Q1 2025 Olin Corp Earnings Call
Speaker Change: [music].
Operator: © The Ultimate Parody Site! © BF-WATCH TV 2021 Good morning and welcome to the Olin Corporation's first quarter 2025 Earnings Profits Call.
Good morning, and welcome to the Olin Corporation first quarter 2025 earnings Conference call.
Operator: All participants will be in a listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by.
All participants will be in a listen only mode.
Should you need assistance. Please signal a conference specialist by pressing star key followed by zero.
Operator: 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. To withdraw your questions, please press star then two. Please note, this event is being recorded.
Following today's brief opening comments there'll be an opportunity to ask questions.
To ask a question you May press Star then one on you touched on phone.
To withdraw your question. Please press Star then two.
Please note this event is being recorded.
Steve Keenan: I would now like to turn the conference over to Steve Keenan, Olin's Director of Investor Relations. Please go ahead, Steve. Thank you, operator. Good morning, everyone. We truly appreciate you joining us today to review Olin's first quarter results. Please keep in mind that today's discussion, together with the associated slides and the question and answer session that follows, will include statements regarding estimates or expectations of future performance. Please note that these are forward-looking statements, and that Poland's actual results could differ materially from those projected. Some of the factors that could cause actual results to differ from our projections are described without limitations in the risk factors section of our most recent Form 10-K and in yesterday's first quarter earnings press release.
I would now like to turn the conference over to Steve Keenan Olin's Director of Investor Relations. Please go ahead Steve.
Thank you operator.
Everyone. We truly appreciate you joining us today to review our first quarter results.
Please keep in mind that today's discussion together with the associated slides and the question and answer session that follows.
Well include statements regarding estimates or expectations of future performance.
Please note that these are forward looking statements.
Actual results could differ materially from those projected.
Some of the factors that could cause actual results to differ from our projections are described without limitations in the risk factors section of our most recent Form 10-K.
And in yesterday's first quarter earnings press release.
Operator: 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 related financial data and information are available under 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 related financial data and information are available under press releases.
Steve Keenan: With me this morning are Ken Lane, Olin's president and CEO, and Todd Slater, Olin's CFO. We'll start with some prepared remarks, then we look forward to taking your questions.
Speaker Change: With me. This morning are Kid Lane, although as president and CEO and Todd Slater Olin's CFO.
Speaker Change: We'll start with some prepared remarks, and we look forward to taking your questions in order to give everyone. An opportunity we will limit participants to one question with no follow ups.
Steve Keenan: In order to give everyone an opportunity, we will limit participants to one question with no follow-up.
Ken Lane: I'll now turn the call over to Bowdoin's president and CEO, Ken Lane. Thanks Steve, and thank you to everyone joining our call today. Let's start with a few first quarter highlights on slide three. Looking across the global macro environment, economic uncertainty continues to dominate the narrative. Against this backdrop, everyone here at Olin continues to focus on the path we laid out during our Investor Day. while closely managing the factors within our control and advancing our value creation strategy.
Ken: I'll now turn the call over to esports, President and CEO Ken <unk>.
Speaker Change: Thanks, Steve and thank you to everyone joining our call today.
Ken: Let's start with a few first quarter highlights on slide three.
Ken: Looking across the global macro environment economic uncertainty continues to dominate the nurse.
Ken: Against this backdrop, everyone here at Olin continues to focus on the path, we laid out during our Investor day.
Ken: Closely managing the factors within our control and advancing our value creation strategy.
Ken Lane: As a result, we're increasing our cost reduction target to $50 to $70 million related to productivity and structural cost improvements for full year 2025. During the first quarter, our chlor-alkali products and vinyls business exceeded expectations as several planned and unplanned industry outages reduced first-quarter chlorine in a caustic soda supply. In response, we delayed the planned first quarter outage at our ChlorAlkali facility in Freeport, Texas to meet customer needs and were pleased to help many customers during the tight market conditions. This is in line with our value first commercial approach, and as we've consistently said, Olin is ready to raise operating rates to meet demand at fair value.
Ken: As a result, we're increasing our cost reduction target to $50 million to $70 million related to productivity and structural cost improvements for full year 2025.
Ken: During the first quarter, our chlor alkali products and vinyls business exceeded expectations.
Ken: Well planned and unplanned industry outages reduced first quarter chlorine and caustic soda supply.
Ken: In response, we delayed the planned first quarter outage at our Chlor alkali facility in Freeport, Texas to meet customer needs and we're pleased to help many customers during the tight market conditions.
Ken: This is in line with our value first commercial approach and as we've consistently said over this ready to raise operating rates to meet demand at fair values.
Ken Lane: We view this as a positive proof point for our chloralkali loaded spring that will be more apparent as we emerge from this extended trough environment. During the first quarter, we also saw stable ECU values continue with positive pricing trends into the second quarter. In our Winchester Division, domestic and international military ammunition volume continues to grow while commercial sales continue to be weak as retailers de-stock, coupled with lower consumer sales. Also during the first quarter, OLA took advantage of historically narrow spreads and successfully refinanced our nearest debt tranche through a bond issue and bank refinance. This pushed our nearest debt tower out to 2029 and positions us very well to weather the uncertain environment we see today.
Ken: We view this as a positive proof point for our core alkali loaded spring that will be more apparent as we emerge from this extended trough environment.
Ken: During the first quarter. We also saw stable ECE values continue with positive pricing trends into the second quarter.
Ken: And our Winchester Division domestic and international military ammunition volume continues to grow while commercial sales continued to be weak as retailers destock, coupled with lower consumer sales.
Ken: Also during the first quarter OLED took advantage of historically narrow spreads and successfully refinanced our nearest debt tranche through a bond issue and bank refinancing.
Ken: This pushed our nearest debt tower out to 2029 and positions us very well to weather the uncertain environment, we see today.
Ken Lane: As we manage through this challenging economic environment, we're taking important steps to advance our strategy and strengthen our business. Slide 4 reviews several of our recent actions. Our Optimize and Grow the Core strategy, introduced during our December Investor Day, outlines our path forward, and we took several steps to advance that strategy in the first quarter. Continuing our commitment to a value-first commercial approach, accelerating structural cost reductions, and maintaining our disciplined capital allocation framework, all while not losing focus on the high-value growth opportunities laid out in the As an example, we make solid progress to implement our Winchester growth strategy.
Ken: As we manage through this challenging economic environment, we're taking important steps to advance our strategy and strengthen our business.
Ken: Slide four reviews several of our recent actions.
Ken: Our optimize and grow the core strategy introduced during our December Investor Day outlines our path forward and we took several steps to advance our strategy in the first quarter.
Ken: We continue our commitment to a value first commercial approach.
Ken: Celebrating structural cost reductions and maintaining our disciplined capital allocation framework.
Ken: All while not losing focus on the high value growth opportunities laid out in December.
Ken: As an example, we made solid progress to implement our Winchester growth strategy.
Ken Lane: I'm pleased to report that Winchester has been awarded a three-year contract extension to continue operating the Lake City GOCO ammunition facility through 2030. Additionally, we closed the acquisition of Ammo Inc.'s ammunition assets. We've also been focused on enhancing our organizational accountability. We've aligned each employee's incentives with our corporate goals and strengthened our equity plans to increase engagement and retention. Also, we consolidated our chemicals commercial talent to our Houston office to facilitate greater cross-collaboration and teamwork.
Ken: I'm pleased to report that Winchester has been awarded a three year contract extension to continue operating the Lake City Gogo ammunition facility through 2030.
Ken: Additionally, we closed the acquisition of ammo weeks ammunition assets.
Ken: We've also been focused on enhancing our organizational accountability.
Ken: We've aligned each employee's incentives with our corporate goals and strengthened our equity plans to increase engagement and retention.
Ken: Also we consolidated our chemicals commercial talent to our Houston office to facilitate greater cross collaboration and teamwork and finally, we establish equate misery is our Winchester headquarters.
Ken Lane: And finally, we established Clayton, Missouri as our Winchester headquarters.
Ken Lane: Now let's turn to slide 5 to review our poor-applied products and vinyls results. First quarter CAPV EBITDA was up slightly with increased chlorine and caustic volumes as we continue to focus on value and push for price gains on each side of the ECU. We expect costing to remain the stronger side of the ECU and see positive pricing trends going into the second quarter.
Ken: Now, let's turn to slide five to review, our Chlor alkali products and vinyls results.
Ken: First quarter see a P V. EBITA was up slightly with increased chlorine and caustic volumes as we continue to focus on value.
Ken: For price gains on each side of the C U.
Ken: We expect caustic to remain the stronger side of the east you can see positive pricing trends going into the second quarter.
Ken Lane: As mentioned earlier, we delayed the start of our planned Freeport, Texas turnaround to opportunistically capture spot demand created by planned and unplanned industry outages. During the first quarter, we re-engaged with several chlorine customers seeking interim supply. The turnaround delay is reflected in our updated expense data on slide 17. This delay will result in $33 million higher sequential turnaround expense. Despite this headwind, we still expect to deliver sequentially similar, more alkali-adjusted EBITDA in the second quarter. As we continue to navigate this unusually long trough, Olin's ECU values and volumes have proven remarkably resilient across the past six quarters as we implement our Discipline Value First commercial approach.
