Olin Corporation

Good morning and welcome to Olin Corporation's second quarter 2024 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. Following today's brief opening comments, there will be an opportunity to ask questions. To ask a question, you may press star, then one on your touchtone 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, Steve.

Thank you. Good morning, everyone, and thank you for joining us today. Before we begin, I'll 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 second quarter earnings press release. A copy of today's transcripts 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 Ken Lane, Olin CEO, and Todd Slater, Olin CFO. We'll begin with our prepared remarks, and thereafter we'll be happy to take your questions. I'll now turn the call over to Ken Lane. Ken?

Thank you, Steve, and good morning, everyone. I want to start by saying how grateful we are that despite a direct hit on our Freeport, Texas facility by Hurricane Beryl, all our team members are safe. I'm very proud of how everyone responded. We saw the best come out with colleagues supporting one another, not only on site during and following the storm, but with each other's homes as well. Many team members experienced significant damage to their homes, and I want to personally thank all of those who stepped up to help during the recovery. While we did experience damage to some of our assets, Olin's preparations limited the impact of the storm and kept our team members and neighbors safe. Turning to our second quarter results, overall the quarter unfolded as expected, with our chemical businesses improving modestly with seasonal demand gains and generally improved pricing. Winchester also delivered on its second quarter objectives, partially offset by improved pricing, continued strength in military, and a strong performance by White Flyer. Looking ahead to the second half, we now have greater clarity around the macroeconomic outlook, customer demand, and global supply. The industrial economic trough we find ourselves in looks to be longer-lived than typical. We expect Hurricane Beryl to represent a setback for our chemicals businesses of approximately $100 million during the third quarter. Based on our current outlook and including the effect of the hurricane, we have lowered our full year 2024 adjusted EBITDA outlook. Olin remains in great shape with our investment-grade balance sheet, strong liquidity, and leading market positions. We will continue to be disciplined with our capital allocation strategy as we were during the quarter. Also, we remain focused on executing our value-first commercial strategy and and continuing to anticipate a bright future as economic activity improves and Olin acts as a coiled spring to serve that recovering demand. Turning to slide four, I'll highlight our efforts in the second half to maximize cash flow. Our teams will continue to focus on cash generation by reducing capital expenditures in spite of hurricane barrel requirements maintaining cost discipline and reducing working capital through the second half of 2024. We've done a lot of restructuring around our chloralkali and epoxy assets and expect to continue to realize benefits in the second half. We will continue to stay focused on cost discipline and explore additional cost-saving opportunities. Now let's turn to slide five for an update on our chloralkali and vinyls business. During the second quarter, we saw typical seasonal demand improvement, but little underlying recovery or growth volume. Olin has been extremely disciplined and continues to not sell into weak markets. The green shoots of demand anticipated as U.S. chlorine customers sought to restart assets during the second half proved overly optimistic. Global industrial activity continues to remain weak, with U.S. chlorine demand still running well below pre-COVID levels. As previously mentioned, Hurricane Beryl made landfall in Freeport, Texas on July 8, with sustained winds measured at our site in excess of 120 miles per hour. Our remarkable Freeport team mobilized quickly to assess and repair damage. Today, fewer than three weeks after landfall, Olin has safely returned many plants to operation. Wind damage to ancillary equipment has prevented the remainder from resuming production. Once this critical equipment is restored, those remaining assets, including our vinyl chloride monomer and phenol acetone plants, will be restarted. Additional global outages have tightened caustic supply and has resulted in upward pricing momentum. For a look at our epoxy business, let's turn to slide six. Epoxy results continue to improve in the second quarter on lower costs and higher pricing. Third quarter epoxy results will be challenged by both the impact of Hurricane Beryl and our planned Stade Germany epoxy resin turnaround. Our U.S. epoxy anti-dumping case continues to progress on schedule with an expectation for provisional duties to be set later this year. We are encouraged that the European Union recently launched a parallel investigation as we pull all available levers to level the global playing field During the second quarter, we've seen several U.S. and EU importers accelerate their epoxy import volumes. This raises the potential for retroactive duties to be applied, and we would expect our coalition of U.S. producers to request this additional remedy. Olin has been clear with regulators in both the U.S. and Europe that success on each front will be essential to keeping production of these critical materials in regions. Please turn to slide 7 for a Winchester update. As expected, Winchester's second quarter results were relatively flat versus the first quarter. Commercial ammunition sales were sequentially lower, and rising propellant costs and reduced availability generated a headwind. Domestic and international military sales continued to show strength during the quarter. Winchester military revenues will continue to grow as global defense spending surges. Our Lake City Next Generation Squad Weapon Ammunition Facility project is expected to generate at least $1 billion of government-funded revenue over the next three to four years. Winchester is a well-respected military partner with a strong brand and reputation within the industry, which provides a solid platform to grow our defense participation. We expect our military sales across all value chains, domestic, international, and projects, to significantly increase in the second half of 2024 versus the first half. This trend of higher military revenue is expected to continue in the coming years. Also, we continue to see very strong performance by our new white flyer business, exceeding all expectations and delivering on synergies. And now I'll turn it over to Todd for financial highlights before I wrap up our prepared comments.