Olin Epoxy Results
Olin Announces Second Quarter 2018 Earnings
- 18 H and 33 min ago
CLAYTON, Mo., July 31, 2018 /PRNewswire/ — Olin Corporation (NYSE: OLN) announced financial results for the second quarter ended June 30, 2018.
The second quarter 2018 reported net income was $58.6 million, or $0.35 per diluted share, which compares to the second quarter 2017 net loss of $5.9 million, or ($0.04) per diluted share. Second quarter 2018 adjusted EBITDA of $325.4 million reflects depreciation and amortization expense of $150.7 million, restructuring charges of $6.4 million, information technology integration and other costs of $11.8 million, and a non-cash impairment charge of $21.5 million. The second quarter 2018 (losses) earnings from non-consolidated affiliates includes the non-cash impairment charge, which relates to an adjustment in the value of Olin’s minority interest in a natural gas storage business. Second quarter 2017 adjusted EBITDA was $180.3 million. Sales in the second quarter 2018 were $1,728.4 million compared to $1,526.5 million in the second quarter 2017.
John E. Fischer, Chairman, President and Chief Executive Officer, said, “The second quarter of 2018 represented the highest level of adjusted EBITDA since the acquisition of the DowDuPont Chlorine Products businesses. Strong performances by both the Chlor Alkali Products and Vinyls and Epoxy businesses contributed to this outcome. We achieved this result while completing the majority of our 2018 planned maintenance turnarounds during the second quarter. We expect the maintenance turnaround expense during the second half of 2018 to decline by approximately $135 million from first half levels. In addition, we expect 2019 maintenance turnaround expenses to decline approximately $30 million to $40 million from 2018 levels.
“Caustic soda prices in Olin’s system increased approximately 5% in the second quarter of 2018 compared to the first quarter and domestic caustic soda prices are expected to increase further in the third quarter. Olin continues to believe that caustic soda is in a multi-year positive cycle that began in the middle of 2016. The combination of steady global demand growth, chlor alkali capacity reductions in North America, Europe and China over the last two years, and minimal capacity additions support the continued caustic soda cycle. Our expectation is for further improvement in caustic soda pricing during the next several years.
“The positive supply and demand dynamics in the epoxy resin markets have continued, providing a constructive near term outlook for the Epoxy business. However, higher propylene costs than were experienced in the first half of 2018 are expected to represent a challenge in the second half of 2018.
“Based on the adjusted EBITDA achieved during the second quarter of 2018 and the positive outlook for the business, we are increasing our 2018 adjusted EBITDA forecast to $1.3 billion with upside opportunities of approximately 4% and downside risks of approximately 4%.”
Olin defines segment earnings as income (loss) before interest expense, interest income, other operating income (expense), non-operating pension income and income taxes and includes the (losses) earnings of non-consolidated affiliates in segment results consistent with management’s monitoring of the operating segments.
CHLOR ALKALI PRODUCTS AND VINYLS
Chlor Alkali Products and Vinyls sales for the second quarter 2018 were $1,018.7 million compared to $865.1 million in the second quarter 2017. The increase in the second quarter sales compared to the prior year was primarily due to increased caustic soda, chlorine and other chlorine-derivatives pricing, and higher volumes, partially offset by lower ethylene dichloride pricing. Second quarter 2018 segment earnings of $149.4 million improved compared to $52.8 million in the second quarter 2017, primarily due to higher pricing for caustic soda, chlorine and other chlorine-derivatives, higher volumes, lower maintenance turnaround costs, and lower ethylene costs. These items were partially offset by lower ethylene dichloride pricing and higher raw material and freight costs. Chlor Alkali Products and Vinyls second quarter 2018 results included depreciation and amortization expense of $119.4 million compared to $106.6 million in the second quarter 2017.
Second quarter 2018 segment results include a $21.5 million non-cash impairment charge related to an adjustment to the value of Olin’s 9.1% limited partnership interest in Bay Gas Storage Company, Ltd. (Bay Gas). Bay Gas owns, leases and operates underground gas storage and related pipeline facilities, which are used to provide storage in the McIntosh, Alabama area and delivery of natural gas. The general partner, Sempra Energy, has made a decision to sell several assets including its 90.9% interest in Bay Gas. The impairment charge adjusts the related assets’ carrying value to an estimated fair value. Olin has no other non-consolidated affiliates.
Epoxy sales for the second quarter 2018 were $543.8 million compared to $492.0 million in the second quarter 2017. The increase in Epoxy sales was primarily due to higher product prices, partially offset by lower volumes. The second quarter 2018 segment income was $24.8 million compared to a segment loss of $8.1 million in the second quarter 2017. The increase in the Epoxy segment earnings was principally due to higher product prices, partially offset by higher raw material costs, primarily benzene and propylene, and lower volumes. The second quarter 2018 Epoxy segment earnings reflected $20.8 million of maintenance costs and unabsorbed fixed manufacturing costs from lost sales associated with an approximately two-month planned maintenance turnaround that began in the first quarter at our production facilities in Freeport, Texas. Epoxy second quarter 2018 results included depreciation and amortization expense of $25.1 million compared to $22.8 million in the second quarter 2017.