Epoxy
November 9, 2020
Hexion Results
Hexion Inc. Announces Third Quarter 2020 Results
Third Quarter 2020 Highlights
- Entered into a definitive agreement to sell our Phenolic Specialty Resin, Hexamine and European-based Forest Products Resins businesses for approximately $425 million
- Net sales from continuing operations of $634 million
- Loss from continuing operations, net of taxes of $26 million
- Net loss of $102 million
- Segment EBITDA from continuing operations of $91 million compared to $104 million in the third quarter 2019. Both periods reflect the treatment of the pending divestiture as discontinued operations. The prior year period also included $18 million of Segment EBITDA related to deferred revenue that was accelerated on July 1, 2019 as part of Fresh Start accounting.
November 09, 2020 07:00 AM Eastern Standard Time
COLUMBUS, Ohio–(BUSINESS WIRE)–Hexion Inc. (“Hexion” or the “Company”) today announced results for the third quarter ended September 30, 2020.
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“Third quarter 2020 results reflected steadily improving volume gains each month during the quarter as ongoing improvement in several key end markets drove Segment EBITDA that exceeded the prior year by 6 percent if excluding the prior year impact of fresh start accounting,” said Craig Rogerson, Chairman, President and Chief Executive Officer. “We were also pleased to post strong sequential Segment EBITDA from continuing operations gains of 60% in the third quarter of 2020 compared to second quarter Segment EBITDA from continuing operations of $56 million. Favorable residential construction trends drove strong sequential improvement in our third quarter volumes and EBITDA for our Adhesives segment. Our Coatings & Composites segment posted positive Segment EBITDA gains in the third quarter of 2020 versus the prior year due to our specialty epoxy resins business and continued positive demand in wind energy, as well as our Versatic Acids™ and Derivatives business due to strength in architectural coatings and recovering automotive demand.”
Mr. Rogerson added: “We were pleased to recently announce a divestiture and continue to explore other portfolio optimization opportunities. Upon closing, we plan to use the proceeds to invest in our business and reduce our debt. While our volumes continued to improve sequentially in October, visibility remains limited regarding the fourth quarter of 2020 because of the pandemic as well as normal year-end volatility. Our balance sheet, liquidity, and ability to generate cash remain strong, and we are encouraged by the recent trends in housing, wind energy, automotive and several other markets, although we continue to keep a close eye on key economic indicators to monitor the impact of COVID-19. In addition, we expect to be free cash flow1 positive in 2020. We remain focused on the things we can control, such as completing the pending divestiture, maintaining our streamlined cost structure and continuing to accelerate new product development, which we believe positions us favorably as demand recovers. We also plan to expand our investments in productivity and growth-oriented capital expenditures to drive future growth in 2021 and future years.”
Hexion Announces Strategic Divestiture
On September 27, 2020, the Company entered into a Purchase Agreement for the sale of its Phenolic Specialty Resin (PSR), Hexamine and European-based Forest Products Resins businesses (together with PSR, the “Held for Sale Business” or the “Business”) for approximately $425 million to Black Diamond and Investindustrial. The consideration consists of $335 in cash and certain assumed liabilities with the remainder in future proceeds based on the performance of the Held for Sale Business. The final purchase price is subject to customary post-closing adjustments.
The business includes approximately 900 associates and 11 manufacturing facilities globally where phenolic specialty resins and engineered thermoset molding compounds are produced for a wide range of end markets including building and construction, industrial, automotive, electronics, agriculture and consumer. The Company expects to use the net sale proceeds to reduce indebtedness as well as for general corporate purposes including investments in its business. The transaction is intended to close in the first quarter of 2021, subject to regulatory approvals and other customary closing conditions, including Works Council consultation.
Fresh Start Accounting
Upon emerging from Chapter 11 on July 1, 2019 (“Effective Date”) and qualifying for the application of fresh-start accounting, Hexion’s assets and liabilities were recorded at their estimated fair values which, in some cases, were significantly different than amounts included in the Company’s financial statements prior to the Effective Date. Accordingly, Hexion’s financial condition and results of operations on and after the Effective Date are not directly comparable to our financial condition and results of operations prior to the Effective Date. References to “Successor” or “Successor Company” relate to the financial position and results of operations of the reorganized Company subsequent to the Effective Date. References to “Predecessor” or “Predecessor Company” refer to the financial position and results of operations of the Company on or before the Effective Date.
