Company News
May 18, 2025
COIM Acquires Palmer Cashew Nutshell Liquid Site
FOR IMMEDIATE RELEASE May 16, 2025
COIM USA Announces Acquisition of Strategic Site in New Boston, Texas
West Deptford, NJ — COIM USA, a leading specialty chemical manufacturer and part of the global COIM Group, is pleased to announce the acquisition of a 20-acre property in New Boston, Texas (Texarkana Region), from Palmer International.
The acquisition includes an existing logistics infrastructure, as well as a new, renewable polyol product line, consisting of materials made principally from rapidly-renewable Cashew Nutshell Liquid (CNSL). This product line will complement COIM’s existing Isoexter line of polyester polyols, allowing them to better serve the market.
COIM also plans to expand operations at the new site, adding 100 million lbs. of capacity for additional product lines by the middle of 2027.
“This acquisition represents a significant milestone in COIM USA’s long-term growth strategy,” said Michelangelo Cavallo, President of COIM USA. He further commented: “The New Boston location broadens our geographic reach, expands our sustainable portfolio, and enhances COIM USA’s ability to serve customers with greater speed, efficiency, and resiliency.”
In summary, the New Boston site will create operational synergies by enhancing COIM USA’s current product portfolio with innovative, sustainable materials. The planned expansion will also deliver geographic efficiencies and operational redundancy, with the goal of ensuring consistent service and supply reliability for customers across North America.
About COIM USA COIM USA is a subsidiary of COIM Group, an international leader in the production of specialty chemicals, including polyesters, polyurethanes, adhesives, and other high-performance materials used in foam, elastomers, packaging, coatings, adhesives, and composites. With a global presence and a
May 15, 2025
Reflections from the Foam Frontier: A Conversation with John Meehan
Recorded: May 2024
Published: May 2025
Location: PFA Conference, St. Petersburg, FL
At the 2024 Polyurethane Foam Association meeting, we sat down for beers and a candid conversation with industry legend John Meehan, who has now retired after more than 60 years in the Urethane business. What followed was a rich tapestry of stories — from the birth of flexible foam to corporate buyouts, mysterious plant fires, and lessons in loyalty that today’s chemical industry would do well to remember.
Summary of the conversation at the bottom. Listen to the interview here:
Read the transcript in full here:
From Hand Mixes to Multinationals
Meehan started his journey in 1960 at Olin Research Labs doing hand mixes, balancing part-time work with school. By 1970, he was formulating rigid and flexible foams for Olin, just as the industry was beginning to take shape.
“We had a $30 million TDI plant — the pilot plants today are bigger than that.”
Back then, Olin was a sprawling industrial force — aluminum, brass, Bible paper, even skis — and Meehan had a front-row seat to its dive into isocyanates and polyols.
The Industry Evolves
The interview charts the transition from conglomerate-dominated foam production to the rise of entrepreneurial foam shops, some run by characters straight out of central casting.
“Chuck Moeller ran a multi-million-dollar operation and spat tobacco juice into a Styrofoam cup at board meetings.”
From dealing with General Tire’s foam division to confronting delinquent customers like Joe DiMaggio’s brother, Meehan’s stories illustrate both the grit and absurdity of business in the chemical trenches.
Then vs. Now: Relationship-Driven Sales
One of Meehan’s recurring themes was the loss of human connection in modern sales.
“In those days, you shook a customer’s hand — and that was the deal. Now, they don’t even answer the phone.”
He describes a time when sales was personal: you knew your customers, their kids’ names, their lunch orders. Today, too often, it’s just price-checking and ghosted emails.
The Vanishing Mentor
Meehan laments the decline of in-house R&D and mentorship, once the bedrock of technical sales and innovation.
“We had a ton of people doing real R&D. Now you can’t even find a pilot machine.”
Companies, Meehan argues, have become too focused on short-term returns, cutting staff and gutting their ability to nurture new talent or develop future technologies.
Is There Hope for Small Companies?
