane or polycarbonate or so forth.

Speaker 4: Can you highlight any other opportunities that you're looking at downstream?

Speaker 4: Well, I would just say that as we look at inorganic opportunities, I mean the best ones that create the biggest value for Olin are ones where we add to our ECU value model. So that could be more ECU capability or it could also be derivatives that, you know, use chlorine.

Speaker 4: I mean those opportunities are likely improving, but clearly I mean they're going to have to compete with the return that we get on share repurchase and that's sort of a measuring stick for that.

Speaker 6: Very good, thank you.

Speaker 2: The next question comes from Hassan Ahmed from Alembic Global. Please go ahead.

Speaker 7: Good morning Scott and Todd. First question just around Q1 and the guidance that you guys gave. You guys always talked about how there could be one quarter or two quarters where you could sort of trend at annualized.

Speaker 7: below guided to sort of trophy bid-da, right? As you sort of rejig or readjust to the stronger side of the ECU. So, you know, what we saw in Q1 and the guidance that you have given for Q2, is it fair to assume that the

Speaker 4: these two quarters are those two quarters and things kind of trend higher thereafter? Yeah, hi Hassan. Look, I mean it's certainly not impossible, right, that we make a significant adjustment in any one quarter to support that four quarter.

Speaker 4: you know, trough level around $1.7 billion. But what I will say is we're halfway through, and we've essentially delivered the same HIBITA number in those first two quarters, and we've given guidance for the next quarter that is slightly below that. So—

Speaker 7: guys obviously want to stick to the sort of area that you're comfortable with, you know, collate integration into the ECU and the like. So from the sounds of it you're looking at downstream products but you know could you also chat a bit about sort of what geographies are of interest to you? I mean you know because back in the day you did talk about maybe potentially being sort of replicating you know what you have in the US out in Europe .

Speaker 4: So that's a consideration.

Speaker 7: Very helpful, Scott. Thank you so much.

Speaker 2: Our next question comes from Jeff Zicakis from JP Morgan. Please go ahead.

Speaker 2: Next question comes from Jeff Dacaucus from JP Morgan. Please go ahead. Thanks very much.

Speaker 5: Why is it that the contract caustic markets in the United States are so much more stable than that?

Speaker 5: spot export caustic markets. And can you talk about where caustic contract prices have been say over the past six months?

Speaker 4: Yeah, good morning Jeff. Yeah, and so the domestic cost of markets, of course, are right where Olin plays and right where Olin leads and right where...

Speaker 4: where we implement our leadership model. So, you know, there's some impact from that. I think, you know, you have to remember how, you know, the world landscape moves around, right? You may start with a butterfly effect coming out of China. So...

Speaker 4: There's a volume and a price indication there. And over time, that may impact international trade. And then over time, that may impact the US Gulf Coast. Over time, the US Gulf Coast impacts the barge market in the US.

Speaker 4: then over time, you know, the barge market may impact the rest of the domestic market. But over all that time, Olin is looking far ahead and looking for the rate of change of each of those things and trying to take some kind of action that tends to support value.

Speaker 4: So by the time you get all the way to the domestic market, we've supported the value of our business. And over the last six months, of course, that has stayed more stable, which is the back part of your question.

Speaker 8: Okay, maybe a question for Todd.

Speaker 8: Okay, maybe a question for Todd.

Speaker 8: What should the normal percentage of operating cash flow to EBITDA, to adjusted EBITDA be for Olin? Is it 70% or 80% or?

Speaker 8: What should the normal percentage of operating cash flow to EBITDA, to adjusted EBITDA be for Olin? Is it 70% or 80% or 60 or 85?

Speaker 4: I think Jeff, this year in the recessionary trough period that percentage is lower than would be typical and the expectation for Olin of that levered free cash flow because of a couple of one time items that are occurring this year.

Speaker 4: the roughly $80 million international tax payment that we'll have to make later this year as well as a one-time item that we need to pay related to some power assets in the Gulf Coast on a contract.

Speaker 4: factor those in, I think that percentage would go up significantly compared to what it seems like this year. But overall, that number is clearly in the upper quartile.

Speaker 8: What happens to power asset payment? Between $50,000,000,000 this year.

Speaker 2: Okay, thank you so much. The next question comes from Vincent Anderson from Soling. Please go ahead.

Speaker 9: Yeah, thanks, good morning. So I wanted to follow up on Kevin's question earlier. Scott, have you settled on maybe a more permanent vision for what the optimal footprint looks like for the epoxy business, particularly with regards to an appropriate level of vertical integration?