Third Quarter 2020 Results
In January 2020, Hexion updated its reportable segments to align around two growth platforms: Adhesives; and Coatings and Composites. The Adhesives Segment is organized around Construction Adhesives, Industrial Adhesives, and Intermediates and Derivatives, while the Coatings and Composites Segment is organized around Composites, Performance Coatings, and Base Chemicals. Corporate and Other continues to be a reportable segment.
As of September 30, 2020, the Company reclassified the assets and liabilities of our Held for Sale Business as held for sale on the unaudited Condensed Consolidated Balance Sheets and reported the results of its operations for the three and nine months ended September 30, 2020 as “(Loss) income from discontinued operations, net of taxes” on the unaudited Condensed Consolidated Statements of Operations. Amounts for prior periods have similarly been retrospectively reclassified for all periods presented. See Schedules 9 and 10 for additional financial information for our Held for Sale Business.
Total net sales for the quarter ended September 30, 2020 were $634 million, a decrease of 9% compared with $693 million in the prior year period. Volumes positively impacted net sales by $13 million due to volume increases in Hexion’s specialty epoxy and base epoxy resins businesses, offset by decreases in the Company’s North American wood adhesives business due to overall weakness in the market, primarily in the non-residential construction industry. Pricing negatively impacted sales by $68 million due primarily to raw material price decreases contractually passed through to customers across many businesses, as well as unfavorable product mix and continued competitive market conditions in base epoxy resins. Foreign currency translation negatively impacted net sales by $4 million due to the weakening of various foreign currencies against the U.S. dollar in the third quarter of 2020 compared to the third quarter of 2019.
Net loss for the Successor three months ended September 30, 2020 was $102 million compared to a net income of $3,054 million for the Predecessor period July 1, 2019 and a net loss of $43 million in the Successor period of July 2, 2019 through September 30, 2019. Total Segment EBITDA from continuing operations for the quarter ended September 30, 2020 was $91 million, a decrease of $13 million compared with the prior year period reflecting improved results in our Versatic™ Acids and Derivatives and specialty epoxy resins businesses, offset by the absence of the $18 million of Segment EBITDA in the prior year related to deferred revenue that was accelerated on July 1, 2019 as part of Fresh Start Accounting.
November 6, 2020
Olin Epoxy Comments from Investors’ Call; Novalac Plant Shuttered
Hassan Ahmed
Scott, congratulations on the new job. A question around strategy. Appreciate some of the color that you gave in your earlier remarks. Can’t help but sort of think about your past life and your time at Celanese and the sort of similarities between the acetyls chain and the chlorovinyl chain in terms of oligopolistic nature and the like. And as I sort of sit here and think about the evolution of the acetyls chain, there was a step change in profitability over there collate from 2011, 2012 onwards. And if one thinks about some of the strategic changes that were implemented, I broadly think about 4 silos.
There was utilization rate management that was exercised, doing more with the network as you guys used to call it, feedstock optionality and commercial flexibility. And it seems all of those things are pretty applicable to chlorovinyl, and it seems that, that’s the direction you guys are headed in. So is it fair to assume that each and every one of those things can be hit? And this $50 million to $200 million number that you’re talking about in terms of exercising your leadership position, over the long run, actually could be far greater than that?
Scott Sutton
Yes. I mean, I guess what I would say is, look, I mean, we’re going to go out and lead with this winning model, right? You described some parts. The main feature of it is we’re going to exercise our number one positions. And so how are we going to do that, right? We’re going to be interacting with global supply-demand. We’re going to be impacting our own global supply-demand. And that means we’re going to be surging inventory when it’s appropriate, releasing inventory when it’s appropriate. We’re likely to do more trading as we reach into pockets of global liquidity that are already out there.
We’re not going to be selling into poor quality markets. And when we do that, we’re going to be overlaying a price increase, and that lets us open and close arbitrage window. So that’s the main elements of how we’re going to go out and manage our landscape. And Hassan, underneath all that, we will certainly have rigorous commerce. We use the terms edgy commerce in here to make sure we get the next — or the best price that we can get and get the breadth, best deal in place at every customer.