Despite the challenges, Meehan believes companies like Everchem have an opportunity to thrive — precisely because they still value relationships and technical integrity.
“You get spec’d in, and you don’t have to worry about the nickel-and-dime pricing.”
His advice: stay close to the customer, focus on being reliable, and speak the language of the people who actually use the product — not just the procurement departments.
Final Thoughts
Meehan’s reflections are more than nostalgia — they’re a call to rebuild the human side of an industry that too often runs on autopilot.
“Sales and marketing is still the best job in the world — if you do it right.”
As he steps away from the business, we’re left with a deep appreciation for the people, processes, and personalities that built the urethanes world — and a reminder that people still matter.
May 12, 2025
Urethane Highlights from Somnigroup Call
Somnigroup International Inc. (SGI) Q1 2025 Earnings Call Transcript
May 10, 2025 2:06 PM ETSomnigroup International Inc. (SGI) StockSGI
Q1: 2025-05-08 Earnings Summary
EPS of $0.49 beats by $0.02
| Revenue of $1.60B (34.92% Y/Y) misses by $22.03M
Somnigroup International Inc. (NYSE:SGI) Q1 2025 Results Conference Call May 8, 2025 8:00 AM ET
Company Participants
Aubrey Moore – Investor Relations
Scott Thompson – Chairman, President & Chief Executive Officer
Bhaskar Rao – Executive Vice President & Chief Financial Officer
Scott Thompson
Good morning, and thank you for joining us on our first quarter 2025 earnings call. I’ll begin with some highlights from the first quarter 2025 and then turn the call over to Bhaskar to review our financial performance in more detail and discuss our revised 2025 guidance. After that, we’ll open up the call for Q&A.
A quick call out. This is the first quarter since we acquired Mattress Firm. So the financial statements are a bit complicated when looking at trend performance. We’ll focus on like-for-like numbers adjusted for the acquisitions impact to provide insight into the underlying business trends. In the first quarter of 2025, net sales were approximately $1.6 billion and adjusted EPS was $0.49. We’re pleased with these results given the weakness of the President’s Day holiday period and the decline in U.S. consumer confidence.
We continue to outperform the U.S. bedding market, which we believe was down high single digits, which was below our expectations. Turning to the first highlight of the quarter. We reported continued strong performance in our international business. We reported mid-single-digit sales growth. Excluding the negative impact of FX, sales grew at a healthy single — high single-digit rate. This is the eighth quarter of mid- to high single-digit sales expansion on a constant currency basis for our legacy international business, while clearly operating in a soft market.
Our new collection of Tempur products continue to be a leading catalyst for growth fueled by expanded price points that have broadened our total addressable market and the improved late-stage customization manufacturing process that allows us to seamlessly tailor products to individual markets and channels. These strategies have already resulted in over 10% growth in distribution with third-party retail partners with additional expansion opportunities underway.
Strong demand for these products, coupled with our ongoing expansion opportunities reinforce our confidence in that the international Tempur Collection will remain a key growth driver for years to come. Our U.K.-based retail business, Dreams, also had a strong quarter, delivering solid mid-single-digit growth against the backdrop that continues to be pressured. Our second highlight was the market outperformance of our Tempur Sealy North America and Mattress Firm business units. Like-for-like net sales for our Tempur Sealy North American business unit were down 3% in the quarter, excluding the mid-single-digit headwind from the foreclosed distribution discussed last quarter.
Our first quarter performance was highlighted by the successful launch of our all-new Sealy Posturepedic collection, a comprehensive reimagining of our posturpedic product branding and marketing strategy. We expect the product to be approximately 80% floored by Memorial Day. Early results from locations where the product is already floored are encouraging with solid performance and share gain. We’re supporting the launch with a national advertising campaign throughout the Memorial Day holiday selling period, which starts this week.
