Epoxy
January 30, 2024
Epoxy Highlights from Olin Investors Call
Olin Corporation (OLN) Q4 2023 Earnings Call Transcript
Jan. 26, 2024 11:38 AM ETOlin Corporation (OLN) Stock
143.43K Followers
Q4: 2024-01-25 Earnings Summary
EPS of $0.27 beats by $0.09 | Revenue of $1.61B (-18.33% Y/Y) beats by $94.55M
Olin Corporation (NYSE:OLN) Q4 2023 Results Conference Call January 26, 2024 9:00 AM ET
Company Participants
Steve Keenan – Director, IR
Scott Sutton – Chief Executive Officer
Todd Slater – Chief Financial Officer
Scott Sutton
Thanks Steve, and good morning to all. In the fourth quarter, the Olin team delivered the four items that were promised, which were $210 million of adjusted EBITDA overcoming a negative $100 million EBITDA impact from our purposeful value accelerator initiative. Stopping the decline of ECU values as a result of our value accelerator initiative, completing the remaining purchase of 10% of our outstanding equity in 2023, and setting the company up for a 2024 that is better than 2023.
We start that set up by making the first quarter of the New Year better than the fourth quarter of the past year. We are also very pleased that outside of the minor purchase price for the White Flyer acquisition, Olin’s net debt at the end of 2023 was essentially the same as the net debt at the beginning of 2023.
Since this could well be my last Olin earnings call. I wanted to remind everyone that Olin has a very unique value creation equation of lifting people to a higher level of fulfillment, delivering value on a contemporary basis through a novel idea pipeline and practicing absolute leadership in commerce. This unique value equation opens a long runway to a very positive future and our leadership team will take Olin there. The earnings and cash flow power of Olin is huge.
Arun Viswanathan
So I guess, I just wanted to ask first on the guidance. So, it looks like you’re expecting some growth in ’24. How do you see that proceeding? Looks like your Q1 guidance is a little bit below where we were expecting. So, I know that you’re implementing the value accelerator initiative. So, maybe you can just kind of walk us through some of the growth you expect, as you move through the quarters in ’24?
Scott Sutton
Good morning, Arun. Happy to do that. I mean, we’re really forecasting some profit growth, right. And if you just walk through the three businesses, and I’ll just start with Winchester. I mean, we are right in the middle of doubling our military business and that is on-track both domestically and internationally.
In the commercial side of that business, demand stays rather high. And on top of that, we have the White Flyer acquisition for a full year. And on top of that, there’s going to be a shortage of propellant across the industry this year and Winchester is well-positioned to take advantage of that. So, we feel really good about the profit growth in Winchester.
Look, in Epoxy, it’s much more a self-help story. We’re not necessarily anticipating demand growth, but clearly the restructuring work that we did is applicable for a whole year. Our focus on systems is working. We don’t have to clean up inventory as much as we did in 2023. And we’re going to work on the illegal flow of products coming from Asia as well.
Arun Viswanathan
And then if I could just ask, is there any update on the search for new CEO [indiscernible]?
Scott Sutton
Look, Arun, I mean, I really don’t have an update on that. And I’m really sorry for that, because look, our shareholders and our Olin women and men, who have really built this value for those shareholders, they deserve a lot better than that from me. But I’m out of the process. That process is 100% run buy our independent board members only. What I can say is to the best of my knowledge, I’m not aware of any offer being extended out there yet to any candidate.
Kevin McCarthy
Scott, I’d welcome your updated thoughts on the shape of the Epoxy cycle. If I look at Slide 8, it appears as though your prices eroded in 4Q versus 3Q. How do you think that will trend in the first quarter? And then, I’m also interested to hear your thoughts on Epoxy’s in Europe. We’re reading about disruptions in trade routes relative to the Red Sea and purchasing managers seem to want to kind of get ahead of those longer lead times and increased tensions and friction and so forth. How do you see the next quarter or two shaping up for Epoxy?
