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spk01: 21 earnings conference call. All participants will be in listen-only mode. Since 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 enjoy your question, please press star then two. Please note, today's event is being recorded. I would now like to turn the conference over to Steve Keenan. and was Director of Investment Relations. Please go ahead, Steve.
spk17: Thank you, Rocco. Good morning, everyone, and thank you for joining us today. Before we begin, let me remind you that this discussion, along with the associated slides and the question and answer session that follows, will include statements regarding estimates or expectations 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 actual results to differ from our projections are described without limitations in the risk factors section of our most recent Form 10-K and in yesterday's fourth quarter earnings press release. A copy of today's transcript and slides will be available on our website in the investor section under past events. Our earnings press release and other financial data and information are available under press releases. With me this morning are Scott Sutton, Olin's CEO, and Todd Slater, Olin's CFO. Olin's business presidents will rejoin our first quarter earnings call. Scott will begin with some brief remarks, after which we will be happy to take your questions. I'll now turn this call over to Scott Sutton.
spk14: Thanks, Steve. 2021 was a solid year for Olin. I'm extremely proud of the complete Olin team for establishing that this company can deliver expected profitability and cash flows. Driving that 2021 performance stake in the ground was critical to our future improvement, as there were many temptations to a falling back into a historical peak trough experience. However, we resisted all of those temptations and instead demonstrated the commitment to our leadership model of lifting Olin's system value above all else. Now, and as called out on slide number three, It is time to demonstrate that we have broad control over improving our value delivery in 2022 and that we have multiple 2022 and 2023 growth vectors in all three of our businesses. As shown on slide number four, we set our market participation according to the weaker side of the ECU. And consequently, we were able to lift our value on both sides of the ECU through 2021. We won't sell into a poor quality market. And in fact, we are pressing that principle more than ever heading into 2022, as shown on slide number five. Instead of choosing to produce and sell incremental volume and negatively impact our market quality, we are instead reducing our capacity utilization and purchasing product liquidity from the market to satisfy our participation level. This is one tool to prevent a traditional negative cycle for Olin and bridge to the future favorable supply-demand structural thematic. Slide number six shows our increased purchase of global liquidity as our parlaying activities grow. For the moment, those parlaying activities primarily serve to complement our leadership model of lifting our system value, but those activities will additionally serve all and well in the future as we grow and we require volume produced outside of our asset perimeter. The favorable supply-demand structural thematic is upon us, and as shown on slide number seven, as the world appears to be under-investing in ECU capacity on the order of 17 world-scale ECU plants over the next six years. This forecasted under-investment comes at a time when clear, positive demand megatrends solidify, as shown on slide number eight. This same scenario impacts epiclorohydrin as well as base ECUs. Moving to slide number nine, The impacts, activities, and outcomes for Olin are clear. The forward structural thematic suggests demand growth is much greater than supply growth. We have taken many actions to improve our system value, and we expect to become the world leader in global liquidity as well. The result is that Olin defeats the cycle, expects to deliver $8 billion of levered free cash flow over the next five years, approximately equal to our current market capitalization, and achieves the improved valuation multiple we deserve. All three of our businesses succeed in materializing their clear growth vectors. Winchester grows shooting sports participation via the Shoot United mission and grows its military business via the demands of the next generation squad weapons. Epoxy grows its upstream value impact in both aromatics and epiclorohydrin and grows its downstream value impact via additional engineered solutions volume into clean energy, composites, and infrastructure. And CAPV becomes the largest buyer of global liquidity and grows by matching our significant excess vinyl upstream capability in EDC and VCM with the right PVC players. These and other growth vectors will become a key subject of future earnings calls. None of this is 100% possible without a platform that is sustainable at Olin. We must have the right ESG program, so we have decided to raise the bar on some of our targets shown on slide number 10, after having met many of our initial ESG goals earlier than targeted. There is more to come here as our stakeholders continue to ask for enhancements in our ESG public profile, and we will continue to upgrade our contemporary scorecard on slide number 11. So, that concludes my opening comments. So, Rocco, we're now ready to take questions.
