OLN - Earnings call transcript Q2 2018

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Operator

Good morning and welcome to the Olin Corporation's Second Quarter 2018 Earnings Conference Call. All participants will be in listen-only mode. After today's presentation, there will be an opportunity to ask questions to ask questions. Please note that this event is being recorded. I would now like to turn the conference over to Larry Kromidas, Olin's Director of Investor Relations. sir. ahead, go Please

Larry P. Kromidas

Good our and second Cole. joining you us on quarter morning, you, thank everyone for Thank earnings call.

this projected. along forward-looking that differ slides future performance. begin that statements will include following and we morning, note estimates to remarks from want materially Before of regarding remind our this prepared presentation could the that with actual and associated Please results statements the those question-and-answer session I everyone these are

Officer; Fischer, actual cause Jim President Risk results differ of earnings under section John Alkali our are Vice and website the data A could Vice Some President today's and and and and without President events. this me in Synergies the of that projections calendar copy our in most and transcript our described other McIntosh, information in morning Slater, release. slides Factors Todd to Executive the release Dawson, are President, Chief and and earnings are Officer. President Financial Services; With Executive XX-K Products available Olin's factors Systems; Vinyls and press and International; The Chairman, releases. and President, from of press will Investor yesterday's President, of Vice Epoxy on financial recent be press limitations Pat Form section Executive John Varilek, Executive under Chlor Chief and and Vice available

to turn over the John to like call John? I'd Fischer. Now

John E. Fischer

joining today. Thank you, morning you Larry. Good thank us and for

more of of this four by second describing performance, key discussion the call, highlights each begin a Olin's will segments. quarter by business During of followed our morning's I detailed

second highest the opportunities of and $X.X are businesses, upside major downside performance in adjusted slide EBITDA in year's XXXX for the quarterly approximately level generated X%. Products XXXX, of million the Chlor assets. $XX to to Epoxy Alkali Olin of turn strong quarter let's and of Vinyls acquisition billion, raising by This by our the quarter second X. we Products adjusted since our In Chlorine After turnarounds and with DowDuPont the guidance So EBITDA our the Vinyls Epoxy on outages. year. than would with are which This to seasonal schedule budget. approximately will than is $XXX consistent turnaround during normal half approximately of completed Chlor the The cost. of million and $XX costs $XXX businesses maintenance half planned and have year this in XXXX second pattern Products approximately our cost turnaround be maintenance million of be in the Alkali and first Maintenance the the lower lower million turnaround on been expected XXXX, be risks

are forecasting to lower XXXX the earned approximately our supply $XX quarter second of impacted a $XX We environment million million continued to resins and $XX to planned has adjusted than cost planned EBITDA costs. for turnaround The levels. epoxy The overall Epoxy million XXXX was quarter, maintenance by approximately of favorable. which expected $XX during business be be million maintenance demand turnaround

we With improved the half improved second XXXX. and significant successfully in results turnaround of completed, maintenance the expect volumes

improvement. costs, quarter, second the quarter second in in prices material are XXXX and raw XX% primarily the word first expected to of higher a However, benzene the compared to X% increase follows the quarter. Caustic system caution, Olin dampen half approximately to of first sequential a propylene, increased in soda which

Domestic soda environment have caustic the soda chlorine with demand contract in caustic market. America not soda in export and North to three soda indices more some In second months, prices, demand weakness soda of prices We are caustic contract third decrease saw price been in spot the domestic impacted expecting supply demand. our increase the domestic modest quarter. reflecting balanced essentially quarter, during has last flat caustic export for pricing caustic stronger we the remaining further The strong. the period seasonally a the caustic soda

in We continued discuss we long-term are pricing slides. couple improvement. caustic a caustic soda in confident But expect the that remains of market more soda detail caustic and cycle soda intact will a positive

to Alkali Products slide summarized segments Chlor and business on beginning turning Vinyls Now with is the which X.

Second quarter Alkali to primarily caustic $XXX.X Chlor increased of and compared Vinyls chlorine XX% adjusted soda, XXXX, EBITDA pricing quarter derivatives. The earnings other to of for and were million, the second chlorine, Products due improved XXXX. higher

China. with records ethylene a to experienced shipments. ethylene Ethylene XX% both dichloride also the strong compared PVC compared in prices of full-year compared demand, to for quarter. expecting higher demand expect increase We've believe quarter. pricing pricing first quarter We further sequential experienced increase dichloride throughout and second third Olin and approximately prices higher lower the prices We XX% XXXX. reflects the year XXXX quarterly bleach in dichloride in pricing Asia quarter, soda quarter chlorinated to We're improved from now volumes second We organic the improved in first in system XXXX. Europe XXXX and ethylene the to in to in the increased in last increased setting Asia filed improve caustic costs Olin naphtha-based which

driven and Olin Products second several the pricing, expect slide caustic to we North expected to the higher sequential and in bleach, second XXXX Vinyls from maintenance volumes on export increased In America X. summarized to from costs. of continues view maintain its positive This record soda pricing reach improvement caustic pricing. XXXX, turnaround once acid, experienced again quarter, of in lower hydrochloric half, is and volumes, soda chlorinated first long-term organic we The by Chlor improve business the products. During chlorine, half Alkali is levels.