Ken: As mentioned earlier, we delayed the start of our planned Freeport, Texas turnarounds to Opportunistically capture spot demand created by planned and unplanned industry outages.
Ken: During the first quarter, we re engaged with several flooring customers seeking interim supply.
Ken: The turnaround delay is reflected in our updated expense data on slide 17.
Ken: Delay will result in $33 million higher sequential turnaround expense.
Despite this headwind, we still expect to deliver sequentially similar for alkali adjusted EBITDA in the second quarter.
Ken: As we continue to navigate this unusually long trawl always easy you values and volumes have proven remarkably resilient across the past six quarters as we implement our disciplined value first commercial approach.
Ken Lane: PBC was another highlight in the quarter, as we delivered our first shipments of Olin PBC during March, marking a key milestone for our PBC business development. In addition to our entry into the PBC market, we're adding value to every ton of EDC we told Kim Won. As we discussed at our December Investor Day, we're exploring potential long-term PBC strategic opportunities including long-term commercial arrangements, available production technologies, and the evaluation of joint venture partners. With respect to current tariffs, we do not expect the direct impact of CAPB to be... Olin's export sales, mainly caustic soda and EDC, are generally sold to low-tariff countries.
Ken: PVC was another highlight in the quarter as we delivered our first shipments of Olin PVC during March marking a key milestone for our PVC business development.
Ken: In addition to our entry into the PVC market, we're adding value to every ton of EDC, we told with tier one.
Ken: As we discussed at our December Investor Day, we're exploring potential long term PVC strategic opportunities, including long term commercial arrangements.
Ken: <unk> production technologies, and the evaluation of joint venture partners.
Ken: With respect to current tariffs, we do not expect the direct impact of C. A T V to be significant.
Ken: Olin's export sales, mainly caustic soda and EDC are generally sold to low tariff countries.
Ken Lane: One potential positive effect may be to tighten U.S. caustic supply as tariffs challenge the economics of Asian imports to the U.S. West Coast and European imports to the U.S. East Coast.
Ken: One potential positive effect may be to tightened U S caustic supply as tariffs challenge the economics of Asian imports to the U S West coast and European imports to the U S East coast.
Ken Lane: Now let's turn to slide six for a brief look at our epoxy results. First quarter epoxy sales improved sequentially, reflecting an increase in both resin prices and volume. However, the margin benefits of improved pricing were more than offset by higher costs.
Ken: Now, let's turn to slide six for a brief look at our policy results.
Ken: First quarter of Hoxie sales improved sequentially, reflecting an increase in both resin prices and volumes.
Ken: However, the margin benefits of improved pricing were more than offset by higher costs.
Ken Lane: Last month, the U.S. Commerce Department issued their final epoxy anti-dumping decision. Olin was encouraged that the anti-dumping duty percentages for selected countries were raised beyond the preliminary determination. However, we remain concerned that the Commerce Department lowered the duty percentages for certain countries, in particular South Korea. The European Union announced their provisional epoxy resin anti-dumping duties during the first quarter and expects to conclude the investigation by issuing definitive measures during the third quarter 2025. Today, South Korea, the largest importer of epoxy resins to the European Union, unfortunately remains exempt. Bulk epoxy resins subject to anti-dumping duties represent less than 25% of our overall epoxy division sales.
Ken: Last month, the U S Commerce Department issued their final epoxy anti dumping decision.
Ken: Oh, it was encouraged that the anti dumping duty percentages for selected countries, where res beyond the preliminary determination. However.
Ken: However, we remain concerned that the commerce department lowers the duty percentages for certain countries in particular South Korea.
Ken: The European Union announced their provisional epoxy resin anti dumping duties during the first quarter and expect to conclude the investigation by issuing definitive measures during the third quarter 2025.
Ken: Today, South Korea, the largest importer of a paci residence to the European Union. Unfortunately remains itself.
Ken: Bulk of policy residence subject to anti dumping duties represent less than 25% of our overall policy division sales.
Ken Lane: Current anti-dumping duties provide minimal upside value. We will continue to advocate for fair trade practices here and in Europe, pursuing every available avenue.
Ken: Current anti dumping duties provide minimal upside value.
Ken: We will continue to advocate for fair trade practices here and in Europe pursuing every available Avenue.
Ken Lane: Looking ahead, building and construction, automotive and consumer electronics demand remain weak in the U.S. and Europe. We are seeing mild seasonal demand improvement, but nothing we would consider as demand recovery. The second quarter epoxy results will include a planned Stade Germany turnaround estimated to present a $10 million sequential headwind. As a result, epoxy earnings are expected to remain negative.
Ken: Looking ahead building and construction automotive and consumer electronics demand remained weak in the U S and Europe.
Ken: We are seeing mild seasonal demand improvement, but nothing we would consider as demand recovery.
Ken: Second quarter Epoxy results will include a planned startup, Germany turnarounds estimated to present, a $10 million sequential headwind.
Ken: As a result of epoxy earnings are expected to remain negative.
Ken Lane: Slide 7 provides an update on our Winchester business. Winchester domestic and international military sales continue to grow as anticipated. Military project spending accelerated through the first quarter and is expected to continue gaining momentum throughout 2025.
Ken: Slide seven provides an update on our Winchester business.
Ken: Winchester domestic and international military sales.
Ken: You need to grow as anticipated.
Ken: Military project spending accelerated through the first quarter and is expected to continue gaining momentum throughout 2025.
Ken Lane: Commercial ammunition demand continues to be weak. We're seeing mid-single-digit pullback across sporting goods, hunting, and gun sales. However, commercial ammunition sales have declined more than the sporting goods category. Ammunition retailers are destocking in parallel with consumers. You may recall that ammunition retailers built very high inventories during the first half of last year in advance of expected propellant shortages and the presidential election. Lower out-the-door retail sales have made de-stocking a lengthier process, which will likely stretch into the second half of 2025. Winchester costs for metals are rising due to tariffs and tight supply. Propellants also continue to present a cost headline.
Ken: Commercial ammunition demand continues to be weak, we're seeing mid single digit pullback across sporting goods hunting and gun sales.
Ken: However, commercial ammunition sales have declined more than the sporting goods category.
Ammunition retailers are destocking in parallel with consumers.
Ken: Recall that ammunition retailers built very high inventories during the first half of last year in advance of expected propellant shortages and the presidential election.
Ken: Lower out the door retail sales have made destocking and linked to your process, which will likely stretch into the second half of 2025.
Ken: Winchester costs for metals are rising due to tariffs and tight supply.
Ken: Propel has also continued to present a cost headwind.
Ken Lane: Although Winchester buys most metals locally, we still realize tariff-related price inflation on the domestic price of steel, aluminum, and copper. At the same time, tariffs may also provide a tailwind for Winchester, as ammunition imports will now carry at least a 10% penalty. And in order to reduce U.S. trade imbalances, country-level tariff negotiations are promoting the increase of defense-related U.S. exports, including small-caliber ammunition.
Ken: Winchester buys most metals locally we still realized tariff related price inflation on the domestic price of steel aluminum and copper.
Ken: At the same time tariffs. They also provide a tailwind for Winchester as ammunition imports will now carry at least a 10% penalty and in order to reduce U S trade imbalances country level tariff negotiations are promoting the increase of defense related U S exports, including small caliber ammunition.
Ken Lane: Now turn to slide 8. This past month, we were pleased to close on the acquisition of Ammo, Inc.'s manufacturing assets. Winchester's timing for the purchase of this state-of-the-art ammunition production facility was ideal.
Ken: Now turning to slide eight.
Ken: This past month, we were pleased to close on the acquisition of ammo Inc's manufacturing asset Winchester.
Ken: Winchester's timing for the purchase of this state of the art ammunition production facility was ideal.
Ken Lane: We were able to acquire a modern plant with a skilled workforce at a highly attractive adjusted purchase price of $56 million. We've begun integrating this new plan to optimize production across our assets in order to begin realizing our target synergies and extending our scale benefits to this new production site.
Ken: We were able to acquire a modern plant with a skilled workforce at a highly attractive adjusted purchase price of $56 million we'd.
Ken: We've begun integrating this new plant to optimize production across our assets in order to begin realizing our target synergies and extending our scale benefits to this new production site.
Ken Lane: As detailed during our December Investor Day, Winchester is an iconic brand and an excellent platform for growth. In addition to being immediately accretive, the shell case expertise we acquired will support a new area of growth for Winchester. The value creation potential of our Winchester platform is significant and this acquisition absolutely exceeds our investment hurdles at less than approximately 1.5 times adjusted EBITDA, including synergies.
Ken: As detailed during our December Investor Day, Winchester is an iconic brand and an excellent platform for growth.
Ken: In addition to being immediately accretive to showcase expertise, we acquired will support a new area of growth for Winchester.
Ken: The value creation potential of our Winchester platform is significant and this acquisition absolutely exceeds our investment hurdles at less than approximately one five times adjusted EBITDA, including synergies.
Todd Slater: Let me now turn the call over to Todd Slater to walk us through some financial highlights. Thanks, Ken. I'll start with slide nine for review, our sequential quarterly adjusted EVA-DA bridge. The adjusted EPA comparison from fourth quarter 2024 to first quarter 2025 is highlighted here by business. Our chloroquine products and vinyls business benefited from our decision to delay the Freeport maintenance turnaround until the second quarter, resulting in higher sales than expected and lower turnaround costs. As we anticipated, our chloroquine results were affected by lower ethylene dichloride, EDC, price. Our epoxy business continued to benefit from modest epoxy resin price improvements and saw lower than normal seasonal volume increase.