spk01: Thank you. If you would like to ask a question, please press star then 1 on your touch-tone phone. If you're using a speaker phone, we ask that you please pick up your handset before pressing the keys. To answer your question, please press star then 2. Today's first question comes from Hassan Ahmed with Olympic Global. Please go ahead.
spk00: Morning, Scott. Scott, a question on 2022 EBITDA guidance, the $2.5 to $2.8 billion that you guys have guided to. Look, as I took a look at slide 16, you know, I mean, where you listed all the different products that you guys have, I mean, apart from aromatics, it pretty much seems that you guys have price hikes, you know, on the table, you know, for Q4 and Q1 across the board. X aromatics, of course. So I'm sitting there thinking that, you know, with you guys logging 2.5, 2.6, slightly north of 2.5 billion in EBITDA in 2021, I mean, that 25 to 28 seems pretty conservative if, you know, most of those price hikes take effect. So, I mean, am I thinking about these things the right way?
spk14: Well, Hasan, if you look at exactly where we are today, right, we're being successful at lifting price and lifting product value. But, you know, there's been some caution around, market quality, so we're not participating as much. So in addition to not participating as much in a little weaker market, you know, we're also not operating our facilities as much as we might as well. So we're additionally buying material or product liquidity out of the marketplace to satisfy our needs. So those are some current offsets. to what's going on with pricing. But, you know, to your point, I mean, the only way that we end up, you know, at a $2.5 billion mark is for these gully conditions that we're in right now to continue. You know, the outlook looks better than that.
spk00: Yep, makes complete sense. And I also appreciated the sort of five-year levered free cash flow guidance of $8 billion that you guys gave and you know, talking about being able to buy the company within five years, you know, at those rates. So my question is, you know, when I parlay that with the supply-demand outlook that you guys gave, you know, obviously, you know, demand majorly outstripping supply growth, right, which to me means obviously there'll be a resilient sort of earnings trajectory on a go-forward basis. You won't really see much volatility, which obviously means that that that should have a positive impact on your valuation multiple, right? So my question really is, with the outlook the way it is for supply-demand, do you feel that quarter after quarter, as you guys keep sort of showing resilient sort of earnings, you will get a sort of bump up in your multiple? Or at some stage, you just sit there and get frustrated and say, I'm just going to move away from the public domain?
spk14: Well, yeah, I think you saw that in fourth quarter, of course, we bought back a number of shares. We're leaning into that even harder. The scenario is set up where 2022 is likely better performance than 2021, and 2023 is likely better performance than 2022. So even in 2022, we're looking at levered free cash flow liberation of about $1.6 billion. So just call that $10 a share. So it's greater than a 20% yield. I mean, I think the dilemma we have is that the forward valuation set up is for an imaginary cliff. That cliff just doesn't exist. So yeah, I think we have a great opportunity. It's the best investment we have is to buy ourselves.
spk00: I like that imaginary cliff analogy. Thanks so much, Scott. Sure.
spk01: We have another question today. It comes from Mike Sisson with Wells Fargo. Please go ahead.
spk08: Hey, good morning, guys. I guess my question is can you maybe help us better understand when it makes sense for Olin to produce Caustic or EDC versus sort of trading it, procuring it? I know And maybe how much volume sort of goes into that calc? I mean, obviously, you're going to still produce a lot, but is there sort of a swing volume that you will sort of move around to make that trade? And then what do you think the benefit was in the fourth quarter in terms of either margin or EBITDA?
spk14: Yeah, sure. Hi, Mike. I mean, look, sometimes it's just more effective to buy. I mean, I get your question on... you know, how do you know how much, right? And a lot of things go into that analysis for us, but any time we see signs of, you know, a poor quality market developing, we're likely to pull back a bit. And, you know, you may have noticed that we do have a slide in the deck now where we're trying to give some quantification around that. So in the fourth quarter, you know, it was roughly about 12% of our sales volume, and that is sales volume for any products that are ECU-oriented or ECU-based derivatives, which is most of our volume. I think that number got up to about 12%, 12%. So in the fourth quarter, Mike, the direct benefit of that is a disbenefit. I mean, that cost us a lot to do that. But what it is is a benefit for the future. It's a benefit for 2022 because we're just not going to sell into a poor-quality market, and we're going to continue to improve the value of the ECU and ECU derivatives, and that's not a one-quarter play. We could have not made those moves in the fourth quarter and produced a bigger result. but that could have led to a lower outcome in 2022 and 2023. So there's a lot that goes into that.
