Q4 2023 Olin Corp Earnings Call
Good morning, and welcome to Olin Corporation's fourth quarter 2023 earnings conference call. All participants will be in listen only mode. Did you need assistance. Please signal a conference specialist by pressing the star key followed by zero. Following today's brief opening comments, there will be an opportunity to ask questions. To ask a question you May Press Star then one on your Touchtone phone. With Charlie 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. Thank you Andrea.
Operator: Good morning, and welcome to Olin Corporation's fourth quarter 2023 earnings conference call. All participants will be in listen only mode. Did you need assistance. Please signal a conference specialist by pressing the star key followed by zero. Following today's brief opening comments, there will be an opportunity to ask questions. To ask a question you May Press Star then one on your Touchtone phone. With Charlie 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.
All participants will be in listen only mode.
Did you need assistance. Please signal a conference specialist by pressing the star key followed by zero.
Following today's brief opening comments, there will be an opportunity to ask questions.
To ask a question you May Press Star then one on your Touchtone phone.
With Charlie 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.
Thank you Andrea.
Steve A. Keenan: Thank you Andrea. 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. We 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 sudden polin, CEO and Todd Slater Olin's CFO. Now I'll turn the call over to Scott Sutton to make some brief remarks, after which we'll be happy to take your questions.
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.
We 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 sudden polin, CEO and Todd Slater Olin's CFO.
Now I'll turn the call over to Scott Sutton to make some brief remarks, after which we'll be happy to take your questions.
Scott McDougald Sutton: Thanks, Steve and good morning to all. In the fourth quarter, the OLED team delivered a four items there for promise, which were $210 million of adjusted EBITDA overcoming a negative $100 million EBITDA impact from a purposeful value accelerator initiative. Stopping the decline of EC <unk> values as a result of our value accelerator initiative. Completing the remaining purchase up 10% of our outstanding equity in 2023 and setting the company up for a 2024 that is better than 2023 restore. We start that setup I'm, making the first quarter of the new year better than the fourth quarter of the past year. We were also very pleased that outside of the minor purchase price for the wife Flyer acquisition Olin's net debt at the end of 2023 was essentially the same as the <unk>. Net debt at the beginning of 2023. Since this could well be my last. Earnings call I wanted to remind everyone that Owen has a very unique value. Sally you creation. Ladies and up listing people to a higher level of fulfillment. Delivering value on a contemporary basis through a novel idea pipeline and practicing absolute leadership in commerce. This unique value equation opens a long runway to a very positive future and our leadership team with Tyco and Bayer. The earnings and cash flow power of OLED is huge. So Andrea that concludes my opening remarks, and now we can proceed to questions.
In the fourth quarter, the OLED team delivered a four items there for promise, which were $210 million of adjusted EBITDA overcoming a negative $100 million EBITDA impact from a purposeful value accelerator initiative.
Stopping the decline of EC <unk> values as a result of our value accelerator initiative.
Completing the remaining purchase up 10% of our outstanding equity in 2023 and setting the company up for a 2024 that is better than 2023 restore.
We start that setup I'm, making the first quarter of the new year better than the fourth quarter of the past year. We were also very pleased that outside of the minor purchase price for the wife Flyer acquisition Olin's net debt at the end of 2023 was essentially the same as the <unk>.
Net debt at the beginning of 2023.
Since this could well be my last.
Earnings call I wanted to remind everyone that Owen has a very unique value.
Sally you creation.
Ladies and up listing people to a higher level of fulfillment.
Delivering value on a contemporary basis through a novel idea pipeline and practicing absolute leadership in commerce. This unique value equation opens a long runway to a very positive future and our leadership team with Tyco and Bayer.
The earnings and cash flow power of OLED is huge.
So Andrea that concludes my opening remarks, and now we can proceed to questions.
Operator: We will now begin the question and answer session. To ask a question you May Press Star then one on your Touchtone phone. If you are using a speakerphone please pick up your handset before pressing the key. To withdraw your question. Please press Star then two. At this time, we will pause momentarily to assemble the roster. Yeah. And our first question comes from Arun Viswanathan of RBC capital markets. Please go ahead.
To ask a question you May Press Star then one on your Touchtone phone.
If you are using a speakerphone please pick up your handset before pressing the key.
To withdraw your question. Please press Star then two.
At this time, we will pause momentarily to assemble the roster.
Yeah.
And our first question comes from Arun Viswanathan of RBC capital markets.
Please go ahead.
Arun Viswanathan: Yes. Great. Thanks for taking my question good morning. I guess I just wanted to ask first on the the guidance. So it looks like you're expecting some growth in in 'twenty for them. How do you see that proceeding it looks like your your Q1 guidance is a little bit below where we were expecting so you know I know that you're implementing the value accelerator ines. So maybe you can just kind of walk us through some of the growth you do you expect them as you move through the quarters of 'twenty four.
Great. Thanks for taking my question good morning.
I guess I just wanted to ask first on the the guidance. So it looks like you're expecting some growth in in 'twenty for them. How do you see that proceeding it looks like your your Q1 guidance is a little bit below where we were expecting so you know I know that you're implementing the value accelerator ines.
So maybe you can just kind of walk us through some of the growth you do you expect them as you move through the quarters of 'twenty four.
Scott McDougald Sutton: Yeah. Good morning over here and you know happy to do that I mean, where we're really forecasting some profit growth right and you know if you just walk through the three businesses and I'll just start with Winchester I mean, we. We are right in the middle of doubling our military business and that is on track. Stickley and internationally in the commercial side. Of that service as you know the demand stays rather high. And on top of that we have a wide flyer acquisition for a full year and on top of that there's going to be a shortage of propel us across the industry. This year and Winchester is well positioned to take advantage of that so we feel really good about the profit growth in Winchester. Looking in a proxy. You know much more of a self help story, we're not necessarily anticipating demand growth, but clearly the restructuring work that we did is applicable for a whole year. Our focus on systems is working we don't have to clean up inventory as much as we did in 2023. And we're going to work on the illegal flow of products coming from Asia as well. So there are when you really get to the biggest business C. A P V, which I'll just remind you has superb fundamentals as you look out in the future, but it's all about turning around the value of the. See you and that's the initiative were running now we have a slide number four it give some indications that we're having some success I would say even on top of that there is less volume entering global trade flows today. Some customers are restarting assets that have been down. So even in that business, we expect Q1 to be larger than Q4, and we expect Q2 to be better than Q1 as well.
We are right in the middle of doubling our military business and that is on track.
Stickley and internationally in the commercial side.