Our Mattress Firm business unit also outperformed the broader industry, reporting like-for-like sales down 1% from the prior year. The team remained agile throughout the quarter as we faced unexpected choppy demand period and managed through post-acquisition transition activities. Our third highlight for the quarter is our mitigation strategy regarding recent tariff announcements. While this is an evolving situation, we are confident that we are well positioned to effectively manage through it.
First and foremost, it’s important to remind everyone that our direct exposure to tariffs on finished goods is structurally mitigated as the vast majority of the products that we sell in the U.S. are manufactured domestically. For our Tempur Sealy business unit, we estimate approximately $750 million of our cost of goods sold are exposed to tariffs. We estimate this could have resulted in approximately $120 million of incremental annual cost before any mitigation actions.
However, our operations team acted swiftly to collaborate with our suppliers and resolved about half of the impact. The balance of the estimated impact of tariffs is being passed through to the market via a modest price increase, which we announced earlier this week and will take effect in the third quarter. The price increase represents a 2% increase in annual sales for our North American stand-alone business unit.
There will be a bit pricing between products, but 2% overall. Based on historical price increases, we would describe this pricing action as average in size. We expect beginning in the third quarter, the combination of the actions just discussed will fully offset the impact of the tariffs currently in place. Due to the timing lag between when the tariffs were enacted and when our pricing adjustment takes effect, we expect a onetime tariff-related headwind of approximately $5 million in the second quarter of 2025.
Turning to our Mattress Firm business unit. We anticipate some tariff impact will be passed through price increases from some of their suppliers, including Tempur Sealy. We expect Mattress Firm will pass along any future price increase to the end consumer or make merchandising adjustments. Thus, we are currently not expecting any headwinds from tariffs in the Mattress Firm unit. Finally, it’s worth mentioning that tariffs are most impactful on imported finished goods, which create a competitive advantage for us.
While there’s no question that tariffs can be disruptive, they also present an opportunity to strengthen our relative market position by making import products more expensive and the tariffs are likely to exert outside pressure on small domestic manufacturers and retailers. Our final highlight is the progress we have made on our synergy initiatives following the acquisition of Mattress Firm.
We are 3 months post acquisition and making good progress on bringing Mattress Firm, Tempur Sealy and Dreams under the Somnigroup holding company structure. In the first few months, we’ve aligned on our leadership organization and established clear goals and objectives to guide our efforts. I’m pleased with the progress made on our opportunities to reduce costs, drive efficiencies and fully leverage our global scale.
The teams at Tempur Sealy and Mattress Firm have collaborated closely to refine and execute our plans, and we’re on track to achieve our target of at least $100 million in annual run rate synergies by 2028. In fact, we’ve already increased our near-term expectations. We now anticipate to realize $15 million of those cost synergies in 2025, an increase from our prior expectation of $10 million.
There are many projects actively underway along the Somni Group organization. One of the opportunities is within our logistics operation is the ability to streamline order fulfillment. We’re advancing a project to leverage Mattress Firm’s home delivery network for Tempur Sealy. In addition to driving cost efficiencies, we expect this initiative to add value by enhancing oversight of delivery processes, in turn, improving customer outcomes and satisfaction. One of our largest opportunities from the acquisition is our combined advertising power. On a consolidated basis, SomniGroup is now the largest bedding advertiser in the industry by a factor of 2.
We expect to leverage this competitive advantage in a couple of ways. First, our enhanced global scale provides us a unique opportunity to drive cost synergies in our advertising investment. Our marketing teams are actively identifying ways to leverage our combined volume to secure more favorable placement and pricing terms.
Second, we see an additional potential to enhance the effectiveness of our combined advertising spend by aligning our advertising approach and messaging. We can deliver higher-quality campaigns, ensuring 1 plus 1 equals more than 2. As part of this alignment, our strategy is position the product as the hero of future ad campaigns, cutting through the noise and better showcasing bedding innovation.
This approach will help consumers more clearly understand the value of products, drive interest and increase retail traffic industry-wide. Another key opportunity lies in Mattress Firm’s merchandising strategy. We see value in taking a more holistic approach to product selection, leaning into suppliers who offer differentiated, high-quality products at a competitive price point and to drive in-store traffic through investments in advertising.