spk08: Got it. Okay. And then just as a follow-up on your ECU calc, it's more than doubled since you've been presenting it. You continue to say it's undervalued. At what level would you say it's fairly valued or above? And then when we get to that level where you think it's, where you're getting the right value for your volume, is that sort of the number where you consider, you know, maybe adding some capacity given that, you know, demand is going to be a lot stronger over the next couple of years?
spk14: Well, yeah, I mean, the value has, you know, become better, man. I would say it, you know, it gets even more barely valued when there's recognition that, again, there's no imaginary cliff there, that we've set it at a value that doesn't cycle up and down. You know, then we'll feel a bit better about it. As far as adding capacity, right, we don't have plans to be adding capacity through an organic means. In fact, you know, we're practicing a bit at our parlaying activities because when we do grow and we have a number of growth vectors in place, We'll rely on that skill that we're developing today to go out and access liquidity in the world that is actually produced on others' assets to support our growth.
spk08: Got it. Thank you.
spk14: Sure.
spk01: And our next question today comes from Jeff Sikoskis with J.P. Morgan. Please go ahead.
spk16: Thanks very much. Is EDC... a more challenging opportunity in 2022 because of the deterioration in Asian PVC prices?
spk14: Hey, Jeff, that's a good question. And so we've seen this movie before. In fact, in the middle of 2021, there was a point where you saw some deterioration in PVC pricing, which tended to drag you know, some deterioration in EDC. But again, when we see a poor quality market developing, we just don't sell into it, and maybe we go out and buy some material to satisfy needs, or we redirect those molecules to other places in our ECU chain, which is exactly what we did in the middle of the year. So here, you know, you sort of see the same scenario happening where PVC in Asia is coming off some, and so we have to adjust our model in real time, which we've done. You don't see the same phenomena affecting PVC in North America and Europe, though.
spk16: If PVC prices in North America and Europe came in, wouldn't that represent additional challenges? And when you redirect your molecules away from EDC, where do you direct them to?
spk14: Yeah, I mean, you're right, Jeff. I mean, that could present some other opportunities, right? So there, you know, we'd have to shift our model dynamically, and we would, you know, reallocate to potentially other areas. And there's lots of other areas to reallocate to, but it's very possible that... you know, we slow down a bit on one side of the ECU, and even though we're not redirecting more molecules into the marketplace, we are getting a lot more value from the other side of the ECU. In fact, caustic could turn out to be really good in that scenario.
spk16: Okay, great. Thank you so much.
spk01: And our next question today comes from Kevin McCarthy of Vertical Research Partners. Please go ahead.
spk06: Good morning. Scott, I was wondering if you could elaborate on your outlook for Winchester along three lines, volume outlook, pricing, and costs for 2022 versus 21.
spk13: Yeah, sure.
spk14: I mean, of course volume is solid in the Winchester business, and we have certainly a heavy commercial market backlog already. But on top of that, right, we have an initiative called Shoot United where we're going out and trying to grow the total number of participants, you know, in this wholesome sporting activity. If you just look at what happened in 2020, you know, there are effectively 8 million new shooters added to the rolls. And if you look at what happened in 2021, there was nearly 6 million additional new shooters added to the role. So now we're up around, you know, 60 million people in this country enjoying this sport. In fact, it's one of the fastest growing high school sports in the country. So what, you know, we're going to do is go out and grow participations. So we expect volume to stay strong. I won't say that we'll have large multiples of volume expansion because we're running pretty hard in that business already. As far as pricing goes, we have another price increase on the table here in the first quarter. A lot of that will go to offsetting some cost increases that we do have, especially across our metals portfolio.
spk06: Okay, and then I'm tempted to ask you about the sequential trend in epoxy. Prices have hung in quite well, I think, as the fourth quarter progressed. How are you thinking about sequential earnings taking the cost side into account?
