Olin Corporation (OLN) Q4 2024 Earnings Call Transcript

Jan. 31, 2025 4:29 PM ETOlin Corporation (OLN) Stock

Q4: 2025-01-30 Earnings Summary

EPS of $0.18 beats by $0.21 | Revenue of $1.67B (3.51% Y/Y) beats by $125.91M

Olin Corporation (NYSE:OLN) Q4 2024 Earnings Conference Call January 31, 2025 9:00 AM ET

Company Participants

Steve Keenan – Director of IR
Ken Lane – President and CEO
Todd Slater – CFO

Ken Lane

Thanks, Steve, and thank you all for joining us today. Starting with Slide 3, I hope everyone was able to participate in our December Investor Day, whether in person or virtually. We laid out our Value Creation Strategy that optimizes our core businesses by maintaining our focus on a value-first commercial approach and streamlining our assets to achieve greater than $250 million in cost reductions by 2028. We expect to achieve $20 million to $30 million of these savings in 2025. We also explained how we will grow our core by focusing on adjacent high-return options, all while being disciplined with our capital allocation framework. Olin has a great legacy, a leading set of businesses and assets, and a bright future.

During our Investor Day, we guided the fourth quarter adjusted EBITDA at the low end of our range. However, as we closed the quarter, the downward pressure on our share price created an unexpected benefit to adjusted EBITDA and Hurricane Beryl costs came in lower than we expected. In Epoxy, seasonally lower demand was a headwind during the fourth quarter. However, this was partially offset by continued price improvement. In Winchester, domestic and international military demand remains strong. However, near-term commercial headwinds persist as commercial retailers continue to trim inventories, and consumer disposable income remains challenged.

Now let’s take a closer look at our Chlor Alkali Products and Vinyls results on Slide 4. CAPV sales were up 9% sequentially on higher volume in the absence of Hurricane Beryl and improved pricing. Our CAPV results also benefited as final Hurricane Beryl spending came in approximately $8 million below expectation during the quarter. Although we are in the midst of a prolonged industry trough, Olin continues to realize higher value than experienced previously. We continue to be disciplined with our operating rates as we navigate this challenging environment. Global caustic soda remains tight as European variable costs rise, Asian demand shows improvement, and we are coming up on the turnaround season.

Combined with seasonally lower merchant chlorine demand, we expect tightness to continue through the first quarter. At Investor Day, we announced our intention to enter the US PVC market via a tolling partnership. This has key strategic benefits, including upgrading a portion of our significant EDC capacity and unlocking incremental caustic soda volume. Longer-term, this will facilitate our strategic assessment of the PVC market and how we will deploy our industry-leading cost position to create higher value. We have received initial shipments and will realize first sales in the first quarter. Our Gulf Coast plants recently weathered Winter Storm Enzo with no material interruptions. However, many of our customers were not as fortunate, which will present a slight headwind in the first quarter.

Moving to Slide 5, we’ll take a look at our fourth quarter and full year Epoxy results. Olin’s Epoxy sales were roughly flat sequentially with improved resin pricing offset by seasonally weaker demand in both the US and Europe seeing weaker demand from the building and construction, automotive, and consumer electronics markets. Notably, during the third and fourth quarters, our team successfully completed the planned turnaround at our Stade, Germany facility. It was completed safely on time and on budget. Fourth quarter Epoxy adjusted EBITDA increased by more than 50% sequentially, largely in the absence of Hurricane Beryl impacts. During the first quarter, we expect improving demand as limited restocking begins and we see some seasonal improvement in our formulated solutions business. US Hydrocarbon feedstock costs remained favorable versus rest of the world. However, Asian Epoxy producers facing higher feedstock and freight costs continue to increase the flow of unfairly subsidized Epoxy resin into the US and Europe. We expect both a final US and provisional EU anti-dumping decision during the first half of the year.

Jeff Zekauskas

Thanks very much. So, Ken, you’ve been CEO of Olin now for almost a year. When you look back on the year and you compare your actions or your leadership direction to Scott Sutton, have there been any changes? Or do you see your tenure over the past year as a continuation of what Scott did?

Ken Lane

Good morning, Jeff. Thanks for the question. Listen, we laid out our vision for the company at the Investor Day. And as we look forward, what we see is that our leading position in both our CAPV business, the Epoxy business, and the Winchester business, we’ve got a lot of opportunity to do things that are well within our control to optimize that. We talked about reducing our costs by $250 million. And a lot of that is related to us cleaning up the asset footprint that we’ve got to remove some of the assets and optimize some of the sites that we’ve got to make them more efficient and to reduce our fixed and variable costs at those sites. Those are things that we’re going to be able to control and deliver on, and I’m convinced that we will. And then you look at the business model that we operate. We’re going to continue to stay focused on being a leader in the industry. And what that means is that we’re going to continue to be disciplined. We’re going to continue to watch our operating rates and we’re going to be focused on value. We don’t see the need to get overly aggressive in terms of volume. I said it just a minute ago, we don’t think that where we are today, there are opportunities for reinvestment economics. We think that we’re far away from that. So we believe that as long as we continue to be disciplined, we can hold value relatively flat versus where we were last year. And as the market comes back, we have the coiled spring and we’ve got a lot of value ahead of us. And as we see the trough — as we come out of the trough, we’re very well-positioned to realize a tremendous amount of value as a company from that. So we’ve got a bright future just around optimizing our core. And then you think about some of the options that we described around growing the core. So we’re entering the PVC resin market here in the first quarter. That’s a way for us to begin to test and learn more about that market to be able to position the future of a very strong set of assets that we have to make Vinyls down at Freeport. And so that creates a great opportunity for us. We talked about building on our bleach position, and we talked about building on our Winchester position and leveraging off of our chemical expertise into some very attractive markets that we think have got strong growth and strong returns for the long term. So that’s our vision for the future is to stay focused on optimizing and growing, and I’m really excited about getting after that and continuing to deliver on that strategy.

Duffy Fischer

Hey, good morning, guys. Just a question around the potential change in trade flows from the tariffs and anti-dumpings around Epoxy. What have you seen so far? Obviously, some of your customers are calling out higher Epoxy prices already. But what do you think is going to happen if the ask that you guys have put forward happens, what do you think that will do to trade flows and what do you think that will do from incremental pricing from here forward?

Ken Lane

Good morning, Duffy. Great question. Listen, it’s a little bit different for Epoxy. Europe is a very large Epoxy market. So once the duties go up there, that’s going to be that’s going to be a good thing for the European market and our position in Europe. It’s not like some other markets that you may think about where there are other large sinks of volume. I do think that between Europe and the US, once you put duties there, it is going to drive prices higher in the short term. And when you look at the cost structure around Chinese producers, they were already dumping product and frankly not making money. The situation is getting worse there. So if their costs continue to rise, you may actually just see the production slow down or even or even shut down. I’m not predicting anything is going to happen for sure, but certainly, the economics are not favorable for them to continue to operate where they are and they’ve added a lot of capacity. So I don’t know that it’s as much about product just shifting around and flowing into different regions, because the largest consuming regions are really US and Europe. I think it’s going to be more about rationalization over the mid-term of capacity that’s not competitive. And you’ve already seen some of that in Asia. So, you saw some capacity announced being shut down just in the past couple of weeks. So that’s how the cycle works. The strong are going to survive and the weak aren’t. I think it’s going to be more that story than it is going to be just things are going to move to different regions in Epoxy.

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