Of that service as you know the demand stays rather high.
And on top of that we have a wide flyer acquisition for a full year and on top of that there's going to be a shortage of propel us across the industry. This year and Winchester is well positioned to take advantage of that so we feel really good about the profit growth in Winchester.
Looking in a proxy.
You know much more of a self help story, we're not necessarily anticipating demand growth, but clearly the restructuring work that we did is applicable for a whole year. Our focus on systems is working we don't have to clean up inventory as much as we did in 2023.
And we're going to work on the illegal flow of products coming from Asia as well. So there are when you really get to the biggest business C. A P V, which I'll just remind you has superb fundamentals as you look out in the future, but it's all about turning around the value of the.
See you and that's the initiative were running now we have a slide number four it give some indications that we're having some success I would say even on top of that there is less volume entering global trade flows today. Some customers are restarting assets that have been down.
So even in that business, we expect Q1 to be larger than Q4, and we expect Q2 to be better than Q1 as well.
Arun Viswanathan: Thanks, and then if I could just ask is there any update on the search for a new CEO. Thanks a lot.
Scott McDougald Sutton: Yeah, sure well I mean. I really don't have an update on that and I'm really sorry. Is that because look our shareholders and our own women women and men who have really built this value for those shares shareholders. They deserve a lot better than that for me. But I'm out of the process that process is 100% run by our independent board members only. What I can say is to the best of my knowledge I'm not aware of any offer being extended out there yet so any candidates.
I really don't have an update on that and I'm really sorry.
Is that because look our shareholders and our own women women and men who have really built this value for those shares shareholders. They deserve a lot better than that for me.
But I'm out of the process that process is 100% run by our independent board members only.
What I can say is to the best of my knowledge I'm not aware of any offer being extended out there yet so any candidates.
Yeah. Yes.
Yes.
Operator: The next question comes from Hassan Ahmed of Alembic Global. Please go ahead.
Hassan I. Ahmed: Good morning, Scott you. You know a question just wanted to sort of go back to the guidance you know accelerates. Accelerated initiatives. I mean, you know you were very specific in talking about limiting your market participation in February 2024. You know what gives you the confidence with regard to that sort of a timeline that you would start sort of potentially seeing a positive inflection there on after a particularly keeping in mind you know the macro you know housing the way it is and the like.
You know a question just wanted to sort of go back to the guidance you know accelerates.
Accelerated initiatives.
I mean, you know you were very specific in talking about limiting your market participation in February 2024.
You know what gives you the confidence with regard to that sort of a timeline that you would start sort of potentially seeing a positive inflection there on after a particularly keeping in mind you know the macro you know housing the way it is and the like.
Scott McDougald Sutton: Yeah, Yeah, sure Hi Hassan. We think that's about the right. So make sure that this gets substantially turned around I mean already and again I'm kind of referring back to slide number four right. We've seen the indicators of success certainly in our business, we are having a caustic price increases. January. January 1st and even a bit before that already. See export pricing has lifted significantly but. Some of the public trading agencies that still just projection so it's their projections, but our projections now, but we do need to make sure that materializes. So look I mean this is a real game. Momentum and third derivatives and second derivatives, and we're just going to make sure. Yeah. We deliver a bit more. Hi that momentum and that's why we're extending your opinions and a partial quarter.
We think that's about the right.
So make sure that this gets substantially turned around I mean already and again I'm kind of referring back to slide number four right. We've seen the indicators of success certainly in our business, we are having a caustic price increases.
January.
January 1st and even a bit before that already.
See export pricing has lifted significantly but.
Some of the public trading agencies that still just projection so it's their projections, but our projections now, but we do need to make sure that materializes. So look I mean this is a real game.
Momentum and third derivatives and second derivatives, and we're just going to make sure.
Yeah.
We deliver a bit more.
Hi that momentum and that's why we're extending your opinions and a partial quarter.
Hassan I. Ahmed: Got it and then just. Wanted to get a bit more sort of quantitatively. Quantitatively specific about the 'twenty 'twenty four guidance that you gave. And you know you're sort of alluding to you know north of $1 3 billion in EBITDA in <unk> in 2024, and you know if I want to just use sort of Q4 as a starting point you did 210 million in EBITDA in Q4, so I annualize that and you're at $840 million right. And to get to north of $1 3 billion you need an incremental you know call. It 460 million in EBITDA right. So so I'm, just trying to understand where that incremental <unk> coming from. I know that in the slides that you guys presented you referred to the sort of Oh. Value is sort of enhancement initiatives being call. It a 100 million a quarter. What does that then okay. So is it primarily you guys sort of. Stopping to partake in that initiative, both February and most of that EBITDA coming from there or are you sort of looking for some margin help from the market as well. Yeah sure I mean, how hopefully you'll you'll it was a little bit on Winchester, and the fact that the raw ballrooms repeat apart CEB zero so.
Hassan I. Ahmed: Got it and then just. Wanted to get a bit more sort of quantitatively. Quantitatively specific about the 'twenty 'twenty four guidance that you gave. And you know you're sort of alluding to you know north of $1 3 billion in EBITDA in <unk> in 2024, and you know if I want to just use sort of Q4 as a starting point you did 210 million in EBITDA in Q4, so I annualize that and you're at $840 million right. And to get to north of $1 3 billion you need an incremental you know call. It 460 million in EBITDA right. So so I'm, just trying to understand where that incremental <unk> coming from. I know that in the slides that you guys presented you referred to the sort of Oh. Value is sort of enhancement initiatives being call. It a 100 million a quarter. What does that then okay. So is it primarily you guys sort of. Stopping to partake in that initiative, both February and most of that EBITDA coming from there or are you sort of looking for some margin help from the market as well.
Wanted to get a bit more sort of quantitatively.
Quantitatively specific about the 'twenty 'twenty four guidance that you gave.
And you know you're sort of alluding to you know north of $1 3 billion in EBITDA in <unk> in 2024, and you know if I want to just use sort of Q4 as a starting point you did 210 million in EBITDA in Q4, so I annualize that and you're at $840 million right.
And to get to north of $1 3 billion you need an incremental you know call. It 460 million in EBITDA right. So so I'm, just trying to understand where that incremental <unk> coming from.
I know that in the slides that you guys presented you referred to the sort of Oh.
Value is sort of enhancement initiatives being call. It a 100 million a quarter. What does that then okay. So is it primarily you guys sort of.
Stopping to partake in that initiative, both February and most of that EBITDA coming from there or are you sort of looking for some margin help from the market as well.