spk14: Well, I think we've called out that we expect net-net our total chemicals earnings to be close to flat and going into one quarter versus fourth quarter. In epoxy, we are facing some cost pressures just like we are in some of our other businesses. That's the business where we're pressing our model harder than any other place. There were some signs of poor quality conditions temporarily developing, especially in the northern hemisphere in the wintertime when there's not as many coatings needed. So, you know, we did slow down our rates and we did, you know, execute some parlaying activities. And what we're really doing there is just trying to bridge through that gully. Because really, if you think about demand in 2022, it's absolutely robust. And you think about the categories of that, you know, marine coatings look good, composite work and light weighting in automobiles, you know, wind blade activity for turbines, Very, very bullish there, and infrastructure isn't going to hurt us at all either.
spk06: Very helpful. Thanks a lot.
spk14: Sure.
spk01: And our next question today comes from Frank Mitch with Permium Research. Please go ahead.
spk02: Good morning, gentlemen, and nice end to the year. I noticed that there was a press release that you guys shut down a bleach facility out on the West Coast. I was wondering if you could talk about the factors behind that and what your general outlook is for the bleach market.
spk14: Yeah, sure. We did shut down or we've announced the closure of the capacity in a facility there in Northern California. The reason we did that is just that bleach is undervalued there. We still have a lot of bleach capability left across the the country, but it's undervalued and it gives us the opportunity to allocate those ECUs back into higher value applications. So that's the reason for it.
spk02: Gotcha. That makes sense totally in keeping with your philosophy. And given the undervaluation of your shares and clearly buybacks are going to play a nice role here in 2022, I was wondering if you guys had any consider giving some thoughts on an accelerated share repurchase program.
spk15: Right. This is Todd. I think as Scott may have mentioned earlier, as you saw in the fourth quarter, we bought roughly $184 million worth of stock early in 2022. You should expect Olin targeting a key use of our pre-cash flow towards share repurchases and you know, probably, you know, leaning in a little heavier than what you saw in the fourth quarter.
spk02: Okay, gotcha. Understood. Thank you.
spk01: And our next question today comes from Arun Viswanathan with RBC Capital Markets. Please go ahead.
spk09: Great. Thanks for taking my question. Yeah, congrats on all the progress. I guess I'm just curious, maybe you could just walk us through some of your statements earlier. You said that there were 17 ECU plants that potentially demand would be necessary over the next several years. Where are we on replacement cost economics right now? Does it make sense that some of those plants start to get announced? pretty soon, and if not, would you expect maybe some brownfield operations or expansions to get announced as well? How are we thinking about new capacity here?
spk14: Hey, Arun. Yeah, I mean, if you could build an isolated ECU plant, right, we're starting to get closer to reinvestment economics. But the reality is that doesn't make a lot of sense to do that just because of the challenges around elemental chlorine. So you really have to attach it to or build a complete integrated complex. And, you know, right now, an integrated complex, it's unlikely to match reinvestment economics. But I would just say that that's not even the biggest driver here now. I mean, there's so many ESG considerations on where the energy, being the biggest input for a chloralkala plant, comes from. And so it's challenging to make a decision about to increase your carbon footprint. So now you've got the added cost of renewable energy as well that goes into those investment decisions. So I would say it's not improbable, I guess, that there could have been some expansions on the table that might not be on the table anymore just because of the ESG trends.
spk09: Great. Thanks. And, um, as a follow up, uh, maybe I can just ask a question on the proxy. there has been a notable improvement in epoxy margins over the last year or two. I guess, do you see this level as kind of the new structural level of earnings power within that business? Should we expect margins to remain north of 20% on an EBITDA basis from here on? Are you kind of implementing a similar ratchet strategy of preserving value in that business as well?
spk14: Our expectation for margins in epoxy is for them to expand from where we are in the fourth quarter. There's just so many upsides in that business. We haven't fully implemented our model across the upstream part of that business. But, you know, the great fundamentals around some of the demand factors that I talked about before, especially as we bridge this fourth quarter and first quarter gully that we're working ourselves through, you know, I expect, you know, mid-year that business to be rocking.
spk09: Okay, thanks.
spk01: And our next question today comes from Steve Byrne at Bank of America. Please go ahead.
