Olin Corporation (OLN) Q1 2025 Earnings Call Transcript

May 02, 2025 3:30 PM ETOlin Corporation (OLN) StockOLN

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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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