Yeah sure I mean, how hopefully you'll you'll it was a little bit on Winchester, and the fact that the raw ballrooms repeat apart CEB zero so.
Scott McDougald Sutton: Yeah sure I mean, how hopefully you'll you'll it was a little bit on Winchester, and the fact that the raw ballrooms repeat apart CEB zero so. Get your get your question for sure. I would also think a little bit about some of the math even behind us now. We took our operating rate down to roughly 50% from around 60% in our fourth quarter and that was a $100 million penalty. So you can imagine that as those rates very slowly creep up to match. Customers coming back online. That's sort of an equation, where you might see $100 million penalty is one quarter to change the rates from 50%, 60% if everyone's paying attention know understand the math behind our operating leverage exactly and it doesn't take very much there. And you know a 100 million or a couple of hundred or even a deal yet and as things get better maybe in 2025.
Get your get your question for sure.
I would also think a little bit about some of the math even behind us now.
We took our operating rate down to roughly 50% from around 60% in our fourth quarter and that was a $100 million penalty.
So you can imagine that as those rates very slowly creep up to match.
Customers coming back online.
That's sort of an equation, where you might see $100 million penalty is one quarter to change the rates from 50%, 60% if everyone's paying attention know understand the math behind our operating leverage exactly and it doesn't take very much there.
And you know a 100 million or a couple of hundred or even a deal yet and as things get better maybe in 2025.
Hassan I. Ahmed: Very helpful. Scott. Thank you so much.
Yes.
Operator: The next question comes from Alethia young from <unk> of Keybanc capital markets. Go ahead.
Go ahead.
Aleksey Yefremov: Thanks, Good morning, everyone Scott. About January 1st caustic soda price increases can you discuss them where are those mostly monthly customers or quarterly our contracts or maybe spot and what is your outlook for caustic next few months,
About January 1st caustic soda price increases can you discuss them where are those mostly monthly customers or quarterly our contracts or maybe spot and what is your outlook for caustic next few months, yeah, Yeah, Hey, Alexia, Yeah, I mean look I would say, it's some of all.
About January 1st caustic soda price increases can you discuss them where are those mostly monthly customers or quarterly our contracts or maybe spot and what is your outlook for caustic next few months,
Scott McDougald Sutton: yeah, Yeah, Hey, Alexia, Yeah, I mean look I would say, it's some of all. Our bad in fact, even though we put January one some of that success happened early earlier than that. While it's across a number of customers I mean, please under please understand that we still have a lot of work to do there and caustic is a business that is still heavily tied to a trade index and that trade index you know in the fourth quarter relative to the third. <unk> showed a decline so our pricing in the first quarter is going to change by the difference between those prior two quarters. So we still have to get by that hurdle and that's why in the last quarterly earnings call. We said, you're really going to see that start to materialize. In a bigger way in our second quarter results.
Our bad in fact, even though we put January one some of that success happened early earlier than that.
While it's across a number of customers I mean, please under please understand that we still have a lot of work to do there and caustic is a business that is still heavily tied to a trade index and that trade index you know in the fourth quarter relative to the third.
<unk> showed a decline so our pricing in the first quarter is going to change by the difference between those prior two quarters. So we still have to get by that hurdle and that's why in the last quarterly earnings call. We said, you're really going to see that start to materialize.
In a bigger way in our second quarter results.
Aleksey Yefremov: Thanks, Scott and Oh on the chlorine side, there's a consultancy of decline for the year what is your outlook in the level of confidence in the outlook. Walk for the next few quarters as well.
Walk for the next few quarters as well.
Scott McDougald Sutton: Well I mean, the chlorine and chlorine derivatives pfizer's still the weaker side of the E. C U but you know what else what I will say is that Owens average chlorine pricing in the first quarter relative to the fourth quarter absolutely goes up. Some of that is because you know we've been able to renegotiate pricing and some contracts that expired at the at the end of the year. Some of that is because we ran this value accelerator initiative and the only way to pull out of the market was actually to pull out of some of our higher price. Business, because it was more spot in nature, but at least on our base business that continues without a contract change that pricing doesn't go down either nothing is getting worse in terms of corn and pricing.
Some of that is because you know we've been able to renegotiate pricing and some contracts that expired at the at the end of the year. Some of that is because we ran this value accelerator initiative and the only way to pull out of the market was actually to pull out of some of our higher price.
Business, because it was more spot in nature, but at least on our base business that continues without a contract change that pricing doesn't go down either nothing is getting worse in terms of corn and pricing.
Aleksey Yefremov: Okay. Thanks, a lot sure.
Operator: The next question comes from Steve Byrne of Bank of America. Please go ahead.
Steve Byrne: Yes. Thank you Scott I was curious about this prolonged trough in <unk> and PVC demand is is that. Is that representing. A bit of a challenge for you to negotiate maybe a partnering opportunity downstream. Post the end of the the Dell agreement in another year.
Is that representing.
A bit of a challenge for you to negotiate maybe a partnering opportunity downstream.
Post the end of the the Dell agreement in another year.
Scott McDougald Sutton: Yeah, Hey, Steve I mean look I do think it's extended at some right. Of course with. The change in our relationship with Dow at Freeport in 2025, we get a lot of excess capability coming back in our hands and you know well have to decide what to do there and everyone already knows that that's quite accretive for us for sure no matter what we do. So that that comes available. I would say in addition to that you know we have a tremendous amount of bcm, that's going through a pipeline to one customer and all of that ends in 'twenty 30, as well so we're getting close to being able to match up with a different PVC operator so. That was spending $6 billion on a completely integrated world scale facility. You know someone has the ability to spend 20% of that to get in business. World scale PVC plant. So I think the timing is okay. We wish it was a bit faster, but youre right I mean, the situation in the world right now is to slow down some of those activities. And then just given this uncertainty about the new CEO Scott are you opposed to staying there in that seat or staying longer depending on on the on this transition.
Scott McDougald Sutton: Yeah, Hey, Steve I mean look I do think it's extended at some right. Of course with. The change in our relationship with Dow at Freeport in 2025, we get a lot of excess capability coming back in our hands and you know well have to decide what to do there and everyone already knows that that's quite accretive for us for sure no matter what we do. So that that comes available. I would say in addition to that you know we have a tremendous amount of bcm, that's going through a pipeline to one customer and all of that ends in 'twenty 30, as well so we're getting close to being able to match up with a different PVC operator so. That was spending $6 billion on a completely integrated world scale facility. You know someone has the ability to spend 20% of that to get in business. World scale PVC plant. So I think the timing is okay. We wish it was a bit faster, but youre right I mean, the situation in the world right now is to slow down some of those activities.