spk03: Scott, those comments you just made about the challenges to building an integrated ECU complex would seem to be even greater for your customers, and thus their interest in back integrating into chlorine would be extremely low. And that's what seems to enable you to use your your epi business, and since you're also downstream into epoxy, you leverage that to drive these tolling agreements with these epoxy customers. Could you not also do that with EDC if you got into the PVC business? You could leverage that EDC position with non-integrated PVC customers or potentially MDI since you're also into aromatics or chlorosilane? Or do you see opportunities to do this and leverage that chlorine business you have and your customer's lack of interest in back integrating?
spk14: Yeah, thanks a lot for the question, Steve. Yeah, and look, you're exactly right. I mean, this is an upside for the company. And, you know, you're going to hear us shift more of our discussion to these growth vectors. And one of the growth vectors that, you know, we will be talking about, you know, is the one I mentioned in some of my opening comments where This is an area, in other words, upstream vinyls, being EDC and VCM, where we have significant extra capability and certainly incremental capability where we might could match up very well with the right PVC leaders. And that same thing can apply potentially to other chlorine derivatives, and this is a great way to grow the company.
spk03: Okay, and also wanted to get your update on some of these legacy chlorine contracts that you've talked about not renewing on expiry. Did some of those roll off at the end of the calendar year, and are there more to go on that?
spk14: Yes, some of them did roll off, so we set those back to, you know, freely negotiated. And there's still some more that we have that continue throughout 2022, but now it's the minority of our business, you know, is still attached to sort of the non-functioning type of index out there.
spk03: Thank you.
spk01: And our next question today comes from John Roberts at UBS. Please go ahead.
spk19: Thanks. On slide six, the parlay volume tracker, how diversified is that today across the opportunities, or is it relatively concentrated? And could you talk a little bit more about what Winchester is doing there? I think it's largely Russian imports into the U.S. of ammo. Is that what they're doing, or is it something else?
spk14: Well, your first question, right, how diversified are we across the chemicals business? We're quite diversified. There may be one or two of our products where we don't necessarily do parlaying activities, but it's actually a very broad base there, and we had just put a few examples on the slides. As far as Winchester goes, the phenomena going on with Russian imports, right, and Russia has been the largest importer of ammunition. Of course, you know, their additional import permits are terminated. So there's a phase down of imports that would be allowed to come in from Russia. that's actually not the volume that we've purchased for our needs. We've purchased some other imports for our needs. So out in the future, we're likely to be a little bigger player in purchasing imports, and there's likely to be total less imports as well because of the country not accepting Russian imports out in the future.
spk19: Okay. And then what's the strategy for the aromatics assets? I'm guessing they're among the lower return assets in your portfolio. Yeah.
spk14: Well, you know, I mean, aromatics is an important upstream business for us. You know, in fact, you know, we have one of the largest humine plants in the world, produce phenol and acetone and BPA. And some amount of all of those we sell into the merchant market Some other amount we use in our downstream businesses, and we just haven't talked a lot about it. The production of phenol and acetone is very interesting. It's a lot like the ECU, right? They're co-produced. We haven't applied our co-production commercial model yet, yet, fully yet, to phenol and acetone. Of course, we're not near as large a player, and we're not the leader in that business, but we do expect to get some upside out of advancing that.
spk19: Great. Thank you.
spk11: Sure.
spk01: And our next question today comes from Eric Petrie with Citi. Please go ahead. Hi. Good morning, Scott and Todd.
spk17: Hi. Great.
spk05: Can you talk a little bit about the opportunity that you have to sell caustic soda and the EVs and battery, the cathode? How large of an opportunity is that, and are those customers asking for a greener caustic soda?
spk14: Well, yeah, I mean, the opportunity continues to grow, and a lot of the opportunity has to do with mining activities or extraction activities for lithium and other metals that go into batteries. So that's on a fast upward trajectory. Today it's not a massive part of our business, but more than likely if you look in the range of five years-ish, maybe a little bit longer, it's actually going to be one of the larger consumer's of costing in the world. And it's one of the items that is driving ECU demand growth and why demand growth is certainly climbing faster than supply growth. It's an important area for us.
spk05: Okay, helpful. And then as you run your models for this year, how much could your volumes be down And similarly, do you expect kind of your parlay volume to stand this low to mid-teens range?