Speaker Change: Let me now turn the call over to Todd Slater to walk us through some financial highlights.
Ken: Yeah.
Todd Slater: Thanks Tien <unk>.
Todd Slater: I'll start with slide nine for a review of our sequential quarterly adjusted EBITDA Bridge.
Todd Slater: The adjusted EBITDA comparison from fourth quarter 2024, our first quarter 2025 as highlighted here by business, our Chlor alkali products and vinyls business benefited from our decision to delay the freeport maintenance turnaround until the second quarter.
Todd Slater: <unk> and higher sales than expected and lower turnaround costs.
Todd Slater: As we anticipated our chlor alkali results were affected by lower ethylene dichloride EDC pricing.
Todd Slater: Our our proxy business continued to benefit from modest apocope resident price improvements and saw lower than normal seasonal volume increases.
Todd Slater: But this favorability was more than offset by higher raw material and operating costs. Winchester results were negatively impacted by lower commercial ammunition demand. In addition, tariff actions have raised the domestic cost of commodity metals. further pressuring Winchester commercial markets. These higher costs have proven difficult to pass along in the weak demand environment.
Todd Slater: This favorability was more than offset by higher raw material and operating costs.
Todd Slater: Winchester results were negatively impacted by lower commercial ammunition demand.
Todd Slater: In addition, tariff actions have raised that domestic cost of commodity metals further pressuring Winchester commercial margins. These.
Todd Slater: These higher costs have proven difficult to pass along in the weak demand environment.
Todd Slater: Now let's turn to slide 10 for a look at our cash flow and liquidity. The increasing uncertainty in the macroeconomic environment reinforces the importance of Olin's investment-grade balance sheet and strong cash flow generation. During the first quarter, we further enhanced our financial resiliency as our team executed a well-timed bond issuance and debt refinancing. which provided a leveraged neutral extension to 2033 of our nearest bond maturity. as well as an extension of our senior credit agreement from 2027 to 2030. We now have no material required debt repayments until mid-year 2029. We have the tools, discipline, and flexibility needed to deliver resilient operating cash flows across the cycle.
Todd Slater: Now, let's turn to slide 10 for a look at our cash flow and liquidity.
Todd Slater: Yeah.
Todd Slater: The increasing uncertainty in the macroeconomic environment reinforces the importance of olin's investment grade balance sheet and strong cash flow generation.
Todd Slater: During the first quarter, we further enhanced our financial resiliency as our team executed a well timed bond issuance and debt refinancing, which provided a leverage neutral extension to 2033 of our nearest bond maturities as well as an extension.
Todd Slater: And of our senior credit agreement from 2027 to 2030.
Todd Slater: We now have no material required debt repayments until mid year 2029.
Todd Slater: We have the tools discipline and flexibility needed to deliver a resilient operating cash flows across the cycle.
Todd Slater: As we expected, first quarter 2025 operating cash flow was negatively impacted by our normal seasonal working capital growth. By year end, we expect to liquidate our seasonal build in working capital, and in fact, expect working capital to be a source of cash flow for 2025. excluding the timing effects of cash tax payments. including the payment of approximately $80 million for the deferred foreign tax payments that we previously discussed. To further enhance our 2025 cash flow, we've reduced our capital spending estimate by approximately $25 million to the range of $200 to $220 million. Through additional productivity initiatives, we've increased our year-over-year cost savings expectation to $50 to $70 million, which is more than double our previous outlook.
Todd Slater: As we expected first quarter 2025, operating cash flow was negatively impacted by our normal seasonal working capital growth.
Todd Slater: By year end, we expect to liquidate our seasonal build in working capital and in fact expect working capital to be a source of cash flow for 2025.
Todd Slater: Excluding the timing effects of cash tax payments.
Todd Slater: The payment of approximately $80 million for the deferred foreign tax payments that we previously discussed.
Todd Slater: To further enhance our 2025 cash flow, we've reduced our capital spending estimate by approximately $25 million took a range of $200 million to $220 million.
Todd Slater: Through additional productivity initiatives, we've increased our year over year cost savings expectation.
Todd Slater: $50 million to $70 million, which is more than double our previous outlook.
Todd Slater: Consistent with what we discussed last quarter, we expect our net debt to increase during the early quarters of 2025, due to the normal seasonality of working capital, the ammunition acquisition funding, and Cash Tax Payment. But by year-end 2025, we expect net debt to be flat with year-end 2024.
Todd Slater: Consistent with what we discussed last quarter, we expect our net debt to increase during the early quarters of 2025 due to the normal seasonality of working capital.
Todd Slater: Mission acquisition funding.
Todd Slater: And cash tax payments, but by year end 2025, we expect net debt to be flat with year end 2024.
Todd Slater: We remain committed to the disciplined capital allocation approach we shared during our most recent Investor Day. Our capital allocation priorities are clear. First and foremost, we maintain our investment grade balance. Second, we fund our sustaining capital spending to maintain the safe and reliable operation of our assets. We're committed to maintaining our quarterly dividends. And then fourth, any available free cash flow is returned to our shareholders via highly accretive growth opportunities such as the recent ammunition acquisition or share buyback. Our teams continue to focus on cash generation, maintaining cost discipline and exploring additional cost savings opportunities.
Todd Slater: We remain committed to the disciplined capital allocation approach we shared during our most recent investor day, our capital allocation priorities are clear first and foremost we maintain our investment grade balance sheet.
Todd Slater: Second we fund our sustaining capital spending to maintain the safe and reliable operation of our assets.
Todd Slater: Third we're committed to maintaining our quarterly dividend and then fourth.
Todd Slater: Any available free cash flow is returned to our shareholders via highly accretive growth opportunities such as the recent ammunition acquisition or share buybacks.
Todd Slater: Our teams continue to focus on cash generation, maintaining cost discipline and exploring additional cost savings opportunities.
Todd Slater: Our strong financial foundation enables Olin to continue executing our value-first commercial approach while adhering to our capital allocation priorities and a prudent capital structure with a strong balance sheet and cash flow.
Todd Slater: Our strong financial foundation enables OLED to continue executing our value first commercial approach, while adhering to our capital allocation priorities and a prudent capital structure with a strong balance sheet and cash flow.
Ken Lane: Now I'll hand the call back to you, Kent. Thanks, Todd.
Todd Slater: Now I'll hand, the call back to you Ken.
Ken: Thanks Todd.
Ken Lane: Let's turn to slide 11 and our outlook for the second quarter. Our poor aqua-like products and vitals business continues to perform well. We're holding true to our disciplined, value-first commercial approach, and the proof of our success lies in our ability to preserve value, even through this deep and long economic trough. Caustic soda prices are rising and we're seeing seasonal recovery in demand for bleach and caustic soda. Our epoxy business is slowly improving, but still faces significant challenges. We're making good progress with our self-help efforts as we continue to focus on cost control and growth in our more profitable formulated solution product lines, but the global capacity overhang will continue to be a headwind for the foreseeable future.
Todd Slater: Let's turn to slide 11, and our outlook for the second quarter.
Yeah.
Ken: Our chlor alkali products and vinyls business continues to perform well.
Ken: We're holding true to our disciplined value first commercial approach and the proof of our success lies in our ability to preserve value even through this deep and long economic trough.
Ken: Caustic soda prices are rising we're seeing seasonal recovery in demand for bleached and caustic soda.
Ken: Our our proxy business is slowly improving but still faces significant challenges.
Ken: We're making good progress with our self help efforts as we continue to focus on cost control and growth in our more profitable formulated solution product lines, but the global capacity overhang will continue to be a headwind for the foreseeable future.
Ken Lane: The commercial ammunition market is also challenged at the moment, but this is not structural. Consumers are cautious and have pulled back at the same time that retailers are trimming inventories and tariffs are inflating metal costs. This combination will continue to weigh on Winchester earnings in the second quarter. However, our military and law enforcement business outlook remains robust.
Ken: The commercial ammunition market is also challenged at the moment, but this is not structural.
Ken: Consumers are cautious that have pulled back at the same time, the retailers are trimming inventories and tariffs are enslaving metal costs.
Ken: This combination will continue to weigh on Winchester earnings in the second quarter.
Ken: However, our military law enforcement business outlook remains robust.
Ken Lane: Against the backdrop of heightened macrouncertainty, we expect our second quarter 2025 adjusted EBITDA to be in a broader range of $170 to $210 million, including an approximate $40 million sequential chemicals turnaround expense headway. We expect the overall direct impact of tariffs to be net neutral to Olin earnings. We say this as we generally source and sell where we produce. We can't speculate on potential indirect or secondary tariff impacts, including effects on demand.
Ken: Against the backdrop of heightened macro uncertainty, we expect our second quarter 2025, adjusted EBITDA to be in a broader range of $170 million to $210 million, including an approximate $40 million sequential chemicals turnaround expense headwind.
Ken: We expect the overall direct impact of tariffs to be net neutral to Olin earnings. We say this is we generally source and sell where we produce.
Ken: We can't speculate on potential indirect or secondary tariff impacts including effects on demand.
Ken Lane: Finally, as we've discussed today, we continue to navigate this challenging environment by managing the factors that are within our control and by executing our long-term strategy.