We communicated these expectations at Mattress Firm’s first-ever major vendor summit. The response was constructive. Consistent with this customer-focused merchandising plan, Mattress Firm recently executed new supply arrangements with Resident Home, a subsidiary of Ashley Furniture, Purple Innovation and Leggett & Platt, which provide for the distribution and development of mattresses, foundations and other bedding-related products across a range of price points.
The expanded assortment of products is expected to be available at Mattress Firm starting in late 2025 and through 2026. These products and others ensure Mattress Firm will meet its objective of servicing customers with different needs and preferences. At the same time, we’re working to optimize Somnigroup’s own brands. Mattress Firm’s new merchandising philosophy removes the pre-acquisition self-imposed cap on Tempur Sealy brands, ensuring the floor and sales reflect in consumer demand.
Tempur Sealy manufactured products represented mid-40% of Mattress Firm sales in 2024, and we expect to be in the high 40 percentages of Mattress Firm’s floor and sales of 2025. This improvement is driven in part by the expanded private label partnership between Tempur Sealy and Mattress Firm. As of the first quarter of 2025, Tempur Sealy is now manufacturing the vast majority of Mattress Firm’s Sleepy’s private label mattresses.
While still in the early stages of implementing this plan, we’re confident in its potential. Importantly, we believe we can execute this strategy while continuing to provide third-party suppliers with significant volume and continuing to be their largest customer. We look forward to providing you further updates on these initiatives as we continue to make progress.
Susan Maklari
I want to talk a bit about demand. Can you give us some color on how things trended through the quarter, what you saw coming into the second quarter? And then when you talk about a modest second half improvement this year, how should we think about what that means and what the drivers are of that?
Scott Thompson
Sure. Thank you, Susan, for your question. Look, the first quarter was a little bit challenged. Obviously, it was a little bit slower than we expected. It actually after President’s Day, gotten better and what I’d call stable, flat, flattish post President’s Day. But President’s Day holiday, as we’ve spoken about earlier, was challenged, I think, for the industry, speaking particularly about the U.S.
If you go after first quarter into the second quarter, it started out — it started out slow. If you’re talking about the last couple of weeks going into the holiday that we’re headed towards, it’s gotten better and then I’d call relatively good the last couple of weeks. So we’ll call it choppy, for lack of a better word. If you’re talking about internationally, internationally, it was — in the market, it was probably weak, but we’re taking significant share both in the first quarter and continuing through the second quarter.
And that market has not been as challenged as the U.S. market as the U.S. market deals with, we’ll call it, interesting dynamics coming out of Washington, D.C. for lack of a better way to explain it and the impact that’s had on consumer confidence or sentiment.
May 8, 2025
Covestro Urethane Highlights
Covestro AG (CVVTF) Q1 2025 Earnings Call Transcript
May 06, 2025 3:06 PM ETCovestro AG (CVVTF) Stock, COVTY StockCVVTF, COVTY
Covestro AG (OTCPK:CVVTF) Q1 2025 Results Conference Call May 6, 2025 9:00 AM ET
Company Participants
Ronald Koehler – Head of Investor Relations
Christian Baier – CFO & Member of Management Board
Carsten Intveen – Investor Relations Director
Christian Baier
Thank you, Ronald, and hello, and a warm welcome also from my side to our first quarter call.
The key financials of the first quarter were as shown on this page. Volumes developed flattish year-over-year. Sales also came in at stable €3.5 billion. We’ve achieved an EBITDA of €137 million, approaching the upper end of our quarterly guidance range. Free operating cash flow shows the usual seasonal dip with minus €253 million and we are reducing the upper end of our EBITDA guidance.
Let us look at the volume development in the first quarter of 2025. The global sales volume was stable with minus 0.4%. North America exhibited slight growth. EMLA developed flattish and APAC was negative. The dip in Asia was caused by our portfolio pruning as we cut loss-making or low-margin businesses.