spk14: Well, you know, we haven't, of course, given a number on whether volumes will go down. Net-net-net across 2022 versus 2021, you know, you shouldn't think that our self-production volumes are going to decline because that's actually unlikely that that happens. I think in our parlaying or purchasing activities of, you know, third-party liquidity, that that'll change quarter to quarter depending on how we're running our model. I'm doubtful that it goes much above this sort of, you know, 10 to 15 percent range that you see it in now. But in any quarter where some weakness shows up, that's when you'll see it peak to those levels.
spk05: Thank you.
spk01: And the next question today comes from Alex Supremo with KeyBank. Please go ahead.
spk18: Thank you. Good morning, everyone. Scott, you earlier talked about EPI. Sorry, on one of the slides, you show EPI continuing to rise. Do you think, sorry, PCI continuing to rise? Do you think PCI will be up in the first quarter, and then should we expect a plateau or continued increases in the PCI in the rest of the year?
spk15: Alexi, this is Todd. We would expect the ACU PCI to continue to improve in the first quarter of 2022 from the fourth quarter, and obviously as we're running our model, it is all about value, and so you should expect that That is going to be the key area of focus as we move from where we are today on into the rest of 2022.
spk18: Thanks, Todd. And the second question is on Appy. You've earlier talked about potentially big repricing opportunity or value enhancement. Can you talk about progress here and also if you have any legacy contracts here similar to Chlorine that may go beyond 2022? Sure.
spk13: Yeah, sure.
spk14: I mean, on epiclora hydrin, you know, I'll just start with the fact that, yeah, we do have some legacy contracts. And just like chlorine, we're working our way through that. We're not as far down the path as we now are on chlorine with the calendar year turning over. But what I will say about epiclora hydrin, right, it's we're likely to participate less in the merchant market relative to our chlorine merchant market participation. I mean, it really is about using that epichlorohydrin as a scarce resource that's really valuable to Olin's downstream operations, and that's where most of it gets directed.
spk01: Thank you. And our next question today comes from Matthew Blair, a tutor at Pickering and Holt. Please go ahead.
spk12: Hey, good morning. Thanks for taking my question. Circling back to the EV discussion, do you have a number on how many pounds of oil and product you could eventually put on an EV compared to how many pounds that you currently put on an ICE vehicle?
spk13: Yes.
spk14: It's a good question. I don't have the exact number, but one consideration there is that even in internal combustion vehicles, the amount of controls and electronics has continued to grow. So even on those, the need for printed circuit boards, you know, i.e. going back to copper-clad laminate, going to epoxy, has continued to grow. The good news is that on EVs, it's probably double that as well. So, you know, the trend is positive in both areas. There's nothing but good news there for epoxy that goes into, call it, printed circuit boards. The only limitation we really have now is driven by supply chain issues, and it's supply chain issues around chips that go on printed circuit boards.
spk12: Right, right. Okay, and then is there any update on your chlorine sales into the TO2 market? Have you shifted away from that market, or are you starting to get higher values into that market?
spk14: Well, we've changed our supply mix. Some where, you know, that's still an area where it's, you know, a lower value outcome for us. So we have changed our mix a bit. But we've also been successful being able to get more value there as well.
spk12: Great. Thank you.
spk01: And our next question today comes from Angel Castillo with Morgan Stanley. Please go ahead.
spk10: Good morning. Thanks for taking my question. Scott, just a question on, you know, what we've been seeing around epoxy. I think Trace Sources have maybe talked a little bit more about potential risk of imports. And you talked about a poor or, I guess, a weak or quality market and maybe more activations around the epoxy business. So, curious, as you think about, you know, go forward and reducing the fidelity of the segment and the business overall, How do you prevent from becoming, you know, a little bit more, where I guess acting more like a marginal producer where you're reducing your operations and, you know, incentivizing others to import more product into any given region?