Ken: Finally, as we discussed today, we continue to navigate this challenging environment.
Ken: Managing the factors that are within our control and by executing our long term strategy.
Ken Lane: To that end, I'm delighted to share that yesterday, retired U.S. Army General Edward M.
Ken: To that end I'm delighted to share that yesterday retired U S Army General Edward M. Daily was officially elected to Olin's Board.
Ken Lane: Daley was officially elected to Olin's board. General Daley's last assignment was as the 20th Commanding General of the U.S. Army Materiel Command, where he oversaw 190,000 people across more than 150 countries. General Daley provided logistics and material readiness across the U.S. Department of Defense and the Joint Forces. As part of Olin's board, General Daley will provide invaluable input and guidance related to our company strategy.
Ken: General dailies last assignment was that to the 20th commanding general of the U S Army material command, where he oversaw 190000 people across more than 150 countries.
Ken: General Daily provided logistics and material readiness across the U S Department of defense and the joint forces.
Ken: As part of Olin's Board General Daily will provide invaluable input and guidance related to our company strategy.
Operator: Operator, we're now ready to take questions. We will now begin the question and answer session. To ask a question, you may press star then one on a touch-tone phone. If you are using a speaker phone, please pick up your handset before pressing the button. To withdraw your questions, please press star then 2. We ask that you respond to one question.
Speaker Change: Operator, we're now ready to take questions.
Speaker Change: We will now begin the question and answer session.
Speaker Change: To ask a question you May press Star then one on a touchtone phone.
Speaker Change: If youre using a speakerphone please pick up your handset before pressing.
Speaker Change: So with kind of your question. Please press Star then two.
Speaker Change: We asked me yourself to one question.
Operator: At this time, we will pause momentarily to assemble our office.
Speaker Change: At this time, we will pause momentarily to assemble our roster.
Speaker Change: Yeah.
Patrick Cunningham: The first question today comes from Patrick Cunningham with Citi. Please go ahead. Hi, good morning, Ken and Todd.
Patrick Cunningham: The first question today comes from Patrick Cunningham with Citi. Please go ahead.
Patrick Cunningham: Hi, good morning, Ken inside.
Ken Lane: Um, can you can you provide an update to sort of volume and price outlook for chloral vinyl sequentially? You know, it seems like you got a clear signal on further price support in the first quarter. You know, how would you characterize the pricing across the major derivatives? You know, particularly EDC has been the weakest one.
Patrick Cunningham: Can you can you provide an update in sort of volume and price outlook for chloro vinyls sequentially now it seems like you've got a clear signal on further price support in the first quarter, how would you characterize the pricing across the major derivatives, particularly E. D. C has been the weakest one.
Ken Lane: Good morning, Patrick.
Patrick Cunningham: Good morning, Patrick Thanks for joining us.
Ken Lane: Thanks for joining us. Yeah, so we are continuing to see weakness, particularly around the EDC pricing, but we don't see it getting significantly worse than where it is now. You know, price levels have already reached a point where even Asian producers are under water, and that's going to keep afloat under EDC pricing.
Speaker Change: Yeah. So we are continuing to see weakness, particularly around the EDC pricing, but.
Speaker Change: But we don't see it getting significantly worse than where it is now you know price levels have already reached.
Speaker Change: The point, where even Asian producers are under water and that's going to that's going to keep a floor.
Speaker Change: <unk> pricing.
Ken Lane: So like we said in the prepared comments, we see positive pricing trends going into Q2, particularly around cost. And so, with the seasonal improvement that we're expecting there, combined with improvements that we see seasonally with bleach, we feel really positive going into the second quarter around price developments for chloralkali.
Speaker Change: So like we said in the prepared comments, we we we see positive pricing trends going into Q2, particularly around cost.
Speaker Change: And so with the seasonal improvement that we're expecting there.
Combined with improvements that we see seasonally with bleach.
Speaker Change: We feel really positive going into the second quarter around price developments for Chlor alkali.
Aleksey Yefremov: The next question comes from Aleksey Yefremov with KeyBank. Please go ahead. Thanks, good morning everyone. You mentioned adding value for every ton of told PVC, so can we assume that your current...
Speaker Change: The next question comes from Aleksey, you Saddler with Keybanc. Please go ahead.
Speaker Change: Thanks, Good morning, everyone, you mentioned, adding value whenever he taught us told P. C. So.
Speaker Change:
Speaker Change: Karla.
Speaker Change: Okay.
Aleksey Yefremov: Thank you very much for being here and how are you planning to ramp up your Chem 1 tolling volumes for the remainder of this year?
Speaker Change: It's cash positive.
Speaker Change: And how are you planning to ramp up your your cap one tolling volumes for the remainder of this year.
Ken Lane: Good morning, Aleksey. Thanks for the question. Yes, we're going to be ramping up through the end of the year. You know, there's obviously uncertainty just around the economic environment, but we've had very positive reception in the market with our sales team for PBC volumes. It is cash positive to us for the PBC sales that we're tolling through Chem 1. And I think that just shows the strength of the advantage that we've got in our cost structure that we're going to continue to leverage longer term.
Good morning, Alexia. Thanks for the question, yes, we're going to be ramping up through the end of the year. You know, there's obviously uncertainty just around the economic environment, but we've had very positive reception in the market with our with our sales team for PUC volumes at <unk>.
Speaker Change: Is it is cash positive to us where the PBC sales that were tolling through Q1.
Speaker Change: And I think that just shows the strength of of the.
Speaker Change: The advantage that we've got in our in our cost structure that we're going to continue to leverage longer term, we see this being a very a very positive growth opportunity for us.
Ken Lane: We see this being a very positive growth opportunity for us, and I'm extremely proud of the team and what they've been able to do in a very short amount of time. You know, we've assembled a small team. They've managed to get into the market and realize some sales and start building a portfolio with customers. And it's great to see. So we're really excited about things that are happening today, and we're setting ourselves up for a really positive future.
Speaker Change: I'm extremely proud of the team and what they've been able to do in a very short amount of time.
Speaker Change: We've assembled a small team.
Speaker Change: They've managed to.
Speaker Change: Get into the markets and realize some sales and start building a portfolio with customers in.
Speaker Change: It's great to see so we're really excited about things that are happening today and we're.
Speaker Change: We're setting ourselves up for a really positive future here.
Speaker Change: Okay.
Hassan Ahmed: The next question comes from Hassan Ahmed with Alembic Global. Please go ahead. Morning, Ken and Todd. You know, question, it seems in Q1, you know, you guys talked about it in your prepared remarks that, you know, you took advantage of some industry outages. So just trying to get a sense of, you know, historically, you guys have talked about your operating rates being in the 60s on the Cap V side of things, the industry running at maybe in the 80s. So just trying to get a sense of where your operating rates were in Q1, particularly as you took advantage of those industry outages.
Hassan Ahmed: The next question comes from Hassan Ahmed with Alembic Global. Please go ahead.
Hassan Ahmed: Good morning, Ken and taught them you know question. It seems in Q1, you know you guys talked about it in your prepared remarks that.
Hassan Ahmed: No you took advantage of some industry outages. So just trying to get a sense of you know historically you guys had talked about your operating rates being in the sixties on the coffee side of things the industry running at maybe in the Eighty's. So just trying to get a sense of where your operating rates were in.
Hassan Ahmed: Q1, particularly as you took advantage of those industry outages.
Ken Lane: Good morning, Hassan. Yeah, I mean, listen, what what you said is correct. You know, we did take advantage of some of the increased spot demand that we saw in the first quarter and deferred that turnaround during Q1 which as a result did elevate our operating race during the quarter versus what we thought you may remember back in Earnings call for fourth quarter, we had indicated volumes would be softer in Q1. That turned out not to be the case because we were able to run a little bit harder and deliver product that our customers needed. Frankly, some customers that we've not supplied in a while, which was nice to see.
Good morning Hassan.
Hassan Ahmed: Yeah, I mean listen what what you said is correct. We did take advantage of some of the.
Hassan Ahmed: Increased spot demand that we saw in the first quarter.
Hassan Ahmed: And deferred that turnarounds during Q1, which as a result did elevate our operating rates during the quarter versus what we thought you may remember back in the.
Hassan Ahmed: Earnings call for fourth quarter, we had we had indicated volumes would be softer in Q1 that turned out not to be the case, because we were able to run a little bit harder.
Hassan Ahmed: And and deliver.
Hassan Ahmed: That that our customers needed frankly, some customers that we've not supply than a while which was nice to see.
Ken Lane: But again, that was spot demand. So we're going to be opportunistic with that and continue to be disciplined.
Hassan Ahmed: But again that was spot demand. So we're gonna be opportunistic with that and continue to be disciplined but what we are seeing as a result as in Q2, our operating rates are back down as you would expect because of the turnaround is moved into Q2. So.
Ken Lane: But what we are seeing as a result is in Q2, our operating rates are back down, as you would expect, because the turnaround is moved into Q2. So it just reflects exactly what we've been saying, is continuing to be disciplined and operating at rates that reflect the values in the market that we want. And we continue to see strength on the costing side of the ECU. And we're going to balance that with the demand around chlorine at the value that we like.
Hassan Ahmed: It just reflects exactly what we've been saying is continuing to be disciplined.