Overlaying all this in the future, you’ll hear us talk about using forward intelligence. You can think of it as AI, almost, to predict the best point that we should run at. So where are we going to set our ECU knob and know that three months in advance? So it really contains a number of elements, right? You’ve got that umbrella of where to set our ECU knob, how we manage our landscape and then our edge e commerce activities. So that’s what it sets up for. In the future, Hassan, I expect it to bring more than the numbers we quoted.
Vincent Anderson
When I think about the $50 million to $200 million target, how are you thinking about the near-term balance between maybe some additional SG&A for those direct negotiations, incremental capital for inventory management infrastructure, fixed cost coverage, things like that, kind of relative to what you see as easy wins in the near term?
Scott Sutton
Yes, sure. So Jim is going to answer the bulk of this question. I mean, I would just say that we have broad opportunities across all those buckets for productivity and it’s many small things that are going to add up to a big thing, right? Internally, I like to say we’re masters of the small on this. But I’ll let Jim answer this.
James Varilek
Sure. Yes. I would say that your comment on adding SG&A to have these capabilities and so forth and, quite honestly, we’d probably be working at getting more efficient rather than adding and still being able to cover what we need. From a productivity standpoint, we actually have very well established programs here and in every division, every function, every site has productivity goals and objectives for not only the coming year but have had the past years.
In fact, just a point of reference, we actually have 1,127 active projects across the company are geared towards driving productivity and getting our fixed costs and our cost down to be able to make sure that we can pull that lever and deliver on that $50 million to $100 million net productivity objective that we have. So we do have momentum on productivity, things like — you’ve heard about our vinyl chloride asset closure, the chlorine closure that we announced about a year ago or so. Epoxy Novalac plant is closing as well.
So we have a number of projects and so forth that will deliver momentum as we head into 2021. And there — some are large, some are small, but they all add up at the end of the day. So we feel confident about that $50 million to $100 million.
Eric Petrie
Olin acquired the Dow Chlorine Products business to expand their chlorine envelope. Where are you thinking that value could be uplifted and captured from those downstream products? And what currently now is in your view, poor quality or low economic return?
Scott Sutton
Yes. I would say that it’s going to be across the entire portfolio, right? And there’s been a lot of effort and money and sweat so many people to put this company together that we don’t have to go out and build anymore, right? And we don’t have to pump a lot more money into that building process. So I mean, we have a game plan to start leading, using what’s already been built. And that’s going to be our game plan until that ECU profit contribution index gets to, whatever, 1.5 or 2. We’ve got to get up in that range to match what we said we do at Investor Day. And we’re going to do it.
As far as areas that we’re lifting, I mean, lifting merchant chlorine is fundamental to this company. And so you see us out there doing that. That’s going to — that’s going to push along and drive many things. In fact, all the way through our Epoxy business which I’m going to ask Pat to come in on here in just a minute. And our Epoxy business is one of our downstream businesses that is subject to this Chlor Alkali ECU winning model and also has its own similar landscape management model built in around epichlorohydrin and Epoxy. So Epoxy, to your question, is one area that we can absolutely lift margins on.
And so I’ll ask Pat, will you comment a little bit on that?
Pat Dawson
Sure, Scott. Like you were saying, just a little bit of the lead in around epichlorohydrin. We’re the only producer of epichlorohydrin now in North America, and of course, we got a major leadership position on epi in Europe as well. And so epi is really critical to strategically what we’re trying to do with our Epoxy portfolio and then how we monetize that epi in the form of liquid epoxy resin, solid epoxy resin and other ways we can sell those epoxy resin equivalents into the downstream.
So back to the plot here, of not selling into low return segments applies to Epoxy, just like it does in the rest of the portfolio, driving productivity. Jim mentioned, we just made the announcement to shut down a Novalac plant in North America, which wasn’t productive. And we have other ways to still participate in that market, but in a more productive way with our asset capabilities in Europe. So I think through epi and how we monetize that epi into various channels, where we select having a sharper edge on where we sell, the epi and the liquid epoxy resin is exactly what we’re going to do.