Going through the different industries. Demand in construction and furniture was stable. Auto showed a low single-digit percent decline and electro followed with a mid-single-digit percent decrease.
Taking a deep dive into the different regions, starting with EMLA. EMLA benefited from significant growth in furniture, wood and a slight growth in construction. Auto and electro on the other hand, had a slightly negative development. Sales volumes in North America also increased significantly in furniture, wood, electro and construction. Automotive continued the negative trend from past quarters with a significant decline. APAC experienced a slight increase in auto but all other industries showed a clear decline.
We’re now on Page 4 of the presentation. Sales for Q1 2025 are stable year-over-year at €3.5 billion. The negative pricing and flat volumes were partly offset by positive FX. A negative impact of €40 million was coming from 1.1% lower prices. The prices in the business segment Performance Materials increased by 0.7% and while Solutions & Specialties was affected by 3% lower prices. Volume was flat with minus 0.4% or minus €14 million year-over-year. Excluding the portfolio pruning, volumes would have been 2 percentage points higher.
The Solutions & Specialties volumes increased by 1.2%, while the segment Performance Materials experienced a 2% decline. The positive FX effect of 0.6% or €21 million was mainly driven by the stronger U.S. dollar and Chinese renminbi.
With that, let’s turn to Page 5 of the presentation where we are showing the Q1 2025 EBITDA bridge. As predicted in our full year call, EBITDA decreased by around 50% to €137 million due to costs of €108 million related to our transformation program strong. Within this amount, €88 million are related to the announced closure of our joint propylene oxide operation with LyondellBasell. However, — the EBITDA came in towards the upper end of the predicted range of €50 million to €150 million.
Lower selling prices due to unfavorable supply and demand in combination with high raw material and energy costs, especially in Europe, led to a negative pricing delta of €73 million. The volume increase could only absorb a part of the negative pricing delta.
As I said before, we reduced loss-making business, especially in polyols and increased sales in areas with strong margins. FX was positive. Other items were burdened by costs associated with our transformation program strong that mainly includes the previously mentioned planned closure.
On Slide 6, we are breaking down the details for the different segments. As usual, starting with Solutions & Specialties. In Solutions & Specialties, the year-over-year price decline of 3% was leading to a sales decline of 1.2% despite increasing volumes of 1.2% and positive FX of 0.6%. Sequentially, sales growth was only recorded in APAC, while North America and EMLA were declining.
The EBITDA in Q1 2025 was lower year-over-year due to a negative pricing data. The quarter-over-quarter EBITDA increase was caused by higher volumes, mainly in our Coatings and Adhesives business after the winter break. With that, the EBITDA margin increased to 10.8%. Despite the narrowing of our full year EBITDA guidance, we are confirming our guidance for S&S to contribute slightly above the 2024 level.
After Solutions & Specialties, we are now looking at the segment Performance Materials. Year-over-year, sales were stable with minus 0.7%, driven by minus 2% from volumes, flat pricing and plus 0.6% from FX. Quarter-over-quarter, sales in North America were flattish while APAC and EMLA declined. The Q1 ’25 EBITDA of €13 million is lower due to the before mentioned provisions for the joint propylene oxide operation closure. Without this onetime effect the EBITDA would be comparable to Q1 2024. Sequentially, the EBITDA in Q1 ’25 decreased based on negative onetime effects and the negative pricing delta due to higher energy prices, mainly in Europe during the winter period. For PM, we are reducing the upper end of our EBITDA guidance range by €100 million and are now expecting a range from €400 million to €700 million.
On March 18, we have announced the decision to permanently close the propylene oxide styrene monomer joint operation of Covestro and LyondellBasell at the Maasvlakte site in the Netherlands. Contributing factors to this decision were the global overcapacity is on propylene oxide being built up in China, leading to low utilization rates and thus low margins. Higher feedstock cost and increased imports from Asia made the production of PO in Europe very challenging. As we have announced during our full year call, this consolidation is part of the ongoing transformation program STRONG, impacting our Q1 EBITDA by €88 million.