Speaker 4: Yeah, yeah, I mean thanks for the question. And look, I mean as we go through this restructuring, right, we're going to get to a footprint and a business presence that removes some element of the duplication that we're going to have.

Speaker 4: When we get through this, Epoxy is still going to be the absolute global leader in that world and it's still going to be the absolute most vertically integrated business in that world as well. You know, Epoxy has certainly been a challenge. If you go a little bit backwards in time...

Speaker 4: You know, whenever Asia volumes became available, you know, customers fought away. And then, you know, when those Asian volumes weren't, you know, available because of instability or demand in Asia, you know, they came back to Olin for security of supply.

Speaker 4: More recently, we probably overpriced a bit for a bit too long. So now we're just moving to a point where we're going to partner with epoxy customers for a bit longer, longer run. And there's going to be a lot more cooperation.

Speaker 4: in that forward world with epoxy customers, especially as our business pivots more to value from systems. So you need to have a longer term profile mix with customers.

Speaker 9: That's extremely helpful. Thank you. Then a quick one, if you don't mind, on something you mentioned in your slides talking about the hydrochloric acid recycling opportunity. Do you have just a couple of comments on what that market structure looks like? I'm assuming in just two and three days the percentage ofshirts or CO2 territory is shown to be more dangerous. Momentum. No. Oh, okay. Okay. Let's see if I'm seeing more for 20 days.

Speaker 4: This is actually a business segment that Olin doesn't really participate in today. And we should be the leader. The reason that this business segment exists is because it's a business segment that exists.

Speaker 4: many applications and many customers for merchant chlorine, and it's not just Olin's merchant chlorine, but any merchant chlorine that is used, a lot of that chlorine comes back out of the process, whether it's all or part of it, because it's not utilized.

Speaker 4: whole cleaning of formations and so forth and oil and gas. But today, Olin just doesn't really participate there and there's no reason that we shouldn't be the leader there, so we're entering that business. So now you have three interesting...

Speaker 4: You know, nearly organic growth areas in our CAPB business, one of them is trading or parlaying, which is, you know, partly our Blue Water Alliance joint venture. The other one is our hydrogen growth.

Speaker 4: And now you're going to have our growth in HCL where we should be the leader and we just haven't developed that business yet.

Speaker 2: Excellent. Thank you. Sure. The next question comes from Mark Sizem from Wells Fargo. Please go ahead.

Speaker 10: Hey guys.

Speaker 10: Just curious, so.

Speaker 10: Where do you think your operating rate, what are you going to do with your operating rates for 2023, I guess? Given you're still in a recessionary trough level sort of outlook, does it stay at first quarter levels for the rest of the year? Yeah. Yeah. Hey, Mike. Um, look, I mean, you know what, what I would say there's...

Speaker 4: I mean they're low. I think we put in our materials that, you know, our epoxy resin operating rate is around 40% or so. And they're, you know, the second quarter landscape is certainly not better than the first quarter landscape. If you were to think about operating rates in our chloralkali and vinyls business, you'd be right.

Speaker 10: Got it. Okay, and then there's a quick follow-up

Speaker 10: You know your ECU PCI calculation is held up You know simply better than the consultants and and I understand it's yours So when you think about the level you're at now versus last year and where you're adjusted even though was being down Is it simply?

Speaker 10: the year-over-year decline in EBITDA just volume? And then if you can hold these ECU PCI levels and volumes come back, are you sort of back to your prior EBITDA levels?

Speaker 4: Yeah, I mean that's a good question and yeah, I mean the decline in IBITDA to these more trough levels in this recessionary time is certainly principally from volume. You know that ECU PCI, that's indicative.

Speaker 4: of our value concept, right? We said we're gonna be the value player and we're gonna place value over volume and that leads to the best outcome in a trough and when you come out of that trough, you come out of it with a lot of earnings, earnings power.

Speaker 4: So, you know, that has been set to a totally, totally different level. Look, I do know this, it will move down some and it will move up some. But clearly we're going to be the value player and that's the biggest indicator of it. And you're right, it's different.

Speaker 4: than trade publications for sure. I mean, it's just like, you know, the chlorine index that is published in a trade indication actually, you know, went down just a little bit here recently, yet our chlorine index moved up. Yet our chlorine price in the first quarter moved up over the fourth quarter, and yet our...