Of course with.
The change in our relationship with Dow at Freeport in 2025, we get a lot of excess capability coming back in our hands and you know well have to decide what to do there and everyone already knows that that's quite accretive for us for sure no matter what we do.
So that that comes available.
I would say in addition to that you know we have a tremendous amount of bcm, that's going through a pipeline to one customer and all of that ends in 'twenty 30, as well so we're getting close to being able to match up with a different PVC operator so.
That was spending $6 billion on a completely integrated world scale facility. You know someone has the ability to spend 20% of that to get in business.
World scale PVC plant. So I think the timing is okay. We wish it was a bit faster, but youre right I mean, the situation in the world right now is to slow down some of those activities.
And then just given this uncertainty about the new CEO Scott are you opposed to staying there in that seat or staying longer depending on on the on this transition.
Steve Byrne: And then just given this uncertainty about the new CEO Scott are you opposed to staying there in that seat or staying longer depending on on the on this transition.
Scott McDougald Sutton: No I'm not.
Steve Byrne: Okay. Thank you.
Operator: The next question comes from Joshua Spector of UBS. Please go ahead.
Please go ahead.
Christopher Silvio Perrella: Hi, everyone, it's Chris Perrella on for Josh Good morning, Scott and Todd. Question on the follow up I saw that the share repurchases slowed in the fourth quarter of what's the outlook for share repurchases for 2024.
Question on the follow up I saw that the share repurchases slowed in the fourth quarter of what's the outlook for share repurchases for 2024.
Yeah, Chris This is thanks for the question. We committed to repurchase approximately 10% of our. Standing shares in 2023. That was consistent with what we achieved them we were relatively steady buyer through the year, we bought a little less in the fourth quarter, but consistent with the guidance that we had provided. Yeah as you look at our Levered free cash flow for 2024. You shouldn't expect us to primarily deploy that cash towards share repurchases, our strong investment grade balance sheet and cash flow enable us to continue to deploy our cash toward repurchasing our shares.
We committed to repurchase approximately 10% of our.
Standing shares in 2023.
That was consistent with what we achieved them we were relatively steady buyer through the year, we bought a little less in the fourth quarter, but consistent with the guidance that we had provided.
Yeah as you look at our Levered free cash flow for 2024.
You shouldn't expect us to primarily deploy that cash towards share repurchases, our strong investment grade balance sheet and cash flow enable us to continue to deploy our cash toward repurchasing our shares.
Christopher Silvio Perrella: Alright, and then a follow up as you take the brake off the value accelerator initiative. And you raised operating rates starting in March a would you know. Current plan I thought there'd be a larger step up in EBITDA our earnings for the Chlor alkali business I'm. Just curious you know given the puts and takes there. It seems like it's not up much and you know that $100 million penalty should be coming back a bit faster. Can you just kind of walk through how that that penalty lifts.
And you raised operating rates starting in March a would you know.
Current plan I thought there'd be a larger step up in EBITDA our earnings for the Chlor alkali business I'm. Just curious you know given the puts and takes there. It seems like it's not up much and you know that $100 million penalty should be coming back a bit faster.
Can you just kind of walk through how that that penalty lifts.
Yeah, I mean, Chris look it's a really good observation. Just keep two things in mind I mean, you know number one. Continuing to run that initiative or you know up to two thirds of the first quarter, but also on top of that it goes back to that caustic pricing phenomenon that I talked about whereby you know the first quarter pricing that we print. You know is determined by the difference between the fourth quarter and the third quarter and that's already known to be a drop so we have to overcome that as well.
Just keep two things in mind I mean, you know number one.
Continuing to run that initiative or you know up to two thirds of the first quarter, but also on top of that it goes back to that caustic pricing phenomenon that I talked about whereby you know the first quarter pricing that we print.
You know is determined by the difference between the fourth quarter and the third quarter and that's already known to be a drop so we have to overcome that as well.
Alright, so it's just a lag in the contract price exactly playing through okay exactly.
Christopher Silvio Perrella: Alright, so it's just a lag in the contract price exactly playing through okay
exactly.
Christopher Silvio Perrella: Thank you very much.
Operator: The next question comes from Frank Mitsch Fermium Research. Please go ahead.
Frank Mitsch: Hey, good morning. Staying on the AR on the Parlay chart, you know, reaching a high of 25% in the fourth quarter, obviously part of that is the. The initiative to ramp back your own operating rates, where does that stand now here in January and and and what are your expectations for that metric through the through the quarter,
Staying on the AR on the Parlay chart, you know, reaching a high of 25% in the fourth quarter, obviously part of that is the.
The initiative to ramp back your own operating rates, where does that stand now here in January and and and what are your expectations for that metric through the through the quarter, Yeah, Yeah, Hey, Frank Yeah, I mean, you're you're you're right. I mean, it's I think it's very interesting that for 25% of our volumes we're out there selling and we.
The initiative to ramp back your own operating rates, where does that stand now here in January and and and what are your expectations for that metric through the through the quarter,
Yeah, Yeah, Hey, Frank Yeah, I mean, you're you're you're right. I mean, it's I think it's very interesting that for 25% of our volumes we're out there selling and we. We're buying those from third parties and it might just tell you about the strengths of all ones that we can do that we can go run our assets at 50% utilization, we can take care of all of those items and still have positive levered free cash flow even in the fourth quarter. So I mean, thanks for the observation on that or the hands of the observation I mean, I would say that look where we're still doing a lot of that because we're still running that initiative I do think you know through the year as we very slowly and incrementally may lift rates a little bit. You might see that percentage decline back solve we're unlikely to be at a 25% purchase of all of our volumes from other parties over a long period of time, it'll probably settle at something lower than that.
We're buying those from third parties and it might just tell you about the strengths of all ones that we can do that we can go run our assets at 50% utilization, we can take care of all of those items and still have positive levered free cash flow even in the fourth quarter.
So I mean, thanks for the observation on that or the hands of the observation I mean, I would say that look where we're still doing a lot of that because we're still running that initiative I do think you know through the year as we very slowly and incrementally may lift rates a little bit.
Frank: You might see that percentage decline back solve we're unlikely to be at a 25% purchase of all of our volumes from other parties over a long period of time, it'll probably settle at something lower than that.
Frank Mitsch: Ah Okay, great Great and then as you are you know as you assess the underlying market demand are by region. You know you indicated the last time, you know that things were right now were rather slow and so forth how is it standing here and in in January and what and what are your expectation what is actually embedded you know in terms of underlying demand. As you think about 24 being better than 23 overall.