Scott Sutton
Look, I mean, we’ve announced price increase and we’re getting some price increase. And in fact, if you really looked at what’s happened over the last few months has been more of a wash tub bottom. It really hasn’t declined further. In fact, even the trade publications now are saying that this is a bottom. Believe me, we absolutely say that this is a bottom. And the disruptions for trade routes that is starting to have an impact, particularly in Europe.
So there’s a lot of momentum for the start of lifting prices again through Epoxy. It’s going to be slow though. I think, what you’ll end up seeing us do is sort of take that wash tub and profit up a little bit. I wouldn’t expect something really, really fast there, but we’re going to change the slope of that curve.
David Begleiter
And just again on Epoxy, what’s the path back to mid-cycle earnings given the amount of oversupply in the marketplace today?
Scott Sutton
Well, I guess it depends on what you call mid-cycle in that business. But I’ll just say it’s a multiyear path and maybe leave it at that.
Jeff Zekauskas
Earlier in the call, you spoke of a large contract that can end in 2030. Did that customer indicate that they didn’t wish to renew?
Scott Sutton
What I would say is that’s the natural expiration of that contract. And we’re currently in a dispute with a very significant value lift opportunity. So we’ll just have to see where that goes by 2030.
Vincent Anderson
So, maybe you have a different view, but it looks like China is probably still planning a fair amount of capacity up and down the Epoxy value chain over the next few years. So, to me at least it would appear that trade protections might be necessary even if we did see some amount of demand recovery. So, I guess to turn that into a question, are you still considering trade cases in Epoxy? And how important is sort of your renewed focus on fleshing out your derivative portfolio as a balance to the operating leverage on the base resin assets?
Scott Sutton
Yes, sure. I mean, no, we’re absolutely doing more than considering that, right. I mean, look, effectively this is illegal product trade flows coming into both Europe and the U.S. And this has to be stopped. And for some of the reasons that you said, it’s likely to continue. So, we’re absolutely going to pursue that.
I think in terms of getting rates up, we’ve reduced our on the ground capacity quite a bit and we’re using our systems portfolio to get some operating leverage back across our base resin. I think that was the second part of your question.
John Roberts
Thank you, and best wishes as well, Scott. I think acetone prices spiked during the quarter. Is that just the normal co-product dynamics with the weak BPA market for Epoxies or is there something else going on there?
Scott Sutton
Yes. I mean principally that’s it. You’re right. I mean phenol acetone co-production a little bit like chlorine caustic. And we sort of transferred some of our model that we run in the ECU world into our phenol acetone production and marketing scheme. And so you’ve seen us take advantage of that and get some value out of assets.
January 25, 2024
Olin Results
Olin Announces Fourth Quarter 2023 Results
Jan. 25, 2024 4:05 PM ETOlin Corporation (OLN)
Highlights
- Fourth quarter 2023 net income of $52.9 million, or $0.43 per diluted share
- Quarterly adjusted EBITDA of $210.1 million
- Share repurchases of $711.3 million in 2023
- Expect 2024 adjusted EBITDA to improve from 2023
CLAYTON, Mo., Jan. 25, 2024 /PRNewswire/ — Olin Corporation (OLN) announced financial results for the fourth quarter ended December 31, 2023. Fourth quarter 2023 reported net income was $52.9 million, or $0.43 per diluted share, which compares to fourth quarter 2022 reported net income of $196.6 million, or $1.43 per diluted share. Fourth quarter 2023 adjusted EBITDA of $210.1 million excludes depreciation and amortization expense of $128.5 million, insurance recoveries of $22.0 million, and restructuring income of $2.4 million. Fourth quarter 2022 adjusted EBITDA was $441.8 million. Sales in the fourth quarter 2023 were $1,614.6 million, compared to $1,977.0 million in the fourth quarter 2022. Full year 2023 reported net income was $460.2 million, or $3.57 per diluted share, which compares to full year 2022 reported net income of $1,326.9 million, or $8.94 per diluted share.