sales caustic mentioned, metric market. key in was we Coast ton per virtually XXXX, were the all moved spot spot soda soda have in recent Since model U.S. acquisition, for quarter sales. lower-priced weakness Gulf recently approximately second during export been after metric XXXX. Olin, caustic flat export We very have minimal. increasing we would sales some $XXX soda point XXXX is of the trades decreased of index based. July the volumes in that $XX a seen approximately half Olin's per X% that have caustic The ton spot the in A contract with also previously export first I observe consideration of the associated of but to As

in has in For and export global influencing these the factors We're key for growth few caustic will in due U.S. pricing chemicals pulp in alumina. and the last and Europe, Brazil market three small under additions to are have demand. are U.S. soda that the and years expected growth to and not recently dynamics. paper, Gulf pressure been continues soda impact demand regional The months short China, been Coast, treatment, and drive organic capacity global in convinced market the announced to that regional and growth conditions caustic Strong Asia, water approximately relation inorganic GDP term. supply

two a dynamics As the market that experienced result, past caustic believe soda been we the long remain place. term have over favorable in years, global

move Let of slide to on our X. is performance us now on which the Epoxy segment summarized

North partially due material volumes. Epoxy delayed of higher the industrial approximately The which pricing, higher was dollars lower demand. were The Second $XX primarily to product second improvement costs by was quarter XXXX, quarter million than million $XX.X in driven and America, higher by coatings EBITDA adjusted lower results. cooler-than-normal raw offset spring significant a customers' volumes XXXX earnings

year. quarter XXXX and XXXX We second last the of compared quarter the to are of quarter both forecasting improved the in of epoxy third third resin sales

improved higher of volumes. These During represent approximately costs present supply second expect costs market. potential second from costs offset a from the turnaround to quarter encouraged costs third We're and increase by million increased the the results raw sequentially the first half levels sequential quarter XXXX business in the benefit overall million in material to XXXX, levels. lower approximately Epoxy demand quarter and dynamics compared propylene $XX the $XX XX% and raw we to to and material maintenance

fourth pricing results completed, increases recover Europe the higher material volumes for Tighter maintenance each improved the the conditions current for The dynamics have and beginning the resin and North XXXX. higher On and moderation. momentum potential been part the and liquid by epoxy demand quarter the forecasted benzene past and and Asia. have half of to of the United Resin expect we costs, in products In Europe, been have and between the on X, X% second X% in prices two raw over resin years XXXX In the location America costs, with application, With of propylene. epoxy continue. negative. improved into slide over turnaround through a to we pricing Pricing significant since the liquid dramatically XXXX, and of with our geographic second these added several primarily of different in lately price XXXX prices show less have the depending beginning raw increased increased risk portion improved late market propylene, the annually. A Asia, in benzene one-half expected to years, resin the quarter principally these latter States, for necessary into dynamics successfully has the of next the XXXX region and material and is and and growth region. are moderated.

to additional effective in September announced America resin and Europe X. have North be price We increases

Winchester to slide X. on Moving on

second which commodity Second material adjusted of quarter XXXX of quarter the quarter million same Winchester second of compared increased million the EBITDA XXXX. year-over-year in adjusted mainly $X.X $XX.X XXXX was Decline higher decrease XXXX. EBITDA million, period the in a the $X.X other was of from to costs, result in and

to XXXX, other For commodity and levels. we million XXXX costs year $XX increase the material from full expect of approximately

partially and decline decline We've the agencies. XXXX, commercial X% ammunition XXXX. enforcement offset military During the to during commercial law first higher ammunition in followed were second XX% demand quarter, of which a seen sales sales by the approximately commercial in lower by half demand

demand quarter from expect of seasonal demand. due the XXXX in third second However, we to do level commercial quarter improve the to normal sequentially

XXXX, selling through with results to third we higher the quarter in Winchester's first the compared our commercial Throughout prices improve met As higher sales. have a second of success. prices limited due to recover result, the expect commodity half to higher to metal efforts quarter

Before are We the would in a our is multiyear I that emphasize outlook conclude, businesses positive. caustic confident that I soda. we remain up-cycle for like to in chemical

and also ethylene have experiencing volume favorable also improved price the and products. Epoxy pricing. increased are chlorine business, we In We derivative in chlorine, and dichloride trends volume experienced other

further for stronger XXXX. basis provide improvement Our of will as second expectations seasonally the into of move we XXXX half

would I turn to like Now, Todd? Todd call the Slater. to over

Todd A. Slater

John. Thanks,

turn our X. forecast, Let's cash on is XXXX flow slide to which

to cash flow. We of $XXX free approximately generate expect million

flow is X.X remains times Our to cash and range. net debt-to-EBITDA priority end combination reduction debt the ratio of the leverage the EBITDA the and of free reduce our expectation growth top will debt for reduction by XXXX, that