Speaker 4: of toxic, Scott, can you just maybe talk about where the Chinese export pressure currently stands today versus maybe a quarter ago and just where you think that trends over say the next quarter or so? Yeah, sure. I mean, that export pressure, you know, I'll say in the second quarter is probably even more than in the first quarter. There's record epoxy exports.

Speaker 4: reversal in trade flows out of China has caused the rest of the volume in Asia, you know, to come toward Europe and North America. So that's the impact we're seeing, and we see extreme pressure continuing there.

Speaker 4: Great, thank you. And then just real briefly, I wanted to follow up on the inorganic opportunities. I think in your slide you made a comment calling them potentially being more executable. So I was just curious if that's really just a comment about asking prices, becoming more palatable and...

Speaker 4: discussions picking up or just more about Olin's ability to execute given where it is in its evolution or financial position.

Speaker 4: Yeah, well I think, you know, Olin is able to execute on most anything we would want to considering our financial position, right? That's really not an issue. But the reason that we use the words more executable is it's not impossible now to get deals done.

Speaker 4: closer to Olin's current trading multiples. It doesn't mean it will be the same, but it certainly means that we'll get there really quickly with the batch of synergies that we would expect to be available in any acquisition.

Speaker 4: closer to Olin's current trading multiples. It doesn't mean it will be the same, but it certainly means that we will get there really quickly with the batch of synergies that we would expect to be available in any acquisition. Makes sense. Thank you. Sure.

Speaker 2: Our next question comes from Arun Viswadathan from RBC Capital Markets. Please go ahead. Great, thanks for taking my question. Just a question on the cadence of the year. It looks like…

Speaker 4: The guidance now has been tightened up to one six to one nine which would put you at 175 for the full year It's very possible that you know you do 865 maybe in the first half and another 865 Or more or slightly more in the second half is that the right way to think about it that the the halves will be kind of equally split and Then if you if that is the case

Speaker 4: When you look into next year, is it mainly volume that would drive you back up to the upper end of that $1.9 range, $2 billion range and above? What would put you at the upper end of the range this year itself? Thanks.

Speaker 4: Well, I wouldn't assume that first half and second half are sort of, you know, perfectly balanced, right? I mean, we will do whatever we need to do, you know, to put this four-quarter trough in around that $1.77 billion. But clearly, we said for the calendar year.

Speaker 4: we have a range of 1.6 to 1.9. The way you would end up at a 1.9 is that, you know, maybe there's a little better condition in the second half than what we're forecasting.

Speaker 4: The way you end up at the 1.6 is that we keep having to make heavy adjustments and things actually get worse, particularly in Asia demand versus where they are today. And that's why we've kept this range. When we sort of get out of this slow demand.

Speaker 4: We'll also have our epoxy systems business being more effective and it's already made a lot of great progress there. Some of the discussion we just went through entering the HCL business, that's something that we can do.

Speaker 4: pretty rapidly and maybe some of the best conditions actually exist in our Winchester ammunition business. The international military piece of that business is growing rapidly. In addition to that, so is the preparations for the next generation squad weapon.

Speaker 11: for that. And then certainly on the on the cash flow side, so

Speaker 11: It sounds like your leverage-free cash flow is going to eclipse the billion. And should we assume that maybe that leaves about $800 million for buybacks? And how are you thinking about that opportunity as you move forward? Will you continue to be prioritizing?

Speaker 4: share buybacks or other uses for the capital. Thanks. Thanks Arun. I think our current forecast for leverage-free cash flow for 2023 is $965 million range. Obviously that includes

Speaker 4: roughly $150 million of one-timers that I mentioned earlier. As we look at that leverage-free cash flow, we would say the first and best use of that excess cash flow relates to share repurchase. And you should see us continue on that pathway.

Speaker 2: Thanks. The next question comes from Josh Spector from UBS. Please go ahead. Thanks for taking my question. Just to follow up on your market participation and how you addressed the weaker side.

Speaker 12: I mean, your response over the last year, at least within the CAV segment, has been generally lower utilization rates.

Speaker 12: I guess is there anything different now that that's shifted back to chlorine being strong, cost of being weaker, that would require a different playbook for you to maintain that EBITDA over the next six months or so?

Speaker 4: Yeah, hey Josh, thanks for the question. I mean, not really, right? Not in totality. We don't expect necessarily, you know, lower overall operating rates, right? You know, I think the dilemma is that, you know, I mean market conditions are really poor and we certainly expect...

