Olin Corporation

Good morning and welcome to the Olin Corporation second quarter 2020 earnings conference call. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star then one on your touch-tone phone. To withdraw your question, please press star then two. Please note this event is being recorded. I would now like to turn the conference over to Steve Keenan, Olin's Director of Investor Relations. Please go ahead.

Good morning, everyone, and thank you for joining us today. Before we begin, let me remind you that this presentation, along with the associated slides and the question and answer session following our prepared remarks, will include statements regarding estimates of future performance. Please note that these are forward-looking statements and that actual results could differ materially from those projected. Some of the factors that could cause results to differ from our projections are described without limitation In the risk factors section of our most recent Form 10-K, the second quarter 2020 Form 10-Q, and in yesterday's second quarter earnings press release. A copy of today's transcript and slides will be available on our website in the investors section under past events. The earnings press release and other financial data and information are available under press releases. With me this morning is John Fisher, Olin's Chairman, President, and Chief Executive Officer. Pat Dawson, Executive Vice President and President of OxyInd International, Jim Varlick, Executive Vice President and Chief Operating Officer, and Todd Slater, Vice President and Chief Financial Officer. We will begin with brief prepared remarks, and thereafter we will be happy to take your questions. I will now turn the call over to John Fisher. John?

Thank you, Steve, and good morning, everyone. I hope you and your families are keeping safe and healthy during these challenging times. Olin shared our second quarter results last night. We'll keep our remarks this morning to a minimum in favor of addressing your specific questions. I'll start on slide three. COVID-19 related demand losses were first seen in our chemical portfolio in March. The demand impact continued through early June before showing signs of recovery. was compounded by two large planned maintenance turnarounds that took place early in the quarter. These included a one-in-every-three-year vinyl chloride monomer turnaround and a one-in-every-five-year free-port epichlorohydrin turnaround. As a result, April and May were Olin's weakest volume months in the chloralkylide products and vinyls business. Overall, Olin's chemical business sales increased each month during the quarter from the April low point. Thank you for joining us. We plan to continue to temporarily idle plants to minimize operating costs. Third quarter 2020 will benefit from improved volumes, lower maintenance turnaround costs and higher product prices compared to the second quarter. We are forecasting third quarter 2020 adjusted EBITDA that is more than double second quarter 2020 levels. Let's now turn to slide four. The most significantly impacted end uses for our products include automotive, aerospace, construction, and oil and gas. Chlorine demand from urethane and isocyanates customers represented our largest volume decline during the second quarter, and that demand outlook still remains challenged. Chlorine sold into titanium dioxide, which held strong through the first quarter, began to weaken during April and is now below historic trend. We have seen Olin's dichloride pricing improve during the third quarter. Our second quarter epoxy resin volumes decreased by approximately 30%, both sequentially and year-over-year, across both Europe and North America, impacted by weak customer demand from automotive, industrial coatings, and oil and gas. We are now one month into the third quarter and have seen an increase in vinyls and isocyanate demand and a slower paced recovery in resins and urethanes. On the caustic side, inorganic end uses are recovering The current environment across our chemical businesses is still marked by uncertainty and volatility. Future demand visibility on both sides of the ECU remains uncertain. Our customer order patterns have been and remain erratic and heavily influenced by their customers and supply chain inventories. As a result, are equally likely that Olin's year-end 2020 caustic soda price will be higher than or lower than our July 2020 pricing. Now let's talk about Winchester, which is on slide six. For the fourth consecutive quarter, the Winchester business experienced year-over-year segment earnings growth. In the second quarter of 2020, Winchester experienced a 17% increase in sales compared to the same quarter last year, resulting in a 61% year over year increase in adjusted EBITDA. These year over year increases were due to higher commercial ammunition sales volume and improved pricing. The second quarter of 2020 represented the strongest quarter in commercial demand since 2016 and we expect this elevated level of commercial ammunition demand to continue at least through the balance of the year. Winchester has significantly reduced inventory levels responding to this surge. The lower level of inventory in the business will limit our ability to meaningfully increase our commercial ammunition sales volume during the third quarter. Following the April 1st price increase, Winchester announced an additional 2020 commercial ammunition price increase effective August 1st. Moving to slide seven, I'll provide an update on Winchester's Lake City project. Winchester will assume operational control of the U.S. Army's Lake City Army Ammunition Manufacturing Facility on October 1st. This multiyear contract is expected to increase Winchester's annual revenue by $450 to $550 million and increase annual adjusted EBITDA for Winchester by $40 to $50 million. Based on the transition work performed to date, Thank you. Thank you. and expected $35 million reduction in annual operating costs from the permanent shutdown of a chloralkali plant with capacity of 230,000 tons and the associated vanillidene dichloride production facility, both in Freeport, Texas. These closures are expected to be completed around year end and will enable OLA to optimize its Freeport, Texas chloralkali operations and cost structure. The winding down of the multi-year information technology projects integrate the acquired Dow Chlorine Products businesses, which is forecast to reduce spending by approximately $110 million annually, split between capital and expense. This wind down begins in the fourth quarter of this year. These after-tax cash flow enhancements of approximately $200 million per year are generally independent of industry conditions. The EBITDA benefit is approximately $140 million annually. Now I would like to turn the call over to Todd Slater, owner and CFO.