the rate to do U.S. the far of million XXXX. During utilization not will $XX be tax tax which in full-year Starting primarily in the We're jurisdictions federal year, because net payments $X.X we XXXX. adjusted be payer, approximately out XX% Olin in the deduct estimated income of acquisition the loss our with reflect a made of forwards, cash expect on year. payments, of Since cost has the waterfall for left first XXXX, prepaid the to our forecast XXXX. half associated forecasting federal of tax million of not the operating carry tax debt. Because mid-point foreign tax $XX been of arising we in of in the billion U.S. EBITDA we chart, of a primarily payer XX% to with range this,

benefit of of continuing in impact XXXX, analyze the in Act XXXX estimated Olin rate in the to Jobs to forecast beyond with XXXX. includes carry and of project our capital law $XXX $XXX in to information Tax of spending into beginning new XX% of $XXX reduction reduce cash the is tax Cuts tax minimal approximately the expect $XX our full credit X million reflects Column an million technology we're investment the which for tax for $XXX While the translates range. associated to estimated changes taxes the cash The midpoint million. tax new maintenance provide the law million. of to capital between the XX% approximately annual due of XXXX do multiyear This million, to benefits and tax law spending of annual current and We cash currently our forwards. is Olin to the and to cash

includes new to As across businesses. planning, enterprise heritage the we have technology began discussed multiyear infrastructure. project Dow a required XXXX, resource the project acquired Chlorine engineering and and Olin implement previously we systems information Products The manufacturing, in

$XX inventory due Now, we're costs currently prices XXXX working associated a integration, about. $XX interruption, The and one-time to turning expense approximately working capital cash project be next first of levels. to in the of the $XX to XXXX selling spoke IT compared XXXX. restructuring and The higher million, interest XX% approximately to estimated revenue XXXX is estimate in increase the of costs, insurance for primarily business $X the items column, expecting to the use the fourth capital approximately We recovery, of cash with increase next multiyear In column, million that represents in just column expense. million. for expect million approximately portion of quarter's include I hydrocarbons the

We have at that in refinancing XX% after of approximately our completed interest rates, debt variable debt January. we the

rates be experienced we higher in to XXXX. We those are forecasting than XXXX interest

XXXX. to We flow $XXX cash are generate in million forecasting free of

paying debt normal approximately We quarterly targeting our approximately dividend reduction a minimum are million. year, this million while totaling $XXX of $XXX

shares free a second for offsetting shares. and dilution in repurchase generation, While debt approximately began of opportunistically cash have goal XXX,XXX top flow repurchased reduction priority to to-date, with the we quarter remains our we

Finally, on of at dividend common XXXX. questions. consecutive is to on The Olin's is paid board close of August by the stock. company. of a shareholders the on September now are of share This declared payable to Operator, business to dividend be XXXth each XX, ready the dividend quarterly July take directors on of Thursday, record we XX, XX, Olin XXXX $X.XX

Operator

Thank you.

the now from And momentarily session. Don we will go this to question begin ahead. Please from assemble Susquehanna. pause roster. question-and-answer our will our Carson We time first comes At

Donald David Carson

on as you magnitude EBITDA You've what terms expressed pricing X the of caustic chlor continue do do past talked And slide $X.X next are will over can year? So, of get that you look, sort mid-cycle a year? think of you last you alkali show we in we about billion, seen increase, we've what where what earnings in John, confidence of there to by you the in think versus the cycle? the

John E. Fischer

I event is a XXXX the standpoint question, think, of XXXX billion, $X.X of mid-cycle from Your first or a achieving us. think that I for

through from a at the are think, we're we say standpoint cycle. in the of halfway I case where I would cycle, worst

seen cause obviously what I going than increases of and things, we've the jump price is think I we're or we a year, to be forward, but that significant slower we've though in go think, going is last the are the as dislocations production increases, We that to will saw we'll some level right degree see seen steady And recently. see slowing more those increases. around which certain be what sum now, it in occasionally I areas think, events will of down past. of

Donald David Carson

And then, a on follow up Epoxy.

characterize per be per of you a you what's margin last – year? So, can And changes leverage would how at us average will to of all your any what's view say idea out margins operating $X.XX your versus help sort with pound? in year on related – this

John E. Fischer

the reach would today, I'm XXXX, made answer million back you to million. a a would those not to good very go the that. presentation investor towards suggested where from really And – chart standpoint on tell if we questions. say, I we're $XXX sure of competitive showed that want you could look to at February either that if you of EBITDA we that I making $XXX achieving are we based in progress we

Donald David Carson

Okay. you. Thank

Operator

And Neel Please go our Morgan ahead. Kumar from next question from Stanley. comes

Neel Kumar

Hi. Good morning.