Hassan Ahmed: And operating at rates that reflect the values in the market that we want and.
Hassan Ahmed: We continue to see strength on the caustic side of the Acu and we're going to balance that with with the demand around flooring at the value that we like.
David Begleiter: The next question comes from David Begleiter with Deutsche Bank. Please go ahead. Thank you.
Speaker Change: The next question comes from David Begleiter with Deutsche Bank. Please go ahead.
Speaker Change: Thank you good morning, Ken on the same topic do you expect to retain any of the spot business you realize one in Q1 going forward.
Ken Lane: Good morning. Ken, on the same topic, do you expect to retain any of the spot business? You realize 1&Q1 going forward.
Ken Lane: Thanks for the question, Morty. So listen, I think just by definition, you know, it's spot volume. So it is opportunistic. And, you know, I what I expect is we're going to continue to see some volatility, you know, as, as, you know, others have turnarounds, either planned or unplanned, you know, you're going to see some opportunities for us to sell a little bit more volume here and there. But I, I would not say that that is going to be consistent, because we've not contracted that volume. And that's my intention.
Speaker Change: Thanks for the question more to date, so listen I think just by definition.
Speaker Change: <unk> volumes, so it is opportunistic and.
Speaker Change: What I expect is we're going to continue to see some volatility.
Speaker Change: As.
Speaker Change: You know others have turnarounds, either planned or unplanned youre going to see some opportunities for us to sell a little bit more volume here and there, but I would not say that that is going to be consistent because we've not contracted that volume and that is by intention.
Josh Spector: The next question comes from Josh Spector with UBS. Please go ahead. Hi, good morning. I wanted to ask just on Winchester kind of two things. First, can you kind of give us a bridge year over year between what's the EBITDA decline from lost volumes versus higher costs? And then with your guidance for the next quarter, there's some moving pieces. Do you think EBITDA is higher or lower sequentially?
Josh Spector: The next question comes from Josh Spector with UBS.
Speaker Change: Please go ahead.
Josh Spector: Hi, Good morning, I wanted to ask just on Winchester kind of two things. The first can you kind of give us a bridge year over year between what's the EBITDA decline from lost volumes versus higher costs, and then with your guidance for the next quarter. There's some moving pieces do you think EBITDA is higher or lower.
Speaker Change: Sure.
Ken Lane: Yeah, good morning. So, you know, like we said in the prepared remarks, we expect to see a little bit of an improvement in Winchester for the second quarter. Some of that is, frankly, related to the white flyer business that we acquired at the end of 2023. This is typically a time when we see some seasonal improvement for white flyer. But we will see some improvement as well in the commercial demand, although more modest than what you would have seen last year. And military is going to continue to improve in the second quarter. So, you know, the biggest driver for the decline year over year is going to be the commercial demand.
Speaker Change: Yeah. Good morning, So like we said in the prepared remarks, we expect to see a little bit of an improvement in Winchester for the second quarter. Some of that is frankly related to.
Speaker Change: To the White Flyer business that we acquired at the end of 2023. This is typically a time when we see some seasonal improvement for Wi Flyer, but.
Speaker Change: But we will see some improvement as well.
Speaker Change: Commercial demand, although more modest than what you would've seen last year.
Speaker Change: The military is going to continue to improve in the second quarter.
Speaker Change: So the biggest driver for the decline year over year is going to be the commercial demand.
Ken Lane: But the headwinds around metals and propellant costs is a meaningful part of the decline. At a high level, you should think of the year-over-year, first quarter decline, you know, roughly two-thirds is volume and price, and one-third is cost, higher commodity metal costs and propellant .
Speaker Change: But the headwinds around metals.
Speaker Change: And propel it costs as a as a meaningful part of the decline.
Speaker Change: At a high level.
Speaker Change: You should think of the year over year first quarter decline.
Speaker Change: <unk> roughly.
Speaker Change: Roughly.
Speaker Change: Two thirds as volume and price and one third is cost higher commodity metal costs and propel us.
Speaker Change: Okay.
Steve Byrne: The next question comes from Steve Byrne with Banks America. Please go ahead. Ken, I'd like to follow up on two things you said.
Speaker Change: The next question comes from Steve Byrne with Bank of America. Please go ahead.
Speaker Change: Okay.
Speaker Change: Follow up on two things you said.
Steve Byrne: You referred to the capacity overhang in Epoxy, and you have this turnaround in STATA coming up, but is that a business that just warrants more shuttered capacity for you to drive a recovery? And the other comment you made was you referred to Winchester as an iconic brand. Could you take an approach to pushing price by calling it a surcharge or something to lead a higher pricing in ammunition at the commercial level?
Speaker Change: You referred to the capacity overhang in our proxy.
Speaker Change: This turnaround in startup coming out but.
Is that a business that just warrants more shuttered capacity for you to drive a recovery.
Speaker Change: The other the other comment you made was you referred to Winchester is an iconic brand.
Speaker Change: Could you taken approach to pushing price by calling it a surcharge or something.
Speaker Change: To lead.
Speaker Change: You know a higher pricing in Winchester and ammunition at the commercial level.
Ken Lane: Good morning, Steve. First, I'll take your question on epoxy. You know, epoxy, there is a significant amount of overhang, particularly in Asia, that has been built over the last several years, and frankly, that's continuing even this year. We have already reduced a significant amount of capacity, and the capacity that we have remaining, we think is the most competitive, at least in the Western world. So there's not really room for us to take more capacity out. And then recall what we said at Investor Day, is the reason that we've got Epoxy in the portfolio is it generates very good value based on the integration.
Speaker Change: Good morning, Steve.
Speaker Change: First I'll take your question on epoxy you know obviously there is a significant amount of overhang, particularly in Asia that has been built.
Speaker Change: Over the last several years and frankly, that's continuing even this year.
Speaker Change: We have already reduced a significant amount of capacity and the capacity that we have remaining we think is.
Speaker Change: The most competitive at least in the western World. So theres not really room for us to take more capacity out and.
Speaker Change: Then recall, what we said at Investor Day is the reason that we've got epoxy in the portfolio as it generates very good value based on the integration.
Ken Lane: The other thing that I want to remind everybody about is when you think about Europe, we do have some tailwinds that are going to be coming. We'll start to see the impact in the first quarter from this, the new cost structure that we're going to have in place in Europe with the new agreements that are going to begin at the end of the year, but we won't see the impact of that until the beginning of Q1. You know, so between the integration value and some of the changes that we've got in the commercial agreements in Europe, we will start to see some improvement in the epoxy business.
Speaker Change: The other thing that I want to remind everybody about is when you think about Europe.
Speaker Change: We do have some tailwind that are going to be coming.
Speaker Change: We will start to see the impact in the first quarter from this.
Speaker Change: The new cost structure that we're going to have in place in Europe with the new agreements that are going to begin at the end of the year, but we won't see the impact of that until the beginning of Q1.
Speaker Change: So between the integration value in some of the changes that we've got in the commercial agreements in Europe.
Speaker Change: We will start to see some improvement in the epoxy business.
Ken Lane: Most likely it's going to be in the first quarter, but it should be a meaningful improvement.
Speaker Change: Most likely it's going to be in the first quarter, but it should be a meaningful improvement.
Ken Lane: Now, going back to Winchester, frankly, like we had said, the biggest issue there is the fact that there's so much inventory that remains and continues to come down, but not as fast as we had hoped, just because sales out the door at the retailers is slower. So frankly, doing any more on pricing, I think, is going to be very hard to do in this environment. We just haven't reached an inflection point yet that would allow that sort of thing to happen. It will come. We're still very bullish on Winchester in the midterm, but we just have to work through this inventory build that really was unprecedented.
Speaker Change: Now going back to Winchester.
Speaker Change: Frankly like like we had said that the biggest issue. There is the fact that there's so much inventory that remains and continues to come down but not not as fast as we had hoped just because sales out the door at the retailers is slower.
Speaker Change: So frankly.
Speaker Change: Doing any more on pricing.
Speaker Change: I think it's going to be very hard to do in this environment. We just havent reached an inflection point yet.
Speaker Change: Would allow that that sort of thing to happen.
Speaker Change: We'll come we're still very bullish on the Winchester and the mid term, but we just have to work through this inventory build.
Speaker Change: That really was unprecedented.
Ken Lane: Combined with the higher costs that we're seeing, it's sort of the perfect storm. And it will pass, and Winchester is going to continue to be a great growth platform for us.
Speaker Change: Combined with a higher cost that we're seeing is it's sort of the perfect storm.
Speaker Change: It will pass in Winchester is going to continue to be a great growth platform for us.
Speaker Change: Yes.
Arun Viswanathan: The next question comes from Arun Viswanathan with RBC Capital Markets. Please go ahead. Great, thanks for taking my question. I hope you guys are well. You know, obviously a very volatile, challenging environment out there. We've seen some of some downstream weakness. You know, I'm just kind of curious. I know caustic has held up a little bit better.
Speaker Change: The next question comes from this fund.
Speaker Change: Kim with RBC capital markets. Please go ahead.
Speaker Change: Okay.
Hey, Thanks for taking my question Hope you guys are well.
You know, obviously, a very volatile and challenging environment out there we've seen.
Speaker Change: Some of our some downstream a weakness you know eh I'm just kind of just kind of curious I know classic has held up a little bit better so.