The overall effect for FY 2025 is expected to be in the low triple-digit Euro million range. And however, starting 2026, there will be a positive mid-double-digit Euro million effect on EBITDA and free operating cash flow. Our sales will be affected by a mid-triple-digit Euro million amount, mainly caused by the sales of styrene. And this with immediate effect as a plant has already been mothballed since end of 2024.
Covestro continues to support its customers and remains committed to the European market despite this closure and therefore, our existing supply network for PO and polyols we are supporting this. The transformation of Covestro is in full swing, and we are walking our talk when it comes to delivering on our targets.
So let me update you on our transformation program STRONG. Gross savings are now at €152 million, adding €33 million from Q1 ’25 to the €119 million achieved in 2024. With 3 quarters to go until year-end, we expect this amount to rise to about €250 million. However, the flip side are the announced onetime costs of €300 million, of which €100 million incurred in Q1 ’25 and a similar amount is to be added during Q2 to Q4 2025. This means that STRONG with overall burden reported EBITDA in 2025 by around €70 million compared to 2024.
As discussed before, the announced closure of the PO production marked an important step in our ambitions for 2025. It hit our EBITDA with the already mentioned €88 million in Q1 ’25, whereas the additional benefits will ramp up over time starting from 2026. Nevertheless, the ambition is clear. With STRONG, we want to achieve €400 million of annual savings or slightly below 10% of our annual fixed cost by 2028. The program consists of various smaller and larger projects and involves the broad rollout of digitalization and AI and we remain focused on fully delivering on this ambitious target.
The next topic is the free operating cash flow development for Q1 2025. And as you can see from the graph, the free operating cash flow in Q1 ’25 was negative with €253 million. The free operating cash flow is significantly lower year-on-year due to the lower EBITDA and higher CapEx. Working capital typically experiences a seasonal increase, however, in Q1 2025, the impact was relatively lower at minus €172 million, primarily due to stringent working capital management.
Q1 CapEx of €180 million increased year-on-year due to higher investments among others, mainly in efficiency and growth projects of our Performance Materials segment in the chlorine production in Leverkusen, Germany and the Aniline project in Antwerp, Belgium. Despite this increase, we remain vigilant about our spending and confirm our CapEx guidance of €700 million to €800 million for FY 2025. All in all, the Q1 ’25 free operating cash flow is showing a dip related to lower EBITDA and higher CapEx.
Let’s now look at our balance sheet on Page 11. Our total net debt slightly increased by €315 million versus the end of 2024. The increase was mainly caused by the seasonally negative free operating cash flow of €253 million and negative others. The decrease in the net pension liability to €247 million was driven by an increase of the pension discount rates mainly in Germany. This comprises pension provisions of €315 million and net defined benefit assets of €68 million.
Summarizing our net debt position. The total net debt-to-EBITDA ratio is at 3.4x based on a 4-quarter rolling EBITDA of €0.9 billion. Without the strong provisions of around €100 million in Q1 2025, the increase would be limited to a ratio of 3.1x. Covestro remains committed to a solid Baa2 investment-grade rating that was just confirmed last week by Moody’s.
Now we are moving away from the actual business figures of Covestro and are trying to analyze the effect of the tariffs announced by the U.S. government beginning of April. When looking at the trade balance for our core products, MDI, TDI and polyols, we can see a growing dependency on imports to supply the North American market. This is most pronounced for MDI already since a couple of years with imports of around 500-kilo tons. These imports are mainly coming from near originating to 70% from China and to 30% from Europe.
On TDI and polyols, we see a growing trend towards imports. However, for TDI, most external supply is coming from Europe to avoid already existing tariffs from China to the U.S. On both isocyanates the tariffs are at 177%. Import streams on polyols from APAC represented less than 30% of the imports in 2024. The highest share here is coming from Mexico. Tariffs on polyols are though significantly lower with 52%.