Matt DeYoe
I understood. And then if I were to think about maybe like three to four big opportunities you think you have in your back pocket to drive growth, I know you mentioned like epoxy being one — sorry, epi being one, but perhaps other things that we’re not thinking about as it relates to kind of what can be kickers on EBITDA over the next two years?
Scott Sutton
Yes. Well, in the next two years, right, it’s all about growth in ECU contribution profit, right? I mean, we have some opportunities for volume growth, but it’s not about volume growth, right? We lead in volume. We can get volume any day that we want to get it. But it’s all about growth in unit profitability, because that’s the number one thing we need to be the value player and be the value leader.
Some of those things that are certainly solid growth in volume is Epoxy. And Pat spoke to that earlier, and look at some of the applications we sell into like [perming] blades on the power generation wind mills, right? We were probably the epoxy in one of every three of those that’s in the world, and that’s definitely a growing segment for us as an example. I would say some of our coordinated organics that go into next-generation refrigerants are a good source of growth for us. And perhaps the number one source of growth for us is in small caliber ammunition as there’s great positive fundamentals there on both the military side, and the consumer side as well as participation is way up.
And just as an example of that, more people are now doing shooting sports and target shooting, then they’re fishing, then they’re camping, then they’re golfing, whatever the case is. And that’s a long-term fundamental that’s driving demand right now, and it’s where we have our biggest backlog in the company by far.
November 6, 2020
Olin Epoxy Comments from Investors’ Call; Novalac Plant Shuttered
Hassan Ahmed
Scott, congratulations on the new job. A question around strategy. Appreciate some of the color that you gave in your earlier remarks. Can’t help but sort of think about your past life and your time at Celanese and the sort of similarities between the acetyls chain and the chlorovinyl chain in terms of oligopolistic nature and the like. And as I sort of sit here and think about the evolution of the acetyls chain, there was a step change in profitability over there collate from 2011, 2012 onwards. And if one thinks about some of the strategic changes that were implemented, I broadly think about 4 silos.
There was utilization rate management that was exercised, doing more with the network as you guys used to call it, feedstock optionality and commercial flexibility. And it seems all of those things are pretty applicable to chlorovinyl, and it seems that, that’s the direction you guys are headed in. So is it fair to assume that each and every one of those things can be hit? And this $50 million to $200 million number that you’re talking about in terms of exercising your leadership position, over the long run, actually could be far greater than that?
Scott Sutton
Yes. I mean, I guess what I would say is, look, I mean, we’re going to go out and lead with this winning model, right? You described some parts. The main feature of it is we’re going to exercise our number one positions. And so how are we going to do that, right? We’re going to be interacting with global supply-demand. We’re going to be impacting our own global supply-demand. And that means we’re going to be surging inventory when it’s appropriate, releasing inventory when it’s appropriate. We’re likely to do more trading as we reach into pockets of global liquidity that are already out there.
We’re not going to be selling into poor quality markets. And when we do that, we’re going to be overlaying a price increase, and that lets us open and close arbitrage window. So that’s the main elements of how we’re going to go out and manage our landscape. And Hassan, underneath all that, we will certainly have rigorous commerce. We use the terms edgy commerce in here to make sure we get the next — or the best price that we can get and get the breadth, best deal in place at every customer.
Overlaying all this in the future, you’ll hear us talk about using forward intelligence. You can think of it as AI, almost, to predict the best point that we should run at. So where are we going to set our ECU knob and know that three months in advance? So it really contains a number of elements, right? You’ve got that umbrella of where to set our ECU knob, how we manage our landscape and then our edge e commerce activities. So that’s what it sets up for. In the future, Hassan, I expect it to bring more than the numbers we quoted.
Vincent Anderson
When I think about the $50 million to $200 million target, how are you thinking about the near-term balance between maybe some additional SG&A for those direct negotiations, incremental capital for inventory management infrastructure, fixed cost coverage, things like that, kind of relative to what you see as easy wins in the near term?
Scott Sutton
Yes, sure. So Jim is going to answer the bulk of this question. I mean, I would just say that we have broad opportunities across all those buckets for productivity and it’s many small things that are going to add up to a big thing, right? Internally, I like to say we’re masters of the small on this. But I’ll let Jim answer this.