Ken Lane: So as you look out into Q2 and maybe even the summer months with the water treatment season coming up, do you anticipate some caustic softness to emerge? Because operating rates will likely go up, seasonally speaking. And, you know, again, maybe there's some downstream demand that's also going to back up. So maybe you can just kind of reiterate your views on caustic and maybe even PVC as you look out. I know you don't participate directly in PVC, but maybe in EDC.
Speaker Change: As you look out into Q2, and maybe even the summer months with the water treatment season coming up.
Speaker Change: Do you anticipate them some some caustic softness to emerge because operating rates will likely go.
Speaker Change: Seasonally speaking and you know again, maybe there's some downs.
Speaker Change: Downstream demand that's also going to back up so maybe you can just kind of reiterate your your your views on.
Speaker Change: Caustic and and maybe even P. B C. As you as you look out I know you don't participate directly in P. B C, but maybe E D C. Max.
Ken Lane: Yeah, good morning Arun, thank you. Listen, we don't, you know, when you think about the amount of chlorine that you're going to produce for the bleach market, it's relatively small to the caustic market, so that's not going to put any pressure on caustic. Caustic market is so much larger and we are seeing some seasonal improvement. Continue to see strength, frankly, in pulp and paper, alumina as well. So, you know, those markets are large, much larger than the bleach. So, when you think about the balance of chlorine that you're producing for a bleach position or water treatment versus the size of the caustic market, it doesn't move the needle.
Speaker Change: Yeah. Good morning, Arun Thank you.
Speaker Change: Listen we built.
Speaker Change: Do you think about the amount of flooring that you're going to produce for the bleach market is relatively small to the caustic market. So that's not going to put any pressure on caustic also the market is so much larger than we are seeing some seasonal improvement continue to see strength frankly in pulp and paper.
Speaker Change: Alumina as well so you know those markets are large much larger than the bleach. So do you think about the balance of clothing that youre producing for bleach position of water treatment versus the size of the caustic market. It doesn't move the needle. It just is not going to I'm going to put any kind of pressure there.
Ken Lane: It just, it's not going to put any kind of pressure there. Well, like we had said in the prepared remarks, we continue to see strength and caustic. We expect that to continue into the second quarter. We're very close with our customers. As you can imagine, during a time like this, you've got to be talking to them even more. And frankly, we're not hearing a lot of negativity. We're hearing uncertainty, but we're not hearing customers really being negative about their outlook. If anything, what we're hearing is, hey, we expect things to be stable, and we'll see if things improve, but we're not hearing much in the way of negativity and decline.
Speaker Change: But like we have said in the prepared remarks, we continue to see strength in caustic.
Speaker Change: We expect that to continue into the second quarter.
Speaker Change: We're very close with our customers as you can imagine during a time like this you've got to be talking to them even more.
Speaker Change: And frankly, we're not hearing a lot of negativity, we're hearing uncertainty, but we're not hearing customers really being negative about their outlook is.
Speaker Change: If anything what we're hearing is hey, we expect things to be stable and we'll see if things improve but we're not hearing much in a way of.
Speaker Change: Negativity in decline so.
Ken Lane: So, you know, I take some positive... away from that because, again, as much uncertainty as there is out there, it could sound more negative than what we're hearing, so I'm cautiously optimistic.
Speaker Change: It takes some positive.
Speaker Change: Away from that because again.
Speaker Change: As much uncertainty as there is out there it could it could sound more negative than what we're hearing.
Speaker Change: Cautiously optimistic.
Kevin Mccarthy: The next question comes from Kevin McCarthy with Vertical Research Partners. Please go ahead. Thank you, and good morning. Ken, I'd like to come back to Winchester, and I appreciate your thoughts on. what you would consider to be the structural or normalized profitability of that business. Part of the reason I ask is if we look back at history pre-pandemic, maybe EBITDA trended on either side of a hundred million dollars. And then what happened was it quadrupled for a couple of years and then we've regressed back down.
Speaker Change: The next question comes from Kevin Mccarthy with vertical research partners.
Speaker Change: Please go ahead.
Speaker Change: Yes, Thank you and good morning.
Speaker Change: Ken I'd like to come back to Winchester and I appreciate your thoughts on.
Speaker Change: What you would consider to be the structural or normalized profitability of that business part of the reason I ask is if we look back at history pre pandemic.
Speaker Change: Maybe EBITDA trended on either side of $100 million and then what happened was it quadrupled for a couple of years.
Speaker Change: And then we've regressed back down so when you think about where we are in the first quarter.
Ken Lane: So when you think about where we are in the first quarter, where do you think we are relative to normalize for Winchester, given the various headwinds that you articulated and how might it change, if at all, through the ammo deal? Good morning, Kevin. That's a great question. And listen, yes, we are we're definitely it's not a cyclical business, but we're in we're in a trough for Winchester today, for sure. You know, one of the things, if you just look at the past few years, that has really significantly improved the earnings capacity for Winchester, it's a combination of we've got the new Lake City business that's going to continue to deliver, and we've announced on the earnings call that we have a three-year extension, so we're going to now be operating that facility through 2030.
Speaker Change: Where do you think we are relative to normalized for Winchester, given the various headwinds that you articulated.
Speaker Change: And how might it change.
Speaker Change: If it all through the ammo deal.
Speaker Change: Good morning, Kevin.
That's a great question and listen.
Speaker Change: Yes, we are we are definitely.
Speaker Change: A cyclical business, but where we're at we're in a trough for Winchester today for sure.
Speaker Change: You know one of the things if you just look at that.
Speaker Change: Past few years that that is really significantly.
Speaker Change: Improve the earnings capacity for Winchester.
Speaker Change: The combination of.
Speaker Change: We've got the new Lake City business, that's going to continue to deliver and.
Speaker Change: We've announced on the earnings call that we have a three year extension. So we're going to now be operating that facility through 2030.
Ken Lane: We've made the acquisition of the white flyer business, which was highly accretive, that was a very good acquisition for us in terms return on that. We do have the Ammo, Inc. acquisition that we've just made. And we've talked about the $40 million of synergies that we're going to realize over the next few years. And that will be accretive to us this year as well. So, you know, when you think about the last 12 months and you look at the earnings level there, there's a lot of growth that's still to come. So we remain very bullish on the future of Winchester's earnings.
Speaker Change: We made the acquisition of the Wi Flyer business, which was highly accretive that was a that was a very good acquisition for us in terms of.
Speaker Change: Return on that.
Speaker Change: We do have the ammo Inc acquisition that we've just made and we've talked about the $40 million of synergies that we're going to realize over the next few years and that will be accretive to us this year as well so.
Speaker Change: When you when you think about.
Speaker Change: The last 12 months and you look at the earnings level there.
Speaker Change: A lot of growth that's still to come so we remain very bullish on the future of Winchester's earnings.
Ken Lane: And, you know, last year, the impact from inflation and the squeeze on the consumer combined with the higher costs and the higher inventory at our retail customers has got to flow through the system.
Speaker Change: And.
Speaker Change: You know last year, the impact from inflation and the squeeze on the consumer combined with a higher cost.
Speaker Change: And then the higher inventory at our retail customers.
Speaker Change: Got to flow through the system.
Ken Lane: And once we get through this time and the consumer is able to afford more and they start consuming more, we're very optimistic that we're going to see a strengthening in the Winchester business in the next 12 to 18 months.
Speaker Change: And once we get through this time and the consumer is able to to afford more and they start consuming more.
Speaker Change: We're very optimistic that we're going to see a strengthening in the Winchester.
Speaker Change: Business in the next.
Speaker Change: 12 to 18 months.
Frank Mitsch: The next question comes from Frank Mitsch with Cranium Research. Please go ahead. Thank you. Good morning.
Speaker Change: The next question comes from Frank Mitsch with plenty of them.
Speaker Change: Research. Please go ahead.
Speaker Change: I think there's good morning, Ken I wanted to follow up on a on a park C. It seems like unfortunately, the south Korean lobbyists are very effective at their job. So we're not going to get.
Ken Lane: Ken, I want to follow up on Epoxy. It seems like, unfortunately, the South Korean lobbyists are very effective at their job, so we're not going to get the sort of benefits on anti-dumping. And you mentioned earlier that you have new agreements in place in Europe, but that should start kicking in in the first quarter of 2026. So are we looking at a lost year here in epoxy? I mean, what needs to happen in order to get epoxy back into the black in 2025?
Speaker Change: What sort of benefits on anti dumping.
Speaker Change: And you mentioned earlier that are you have new agreements in place in Europe, but that should start kicking in in the first quarter of 'twenty six.
Speaker Change: So or are we looking at a last year here in our proxy I mean, what needs to happen in order to get a proxy back into the black.
Speaker Change: In 2025.
Ken Lane: Good morning, Frank. I would not call it a lost year, but I do think that you're going to see Epoxy continue to struggle in 2025. You know, we've got some tailwinds related to some of the anti-dumping duties on some of the countries that we've seen, we have seen some positive impact. You know, pricing has improved. We've seen some improvement in volume where we've had customers that were not buying from us that have come back to us. So we've seen those improvements already flow through in the P&L. We did have some cost headwinds in the first quarter related to some unplanned outages and, you know, just some other things that were not related to the market.
Speaker Change: Good morning, Frank.
Speaker Change: I would not call it a last year, but I do think that you're going to see if oxy continue to struggle in 2025.