Looking at the supply picture of Covestro, we see that our regional production exceeds sales indicating that our production in the region for the region holds true. We are entertaining 9 sites for local U.S. production with a major hub in Baytown near Houston, Texas with assets for production of MDI, TDI polycarbonates and aliphatic isocyanates. Despite the vast majority of our products sold coming from the U.S., there is an import volume of around €500 million, mainly being imported from Europe into the U.S. These volumes are to support the region on specialty products, scars products and safeguarding supply of our customers during turnarounds.
In general, we expect market prices to increase on the back of higher import prices. However, there are underlying risks that the tariffs could be having a detrimental effect on the regional GDP development and thus on the global GDP. Drilling it down into the core industries, we would expect a dampening on the demand in all our core industries, automotive, construction and electro, especially furniture/wood is already impacted by imposed antidumping rates on mattresses and furniture and additional tariffs bear the risk or further slowdown.
Next to the implications on GDP, we might see a diversion from established trade flows. China is the global workbench for electro electronics and other labor-intense products as well as holding the biggest capacities of MDI and TDI. Tariffs, as announced, might reduce imports into the U.S. So the remaining products might then stay in APAC or end up in Europe with negative effects on prices and margins. Overall, this is a very mixed picture with risk but also with opportunities. However, there are so many erratically moving parts so that it is almost impossible to have an exact prediction of the outcome. From our side, Covestro remains agile and responsive to accommodate any new developments but we need to wait it out until we see a clear direction, this tariff escalation will take.
We are now coming to the outlook for Covestro’s core industries on Page 13 of the presentation. The global GDP expectation is almost unchanged at 2.6% compared to the outlook of 2.8% we presented end of February. Looking deeper into regional GDPs, we also see a steady growth prediction of 1.7% for EMLA and 3.9% for APAC and around 4.5% for China. However, the U.S. economy has seen a slight downward momentum from 2.6% to 2.0%.
Growth expectations for most of the key industries for Covestro have only seen insignificant changes with the exceptions of a slightly declining trend for furniture and a 2.6% downgrade for electro-electronics but a 3.7% upgrade for the subcategory of appliances. However, all these growth predictions do not incorporate the effects of the spreading trade war initiated by the tariff announcements by the incumbent U.S. government early April.
For example, the automotive industry is still expected to grow slightly at 2.4% and a stable growth of electric vehicles of 22.4% is predicted. As mentioned before, erratically imposed and then lifted or delayed tariffs are fundamentally disturbing a rational evaluation of the consequences of these actions and in absence of new reliable data, we are sticking to the known facts and remain vigilant to new developments. Currently, none of the growth indications for our core industries is reflecting the increased uncertainties and risks in the global economy that it is facing and this has been also influencing our guidance for FY 2025.
After the economic outlook, let us now discuss the guidance for Covestro, taking into account the fundamentals of the last slide. Despite increasing uncertainties, it is not clear whether the world or more specifically the U.S., will incur a recession. In the absence of clear indications in that direction, we are keeping our guidance aligned with the currently available data and not draw a doomsday scenario. However, we see the risks to the global economic development outweighing the chances of an optimistic scenario and as such, have decided to narrow our guidance from the top end by €200 million to now €1.0 billion to €1.4 billion. This narrowed range is due to the consistently low margin level in Q2 whereas our previous assumptions anticipated the beginning of margin recovery from Q2 onwards. The effects of the volatile environment on GDP and exchange rates are not included in our FY guidance.