Speaker 4: more of the same. But that's one element that ends up you know setting our operating rates. What you have to remember about Olin, we make value when there's a level of imbalance between the two sides of the ECU. So you can actually have a declining overall global market.

Speaker 4: But yet there's some kind of imbalance between the two totally different kinds of market outlets on the chlorine side of the ECU versus the caustic side of the ECU. And when we have that imbalance, or can help create...

Speaker 12: that imbalance, that's when we're able to hold value. Okay, I guess maybe you can correct me if I'm wrong, but I would think, I mean you have more options I'd say on the chlorine side of where you can do that and maybe go to a stronger market. I mean conversely I'd say maybe there's less options on the caustic side. I guess where would I be wrong in that?

Speaker 4: Well, I mean it's true that, look, I mean we have a lot of business on the chlorine side of the ECU and are forward integrated into vinyls, epoxy, chlorinated organics, a number of inorganics there so we have options. Also, you know, the caustic market is...

Speaker 4: in the domestic market. So there's a lot of service options there. And there's also options to package up ECUs for customers that use a full ECU. And on top of that, we're able to use our Blue Order joint that you can sequence people under the same programs like Green ms or Blue Order

Speaker 2: The next question comes from Alaski Efremov from KeyBank Capital Markets. Please go ahead.

Speaker 4: Thanks, good morning everyone. Scott, inorganic opportunities, can you tell us how you think about potential size of a deal here, bolt-ons or something larger, more transformational in nature? Yeah, I mean look, there's of course a number of options. I mean what we need to do and would prefer to do is something that's right down the fairway that we can get.

Speaker 4: high level of synergies quickly and you know pay off any kind of financing that we might do in order to do that acquisition and all of that has to add up to a picture that

Speaker 4: gives us much better return to our shareholders than doing share repurchases. So I think there's options there. Of course, we would prefer to do something initially that's measured down the fairway and is slam dunk.

Speaker 4: Very helpful, thank you. Your annual guidance range, especially at the low end, are you assuming a meaningful decline in the caustic soda price? And by meaningful I mean, say, $100 or more drop.

Speaker 4: or price declines from any other important commodity? Where is the range variability mostly due to volumes going up and down?

Speaker 4: Well, I would say caustic pricing is moving down globally and that's why it's become the weaker side of the ECU and that's why we've adjusted our participation to dampen the rate of that.

Speaker 4: you know, decline. So we've taken our outlook there into account in our forecast and that's included in that range of 1.6 to 1.9.

Speaker 6: Thanks a lot.

Speaker 4: Thanks a lot. Sure. Thank you.

The next question comes from Matthew Blair from Tudor Pickering, please go ahead Hey, good morning, thanks for taking my questions Scott I just wanted to follow up on on your comment a few questions ago when we talked about you can make value When there's a level of imbalance between the two sides of the ECU

Can we assume that that level of imbalance was actually pretty tight in Q1, given that the caustics flipped to the weak side? I guess how is that trending in Q2 and what are your expectations? Do you think that level of imbalance will widen as we progress throughout the rest of the year? Thanks for the question. I think as the global landscape.

changes, you know, there's likely to be more imbalance as opposed to less imbalance, right? I mean, where the landscape is...

weaker, at least for Olin's outlook, is when there's balance between the two sides. So, you know, at the first part of the quarter, you know, it looked like PVC and vinyls were actually going to get a little stronger, but that was, you know, a little bit more than

are changing there's likely to be some imbalances and we have the ability to go out and you know manage some global liquidity do some parlaying to accelerate or decelerate the timing of where those imbalances happen so you know I

I don't know that it will necessarily be a lot more, but as things change there will be opportunities. It's been pretty stable, I would say, if you look back over the last six to nine months. It's more stable than maybe it's been in a very long time.

Okay, sounds good. And then I had a question on slide nine. You showed the parlay volumes at what I think is a record 16%. I thought that happened when caustic prices in your system were moving down, but that same slide shows caustic prices moving up quarter over quarter in Q1.

So could you help us just understand what's going on there?

Yeah, sure. I mean, in January , our Blue Water Alliance joint venture started operation. And remember, the point of that joint venture is to go out and do...

more trading, more parlaying, more management of global liquidity that is to the partners benefit. So as a percent of our total volumes, much more of it came from trading and parlaying. And that's why it jumped up to 16% of our total.