As you think about 24 being better than 23 overall.
Scott McDougald Sutton: Yeah, well I mean look at in in Winchester, Theres, a demand increase in military. It's sort of put that one to bed, we havent planned on any demand increase in our pocket right. That's a that's a self help type of work even in Chlor alkali very limited demand recovery, but I will just say that sentiment is a little bit better here at the start of the. A year customers are restarting two of our larger customers that have large off takes had been down for many weeks and in fact, they're restarting there's some light confidence I'd say and homebuilders, where at least may be that that doesn't go the wrong the wrong way. So there's just not a lot of strength in demand built in our outlook right.
It's sort of put that one to bed, we havent planned on any demand increase in our pocket right. That's a that's a self help type of work even in Chlor alkali very limited demand recovery, but I will just say that sentiment is a little bit better here at the start of the.
A year customers are restarting two of our larger customers that have large off takes had been down for many weeks and in fact, they're restarting there's some light confidence I'd say and homebuilders, where at least may be that that doesn't go the wrong the wrong way.
So there's just not a lot of strength in demand built in our outlook right.
Okay very helpful. Thanks, So much Scott and if this is the last time. We speak is are you being part of a Oh and I'm looking forward to your next adventure. Thanks, So much thanks Frank.
Frank Mitsch: Okay very helpful. Thanks, So much Scott and if this is the last time. We speak is are you being part of a Oh and I'm looking forward to your next adventure.
Thanks, So much thanks Frank.
Operator: The next question comes from Kevin Mccarthy of vertical research partners. Please go ahead.
Please go ahead.
Kevin McCarthy: Yes, Thank you and good morning, Scot I'd welcome your updated thoughts on the shape of the Epocrates cycle. If I look at slide eight it appears as though your prices eroded in <unk> versus <unk>. How do you think that will trend and in the first quarter and then I'm also interested to hear your thoughts on a park season in Europe. You know, we're reading about disruptions in trade routes relative to the Red Sea in purchasing managers are seem to want to kind of get ahead of those longer lead time. <unk> and increased tensions and friction and so forth. How do you see the next quarter or two are shaping up for a policy
How do you think that will trend and in the first quarter and then I'm also interested to hear your thoughts on a park season in Europe. You know, we're reading about disruptions in trade routes relative to the Red Sea in purchasing managers are seem to want to kind of get ahead of those longer lead time.
<unk> and increased tensions and friction and so forth.
How do you see the next quarter or two are shaping up for a policy yeah sure Hey, Hey, Kevin. Good question, Yeah look I mean, we've announced price increase and we're getting some price increase and in fact, if you really looked at what's happened over the last few months has been more of a.
How do you see the next quarter or two are shaping up for a policy
Scott McDougald Sutton: yeah sure Hey, Hey, Kevin. Good question, Yeah look I mean, we've announced price increase and we're getting some price increase and in fact, if you really looked at what's happened over the last few months has been more of a. Wash tub bottom it really hasn't declined further in fact, even the trade publications now are exciting that this is a bottom believe me we absolutely say that this this is a bottom and the disruptions for trade routes that is starting to have. An impact, particularly in Europe. So there's a lot of momentum for the start of lifting prices again through our policies, it's going to be slow. So I think the what what what you'll end up seeing us do is sort of take that washed up in <unk>. It up a little bit you know I wouldn't expect something really really fast there, but we're going to change the slope of that curve.
Wash tub bottom it really hasn't declined further in fact, even the trade publications now are exciting that this is a bottom believe me we absolutely say that this this is a bottom and the disruptions for trade routes that is starting to have.
An impact, particularly in Europe. So there's a lot of momentum for the start of lifting prices again through our policies, it's going to be slow. So I think the what what what you'll end up seeing us do is sort of take that washed up in <unk>.
It up a little bit you know I wouldn't expect something really really fast there, but we're going to change the slope of that curve.
Kevin McCarthy: Okay. That's helpful and then. Curious on an E D C. We've seen those prices percolate higher notwithstanding weakness in downstream PVC resin. Headroom is there before you kind of run into that P. B C ceilings so to speak.
Curious on an E D C. We've seen those prices percolate higher notwithstanding weakness in downstream PVC resin.
Headroom is there before you kind of run into that P. B C ceilings so to speak.
Scott McDougald Sutton: Yeah, well look I mean, Pete you know, particularly the export PVC pricing is not good and you know you see ADC list, but there's still a substantial gap west even when PVC is this slow and that's one of the focuses we've had. And one of the initiatives. We've had is to try to close that gap and we were never really successful at closing that gap. So there's still room there to move it some more relative to PVC.
And one of the initiatives. We've had is to try to close that gap and we were never really successful at closing that gap. So there's still room there to move it some more relative to PVC.
Great well that's helpful. And then if it is the last call Scott Congrats on all that you've been able to do with the company and in less than three years and look forward to keeping in touch yeah. No no. Thanks, a lot it's really not me though.
Kevin McCarthy: Great well that's helpful. And then if it is the last call Scott Congrats on all that you've been able to do with the company and in less than three years and look forward to keeping in touch yeah.
Scott McDougald Sutton: No no. Thanks, a lot it's really not me though. This team and this employee group.
This team and this employee group.
Thanks.
Okay.
Operator: The next question comes from David Begleiter of Deutsche Bank. Please go ahead Sir.
David Begleiter: Good morning, I'm, Scott just on the Blue water aligns keynote data on how it performed last year and what's the expected EBITDA contribution 2024.
Scott McDougald Sutton: Yes. Hey, good morning, Yeah, I mean look I, probably won't give a forecast of the EBITDA contribution, but I mean, clearly that does appear indirectly in our in our financials and it was a positive contributor in 2023, which was actually the expectation. Right, it's sort of a first year. There's a lot of purposes or or blue water, we don't intend for it to be a wild direct contributor of profit, but the value to Taiwan and the value in the overall product levels of Olin. Is there I mean part of our parlay work that we're doing now and you know, we just had that discussion being 25% of our business is associated with blue water. So it'll. It'll it'll likely improve this year, but it's not going to be a major direct contributor relative to the size of the rest of our business.
Hey, good morning, Yeah, I mean look I, probably won't give a forecast of the EBITDA contribution, but I mean, clearly that does appear indirectly in our in our financials and it was a positive contributor in 2023, which was actually the expectation.
Right, it's sort of a first year.
There's a lot of purposes or or blue water, we don't intend for it to be a wild direct contributor of profit, but the value to Taiwan and the value in the overall product levels of Olin.
