OLN - Earnings call transcript Q3 2018

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Operator

Good morning and welcome to the Olin Corporation Third 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. Please note this event is being recorded. I would now like to turn the conference over to Larry Kromidas, Olin's Director of Investor Relations. ahead. go Please

Larry P. Kromidas

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

this projected. along forward-looking that differ slides future performance. Before that statements will include following and begin morning, note estimates to remarks from want materially we 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, to results Jim President section differ our factors earnings under section John Alkali recent are Vice and website that data A actual Vice Some President today's and and and and in President events. this me third Synergies Factors of cause described calendar copy are Risk Form yesterday's transcript our limitations other McIntosh, information in morning Slater, release. slides of Todd from Executive the release Dawson, without President, Chief and and earnings are Officer. President Financial Services; With Executive in Products available Olin's could Systems; Vinyls and press and International; The Chairman, Releases. and President, projections most press will Investors quarter President, of Vice Epoxy on financial XX-K be Press the Pat and our 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

since discussion current turn If for EBITDA assets of some Dow business highlights. level $XXX in upon quarterly was now this segment. acquisition to quarter late-XXXX. X, key million. more quarter, adjusted XXXX the highlighting by takeaways of second each in the I'll call, adjusted we slide Chlorine from performance our begin is detailed third EBITDA This Products quarter, the will highest the the Olin's followed each market by and During the a segments environment third the morning's I of talk record about Building

the market of year, moment, through demand detail fourth in our I progress the short-term in the likely we will are quarter. several to will there performance These addition dampen that seasonal As normal in balance the earnings slowdown. discuss in a more headwinds

result, approximately As with to in X%. XXXX a adjusted risks expect range downside now the of be we opportunities full-year EBITDA billion and upside $X.XX

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

earnings third adjusted and third XX% dichloride, quarter of Products than Chlor the reported of caustic soda, $XXX Vinyls more over and For quarter the pricing due of Alkali XXXX. EBITDA of derivatives. The ethylene an improvement XXXX, chlorine, to million, increased higher chlorine for primarily other were

more For dichloride have example, doubled so prices system ethylene than year. in this far Olin

higher to result ethylene during first quarter, During XX% of the higher a higher as approximately the we half third Ethane, prices, year, costs. increase. costs the in addition quarter, a during $X.XX per third per which gallon the averaged gallon of averaged freight experienced ethane $X.XX

range average We are the in ethane mid-$X.XX quarter. the per forecasting fourth gallon that will prices in

higher a basis. remain by EBITDA impacts of XXXX. $X.X a XXXX in as And first on $X.XX approximately than to ethane We million ethane our reminder, of the price prices expect a of gallon the full-year half a change through

truck In rates. addition, last quarter freight in reflecting the costs compared year, freight increased third and quarter to railroad approximately the higher third XX% XXXX both

soda X. on caustic slide pricing turning to Now,

and European so, mercury year Hurricane has shutdowns, Harvey, by caustic or most events, the the Alunorte been series Over past alumina plant influenced the recently one-time of curtailment. pricing a including soda

caustic China positive the curtailment increase with pressure export caustic a have next soda the This been pricing represents impact a year. PVC The recently demand and soda note, putting momentum. If first current soda XXXX first domestic two on the favorable created seen compared combined both EBITDA disruption. were contract in disruption, XXXX prices will of prices has XXXX caustic headwind operating export into that price remains soda levels, adjusted On disruptions strong in Alunorte seasonally supply rates, $XXX fourth from have market, Europe demand which quarter a Olin's of their would at levels. caustic and approximately we price to quarter recent lows. The million

If to into EBITDA forward portfolio, by merchant our levels. chlorine-derivative provide look improve levels, earlier to at XXXX opportunities current soda hydrochloric offsets we would fourth pricing organics, As and are that ethylene acid, the compared million bleach, $XX million can adjusted including XXXX to remains there quarter chlorine, presents. that pricing caustic challenge XXXX dichloride chlorinated XXXX, in $XX

dichloride], expect chlorine, XXXX. ethylene further pricing chlorine-derivatives (sic) and [ethylene in improve dichlorine to We