Scott Sutton, Chairman, President, and Chief Executive Officer, said, “Through the challenging economic environment of 2023, Olin successfully demonstrated our unique winning model by delivering $1.3 billion of adjusted EBITDA and corresponding cash flows enabling the 2023 repurchase of approximately 10% of our outstanding shares. As we are confident in our Company’s future and the strength of our earnings and cash flow, we plan to continue our capital allocation strategy, while committing to maintain an investment-grade balance sheet and achieving additional investment-grade credit ratings.
“In fourth quarter 2023, we executed a ‘value accelerator initiative’ designed to halt the decline in our electrochemical unit (“ECU”) values and accelerate a favorable inflection point for our Chlor Alkali Products and Vinyls business. We are seeing success with our ‘value accelerator initiative’ but expect to continue to limit our market participation through February 2024, as we remain disciplined in our approach to ECU values. We anticipate our initiative supports an improved 2024 adjusted EBITDA as compared to 2023. Considering the ongoing difficult global economic environment and our ‘value accelerator initiative,’ we expect first quarter 2024 results from our Chemical businesses to be slightly higher than fourth quarter 2023 levels. We also expect our Winchester business first quarter 2024 results to increase sequentially from fourth quarter 2023. Overall, we expect Olin’s first quarter 2024 adjusted EBITDA to improve by approximately 10% from fourth quarter 2023 levels.”
SEGMENT REPORTING
Olin defines segment earnings as income (loss) before interest expense, interest income, other operating income (expense), non-operating pension income, other income, and income taxes.
EPOXY
Epoxy sales for the fourth quarter 2023 were $313.1 million, compared to $484.2 million in the fourth quarter 2022. The decrease in Epoxy sales was primarily due to lower product pricing and $94.0 million of lower cumene and bisphenol A sales. As part of the Epoxy business restructuring actions to right-size our global asset footprint to the most cost-effective asset base to support our strategic operating model, the Epoxy business ceased operations at our cumene facility in Terneuzen, Netherlands in first quarter 2023 and one of our bisphenol A production lines at our Stade, Germany facility in fourth quarter 2022. Fourth quarter 2023 segment loss was ($23.1) million, compared to segment earnings of $30.5 million in the fourth quarter 2022. The $53.6 million decrease in Epoxy segment earnings was primarily due to lower pricing and incremental costs associated with inventory reduction, partially offset by lower raw material and operating costs, mainly decreased natural gas and electrical power costs, and an improved product mix. Epoxy fourth quarter 2023 results included depreciation and amortization expense of $13.0 million compared to $22.4 million in the fourth quarter 2022.
December 20, 2023
BASF Expansion
BASF completes its capacity expansion for key specialty amines in the Americas
- Focus on polyetheramines and amine catalysts
- BASF continues to be a reliable supplier to our customers
FLORHAM PARK, NJ, December 12, 2023 – BASF has completed its capacity expansion for key specialty amines manufactured at its Geismar, Louisiana site. As a result, BASF will be able to produce more of its key polyetheramines and amine catalysts marketed under the Baxxodur® and LupragenTM brands.
“This project represents our commitment to growth in the Americas market,” said Kevin Anderson, Vice President, Business Management Amines, Acetylenics and Carbonyl Derivatives, Chemical Intermediates, North America for BASF. “Our Geismar site was the ideal location for this expansion thanks to its existing infrastructure and skilled workforce.”
BASF’s Baxxodur portfolio is utilized by customers as highly efficient curing agents and chain extenders in epoxy and polyurea applications for the wind, electrical, composites, adhesives and flooring industries. The usage of Baxxodur products allows customers to achieve a wide range of benefits in their formulation, including improved curing time, hardness, flexibility, peel strength and chemical and temperature resistance.
BASF’s Lupragen products are highly efficient amine catalysts for Polyurethanes (PU). Those catalysts are typically tertiary amines, which are required to facilitate the reaction of the main components – isocyanate and polyol. Depending on the choice of catalyst, the polyurethane forming process can be controlled to enhance the gelling or blowing reaction. BASF’s Lupragen portfolio includes several low-VOC catalysts which offer support to address the increasing target of sustainable emission reductions.