John E. Fischer

morning. Good

Neel Kumar

it assume, at new cost guidance, What as EDC and I epoxy is billion $X.X is your with levels? July prices, regards to EBITDA of

Todd A. Slater

priced about XXXX. over haven't Todd. quarter are than two the that second being on coming in is that we July. then what end And was price million is pricing an slide, to quarter. the in I EDC the this it for But $XX EDC, we think, in it announcement pricing X year is It caustic you earnings saw prior to Epoxy, through than on September our was a on other the third improvement that about And hydrocarbons the Neel, talked higher Epoxy, and clear, of full $XX there improvement were the That on talked there's as million of for we've the outlook compared there. at in out assumes calls. the assumes XXXX in for higher effect

Neel Kumar

Thanks. would down you That's level maintenance believe also declining million further? $XX in for And helpful. to additional forward that maintenance can or be good a going million even you've guided Do to costs rate run costs $XX then, XXXX. come

John E. Fischer

guided – I to think, XXXX be we to they $XX would million than in $XX in they lower were million XXXX.

Neel Kumar

Right. saying, rate XXXX going levels, was a you Yeah. basically even that It's maybe me forward? run more new but I that's what wrong, come probably, they do or you XXXX in heard can down think is

John E. Fischer

are are different which which we've in every have three you I the assets done six there was about to Epoxy turnarounds years. there three and talked are done, done been think now – if VCM is every years at, five in done asset the That large assets, which look XXXX.

say low XXXX balance, would near I if So, it see. on end what we you looked would of is at probably the

Neel Kumar

see. I

initiatives Okay, Epoxy, great. you question, where in are out mix? your then last to product longer-term cost business, and in portfolio the your that of upgrade drive And then,

Pat D. Dawson

this Neel, Dawson. Pat is Yeah.

strategy We on productivity productivity we're to about going – the next remains made million have here going that that last two of drive five a driving improvements would in critical say, years, of announced I over part years. $XXX forward. is cost progress that good we've the the Epoxy

Neel Kumar

Great. Thanks.

Operator

Research And our question Kevin McCarthy go ahead. Partners. comes next Please from from Vertical

Kevin W. McCarthy

that Couple would enough of offset the describe through increase you referenced? America and you on prices operating to outlook the morning. there? And describe level can of course you North inflation the million $XX would to How how million in Epoxy. is Good of Europe? Yes. your questions time likewise, of What rate cost that $XX confidence

Pat D. Dawson

two fundamentals. been years outlook you back supply/demand in terms step of few has over the a ago, the improving The past outlook, years, if just

to continues think improve. we supply/demand, So,

not have information. any that's We not But it's rates, definitely improving. announced operating public

China see also the on enforcement environmental We the the crackdowns around in regulations.

that each and additional industry as it in in about the to added being have long goes seem also, that that teeth you capacity continue that see And don't we X% in has X% think more conditions As will well. we've now. improve. we to But range helped new before, by to talked to any right month improvement as continue grow the as

Kevin W. McCarthy

Have short volatile a Olin consider as propylene high and synthetically have Pat, been you someone the either propylene, in relatively own of and molecule. integration both your And on the is or or Europe. considered in follow-up, would U.S. asset? vertical through prices Obviously, lately else's you base-loading

Pat D. Dawson

Yeah.

that's I obviously, think, hitting evaluate. has the oil follows been highs oil here last has would Propylene, to something that in we couple of months. continue been doing what and

So our options we propylene improve are at a is definitely that definitely headwind to and looking always position.

Kevin W. McCarthy

you. Thank

Operator

our Jeff Please question next comes go from Zekauskas from And JPMorgan. ahead.

Jeffrey J. Zekauskas

much. are and are describe the stabilize? what X, where and your On liquid think resin very you all of as you show up. regions of raw decreasing dynamic you the market do things idea Thanks an Can have slide in you trends three pricing will epoxy materials going is

Pat D. Dawson

Yeah.

first at look I been you've that a if up. run better supply/demand just our where probably the pretty Epoxy And seen mentioned you has fundamental middle getting I this year, started as whole back of I across of third quarter think, year, I mean, all, last earlier, the chain. last of good think

think, year, last has beginning the little towards prices year. I end I think that the frothy here, seen pretty the cool-down gotten of you've this of

seen and here are things stable So, stable things months. I the very four three think or last we've that

seen North stability with first mentioned way, see fundamentals, And the a out America his what in forward the than better in past. remarks, as you've by So, this do September going to going Europe. you're supply/demand we have and price improving increase there in I think, John overall,

Jeffrey J. Zekauskas

contract difference I your that I've soda, priced of guess, realizations? now make imagine change that that And to caustic in If your that a caustic different earnings Okay. of price, caustic at would have at a you might your how I different caustic time. the signed was points average contracts a, much market or question were all

James A. Varilek

two the times, do sometimes This in momentum a to the we've contracts Yeah. often and renew is over that. three period years extending Yeah, contracts of Jim. time, got beyond

quarter, the prices index have is provide have that we do that have attained into momentum quarter. So, quarter and renewed higher saying that The there, contracts third the constantly forth the that prices quarter. so out which changes will why third are we going and momentum Olin second the of in we're in domestic will to we so into continue we third

John E. Fischer

season in And quarter. is anywhere negotiated of so I have years, a would fourth in just XXXX would netback to market timeframe, see you as group And time. seller's in that our five the run that QX have from at which we we add contracts to a still a it's rollover, when our expectation that, you And XXXX of that three QX. point typically, renewal the meaningful in say not versus was to that they contracts we will were get contract improvement

Jeffrey J. Zekauskas

Okay. so you much. Great. Thank

Operator

And the next ahead. UBS. go from question from Please John Roberts comes

John Roberts

improvement aromatics? the in at Was EPI, Epoxies you. LER, Thank in concentrated all or

Pat D. Dawson

was across say value Epoxy to from to chain, whole the I really the midstream downstream. that the Yeah. that the Epoxy, upstream would our

John Roberts

Okay.