In turnaround lower especially Epoxy maintenance forecast $XX be are million XXXX costs, to XXXX. to business, in million compared $XX approximately addition, the in to

our we anticipate expect we to to to XXXX in dichloride ethylene costs in compensate these ethane higher pricing, for while more ethylene Finally, higher higher higher costs. XXXX due XXXX than to ethylene pricing be compared

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

EBITDA partially of Sequentially, quarter the results. earnings improvement higher costs, second significant XXXX primarily $XX material higher million by adjusted and turnaround volumes, pricing The lower volumes, and driven product was EBITDA adjusted approximately the offset by benzene was quarter primarily XXXX offset $X costs, $XX by was raw from higher third quarter Third Epoxy partially material propylene. by higher than million improvement the driven propylene. and higher costs raw million

sequentially EBITDA for third quarter we The strongest to resin quarter forecasting epoxy epoxy lower quarter third are resin typically is and than seasonal quarter fourth Therefore, demand. results. be the the sales adjusted

supply results demand the overall business by this market. the Epoxy in are the dynamics the and and in present year We encouraged

this necessary in higher improved of and demand market quarter epoxy resin have Asia, slide increased we tighter dynamics during region early quarters successful that XXXX, resin, the first of of second and raw and liquid of have different our since Europe, in and XXXX. in to adding completion In latter Epoxy we beginning to results part XXXX America last through region. and and XXXX. second the America epoxy pricing resin in year maintenance improved have experienced, earlier chart the moderated been have portion A prices the primarily each been of pricing and the in resin in slightly. the the costs Supply propylene. increases XXXX Asia. United In has On dramatically fundamentals turnarounds conditions Resin recover prices late have price X, year material the XXXX, then by and the resulted of late into benzene States, and momentum. and Europe beginning North of expect into pricing With North quarter displays increased Europe, declined the these XXXX. a improved of fourth volumes in for liquid

epoxy quarter to During epichlorohydrin XXXX, current support and the prices have A pricing third the were resin stable of bisphenol continued Increased levels. for globally. pricing resin global

Winchester on to on Moving X. slide our business

Third lower from of volumes of quarter The operating of partially commercial to third $X.X $X costs is XXXX. year-over-year $XX.X $X million, quarter decrease million and of other attributable XXXX Winchester adjusted million, EBITDA million, higher by decrease million. the was costs material offset $X lower pricing of and a commodity

overall approximately commercial compared months nine XX%, increased by in of $XX in XXXX first of demand the as and decline first have million approximately to material a decline the commercial XXXX, other which costs now XX% months XXXX. During nine to commodity follows demand expect We XXXX.

ammunition will have weakest While fourth has strong, historically normal consumers believe the usage continuing demand as has result, been their decline we at a ammunition personal that fourth be remained sequential to results the the The quarter. confidence there to level quarter as in and compared a we that quarter third we expect consumer reduce are inventories. quarter,

in derivatives new realize, resin produce global produces caustic areas More expect related to soda, years, continues epoxy be that for for specifically product in will chlor demand soda and the the the its and continued cost and the bullishness capacity as new allyl and resin. chlorine, bullish about X%. precursors, upstream of market. epoxy I the supply well next of of liquid on A view we products for North vinyls growth approximately will drive required in the businesses. reflects Olin required America utilize both of the favorable X, the the bisphenol epoxy and grow slide additional chemical or epichlorohydrin in five to prospects these required the X% other our for to to position Turning alumina of by phenol, for caustic investment points, energy continuation demand as improvement resin This of by alkali capacity discuss to over forecast dynamics growth chloride, long-term and cost that chlorine-derivatives, industry led requirements annually, the key the

only point this growth to additions PVC XX tons ECU in approximately grow investment of capacity to at being demand also this increased current will million At translate the global global into the required announced. gap. do growth million fill economics the the believe not X.X% tons. justify We This area approximately in of that We there's largest time, X chlorine expect additional been approximately with industry. demand

would do also increase sustained filled factors We long-term believe rates, average. than higher continue and have improved be will to at structural XX These the improved can chlor business result be the the lead believe not by is to alkali over midst approximately the growth. profitability us to The and demand necessary investments soda points this higher global change percentage operating additional and which in chlorine profitability would to caustic meet be that the needed caustic soda justify to additional a time. in demand of