James Varilek
Sure. Yes. I would say that your comment on adding SG&A to have these capabilities and so forth and, quite honestly, we’d probably be working at getting more efficient rather than adding and still being able to cover what we need. From a productivity standpoint, we actually have very well established programs here and in every division, every function, every site has productivity goals and objectives for not only the coming year but have had the past years.
In fact, just a point of reference, we actually have 1,127 active projects across the company are geared towards driving productivity and getting our fixed costs and our cost down to be able to make sure that we can pull that lever and deliver on that $50 million to $100 million net productivity objective that we have. So we do have momentum on productivity, things like — you’ve heard about our vinyl chloride asset closure, the chlorine closure that we announced about a year ago or so. Epoxy Novalac plant is closing as well.
So we have a number of projects and so forth that will deliver momentum as we head into 2021. And there — some are large, some are small, but they all add up at the end of the day. So we feel confident about that $50 million to $100 million.
Eric Petrie
Olin acquired the Dow Chlorine Products business to expand their chlorine envelope. Where are you thinking that value could be uplifted and captured from those downstream products? And what currently now is in your view, poor quality or low economic return?
Scott Sutton
Yes. I would say that it’s going to be across the entire portfolio, right? And there’s been a lot of effort and money and sweat so many people to put this company together that we don’t have to go out and build anymore, right? And we don’t have to pump a lot more money into that building process. So I mean, we have a game plan to start leading, using what’s already been built. And that’s going to be our game plan until that ECU profit contribution index gets to, whatever, 1.5 or 2. We’ve got to get up in that range to match what we said we do at Investor Day. And we’re going to do it.
As far as areas that we’re lifting, I mean, lifting merchant chlorine is fundamental to this company. And so you see us out there doing that. That’s going to — that’s going to push along and drive many things. In fact, all the way through our Epoxy business which I’m going to ask Pat to come in on here in just a minute. And our Epoxy business is one of our downstream businesses that is subject to this Chlor Alkali ECU winning model and also has its own similar landscape management model built in around epichlorohydrin and Epoxy. So Epoxy, to your question, is one area that we can absolutely lift margins on.
And so I’ll ask Pat, will you comment a little bit on that?
Pat Dawson
Sure, Scott. Like you were saying, just a little bit of the lead in around epichlorohydrin. We’re the only producer of epichlorohydrin now in North America, and of course, we got a major leadership position on epi in Europe as well. And so epi is really critical to strategically what we’re trying to do with our Epoxy portfolio and then how we monetize that epi in the form of liquid epoxy resin, solid epoxy resin and other ways we can sell those epoxy resin equivalents into the downstream.
So back to the plot here, of not selling into low return segments applies to Epoxy, just like it does in the rest of the portfolio, driving productivity. Jim mentioned, we just made the announcement to shut down a Novalac plant in North America, which wasn’t productive. And we have other ways to still participate in that market, but in a more productive way with our asset capabilities in Europe. So I think through epi and how we monetize that epi into various channels, where we select having a sharper edge on where we sell, the epi and the liquid epoxy resin is exactly what we’re going to do.
Matt DeYoe
I understood. And then if I were to think about maybe like three to four big opportunities you think you have in your back pocket to drive growth, I know you mentioned like epoxy being one — sorry, epi being one, but perhaps other things that we’re not thinking about as it relates to kind of what can be kickers on EBITDA over the next two years?
Scott Sutton
Yes. Well, in the next two years, right, it’s all about growth in ECU contribution profit, right? I mean, we have some opportunities for volume growth, but it’s not about volume growth, right? We lead in volume. We can get volume any day that we want to get it. But it’s all about growth in unit profitability, because that’s the number one thing we need to be the value player and be the value leader.
Some of those things that are certainly solid growth in volume is Epoxy. And Pat spoke to that earlier, and look at some of the applications we sell into like [perming] blades on the power generation wind mills, right? We were probably the epoxy in one of every three of those that’s in the world, and that’s definitely a growing segment for us as an example. I would say some of our coordinated organics that go into next-generation refrigerants are a good source of growth for us. And perhaps the number one source of growth for us is in small caliber ammunition as there’s great positive fundamentals there on both the military side, and the consumer side as well as participation is way up.