May 6, 2025
Epoxy Highlights from Olin Earnings Call
Olin Corporation (OLN) Q1 2025 Earnings Call Transcript
May 02, 2025 3:30 PM ETOlin Corporation (OLN) StockOLN
Q1: 2025-05-01 Earnings Summary
EPS of $0.03 beats by $0.13
| Revenue of $1.64B (0.54% Y/Y) beats by $68.64M
Call Start: 09:00 January 1, 0000 9:52 AM ET
Olin Corporation (NYSE:OLN)
Q1 2025 Earnings Conference Call
May 2, 2025, 09:00 AM ET
Company Participants
Steve Keenan – Director of IR
Ken Lane – President and CEO
Todd Slater – CFO
Ken Lane
Thanks, Steve, and thank you to everyone joining our call today. Let’s start with a few first quarter highlights on Slide 3.
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. 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.
During the first quarter, our Chlor Alkali products and Vinyls business exceeded expectations as several planned and unplanned industry outages reduced first quarter chlorine and caustic soda supply.
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. 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 values. We view this as a positive true point for our Chlor Alkali 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 destock, coupled with lower consumer sales.
Also during the first quarter, Olin took advantage of historically narrow spreads and successfully refinanced our nearest debt tranche through a bond issue and bank refinancing. This pushed our nearest debt tower out to 2029 and positions us very well to weather the uncertain environment we see today. 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 December.
As an example, we made solid progress to implement our Winchester growth strategy. I’m pleased to report that Winchester has been awarded a three-year contract extension to continue operating the Lake City GOCO2 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. And finally, we established Clayton, Missouri as our Winchester headquarters.
Now let’s turn to Slide 5 to review our Chlor Alkali 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 caustic to remain the stronger side of the ECU and see positive pricing trends going into the second quarter.
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 reengaged 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 Chlor 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 disciplined value-first commercial approach.
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. In addition to our entry into the PVC market, we’re adding value to every ton of EDC we toll with ChemOne. As we discussed at our December Investor Day, we’re exploring potential long-term PVC 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 on CAPV to be significant. Olin’s export sales, mainly caustic soda and EDC, are generally sold to low tariff countries. 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.
Now let’s turn to Slide 6 for a brief look at our Epoxy results. First quarter Epoxy sales improved sequentially, reflecting an increase in both resin prices and volumes. However, the margin benefits of improved pricing were more than offset by higher costs. Last month, the U.S. Commerce Department issued their final Epoxy antidumping decision. Olin was encouraged that the antidumping 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 antidumping 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 antidumping duties represent less than 25% of our overall Epoxy division sales. Current antidumping duties provide minimal upside value. We will continue to advocate for fair trade practices here and in Europe, pursuing every available avenue.
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. 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.
Steve Byrne
Ken, I’d like to follow up on two things you said. You referred to the capacity overhang in Epoxy and you have this turnaround in Stade 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 the higher pricing in Winchester in ammunition at the commercial level?
Ken Lane
Good morning, Steve. First, I’ll take your question on Epoxy. 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.
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. 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. Most likely it’s going to be in the first quarter, but it should be a meaningful improvement.
Frank Mitsch
Thank you. Good morning. 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 antidumping. And you mentioned earlier that you have new agreements in place in Europe, but that should start kicking in in the first quarter of ’26. 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?
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. We’ve got some tailwinds related to some of the antidumping duties. On some of the countries that we’ve seen, we have seen some positive impact. 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 just some other things that were not related to the market. But I do think that this year is going to continue to be a struggle for the Epoxy business. However, I think 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, the integration value there is still in the mid to high double-digit millions that it creates for us being integrated with our Chlor 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 to this year as well. So a lot of good things that we’re doing that are within our control, but it is a challenging environment for sure.
Jeff Zekauskas
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 European operations, or do they not really touch you? And then secondly, can you talk a little bit about the wind turbine market in Epoxies? How important is that for you? And what are the current demand trends?
Ken Lane
Good morning, Jeff. So listen, I think just in terms of the Dow assets or M&A in general, 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. So 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, that’s really meaningful for our Epoxy business. So that’s one touch point that we’ve got with Dow that is going to be very positive for us.
With respect to the wind business, that’s an important business for us. We’re a leader in the wind business for Epoxy. We are seeing — we’re still seeing growth year-over-year. So 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.
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