And reflective very it kind the So, broad-based center mix? that gravity of price of be you're that of of chart would your LER is saying.

Pat D. Dawson

it's a think statement. I fair

John Roberts

capital as forward can maintenance well then, or us share have expense anything you your XXXX outlook, on budget the Okay. do you a for for gave that yet you outlook? And XXXX else

John E. Fischer

time, this at Not John.

John Roberts

you. Thank Okay.

Operator

And ahead. our go Jim comes next question SunTrust. Sheehan from Please from

James Sheehan

a You basis on impact confidence in the why talk supply/demand. years capacity addition saying having talked you the not for new three that? taking dramatic about Can alkali and chlor as long-term in about your

James A. Varilek

worth of If that annually, domestic you it look represents you XX two of the maybe growth and capacity the of global caustic and months size new at at growing believe growth. and demand the capacity is months' X% announcement

not capacity. that's really lot a So, of

James Sheehan

range? get range X%. end plus would on got factor materials What there. you've Obviously, minus your are of or you a the EBITDA, to And to for raw that Great. XXXX have of to outlook the high for happen

James A. Varilek

if pricing we the have opportunities us We've are soda would stronger-than-expected And EDC. say would some those be caustic got and I two think of factor around I biggest. the biggest for volumes.

James Sheehan

Thank you.

Operator

from Holt. Please ahead. comes the And Blair Pickering, go next question Matthew from Tudor,

Matthew Blair

pricing Hey, also, Is expecting cost good and just And what that you gives U.S., in you talk demand? kind seeing morning. the explain you could function demand Europe, and Asia? despite on of could of contract about trends a higher some are Thanks. QX John, confidence you spot here? in to weakness, what supply you're mentioned of the seeing you're what you

James A. Varilek

Jim. second is that so industrial is seeing. have that this actually Matthew, forth do the is Asia caustic that is have we good. numbers what to expect those and seeing, with in takes There picture quite had We seen We're that And The in and fact America, the have us some for our very From on. carry-through demand success in we're very those we'd and confidence have continue in believe GDPs be that strong. impacted strong third off North of contract to America, situations the that confident things you're our we solid, global have. the because that. in production temporary. pricing. first export nothing of Latin standpoint, is quarter. Demand we We quarter a

comes also the side the – to demand some had seen there. the return about we China things to the But some Latin to trade also have though expect stream ago we do offline. expect capacity capacity demand, in to we terms expect of and we norm come we in were Asia, those even in tight. return on we As year flows that America, in a back And,

So, trends there's all us nothing that of saying along. long-term we'd been takes that off the

stream GDP, that drive Continued GDPs caustic global strong, world good growth. out there's very capacity and the around coming And anytime soon. been no on there's capacity actually, the taken

environment So, a forward. as we good continued we go expect

Matthew Blair

guess, then, I of brownfield IRR capacity like a economics an and pricing, Thanks. based on current do multiple? for in the greenfield terms new whether think or U.S., in chlor you Okay. maybe And what alkali are

John E. Fischer

that. would ton. to comment chlorine user an on do necessarily lot I greenfield today, and you're where ECU his to IRR say a has building that $X,XXX I with north we a puts wouldn't is because, want remember, probably an the of think,

who I think some tons They what I brownfield, it world create of on $X,XXX debottlenecks scale all that for and imagine. a done doing. be probably kind would ton, plans. could to debottlenecking those depends There's XXX,XXX here don't create But they're $XXX and is there.

Matthew Blair

you. Thank it. Got

Operator

Please question And Arun the RBC ahead. comes Viswanathan Markets. from go from next Capital

Arun Viswanathan

quarter. guys. Great. Thanks. Good good a morning, Congrats on

John E. Fischer

you. Thank

Arun Viswanathan

question a guess now. should just wanted of on the the how get the rates high We're for mean, thoughts relatively the operating operating operating we I And in we rates rates. rest I seeing, to to traject expect Just your year. seasonality mid-XXs remain kind on your now? environment caustic? maintenance, that for result then, QX, or of in in down pricing and would high and for that that in QX operating allows stable And pricing maybe of is tick kind rates typical some change on

James A. Varilek

stay Arun, summer months. the I think, you've to strong outlined rates it actually quite well. operating We do during expect

standpoint. overall, that from to modest both vinyl expect capacity drive snug And You've from is see water still got some an the fourth operating chlorine from the standpoint rates. operating those demand, rates to very seasonality will quarter. a There operating treatment is strong some But picture we would a into decline.