287 down to 262. But almost all the chlorine caustic products went up sequentially. So Apoxies was big enough and declined enough that it offset all the gains in the other products sequentially.

Yeah, I mean, John , Epoxy was a big driver of that because, you know, per ECU, you know, there was less delivery of contribution profit. So in Epoxy, not only do you have price declines, but you have volume declines as well. So you get...

the impact of volume and price coming through there. Even within poor alkali, you know, a lot of it has to do with the mix of products as well. So for all those reasons, that's why it came down.

But that's a variable contribution that volume shouldn't play into there, right? No, it will. Here's what it is. It's the total contribution profit that this company delivers divided by the total number of ECUs that we sell.

the weak side here? Well, I think caustic is actually...

flipping to the weak side. I mean, housing is certainly off, but you also have movements in the caustic demand market as well. Okay, just historically more housing would have driven, which is strong, weak.

versus General Industrial, I think. But John , maybe Claire, maybe I misunderstood your question. You asked me if I was surprised that caustic hasn't become weak.

No, that it flipped to the weak side that's there. Usually with a weaker housing market here, we'd have a cost against the strong side, which is what we've had until recently.

Yeah, well look, I mean you've got to remember, you know, caustic is also globally traded, right? And if PVC demand goes down even more, our actions to flip our approach to the market along with maybe a shortfall in caustic supply.

could redirect that.

That's not impossible. I mean to your point, traditionally that's the way it would go. So we've taken actions to support our caustic pricing and then there could be market impacts that return to traditional ways such that it may be another force.

that's lifting caustic price.

Thank you. The next question comes from Angel Castillo from Morgan Stanley . Please go ahead. Good morning and thanks for taking my question. Scott, I just wanted to dig a little bit deeper on the second quarter. I think the commentary is generally indicated as extremely weak market.

of percentage E without decline. I'm curious if you could give the same, you know, just way of kind of clarifying what's slightly lower than one Q means and in that sense, giving a kind of a guardrail for, you know, what the downside or upside risk is versus your expectations.

Yeah, yeah, yeah angel. I mean I would just say you know slightly lower means you know a little bit lower It is the reality and we have you know taken into account

you know, the current negative momentum in caustic pricing. And, in fact, you know, we readjusted our market positioning to dampen that some and likely strengthen the other side of the ECU. So, we've just taken all that into account.

I would just say remember when we were in the fourth quarter, you know, we said the first quarter might be slightly down too, you know, if you need some guidance for the second quarter.

I guess as I think about it for –

As we kind of move through the second quarter, it sounds like you are accounting for some of this weakness. Just curious, have these plans that have been under turnaround, there's a pretty large amount of maintenance activity in the current market. So it's surprising, I guess, that the coffee market is still weak given the degree of turnaround. So just curious, as those plans come back online, it sounds like you are kind of enforcing your parlaying activity.

and the current demand that takes the movement to year lower.

you know, takes the movement dearly lower. So here's what gives you confidence in that.

Well, you know, I mean we feel okay about slightly lower, but you know, I don't think anyone should be surprised that, you know, caustic pricing has started coming down, right? I mean, PVC was chased hard.

for a while. In China, caustic exports have been pretty extensive, much more than normal, and that certainly didn't help the caustic world. I think if there's one piece of good news, it's that those...

Export prices of caustic out of China have sort of flattened. And the reason that they're flattening now is that the China ECU producers, right, were not getting value for chlorine. In fact, they were paying customers to take the chlorine out of the oil.

So, that was to be able to chase things, but when they chased them, market pricing eventually came down and cost it, and all of a sudden, to be in an ECU business, you have to be willing to attach $100 bills to every shipment that's going out of China. And so, even they're not willing to do that. So finally, you see that moderate.

And perhaps that means something different in the future. Got it. So maybe that's a different way. You raised the low end of your 2023 guidance from 1.5 to 1.6. And just given the backdrop that you've kind of described.

What is kind of the step change that gives you confidence that we won't see something closer with a 1.5 rather than a 1.6? What kind of change in the past quarter that gets you there? Well, I think what gives us confidence there is we just printed one quarter and we just gave a forecast for the second quarter that is just slightly lower. Got it. Thank you so much. Okay, thank you.

As there are no further questions, this concludes our question and answer session. I would like to turn the conference back over to Scott Sutton for closing comments. Scott Sutton Yeah. No, I would just say thanks a lot to everybody for joining the call. Thanks. Thank you for attending today's presentation.

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