Speaker Change:
Speaker Change: We've got some tailwind related to some of the anti dumping duties on some of the countries that we've seen we have seen some positive impact pricing has improved.
Speaker Change: We've seen some improvement in volume, where we've had customers that were not buying from us that have come back to us.
Speaker Change: So we've seen those improvements already flow through in the P&L. We did have some cost headwinds in the first quarter related to some unplanned outages in.
Speaker Change: Just some other things that were not related to to the market.
Ken Lane: But I do think that this year is going to continue to be a struggle for the Epoxy business. However, I think, you know, by the time we get to the end of the year, to the beginning of next year, we will start to see a positive result coming out of Epoxy. But don't forget, you know, the integration value there is still in the, you know, mid-to-high, double-digit millions that it creates for us, being integrated with our core Alkali assets. So, it still is very positive for us to have that in the portfolio, and we're going to continue to manage our product portfolio more towards higher-value, formulated solutions, and we're already seeing growth in that business for us this year as well.
Speaker Change: But I do think that this year is going to continue to be a struggle for the epoxy business.
Speaker Change: However, I think you know about.
Speaker Change: The time, we get to the end of the year to the beginning of next year, we will start to see a positive.
Speaker Change: A positive result, coming out of the toxic.
Speaker Change: Don't forget.
Speaker Change: The integration value there is.
Speaker Change: Still in the mid to mid to high double digit millions that it creates for us being integrated with with our Chlor alkali assets. So.
Speaker Change: It still is very positive for us to have that as a portfolio.
Speaker Change: And we're going to continue to manage our product portfolio more towards higher value formulated solutions.
Speaker Change: And we're already seeing growth in that business for us this year as well so.
Ken Lane: So, a lot of good things that we're doing that are within our control, but it is a challenging environment for sure.
Speaker Change: A lot of good things that we're doing this that are within our control, but it is a challenging environment for sure.
Peter Osterland: The next question comes from Pete Osterland with Truist. Please go ahead. Hey, good morning. I wanted to ask one on the increased cost cutting target for the year. Just in the context of the 250 of cost savings you're targeting for 2028. Do you view the increase you just announced for 2025 as a pull forward that's included in that target? Or are these incremental? And in which segment or segments are the extra savings this year concentrated?
Speaker Change: The next question comes from Keith Bachman with sure. Please go ahead.
Keith Bachman: Hey, good morning.
Keith Bachman: I wanted to ask one on the increased cost cutting target for the year just in the context of the $2 50 of cost savings you're targeting for 2028, how do you view. The increase you just announced for 2025 as a pull forward. That's included in that target or are these incremental and in which segment or segments or the extra savings.
Keith Bachman: This year concentrated.
Ken Lane: Morning, Peter. You know, some of that is we are we are working to accelerate some of our structural costs for sure, some of our structural cost savings. But we're also working very hard. We've got robust processes in place. to find productivity opportunities as well during the year. And so all of those things are, like I had said in the prepared comments, these are things that we can control. And the team is very focused across all of our sites, across all of our functions, at finding ways to reduce costs and be more efficient. So it's a combination of accelerating some of our structural cost savings that we've talked about, as well as increasing the productivity savings that we can realize in 2025.
Peter: Good morning, Peter.
Peter: You know some of that is we are we are working to accelerate some of our structural costs for sure. Some of our structural cost savings, but we're also working very hard we've got robust processes in place.
Peter: To find productivity opportunities as well during the year.
Peter: And so all of those things are like I had said in the prepared comments. These are things that we can control.
Peter: And you know the team is very focused across all of our sites across all of our functions is finding ways to reduce costs and be more efficient. So it's a combination of accelerating some of our structural cost savings that we've talked about as well as increasing the productivity.
Peter: <unk> savings that we can realize in 2025.
Vincent Andrews: The next question comes from Vincent Andrews with Morgan Stanley. Please go ahead. Thank you. It says you've lowered your annual capital spending by $25 million. Is that just for 2025, or is that a change you've made that's a perpetual benefit?
Vincent Andrews: The next question comes from Vincent Andrews with Morgan Stanley. Please go ahead.
Vincent Andrews: Thank you I asked you you've lowered it since you've lowered your annual capital spending by $25 million is that just for 2025 or is that a change you've made that.
Vincent Andrews: Perpetual benefit.
Ken Lane: And I guess within that question, I just would also like to ask on the PVC strategy, what if any capital light opportunities do you see there? Good morning, Vincent. Thanks for the question. Yeah, so the reduction that we're announcing for our capital spend this year doesn't change what we talked about at the investor day, which is, you can think about an average level of spend for us between now and 2028 of around 250 million. You know, that's that's still going to be the case. So what we're doing is we're trying to optimize spend on assessing and investigating some of those growth opportunities that we talked about at the Investor Day.
Vincent Andrews: And I guess within that question I, just would also like to ask on the P V C.
Vincent Andrews: Strategy, what what if any capital light opportunities do you see there.
Vincent Andrews: Good morning, Vincent Thanks for the question Yeah. So the reduction that we are announcing.
Vincent Andrews: Announcing for capital spend this year doesn't change what we talked about at the Investor Day, which is you can think about an average level of spend for us between now and 2028 of around $250 million.
Vincent Andrews: You know, that's that's still going to be the case.
Vincent Andrews: So what we're doing is we're trying to optimize.
Vincent Andrews: Bend on assessing and investigating some of those growth opportunities that we talked about at the Investor day, we're going to just be a little bit more prudent with our spend there where we're continuing to make progress.
Ken Lane: We're going to just be a little bit more prudent with the spend there. We're continuing to make progress on investigating, looking at some of those growth options that we talked about around our water treatment, the bleach space, the PVC space as well. We want to keep looking at those things. We don't want to take our eye off of the future. So we're just trying to tighten our belt a little bit here this year. We're going to spend what we need to spend to be able to operate safely and reliably. Related to PVC specifically, we're going to look at all options.
Vincent Andrews: On investigating looking at some of those growth options that we've talked about our route.
Vincent Andrews: Around our water treatment is the belief space.
Vincent Andrews: The PVC space as well.
Vincent Andrews: We want to keep looking at those things, we don't want to take our eye off of the future.
Vincent Andrews: So we're just trying to tighten our belt a little bit here. This year, we're going to spend what we need to spend to be able to operate safely.
Vincent Andrews: Safely and reliably.
Vincent Andrews:
Vincent Andrews: Related to PVC specifically.
Vincent Andrews: We're going to look at all options, we will continue to explore potential commercial agreements.
Ken Lane: We will continue to explore potential commercial agreements. similar to what we have today to continue to have exposure to the PBC market.
Vincent Andrews: Similar to what we have today to continue to have exposure to the D C market.
Ken Lane: But what you see us doing with our business development activities through our tolling arrangements is we're building the capability to be able to do something directly in PBC, either through a joint venture, you know, with a new PBC asset in the next, say, five and a half to six years, or something similar to that, you know, so there's more that we've got to do to study that. We're already talking with potential partners. We're talking with also potential technology providers. So those are the things that we've got to do to be ready, and, you know, I'm really happy with the progress that we're making.
Vincent Andrews: But what you see is doing with our business development activities.
Vincent Andrews: Through our tolling arrangements.
Vincent Andrews: As we're building the capability to be able to do something directly in PVC either through a joint venture.
Vincent Andrews: With a new PVC assets in the next say five five to six years.
Vincent Andrews: Or something similar to that.
Vincent Andrews: You know so there's more that we've got to do the study that.
Vincent Andrews: We're already talking with potential partners.
Vincent Andrews: Talking with also a potential technology providers.
Vincent Andrews: So those are the things that we've got to do to be ready and.
Vincent Andrews: I'm really happy with the progress that we're making.
Vincent Andrews: Yeah.
John Roberts: The next question comes from John Roberts with Nazuho. Please go ahead. Thank you. Is the difference on the purchase price for ammo related to an earn out or what is it that lowered the price?
Speaker Change: The next question comes from John Roberts with Mizuho. Please go ahead.
Speaker Change: Thank you is the difference on the purchase price for ammo related to an earn out or what is it that lowered the price there.
Speaker Change: Yeah.
Ken Lane: Good morning. Good morning, John. No, it's not related to an earn out, frankly, you know, the team did a very good job working through some things as we approach closing on that to find areas of value for Olin. It's also lower working capital when we when we close the deal, but You know, again, we did a tremendous job finding value in that deal, and we're going to be able to realize a tremendous return on that investment. And candidly, the lower working capital is working capital we didn't want anyway.
Speaker Change: Good morning, Good morning, John No, it's not related to an earn out frankly the team did a very good job.
Speaker Change: Working through some things are as we approach closing all that.
Speaker Change: To find areas of value for Olin.
Speaker Change: It's also lower working capital when we when we close the deal but.
Speaker Change: You know again, we did a tremendous job finding value in that deal and we're gonna be able to realize a tremendous return on that investment.
Speaker Change: In Kansas related to lower working capital as working capital we didn't want anyway.
Matthew Blair: The next question comes from Matthew Blair with TPH.
Speaker Change: The next question comes from Matthew Blair with cheap.