Arun Viswanathan

first picks that the quarters increase an assume reaccelerate is I a mechanism industry QX on the be And has the it is now like it just seems ask wrong, within the to year. seen for guess, QX? ask I and should because in you two momentum has been July, so, a we so decrease back QX prices shifted, lot maintenance? been expect But, elaborate of of that. reason to in on may The maybe there another the that the is I do of maintenance price now I up But we've reason you the $X that could in because

James A. Varilek

rate operating operating seen on event-driven and pricing couple seen the in what causes the The impact high that things under then, and we've rates years. that an a caustic. Yeah. last And environment definitely spikes any specific over some that's have you've of

and I the driving marketplace think in of chlorine equation it's pricing side the lot And the also as the on the important to well. chlorine derivatives, of as well. is side the note a the tightness chlorine chlorine the side

Arun Viswanathan

And us impact your some well Is helpful. you the as that you maybe That's Vinyls. costs for guys Thanks. chain in Okay. input ethane. – on increase an just on thoughts give We've seen through can then, or not? in

James A. Varilek

We into so on an does have it that, have a yes, cost cost-base ethane structure. being our now, and ethylene impact an input

Arun Viswanathan

All right. Thanks.

Operator

And Petrie Citi. from comes next ahead. Please Eric go our question from

Eric B. Petrie

Good morning. Hi.

John E. Fischer

Good morning.

Eric B. Petrie

prices, customers for in substitution soda a we going get purchasing markets potential initiatives. smaller A produce, some alumina either forward, expect what you price question At on pure soda end bauxite more into grades? point caustic you noted or do ash dynamic

James A. Varilek

think that's are the try – going and whether that all They're forth always time. markets can and doing optimize something that done be customers their forth. usage alumina want the to I that to so and in so so to

So, see prices caustic pricing. the soda specific Alumina the is terms in – on production I affordability moving, pricing. are any there, don't change of so and

not I'm concerned So that. that not about – we're

honestly, running ash, so high Soda switching a are – quite forth. they're and capacities, market cost a demands that and large those there's – running there's

don't soda we ash. impact So, from any see

Eric B. Petrie

into competitive U.S. your the And and you. secondly, Thank seeing on slide liquid either regions, dynamic you epoxy X between from Asia markets? gap the pressures with or producers then pricing Europe any Helpful. resin are

Pat D. Dawson

been this It's years. No, not many way really. for

anything see much Actually, we better don't dramatically. fundamentals. really we So, changing see

fundamentals that's for fact As in the – things the the a good regions. that tightens, one see are better think main we the I data of point market each tighter. of And been

Eric B. Petrie

you. Thank

Operator

Byrne Bank from Merrill next Please of America go comes from our Stephen Lynch. question ahead. And

Stephen Byrne

a historical idling, whether you in was chlor controls? or of not matter you've a drilled wondering the that's you had function just more updated alkali that have of it's China or permanent shutdown a roster plants some a on if implementing levels, fraction view whether a temporary it's whether at of pollution a operating into and I

John E. Fischer

the general, answer think I in we some things some all to it's have the view that, is and of you mentioned. three that effect

Stephen Byrne

coal-derived in a really And – not is driving of because that are operation? similarly improvement that that's producers those is on controls – a epoxy dealing emission Asian you're unit matter just with

Pat D. Dawson

no, with sorry, this Pat No, – are Dawson. but dealing you is

raw key which get I epichlorohydrin, with high-energy though dealing mean, the it chlorine material. are to where starts You – intensiveness. with to that's is

standpoint. high challenging from and you a water high are with a product dealing a So treatment water resource, and very energy, environmentally

China we see in capacity continuing have So, to China. new an enforcement and on this do of round regulations impact

Stephen Byrne

Very you. Thank good.

Operator

Dmitry And Research. our from Longbow go question from Please comes next Silversteyn ahead.

Dmitry Silversteyn

One, talk a it seeing you Alkali bit big in bit in taking of in for a Europe domestic differences export growth where about overall but segment. more into what, couple of more of pace there's globally, are, or talk the they're still destinations can America, X% the a going? the growing volume mentioned volumes on market Can that Asia-Pacific And sort there? little about in growth you're the growth question, you – at if main little of Chlor you of Thanks about getting terms them. terms export your is my and and the kind you're in growth, and of Latin versus

James A. Varilek

This is Jim.

to Latin significant also Asia a earlier has There they The the down. a been, have amount similar and significant second movements terms destinations out the Coast were in in that's part slowed what But are into of differential. second America of the and Australia destinations into Europe not lot trade to Pacific, forth, so year quarter, some the this pretty aluminum. much into question of of movement Gulf

trade So, not of any in the Coast. dramatic shift of out flows Gulf a the

strong. it as a of have GDPs the terms GDPs, well. the demand, look is know, to tendency U.S., And as you relatively in because in best quite think, to As we GDP at far track the I been have way

have growth the do honestly, continue, chemicals. and U.S. pulp processed paper we to strong. in here markets, in Quite have and strong that demand expect we everything relatively is market So, the strong and

say So, demand and world we the by around off is the to see any means. export the demand. not dropping That's that domestic good

or get again, Australia You is there. I dislocations it in But markets are China here some and aluminum the would say solid. what is

driver demand. is So, is globally. probably to the our the And use demand GDPs again, for there best