And just as an example of that, more people are now doing shooting sports and target shooting, then they’re fishing, then they’re camping, then they’re golfing, whatever the case is. And that’s a long-term fundamental that’s driving demand right now, and it’s where we have our biggest backlog in the company by far.
November 5, 2020
Olin Earnings
Olin Announces Third Quarter 2020 Results
Wed November 4, 2020 5:33 PM|PR Newswire|About: OLNQ3: 11-04-20 Earnings Summary
EPS of $-0.1307 beats by $0.10 Revenue of $1.44B (-8.82% Y/Y) beats by $22.97M
CLAYTON, Mo., Nov. 4, 2020 /PRNewswire/ — Olin Corporation (OLN) announced financial results for the third quarter ended September 30, 2020.
The third quarter 2020 reported net loss was $736.8 million, or $4.67 per diluted share, which compares to the third quarter 2019 reported net income of $44.2 million, or $0.27 per diluted share. Third quarter 2020 adjusted EBITDA of $195.5 million excludes depreciation and amortization expense of $142.1 million, a goodwill impairment charge of $699.8 million, information technology integration costs of $25.5 million, and restructuring charges and other non-recurring costs of $7.0 million. Third quarter 2019 adjusted EBITDA was $292.9 million. Sales in the third quarter 2020 were $1,437.6 million compared to $1,576.6 million in the third quarter 2019.
Scott Sutton, President and Chief Executive Officer, said, “Third quarter 2020 sales for the Chemicals businesses increased sequentially from second quarter 2020 by approximately 17%, and sales have increased every month since the low point in April. Additionally, Olin drove sequential pricing improvement in the third quarter 2020 for chlorine and almost all chlorine derivatives and our newly established ECU (Electrochemical Unit) Profit Contribution Index improved in the third quarter compared to the second quarter. Looking ahead, Olin’s recent price increases for chlorine, epoxy resins, bleach, ethylene dichloride and chlorinated organics are expected to positively contribute to our ECU Profit Contribution Index in the fourth quarter. Fourth quarter volumes are expected to be challenged based on customer year-end inventory reductions and Olin selectively selling less into poor quality markets, slightly more than offsetting the positives from driving price increases.
“The Winchester business continued to drive improved segment earnings from strong commercial ammunition demand. On October 1st, Winchester began to operate the Lake City U.S. Army Ammunition Plant (Lake City) and expects to generate sequential incremental adjusted EBITDA of approximately $10 million in fourth quarter 2020 from both Lake City and price increases across the commercial ammunition portfolio.”
Sutton added, “Our employees are engaged in implementing a new winning model focused on leveraging Olin’s leadership across the whole ECU and ammunition landscape regardless of singular product demand.”
SEGMENT REPORTING
Olin defines segment earnings as income (loss) before interest expense, interest income, goodwill impairment charges, other operating income (expense), non-operating pension income, other income, and income taxes.
CHLOR ALKALI PRODUCTS AND VINYLS
Chlor Alkali Products and Vinyls sales for the third quarter 2020 were $755.1 million compared to $876.3 million in the third quarter 2019. Third quarter 2020 segment earnings were $37.8 million compared to $112.7 million in the third quarter 2019. The decreases in the third quarter sales and segment earnings compared to the third quarter of 2019 were primarily due to lower ECU pricing, mainly caustic soda and ethylene dichloride, and lower volumes. The decline in segment earnings was partially offset by lower raw material and operating costs. Chlor Alkali Products and Vinyls third quarter 2020 results included depreciation and amortization expense of $112.1 million compared to $122.2 million in the third quarter 2019.