Ken Lane: Please go ahead. Thank you, and good morning, Ken and Todd. If we could circle back to caustics, so you mentioned some positive trends in pulp and alumina. Your guidance includes higher caustic prices for the first quarter. I think U.S. spot caustic has been moving up as well. I would say the one red flag is the recent drops in Southeast Asia caustic prices. I think they've fallen by about 35 a ton over the past three weeks or so. What's driving that delta between the U.S. and Asia market, and do the falling values in Asia represent a concern?
Please go ahead.
Speaker Change: Alright, Thank you and good morning, Ken and Todd.
Speaker Change: We could circle back to caustic. So you mentioned some positive trends in pulp and alumina. Your guidance includes higher caustic prices for the first quarter. I think you are spot caustic has been moving up as well I would say the one red flag as the recent recent drops in South East Asia caustic prices I think they've fallen.
Speaker Change: You got 35, a ton over the past three weeks or so what what's driving that delta between the U S and Asia market.
Speaker Change: With the falling values and Asia represent a concern.
Ken Lane: Good morning, Matthew. Listen, you know, we're watching that very closely as well. I don't see that as a concern for us. You know, when we look even here domestically, we're already seeing those price increases firm. We've mentioned in our prepared remarks that there's a potential upside just related to the tariffs on caustic imports to the east and west coast from Europe and Asia, respectively. And frankly, we are seeing that get passed through in the market. So, you know, we still feel very good about the outlook for caustic in the markets where we mainly participate, which is going to be in the Americas.
Speaker Change: Good morning, Matthew.
Speaker Change: Listen, we're watching that very closely as well.
Speaker Change: I don't see that as a concern for US you know when we look even here domestically, we're already seeing those price increases firm.
Speaker Change: We mentioned in our prepared remarks that there is a potential upside.
Speaker Change: Related to the tariffs on.
Speaker Change: Caustic imports to the east and West Coast from Europe, and Asia, respectively, and frankly, we are seeing that just pass through in the market. So.
Speaker Change: We still feel very good about the outlook for caustic in the markets, where we mainly participate which is going to be in the Americas. We see continued strength in Latin America as well. So you know we're we're remaining to be very constructive on our outlook for caustic in the second quarter.
Ken Lane: We see continued strength in Latin America as well.
Ken Lane: So, you know, we're remaining to be very constructive on our outlook for caustic in the second quarter.
Speaker Change: Yeah.
Mike Sison: The next question comes from Mike Sison with Wells Fargo. Please go ahead. Hey guys, good morning, nice quarter. You had mentioned that, you know, caustic is the stronger side of the ECU. How do you, you know, what's sort of the thought about taking advantage of that? Or are you still really focused on sort of managing to the weaker side, being chlorine? where I think longer term your earnings power really can take off. Good morning, and thanks, Mike. I mean, listen, we are taking advantage of that, but we're going to do it in a disciplined way.
Speaker Change: The next question comes from Mike Sison with Wells Fargo. Please go ahead.
Mike Sison: Hey, guys good morning nice quarter.
Mike Sison: You had mentioned that you know caustic is the stronger side of the E. U how how do you know what sort of a thought about taking advantage of that or are you still really focused on sort of managing to the weaker side being chlorine.
Mike Sison: Where where I think longer term your earnings power really can take off.
Mike Sison: Yeah.
Speaker Change: Good morning, and thank Mike I mean listen we are taking advantage of that but we're going to do it in a disciplined way so.
Ken Lane: So, you know, part of that is our EDC position. EDC is our flywheel, and we're going to continue to participate in the EDC market because we are the lowest-cost producer of EDC. There are a number of players in Asia that have already backed off their production, and what that does is it allows us to, you know, maintain a very good... We have a value approach around our cost and position in the markets where we like to participate. I just mentioned that's primarily in the Americas. So we are actually optimizing that today, but we're not going to start pushing chlorine or chlorine derivatives into the market just to make costing.
Mike Sison: So you know part of that is as is our EDC position.
Mike Sison: EDC is our flywheel it and we're going to continue to participate in the EDC market. Because we are the lowest cost producer of EDC. There are a number of players in Asia that have already backed off there.
Mike Sison: Their production and what that does is it allows us to.
Mike Sison: You know maintain a very good.
Our value approach around our cost position in the markets, where we like to participate I just mentioned.
Mike Sison: That's primarily in the Americas, So where we are actually optimizing that today, but.
Mike Sison: But we're not going to start pushing chlorine and chlorine derivatives into the market just from a cost base.
Ken Lane: That's not going to be the strategy. We're going to stay focused on the ECU values that we're realizing, and as long as we see values there that are attractive to us, then that's how we're going to set our operating rate.
Mike Sison: That's not going to be the strategy, we're going to stay focused on the EC ucu values that we're realizing it as long as we see values there that are attractive to us.
Mike Sison: And that's how we're going to set our operating rates.
Mike Sison: Okay.
Jeffrey Zekauskas: The next question comes from Jeff Zekauskas with JP Morgan. Please go ahead. Thanks very much. I think Dow wants to sell various assets in Europe. Would you be interested in? Looking at any of those at the appropriate value. do their plans, perhaps. make it more difficult for you in your And then secondly, can you talk a little bit about the wind turbine market in epoxy? How important is that? And what are the current demand Good morning, Jeff.
Speaker Change: The next question comes from Jeff Kauffman with Jpmorgan. Please go ahead.
Mike Sison: Alright, thanks very much.
Speaker Change: But I think Dow wants to sell various assets in Europe.
Mike Sison: Would you be interested in.
Mike Sison: Looking at any of those at the appropriate value.
Mike Sison: Due to their plans perhaps.
Mike Sison: Make it more difficult for you in your European operations or do.
Mike Sison: Do they not really touching.
Mike Sison: And then secondly can you talk a little bit about the wind turbine market and the boxes.
Mike Sison: How important is that for you and what are the current demand.
Mike Sison: Demand trends.
Jeff Kauffman: Good morning, Jeff.
Ken Lane: So listen, I think just in terms of the Dow Assets or M&A in general, you know, we're not going to comment on anything in particular. What I'll do is just go back to what we said at our investor day, and the areas that we're going to look to grow and invest in are predominantly going to be in the areas of water treatment. So you think about our bleach business. We've talked about the PVC business. And those are the areas that really we're going to focus on. The good thing that we see related to Europe for us is that we do have the new cost structure that's going to be coming through with the new agreement that we've got in place that's going to start to show up in Q1.
Jeff Kauffman: So listen I think just in terms of the Dow assets or M&A in general.
Jeff Kauffman: Not going to comment on anything in particular, what I'll do is just go back to what we said.
Jeff Kauffman: At our Investor day, and in the areas that we're going to look to grow and invest in.
Jeff Kauffman: Nominally going to be in the areas of a water treatment. So you think about our bleach business.
Jeff Kauffman: We've talked about the PBC business.
Jeff Kauffman: And those are the areas that really were going to focus on and so.
Jeff Kauffman:
Jeff Kauffman: The good thing that we see related to Europe for US is that we do have the new cost structure thats going to be coming through with the new agreement that we've got in place that's going to start to show up in Q1, that's really meaningful for our oxy business. So that's one touch point that we've got with the <unk>.
Ken Lane: That's really meaningful for our epoxy business. So that's one touchpoint that we've got with Dow that is going to be very positive for us.
Jeff Kauffman: With Dow that is going to be very positive for us with respect to the wind business. Yeah. That's that's an important business for us we're a leader in the wind business Remoxy ER.
Ken Lane: With respect to the wind business, yeah, that's an important business for us. We're a leader in the wind business. We are seeing, we're still seeing growth year over year, so, you know, we're going to see this year probably somewhere low double-digit growth versus prior year. And it fits very well with what we said around our growing in the formulated solutions area. We're a leader there, we're going to see growth there this year, and that's part of what's going to help our earnings continue to improve as we go through 2025.
Jeff Kauffman: We are seeing we're still seeing growth year over year. So we're going to see this year, probably somewhere low double digits.
Jeff Kauffman: Growth versus prior year.
Jeff Kauffman: And it fits very well with what we said around our rolling into formulated solutions area.
Jeff Kauffman: We're a leader there we're going to see growth there this year and that's part of what's going to help our earnings continue to improve as we go through 2025.
Operator: Since there are no further questions, this concludes our question and answer session.
Jeff Kauffman: There are no further questions. This concludes our question and answer session I would like to turn the conference back over to Ken Lang for any closing remarks.
Ken Lane: I would like to turn the conference back over to Ken Lane for any closing remarks. Thank you, Betsy. I just want to say thank you to everybody for joining us today. We're really optimistic about the future of Olin. We've laid out a great strategy. Our team is focused on the things that we can control, and we're going to continue to do that without taking our eye off the future. So we wish you all a very safe weekend and look forward to speaking to you at the end of the second quarter.
Ken Lang: Thank you Betsy I just wanted to say, thank you to everybody for joining us today.
Speaker Change: We are really optimistic about the future of Olin, we've laid out a great strategy. Our team is focused on the things that we can control and we're going to continue to do that without taking our eye off the future. So.
Speaker Change: So we wish you all a very safe weekend and look forward to speaking to you at the end of the second quarter.
Operator: Thank you for attending today's presentation.
Speaker Change: Thank you for attending today's presentation you may now disconnect.
Operator: You may now disconnect. © BF-WATCH TV 2021 © BF-WATCH TV 2021
Speaker Change: [noise] [music].
Speaker Change: Okay.
Speaker Change: [music].