Dmitry Silversteyn

pass an All $XXX think question right. about kind material is to seemed lack we raw your this of terms to Thank environment through? you. able structural don't second thereof when business about, in or of it in of about business, $XXX you Mississippi. material be should you think million ability costs, and Illinois of of talked the in the EBITDA Winchester. persistently that And high on this that my some annual should and costs back How where profitability pricing to EBITDA We've million, to day were recapture from stays sort the margin? in raw How the of of assuming metal we relocating

John E. Fischer

have Dmitry, factors just commercial that you described, better the believe that last XXXX. volumes. we than all quarter, did when be mean, we talked results about Winchester, not we would lower said I XXXX we

around we if historically, a decline volumes to quarters tend look back peak. do off think However, commercial six consecutive somewhere of you

year of sixth quarter. the second The this have quarter been would

here. the continue I we've So, we that years with to that for military commercial XXXX. will a for have high. offset us would volumes I stabilize market of once definitely should better environment, But and our improve stable better right been in some probably that volumes, did several got will do $XXX costs. commodity was higher we've say, expectations more able we The than get to think million at we which operating I now, think cost, world, too to the as what look we we

Dmitry Silversteyn

All right. you. That's Thank helpful.

Operator

question And Aleksey Nomura go our Please next ahead. comes Yefremov Instinet. from from

Aleksey Yefremov

your to about raw In million Thank will about should cost sequentially sort material flat everyone. and think here morning, Good you. about Is Epoxy approximately $XX we sequentially? million, $XX segment? outage decline as be good costs your could million a $XX going segment, think factor the neutral up way a pricing and EBITDA a are it of so to Epoxy

John E. Fischer

did the first we thing half. half relative we one in say Epoxy the expected volumes Well, the was to second of improved

improved be you have in be other it volumes, just if agree. what think, you would said, if I it improved you add than I flat. – would don't So, volumes,

Aleksey Yefremov

just account outage So, for improvement not John, it this clarify does million cost, volume, to in $XX right? improved that

Todd A. Slater

as Alex, that's the the factor additional just of Todd. the cost. are fixed $XX this unabsorbed in the outage as beyond outage million well There is costs and volumes the

Aleksey Yefremov

Understood.

prices much. Asia at X, If to slide costs $X.XX the current look pound. approximately And very way we then, Epoxy. floor another on how cost these Is globally? question any what's there you up Thank a much Okay. went They're for and resin prices say up. went

Pat D. Dawson

than any those floor, if have think No, on you other out indexes on costs have impact don't real and saying up that I going published that and information look at cost non-integrated a we that on BPA has that been the given epichlorohydrin producers.

Aleksey Yefremov

Maybe in one follow-up also, gives or sort think and as September of you what Europe, next down, for in prices Do is move in and up increase? Pat the epoxies price the U.S. these the August confidence well. for flat, you in

Pat D. Dawson

I in is market. the what us gives just confidence think, tightness September increase of the

So there's just been off some self. big obviously a turnarounds, of came we turnaround our

of anywhere see available there, lot globe us in we out most a and So, the confidence. that gives product just the don't

Aleksey Yefremov

Great. Thank you.

Operator

of from go And our Roger Spitz from question comes Bank ahead. next Please America.

Roger N. Spitz

to I very in just frequently. you soda and want the caustic, said pushes the much. to usually, help exports address make wonder to I Good move tend morning. EDC you opposite might so before, Thanks the pricing outlook – is caustic outlook square I higher you directions as EDC half. mean, second more they in higher if price chlorine one that. where

John E. Fischer

prices react and is in soda other. Yeah. talked soda the export lower is two factor domestic The product. in markets a to prices. export not remember, Those do was for about we've the us caustic short-term the Its each entirely EDC improvement for Roger, caustic in being market market. which an EDC higher

Roger N. Spitz

acetone small you? or in contracts acetone your guess or fixed spread demand spread you fixed all phenol weak has is here it's on Has facility, impacted that U.S. the part Got and product, I core Freeport all pricing? out been plus contracts And that of but it. under cost for sell on you

James A. Varilek

published it around that the moves Roger, indexes primarily you there. see out

Roger N. Spitz

you it. much. very Got Thank

Operator

ahead. Please Sachs. comes Karl from question next our And Blunden from go Goldman

Karl Blunden

for time. guys. Hi. Good Thanks morning, the

billion bridge your near-term focus slide to the on $X.X potential. XXXX Just to XX,

drives when On bit perhaps the in could or driver where XXXX/XXXX, and the a you detail in be? earnings, first to improvement else, in margins its operating described Is run rate more continuation what about how simply it that higher you into Interested at that? Epoxy in a drives piece, Epoxy could existing go what of and of rating XXXX relative view rates? there big your is something that on maybe half were we