Is there I mean part of our parlay work that we're doing now and you know, we just had that discussion being 25% of our business is associated with blue water. So it'll.
It'll it'll likely improve this year, but it's not going to be a major direct contributor relative to the size of the rest of our business.
David Begleiter: Very good and just to get a pox he wants a path back to mid cycle earnings given the amount. The amount of oversupply in the marketplace today.
The amount of oversupply in the marketplace today.
Scott McDougald Sutton: Well you know I guess it depends on what you call mid cycle in that business, but I'll I'll I'll, just say, it's a multi year path is and maybe leave it at that.
David Begleiter: Thank you very much yeah sure.
Operator: The next question comes from Mike <unk> of Barclays. Please go ahead.
Michael Leithead: Great. Thank you. Good morning first question on Winchester, you've obviously talked a lot. This call Scott about the earnings improvement likely this year could you first remind us just how big military is relative to your overall sales mix in this business and second it is an election year does that normally change commercial order. Patterns or do you see that impacting at all commercial sales volumes.
Patterns or do you see that impacting at all commercial sales volumes.
Scott McDougald Sutton: Yeah, Hey, good morning, and you know. The military side of that business now has become about as big. In rough terms it was the commercial side of that business in fact in the third quarter of 2023, it was actually bigger than the commercial business for the first time in history. So I think a good way to think of it as it's sort of half and half from a sales perspective, it's not quite as profitable. As the commercial business, but that's that's roughly the sizing of. What was the second part of the question.
The military side of that business now has become about as big.
In rough terms it was the commercial side of that business in fact in the third quarter of 2023, it was actually bigger than the commercial business for the first time in history. So I think a good way to think of it as it's sort of half and half from a sales perspective, it's not quite as profitable.
As the commercial business, but that's that's roughly the sizing of.
What was the second part of the question.
Potential election, Oh, yeah, yeah. Thank you yeah, yeah, I mean that that kind of uncertainty you know along with other things that are out there in the market place and I mentioned this challenge on propel and supplied to the whole industry. Those two things coming together you know.
Michael Leithead: Potential election,
Scott McDougald Sutton: Oh, yeah, yeah. Thank you yeah, yeah, I mean that that kind of uncertainty you know along with other things that are out there in the market place and I mentioned this challenge on propel and supplied to the whole industry. Those two things coming together you know. Are likely to cause you know a run on on ammunition.
Are likely to cause you know a run on on ammunition.
Michael Leithead: Got it Okay, and then second question I wanted to parse apart. The comments are bullets, you have in the slide deck slide four where I think you said customer requests for merchant chlorine increase should we interpret that that customers are coming to you asking for more product, but not at a price or an economic you're willing to sell at or can you maybe expand upon that but yeah I think the way to two in <unk>. But that is that when we you know pull back from the market. Some just because we're running our initiative, we're not going to participate in a poor quality market. After we did bat that caused some customers some not even the same customers that we may have pulled back from Chicago asked for more volume again, it's just an indication that we can have an impact by taking that kind of action. And it's an indication that we had the opportunity to turn back on some of these assets, though at a very very you know incremental amount one way and do some additional business.
Michael Leithead: Got it Okay, and then second question I wanted to parse apart. The comments are bullets, you have in the slide deck slide four where I think you said customer requests for merchant chlorine increase should we interpret that that customers are coming to you asking for more product, but not at a price or an economic you're willing to sell at or can you maybe expand upon that
The comments are bullets, you have in the slide deck slide four where I think you said customer requests for merchant chlorine increase should we interpret that that customers are coming to you asking for more product, but not at a price or an economic you're willing to sell at or can you maybe expand upon that but yeah I think the way to two in <unk>.
But that is that when we you know pull back from the market. Some just because we're running our initiative, we're not going to participate in a poor quality market.
Scott McDougald Sutton: but yeah I think the way to two in <unk>. But that is that when we you know pull back from the market. Some just because we're running our initiative, we're not going to participate in a poor quality market. After we did bat that caused some customers some not even the same customers that we may have pulled back from Chicago asked for more volume again, it's just an indication that we can have an impact by taking that kind of action. And it's an indication that we had the opportunity to turn back on some of these assets, though at a very very you know incremental amount one way and do some additional business.
After we did bat that caused some customers some not even the same customers that we may have pulled back from Chicago asked for more volume again, it's just an indication that we can have an impact by taking that kind of action.
And it's an indication that we had the opportunity to turn back on some of these assets, though at a very very you know incremental amount one way and do some additional business.
Michael Leithead: Great. Thank you.
Operator: The next question comes from Mike Sison of Wells Fargo. Please go ahead.
Michael Joseph Sison: Hey, guys Scott. Great working with you over the last several years. I guess, just just to clarify here you would need to get your operating rate in cab between 60 and 70%. At some point, maybe in the second quarter and beyond to get to your guidance of $1 3 billion or better. And I. I mean it. Demand is there to do that I guess. A follow up question or do you need demand to get better to do that.
Great working with you over the last several years.
I guess, just just to clarify here you would need to get your operating rate in cab between 60 and 70%.
Michael Sison: At some point, maybe in the second quarter and beyond to get to your guidance of $1 3 billion or better.
And I.
I mean it.
Demand is there to do that I guess.
A follow up question or do you need demand to get better to do that.
Scott McDougald Sutton: Well I don't know that we need to get back to the levels that you you spoke of I mean remember you know Winchester on the Pax here has got to do better and we expect CATV to do incrementally better as well. Adding anything back to our rates may be below the numbers that you spoke of gifts was there when you take that in combination with <unk> with you know the fact that look we don't have another $100 million penalty for them not being able to run our V. C M unit. For a whole corridor for example, so when you put those two things together I don't think we need to get there by 2025, I think we need to be in the sixties.
Adding anything back to our rates may be below the numbers that you spoke of gifts was there when you take that in combination with <unk> with you know the fact that look we don't have another $100 million penalty for them not being able to run our V. C M unit.
For a whole corridor for example, so when you put those two things together I don't think we need to get there by 2025, I think we need to be in the sixties.
Michael Joseph Sison: Got it and then what. And just curious what would prevent you from. Moving your operating itself I mean, I know the consultants. No. They havent you see your margin kind of down sequentially, they might not necessarily be right, but you know what are you looking what what what would prompt you to not to. Be able to raise your operating rates heading into two camps.
And just curious what would prevent you from.
Moving your operating itself I mean, I know the consultants.
No. They havent you see your margin kind of down sequentially, they might not necessarily be right, but you know what are you looking what what what would prompt you to not to.