spk14: Yeah, in epoxy, I mean, what's... You know, what's happening now, I wouldn't want you to sort of extend that into a permanent pattern for the future, right? There's been, you know, a large value change in the epoxy chain, and then, you know, you sort of run into an end-of-the-year, you know, winter in the northern hemisphere scenario and That's what we had called out in our third quarter earnings is that that would happen in fourth quarter, and it did. So when these things happen, you do have the opportunity to go get slugs of material that come out of Asia. But those are always temporary, and they're going to be temporary again. And we are getting our sales partnered up with the right customers for the future and And it's not about just epoxy resin. I mean, no doubt demand for epoxy resin is certainly growing. And there can be some supply expansions, you know, in the epoxy world as well. But it all goes back to epiclorohydrin. Most of those supply expansions, you know, are limited by epiclorohydrin, which is where we focus a lot of our landscape activities on.
spk10: That's very helpful. Thank you. And then one thing that struck me, I guess, was they mentioned, you know, becoming the largest ECU buyer. So as we think about your ratchet strategy and continuing to, you know, increase the value of your ECU, I guess how do we balance that with, you know, if I think about Olin as a buyer or the largest buyer of ECU, I would imagine that to some degree then you benefit from lower value. So where is the balance of continuing to, you know, drive higher value but also becoming a larger buyer of the product globally?
spk14: Well, sometimes it's just more effective to buy. And, you know, I want to repeat something that I had, you know, tried to clarify earlier. Today we're in that position of buying or parlaying. because it supports our model and it certainly helps us bridge a bit of a gully here. But in the future, that's a great way to grow the company without spending excessive capital.
spk10: Understood. Thank you.
spk01: And our next question today comes from Mike Lighthead with Barclays. Please go ahead.
spk04: Great. Thanks. Congrats on the quarter. Just one for me today. I wanted to follow up on Hassan's earlier question, maybe a bit more directly. So, Scott, in the slides now, you're confident you're going to get $8 billion in free cash over the next five years, which is more than your market cap today. And I think you lay out a fairly compelling rationale for that. And for whatever reason, when I look at your share price trading at a 20% cash yield for each of the next five years, I think the market valuation is saying they don't believe you or you're wrong. So if the public market won't give you credit, and I don't mean this to be flippant, but why not just take yourself private? I mean, the back of the envelope LBO math is extremely compelling with that level of cash flow if you're confident you're going to deliver that.
spk14: Yeah, I appreciate your question. And yeah, that's exactly right. I mean, in theory, you know, you can... buy ourselves back either immediately or over some time. Look, I mean, the only way that I can really answer that question is just to say that we are the best value for the use of our own cash at the moment, and we've been leaning into that, and we're going to lean into that a bit harder.
spk04: Great. Thank you.
spk01: And our next question today comes from Roger Smith with Bank of America. Please go ahead. Thank you very much.
spk07: Do you have a target of how short you'd like to be in ECUs or a target range?
spk14: You said how short we want to be in ECUs. Well, I would just say this, that just because we have ECU capacity doesn't mean that we necessarily run it, right? We have reduced our ECU capacity, in fact, by about 850,000 ECU tons a year because it was undervalued. We'll always have the ability at the right value to move around by 5% or so. But we're not necessarily gonna use that capability to service a market unless that's a growth market. But I think getting at your question, because we'll be the largest buyer, net buyer, there's a point in our future where the combination of what we produce and buy is larger than our capacity. And that's likely to be a permanent feature going forward. So I hope I answered your question.
spk07: I mean, you did, but I'm trying to figure out whether that production and buying is at, you know, are you 5% short or you want to be 25% short?
spk14: Well, we haven't given a number on where we are today. But in our future, we want to lean toward being more short.
spk07: Okay. The other question I have is you've stopped selling to TiO2 producers. TiO2 producers, you may have heard on some of their calls say, well, we'll just build chloralkali. Does that have a risk to start flooding the global market with caustic if they start building chloralkali for their own chlorine process needs?
spk14: Well, I would just say that the world's going to need more chloralkali, and it's not on the world's agenda right now to build more plants. So, you know, somebody's going to build. We'll see.
spk01: Thank you very much.
spk14: Sure.
spk01: And as there are no further questions, this concludes our question and answer session. I'd like to turn the conference back over to Scott Sutton for closing comments.
spk14: No, I would just say thanks to everybody for joining us today. Appreciate it.
spk01: Thank you. This concludes today's conference call. We thank you all for attending today's presentation. You may now disconnect your lines and have a wonderful day.
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