John E. Fischer

we've of obviously, of talked long-term move biggest The a bit XXXX XXXX is in that in historically. productivity. a in large as outages and move occurred the volumes. a lower have That's improved XXXX as driver better will drive we maintenance that than costs it. both the we little pricing opportunity environment piece XXXX forward here absence been And about be and Pat through we to and

Karl Blunden

you. Got That's helpful.

holding expectation part it of part up. of is an then is pricing market and So, it you on

where for Just Todd, what's way helpful. business? target, here, in tied more announced on around perhaps? the Any it a flow that, some be you've to want capital rationale thoughts be that to debt for reduction through that? cash very maybe from the cycle? precision structure the $XXX Is It'd expectations you Is debt the on have you million the

John E. Fischer

This is John.

we we objective. be. debt a turns, think negative turns business this our level we EBITDA Because, a when that business, in be in targeting, cycle the And turn a here. what on based But trough the it based that have cycle a and to do highly forecasting target think are will We is we debt cyclical it's specific as the you a what not trough. what can I'm earn would that's upon know,

Todd A. Slater

that you by ended Karl, we'll the And X repay billion we where EBITDA range to approximately have times. you doing get XXXX. of $X.X net to what the million of that to we've from math, And debt is time said need debt under $XXX EBITDA,

and is out this So, year. approximately coming a minimum $XXX million

Karl Blunden

you. Got

Okay.

Thanks, Appreciate timeframe you that kind it's helpful. to it. in had already. a of allocating mind So, guys. actions simply That's

Operator

Baird. comes Please question next our ahead. from Owen go And from Douglas

Owen Douglas

Good Hi. the taking question. guys. for morning, Thanks

market of sort the of of cost much quick for soda. of one a for bit higher the guess a push? versus the Just a being prices, that outlook balance I How constructive on supply/demand also caustic on terms chlorine little reflection in chlorine while is perhaps

James A. Varilek

about high what's I think earlier honestly. of rates the on of We operating quite ECU sides pricing. supply-demand it's good reflective environment the demand and more both and we're driving that's seeing talked

Owen Douglas

Got it. I see.

softening to real do risk cycle move on caustic think things in here, that soda the you as a forward there's economics? So, this

James A. Varilek

left. guess we Jim. no. the And economics is short the with continue a positive to would of improve. to see outlook expect would be years answer several This runway I We

Owen Douglas

sounded the little kind potential of cautious expecting some than commentary of for one earnings Okay. final bit was That's me. it. that for around holding very the factors helpful, a appearing for The far and you outlook more of too not do Can guys back the Epoxy I of business, that the enthusiasm? what you help off sort me some think of understand were are you with

Pat D. Dawson

Pat. is This Yeah.

first experienced the think, optimistic And about here, improve. we've six say, you've all, of fundamentals of nine to the I'd that X, I we're seen cautiously supply/demand run-up and that sustainability the the months. our primarily in continuing last graph to on run-up

costs And and point the think other we're I And bit about issue talk depending little lower we a course, know looking continue be the geography end concern that mentioned volatility expected our impacts think is And to probably we'll that question we've time. around again, or at a this you oil we And, say, seeing of would of applications. going what the factors to I on the in on that market forward. and growth. are X% as there's volatility no we those that got growth hydrocarbon than forward. growth you've about curve hydrocarbon X% mention had

Owen Douglas

know you I of a and X.XX% have which legacy That bite little the if have out that performed Okay. still guys take me. from final is well, EPF, one XX% these will. helpful and but notes you obviously

far your So, repayment? just your earnings? funding versus to bit, help some cost me much around sort it of of what for priorities debt understand is debt of balance thinking little that this the does what as absolute your about also a as of are and How

John E. Fischer

to first with them. targets The I can bonds designed reduction the is we in long-term repaid debt that's can position, think where those call capital day structure. we based being us are on on a the refinance put date the XXXX debt

Owen Douglas

bonds? XXXX I Oh, see.

and the XXXX Sorry, XXXX you bonds mean? bonds,

Todd A. Slater

looking so. really potentially The Morris with Trust, XXXX. can't and of of October happen are until that the million transaction million and late in you're October Reverse in at issued because today's be that XXXX. in of called But conjunction debt interest, $XX XXXX saving those $XX can't Dow the And before economics once callable on called, was bonds first is between

Owen Douglas

Got guys. understand. Thank it. Great. you much, very I

Operator

to There conference questions. closing over remarks. question-and-answer session. Fischer the would I back to turn for now This John our further concludes are no like

John E. Fischer

I'd like results. everyone we speaking to So, thank quarter forward look joining for today again and to to you about us our third

Operator

for you now The conference concluded. attending today's is presentation. Thank

now may disconnect. You

Olin (OLN) 1 Aug 182018 Q2 Earnings call transcript