Be able to raise your operating rates heading into two camps.
Scott McDougald Sutton: Well, if we weren't having success moving product values than we would keep running this initiative, but. We're having success changing the direction of <unk>. Our product pricing.
We're having success changing the direction of <unk>.
Our product pricing.
Michael Joseph Sison: Yeah. Got it thank you.
Got it thank you.
Operator: The next question comes from Jeff Zekauskas of Jpmorgan. Please go ahead.
Jeffrey J. Zekauskas: Thanks very much. Earlier in the call you spoke of a large contract that. That that can end in 2030 that did that customer indicate that they didn't wish to renew it.
Earlier in the call you spoke of a large contract that.
That that can end in 2030 that did that customer indicate that they didn't wish to renew it.
Scott McDougald Sutton: Well, Hey, Jeff Hi, how are you doing what I would say is that's the natural exploration. Of that contract and we're currently in a dispute with a very significant value lift opportunity. So we'll just have to see where that goes by 2030.
Of that contract and we're currently in a dispute with a very significant value lift opportunity. So we'll just have to see where that goes by 2030.
Jeffrey J. Zekauskas: Okay and then. Secondly, can you just compare general demand conditions in the caustic chain to the chlorine chain. And in your curtailment of production are you, making a larger difference to the chlorine side part of the caustic side and why.
Secondly, can you just compare general demand conditions in the caustic chain to the chlorine chain.
And in your curtailment of production are you, making a larger difference to the chlorine side part of the caustic side and why.
Scott McDougald Sutton: Yeah, Yeah, well I mean, right right now Jeff. Lori and chlorine derivative side is weaker for us. So we generally said our participation according to that weaker side and so we're having an impact. More than likely the bigger part of the impact will be on the stronger side, because you end up really shortening that demand profile more.
Lori and chlorine derivative side is weaker for us. So we generally said our participation according to that weaker side and so we're having an impact.
More than likely the bigger part of the impact will be on the stronger side, because you end up really shortening that demand profile more.
Jeffrey J. Zekauskas: Hmm. Okay. Okay I understand that thank you very much okay. Thank you.
Okay.
Okay I understand that thank you very much okay. Thank you.
Operator: The next question comes from Vincent Anderson of Stifel. Please go ahead.
Vincent Anderson: Hi, Thanks, good morning. So you know maybe you have a different view, but it looks like China is probably still planning a fair amount of capacity up and down the epoxy value chain over the next few years. So to me at least it would appear that trade protections might be necessary, even if we did see some amount of demand recovery. So I guess it turned out into a question you are you still considering trade cases in epoxy and how important is sort of your renewed focus on fleshing out your derivative portfolio as a balance to the operating leverage leverage on the base resin assets.
So you know maybe you have a different view, but it looks like China is probably still planning a fair amount of capacity up and down the epoxy value chain over the next few years. So to me at least it would appear that trade protections might be necessary, even if we did see some amount of demand recovery.
So I guess it turned out into a question you are you still considering trade cases in epoxy and how important is sort of your renewed focus on fleshing out your derivative portfolio as a balance to the operating leverage leverage on the base resin assets.
Scott McDougald Sutton: Yeah, Yeah sure I mean, no we're absolutely doing more than considering that Brian I mean, effectively this is illegal product trade flows coming into both Europe and the U S. And you know this has to be stopped and for some other reasons. But you said, it's likely to continue so yeah, we're absolutely going to have gone up for her pursue that I think in terms of getting rates up we've we've reduced our on the ground capacity quite a bit and we're using our systems portfolio. You get some operating leverage back across our base resin I think that was the second part of your question.
But you said, it's likely to continue so yeah, we're absolutely going to have gone up for her pursue that I think in terms of getting rates up we've we've reduced our on the ground capacity quite a bit and we're using our systems portfolio.
You get some operating leverage back across our base resin I think that was the second part of your question.
Vincent Anderson: Yeah. It was it was very. Very helpful. Thank you if I could ask one other one I may be too early on this but you know we're reading about the Chinese ramping up capacity of sodium ion battery production I'm curious if you've seen any meaningful change in their sodium markets, whether that's coming from the caustic side or maybe they're using. Soda ash, but just anything you can shed a light on because it's still a bit of a black box on our end.
Very helpful. Thank you if I could ask one other one I may be too early on this but you know we're reading about the Chinese ramping up capacity of sodium ion battery production I'm curious if you've seen any meaningful change in their sodium markets, whether that's coming from the caustic side or maybe they're using.
Soda ash, but just anything you can shed a light on because it's still a bit of a black box on our end.
Scott McDougald Sutton: Yeah, and I, probably can't help that much on that specific on an item right, but what I. What I can say is you know the ramp up of battery production. Battery recycling is probably the largest growth item, we have across our core alkali portfolio, there's a demand for more caustic and many of those applications. There's also an additional demand for hydrochloric. Asset in those as well so it's probably the premier growth item over the next 10 years in this business.
Battery recycling is probably the largest growth item, we have across our core alkali portfolio, there's a demand for more caustic and many of those applications. There's also an additional demand for hydrochloric.
Asset in those as well so it's probably the premier growth item over the next 10 years in this business.
Vincent Anderson: Alright, well thanks, Thanks, Scott I appreciate it.
Sure.
Operator: The next question comes from Matthew Blair. P. H. Please go ahead.
P. H. Please go ahead.
Matthew Blair: Hey, good morning, Scott. Eight eight shows caustic holding as a strong side of the C U E. This quarter I think in the past, who said you you'd like it when that gap is pretty wide. Could you talk about what you're seeing in the market now and is that gap widening out or is it is it narrowing. Give me a little clarification I missed the gap between what two things. Oh, the the gap between chlorine and caustic in the east to you and which is the strong side in Wichita weeks that
Eight eight shows caustic holding as a strong side of the C U E.
This quarter I think in the past, who said you you'd like it when that gap is pretty wide.
Could you talk about what you're seeing in the market now and is that gap widening out or is it is it narrowing.
Give me a little clarification I missed the gap between what two things.
Oh, the the gap between chlorine and caustic in the east to you and which is the strong side in Wichita weeks that yeah, sorry, sorry, Yeah, I appreciate that and I mean, you know first of all you know Olin does do better when you know there is a difference in the.