With about 300 different amines, BASF has one of the world’s most diverse portfolio of chemical intermediates. Along with alkyl-, alkanol- and alkoxyalkylamines, BASF offers heterocyclic and aromatic as well as specialty amines. The versatile products are utilized mainly to manufacture process chemicals, pharmaceuticals and crop protection products, as well as cosmetic products and detergents. They also are used to produce coatings, special plastics, composites and special fibers.
Baxxodur® andLupragenTM are trademarks of BASF SE.
October 29, 2023
Wind Turbine Prices Fall
Profit At China’s Top Wind Firm Slumps 98%
by Tyler Durden
Friday, Oct 27, 2023 – 05:00 AM
By Charles Kennedy of Oilprice.com
Lower prices for turbines amid a price war in China have resulted in a 98% plunge in the net profit of the top Chinese wind turbine maker, Xinjiang Goldwind Science & Technology Co.
While investments in renewable energy projects in China are booming, intensified competition has led to a race to the bottom for wind turbine prices—a race that has dented profits at the biggest Chinese manufacturer.
Goldwind booked $1.28 million in net income for the third quarter of 2023, down by a massive 98% compared to the same period of 2022, a company statement quoted by Bloomberg showed on Thursday.
Chinese clean energy technology manufacturers have also come under EU scrutiny as the bloc fears cheaper products from China would undermine the European Union’s goals of having a strong EU clean energy manufacturing industry.
Globally, the wind power industry faces additional challenges. Offshore projects are being scrapped amid rising costs and interest rates and supply chain issues.
In August, Siemens Energy initiated a review of its wind business after taking a large hit to earnings and expected full-year revenues and profits due to problems at its unit Siemens Gamesa, one of the largest wind turbine makers in the world. At the end of June, Siemens Energy withdrew the profit guidance for the company due to problems with wind turbines at Siemens Gamesa.
“Following a substantial increase in failure rates of certain wind turbine components, an extended technical review suggested that significantly higher costs will be incurred than previously assumed to reach the targeted quality level,” Siemens Energy said in August.
On Thursday, October 26, Siemens Energy shares plunged by more than 30% to an all-time low after the company said it is in preliminary talks with different stakeholders, including banking partners and the German government, to ensure access to guarantees for long-term projects. More than $3 billion of Siemens Energy’s market value was wiped out by the early afternoon in Frankfurt today.
https://www.zerohedge.com/markets/profit-chinas-top-wind-firm-slumps-98
October 25, 2023
Invista to Close HMDA Plant in Texas
INVISTA decision to close Orange facility catches many by surprise Published 3:09 pm Thursday, October 5, 2023 By Staff Reports (invista.com) INVISTA’s announcement that it is shutting down production at its Orange facility was unexpected news to many.
Orange County Judge John Gothia said he was informed of the news Thursday. “Anytime we have a shut down or loss of jobs in the community, it’s never a good day,” Gothia said.
Gothia said the county has a number of programs to entice businesses to the area and stay competitive, but there’s not a lot to offer to keep an existing business. Looking toward the positive, Gothia noted there are a lot of growth and job opportunities on the horizon in Orange County coming in the next year, in addition to Lamar State College Orange offering a number of training programs to aid job seekers.
INVISTA operates its facility at 3055 FM 1006 in Orange. Francis Murphy, INVISTA president and CEO, said they appreciate the diligent and innovative work of employees at the Orange site over the years. “Unfortunately, lower than anticipated growth and an increase in global supply led to this difficult decision,” a company statement read. The site will begin the safe shutdown of the adiponitrile production unit right away and expects to cease production of hexamethylene diamine in mid-2024, according to information from INVISTA.
HMDA is the precursor for HDI.
Approximately 240 of the site’s 300 roles will be eliminated by the end of 2024. All impacted employees will be eligible for severance benefits. Throughout this transition, the company is committed to treating every employee with dignity and respect, leaders said. INVISTA’s top priority now and always is the safety of employees, contractors and the surrounding community.
“Ultimately, this decision was made to position our business to more competitively serve the long-term needs of our customers,” Murphy said.
Read more at: https://www.orangeleader.com/2023/10/05/invista-decision-to-close-orange-facility-catches-many-by-surprise/
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