believe $X.X of a a point our past, closed when of in billion. improvement transaction Products curve of Now, Dow we've of EBITDA October achieved was the that the referred business the Today, the XXXX. This next XX slide a on forecast be mid-cycle Chlorine In forecast will on based months. is in adjusted long-term to developed we turning billion to adjusted XX. EBITDA view $X.X

third export point impact commercial of Olin's lower of pricing, EBITDA approximately by ammunition higher $XX weaker adjusted million. a reference, ethane prices, sales reduced caustic the As soda quarter and

billion achieve demonstrate EBITDA. The those quarter performance of plus third adjustments the ability adjusted our to $X.X

intention is Day it provide York industry host analysis our an to New our of Investors' detailed views. in in Finally, a early-February to

call Olin's CFO. Now, I'd like to to Todd turn the over Slater,

Todd A. Slater

Thanks, John.

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

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

combination over reduction. of EBITDA has free for X.X debt as top our reduced net ratio EBITDA reduction last times. remains with the growth to Our priority XX the debt XX, been of leverage September flow months, And and debt-to-adjusted cash

jurisdictions ratio forecasting cash on year. in primarily cash We're XXXX. tax for year to reflect federal not range X and in in do in our the Since $XX of leverage million XX% which deducted improved a with midpoint we this, X.X the $X.XX utilization carryforwards, We been the Olin XXXX we expect XXXX. net waterfall further billion of of that adjusted operating be will in our expect estimated to income full times not far be times tax U.S. XXXX, the to XX% with EBITDA foreign U.S. forecast in primarily the arising made tax because be has the the to the by of payer, range tax Starting to range. costs in XXXX. federal loss payer Because payments of associated chart, a payments, of the of the out to acquisition left be tax rate year-end

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

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

business to to business. Epoxy the with capital turning in in the be selling approximately column, prices Now, increase cash expect higher of XXXX of approximately incurred, cash the fourth full and revenue column, items In costs $XX.X represent insurance million. inventory propylene the an capital million. recovery; portion costs expense for and quarter's project to the approximately and XXXX million environmental in for levels. include: year of The working integration insurance one-time spoke We a of and $XX remediation benefit multiyear costs; expecting first $XX the IT XX% costs million currently to to net interruption associated that I sites; legal we're one-time restructuring $X recovery, just next compared The million of is increase $XX due higher estimated approximately items use about. in a primarily various XXXX the working

a $XX settled million, disputes totaling coverage recognized which with pre-tax gain sites. reduced insurance legal was with recovery. this of associated various fees for Furthermore, subsequent remediation recognized liabilities certain an owners – to $XXX costs During to incurred of of at in $XXX million Olin effect sites the third million. certain XXXX insurance we by environmental respect environmental quarter, of claims $XX.X estimated pre-tax these by we of therefore, settled a we remediation million

we result, $XX.X interest a we adjusted The XX% represents our and than As debt of insurance XXXX next completed estimate rates refinancing recoveries. the We was fourth those higher variable forecasting expense. environmental associated EBITDA approximately be after experienced with The to recovery the column this have at of excludes interest XXXX. in quarter. rates in currently interest million received in debt we're of cash an January, the

capital to turning Now, allocation.

$XXX nine we the approximately of debt. During year, in first months the prepaid million

the and repurchases. dividends share form $XXX returned addition, of in we've to shareholders million In

Given our the quarter. businesses insurance in cash received, the outlook generation allocation confidence and and positive for the more balanced to expect recovery for outlook chemicals our the our capital fourth environmental in we be in

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

Operator

begin go will of session. question the And Carson Don comes now ahead. our We Susquehanna. from question-and-answer first Please

Emily Wagner

for morning. Wagner This Emily is on Good Don.