Oh, the the gap between chlorine and caustic in the east to you and which is the strong side in Wichita weeks that
Scott McDougald Sutton: yeah, sorry, sorry, Yeah, I appreciate that and I mean, you know first of all you know Olin does do better when you know there is a difference in the. <unk> demand profile on the chlorine side of it he sees you versus the caustic side of the Acu. Because just because we can act on one versus the other the only challenge that we really have is when both are bad and they're equal you know that's the hardest profile for Olin to add. Act on so we don't we don't have a problem with one being weak and one being stronger. That's the way we're set up now caustic a stronger boring is weak, but overlaying that is just general weakness and that's why earnings are down.
<unk> demand profile on the chlorine side of it he sees you versus the caustic side of the Acu.
Because just because we can act on one versus the other the only challenge that we really have is when both are bad and they're equal you know that's the hardest profile for Olin to add.
Act on so we don't we don't have a problem with one being weak and one being stronger.
That's the way we're set up now caustic a stronger boring is weak, but overlaying that is just general weakness and that's why earnings are down.
Matthew Blair: Got it and then. Thought it was interesting that you mentioned that they didn't general winchester's, the bright spot and talked about military being a big opportunity I think the slides mentioned the military demand was actually down a little bit in the fourth quarter quarter over quarter, even given this period of global instability. What are you seeing in in Q1 and is that starting to rebound. And honors I understand your comment that was just a sequential issue and it's really only order pattern, whereas you know related and delivery related a lot of those deliveries into the military application are very large and they're very discrete so that that's only an order pattern. Issue
Thought it was interesting that you mentioned that they didn't general winchester's, the bright spot and talked about military being a big opportunity I think the slides mentioned the military demand was actually down a little bit in the fourth quarter quarter over quarter, even given this period of global instability.
What are you seeing in in Q1 and is that starting to rebound. And honors I understand your comment that was just a sequential issue and it's really only order pattern, whereas you know related and delivery related a lot of those deliveries into the military application are very large and they're very discrete so that that's only an order pattern. Issue
And honors I understand your comment that was just a sequential issue and it's really only order pattern, whereas you know related and delivery related a lot of those deliveries into the military application are very large and they're very discrete so that that's only an order pattern. Issue
Issue you know again I would just compare year on year on year, and you know theres substantial year on year on year.
Issue
Scott McDougald Sutton: you know again I would just compare year on year on year, and you know theres substantial year on year on year.
Matthew Blair: That's really helpful. Thank you sure.
Yeah.
Operator: The next question comes from Vincent Andrews of Morgan Stanley. Please go ahead.
Vincent Stephen Andrews: Thank you good morning on the cash taxes. My recollection is that those that increase was also especially to take last year and I think you mentioned the firm into this year. So it is this year that that increase I think its 80 million is that definitive for 'twenty 'twenty four or is there some chance to further defer those.
Scott McDougald Sutton: Yes. Thanks for the question Vincent. I wish I could sound very optimistic and say, there's a chance to differ. I don't believe that will be the case, and we would expect that that $80 million will be paid out. Roughly during the middle of this year.
Thanks for the question Vincent.
I wish I could sound very optimistic and say, there's a chance to differ.
I don't believe that will be the case, and we would expect that that $80 million will be paid out.
Roughly during the middle of this year.
Vincent Stephen Andrews: Okay and then also on that same slide nine and the primary uses for for cash flow are the third one being the alliance and JV opportunities is there sort of a rough amount you could suggest that it could could go towards those this year or a max amount.
Scott McDougald Sutton: Okay. We'd be Vince and thank you for the question on that at this point they would be very small we do have a you know a hydrogen joint venture that we do have a little bit more that will be paid during this year. So that that is a small number relative to any of those cash flow numbers.
We'd be Vince and thank you for the question on that at this point they would be very small we do have a you know a hydrogen joint venture that we do have a little bit more that will be paid during this year.
So that that is a small number relative to any of those cash flow numbers. Okay. Thank you very much.
So that that is a small number relative to any of those cash flow numbers.
Vincent Anderson: Okay. Thank you very much.
Operator: The next question comes from John Roberts of Mizuho. Please go ahead.
John Roberts: Thank you and best wishes as well Scott. I think acetone prices spiked during the quarter or is that just normal co product dynamics with the weak BPA market for Epocrates or is there something else going on there.
I think acetone prices spiked during the quarter or is that just normal co product dynamics with the weak BPA market for Epocrates or is there something else going on there.
Scott McDougald Sutton: Yeah, I mean, principally that said you're right I mean, you know phenol Aster town co production, a little bit like chlorine caustic.
And you know we saw.
Sort of transfer some of our model that we run in the EC you world into our phenol acetone production and marketing scheme, and so you've seen us take advantage of that and get some value out of assets.
And then at Lake City do you think there are any political risk to being able to use the excess capacity for commercial production in the New York Times had a pretty high profile article during the quarter.
No I don't think there is there is any risk there at all I mean, what I, what I will say is that look I mean, there's always this sort of back door play to try to go after the second Amendment, you know of the Constitution and in the U S.
Yes, and that's what that is and those those kind of things are not likely to be very successful you know I'd. Just go back to the fact that probably in this country. There's 26000 gun laws on the books I'm still you know sports shooting is the largest participant sport in our country.
He just below exercise okay.
And coming after ammunition.
There's probably not as successful road some my follow on there.
Thank you got it.
Yeah.
The next question comes from Rod Roger Spitz of Bank of America. Please go ahead.
Thank you very much I'm, assuming you've idled some of your electrical lives or perhaps full trains to get to the 50% operating rates will there be material restart Clos as you move your operating rates up.
Yes membranes can be finicky or are you, mainly idling gesture asbestos diaphragm.
At your license.
Yeah, Yeah. Thanks for the question no. There's no incremental cost we can move those up and down rather quickly and in fact, just a smaller point for you that's pretty interesting is the.
The diaphragm system relative to the membrane systems are very easy to go up and down and that's one advantage of asbestos diaphragms or other kinds of diaphragms relative to membrane system very easy to turn on and off.
Got it and then secondly, historically.
Shell's commercial ammunition sales have been higher.
When Democrats are have the administration versus Republicans.
Do you have any view of how much EBITDA is in western Winchester are attributed to the fact that we currently have a Democratic administration.
Well I would say not really I would say, it's more attributed to the fact that there's you know at least 15 million new participants doing sports shooting in this country.
Michael Sison: And every month I forget how many and maybe someone someone will tell me how many months in a row that the knicks background checks have been above a million guns, a month, but it's like 40 or 50, maybe even more I just can't remember that but the number and that trend continues and that's driven a lot more.
Our participation in the sport.
Thank you very much.
Yes.
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.
Well I would just say thanks very much everybody for attending today.
Yeah.
Thank you for attending today's presentation you may now disconnect.
Yeah.
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