EPOXY
Epoxy sales for the third quarter 2020 were $476.1 million compared to $511.6 million in the third quarter 2019. The decrease in Epoxy sales was primarily due to lower product prices and lower epoxy resin volumes. The third quarter 2020 segment earnings were $14.9 million compared to $24.2 million in the third quarter 2019. The decrease in Epoxy segment earnings was primarily due to lower product prices and lower epoxy resin volumes, partially offset by lower raw material costs, primarily benzene and propylene, and lower operating costs. Epoxy third quarter 2020 results included depreciation and amortization expense of $23.9 million compared to $26.9 million in the third quarter 2019.
https://seekingalpha.com/pr/18072103-olin-announces-third-quarter-2020-results
November 5, 2020
Olin Earnings
Olin Announces Third Quarter 2020 Results
Wed November 4, 2020 5:33 PM|PR Newswire|About: OLNQ3: 11-04-20 Earnings Summary
EPS of $-0.1307 beats by $0.10 Revenue of $1.44B (-8.82% Y/Y) beats by $22.97M
CLAYTON, Mo., Nov. 4, 2020 /PRNewswire/ — Olin Corporation (OLN) announced financial results for the third quarter ended September 30, 2020.
The third quarter 2020 reported net loss was $736.8 million, or $4.67 per diluted share, which compares to the third quarter 2019 reported net income of $44.2 million, or $0.27 per diluted share. Third quarter 2020 adjusted EBITDA of $195.5 million excludes depreciation and amortization expense of $142.1 million, a goodwill impairment charge of $699.8 million, information technology integration costs of $25.5 million, and restructuring charges and other non-recurring costs of $7.0 million. Third quarter 2019 adjusted EBITDA was $292.9 million. Sales in the third quarter 2020 were $1,437.6 million compared to $1,576.6 million in the third quarter 2019.
Scott Sutton, President and Chief Executive Officer, said, “Third quarter 2020 sales for the Chemicals businesses increased sequentially from second quarter 2020 by approximately 17%, and sales have increased every month since the low point in April. Additionally, Olin drove sequential pricing improvement in the third quarter 2020 for chlorine and almost all chlorine derivatives and our newly established ECU (Electrochemical Unit) Profit Contribution Index improved in the third quarter compared to the second quarter. Looking ahead, Olin’s recent price increases for chlorine, epoxy resins, bleach, ethylene dichloride and chlorinated organics are expected to positively contribute to our ECU Profit Contribution Index in the fourth quarter. Fourth quarter volumes are expected to be challenged based on customer year-end inventory reductions and Olin selectively selling less into poor quality markets, slightly more than offsetting the positives from driving price increases.
“The Winchester business continued to drive improved segment earnings from strong commercial ammunition demand. On October 1st, Winchester began to operate the Lake City U.S. Army Ammunition Plant (Lake City) and expects to generate sequential incremental adjusted EBITDA of approximately $10 million in fourth quarter 2020 from both Lake City and price increases across the commercial ammunition portfolio.”
Sutton added, “Our employees are engaged in implementing a new winning model focused on leveraging Olin’s leadership across the whole ECU and ammunition landscape regardless of singular product demand.”
SEGMENT REPORTING
Olin defines segment earnings as income (loss) before interest expense, interest income, goodwill impairment charges, other operating income (expense), non-operating pension income, other income, and income taxes.
CHLOR ALKALI PRODUCTS AND VINYLS
Chlor Alkali Products and Vinyls sales for the third quarter 2020 were $755.1 million compared to $876.3 million in the third quarter 2019. Third quarter 2020 segment earnings were $37.8 million compared to $112.7 million in the third quarter 2019. The decreases in the third quarter sales and segment earnings compared to the third quarter of 2019 were primarily due to lower ECU pricing, mainly caustic soda and ethylene dichloride, and lower volumes. The decline in segment earnings was partially offset by lower raw material and operating costs. Chlor Alkali Products and Vinyls third quarter 2020 results included depreciation and amortization expense of $112.1 million compared to $122.2 million in the third quarter 2019.
EPOXY
Epoxy sales for the third quarter 2020 were $476.1 million compared to $511.6 million in the third quarter 2019. The decrease in Epoxy sales was primarily due to lower product prices and lower epoxy resin volumes. The third quarter 2020 segment earnings were $14.9 million compared to $24.2 million in the third quarter 2019. The decrease in Epoxy segment earnings was primarily due to lower product prices and lower epoxy resin volumes, partially offset by lower raw material costs, primarily benzene and propylene, and lower operating costs. Epoxy third quarter 2020 results included depreciation and amortization expense of $23.9 million compared to $26.9 million in the third quarter 2019.
https://seekingalpha.com/pr/18072103-olin-announces-third-quarter-2020-results
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