EBITDA guidance the we decline lower update, that per that to translates the over ton prices going in Just second about million from half. lower roughly caustic calculate $XX the $XX short prices for

change declined index color expect more in XQ, you So, and happen could the give in what you quarter? some pricing the export knowing index that to to do the $XX about us fourth on the in

James A. Varilek

has currently another Emily, this and is down Jim. The domestic quarter quarter. index, as third in in forecast for $XX ton you moved fourth is mentioned, a the the

to As expect seeing now. that we a marketplace we taking that are see leveling out part a changes and next demand reductions right start of dynamic export some, out now of few with far say, goes, right would place pricing bottoming would are expecting we're to place the it's some year, And expect, the early reverse. and we of as to taking

Emily Wagner

reducing $XX is And it little imply follow-up, that? from it's seems take full $XX Is if the that better million $XX better the to down then things. about a offsetting items that seems you. break those just three those year. you million, you offset Epoxy guidance, bit? million can a like or What for for Thank that's It

John E. Fischer

chlorine seen derivatives, driver the side, biggest cetera, about improvement We that that. the et is and the talked the -or the improvement been we've that on we've year-over-year chlorine of

Emily Wagner

you. Thank Okay.

Operator

ahead. Our of Please Jim next SunTrust. question from comes Sheehan go

James Sheehan

ethane year? and Ethane be on conservative collapsed in I ethane you the XXXX. next outlook low-XXs. volatility Do or you think in XXXX prices your those have about you back might you see are more that banking talked might impacts think into continuing

James A. Varilek

Yeah.

I it think about is ethane is now thing very that volatile. right the

we that XXXX. so, And here from that in we've do we to it albeit to the do settle do the we seen level expect a at expect half of spikes be first timeframe, we higher experienced that expect in than the September-October back,

James Sheehan

when to would situation, the above rates XX%? expect to on facility And that Thanks. Alunorte operating you return

James A. Varilek

that, the from been week site. good last on while. a question. the for the The has embargo EPA recently – one removed removed an the a barriers It's Brazilian been we've one situation their It's of asking equivalent of is

the can't remove it's that are to be but And you we're in been really strictly any kind hurdles court will over, now of that now resolved. federal give that embargo. date, hands, it's so, elections hopeful the that their And hands I the technical removed. of in have

James Sheehan

Thank you.

Operator

Fermium ahead. comes Frank next Our Research. of question Mitsch from go Please

Frank J. Mitsch

on export have might there, expectation impact not Alunorte, you what gentlemen. what caustic morning, about on And Good your what is the but Hi. pricing? hearing that following-up and RUSAL Jim, What sanctions? there, Yes. are

James A. Varilek

Yeah. earlier flows bit it not couple year would caused I of any don't Trade a excitement so RUSAL the and anything the expect quickly, on not more a sanctions. I I'm for we impact. relatively of but adjust had – from RUSAL in months, expecting

Frank J. Mitsch

All that right. money what in the on XQ. et of in be that capital "more comment implications Can and the elaborate spent allocation made might in what buyback, Terrific. And Todd, means being you balanced" share you you anticipate cetera? on terms

Todd A. Slater

as be would flow so we our far in million free and share Frank, to What is repaid $XXX returned said, returned fourth repurchases. dividends $XXX XXXX say approximately percentage we in to and million in cash of the higher the of we a expect shareholders. we Yeah. I debt to quarter shareholders

Frank J. Mitsch

right. All Terrific.

so the I So, right. appreciate obviously much. is All it. flywheel share Thanks buyback.

Operator

question from Stanley. Kumar next Neel comes Morgan of go ahead. Our Please

Neel Kumar

morning. Good Hi.

in caustic end of price XXXX any some contract price of to the for system your seemed levels. million $XXX that the be And at caustic expect your in the to the XQ improvement at the projecting? October legacy also, headwind EBITDA, IHS incorporate stay year? the consider On which decline reset of in you that any Does pricing does

John E. Fischer

in of in the the had simply in time we system system measurement is prices week. as our – that It a last we had point end of of No. our at

favorable our positive; a a that's reset So, if positive; and pricing, if negative. move they if contract get that's a the that's we a down, from move up, indices

Neel Kumar

to disruption out new Can on seen will prices your reports Northeast the resolved of India be we've down play think issue (XX:XX). thoughts due Asian a of of give you you us flows Standards some will recently it their export Also, Industrial Bureau near-term? and coming how trade in in from

James A. Varilek

that reset to that, India is activity a means this needs on Neel, a of will to – that be into a trade adjusted. a place are The time, import I taking long-term thing. to Yeah. technical need it's to it for it place India caustic basically India. will product to some pass, of the continue is situation, really What It's again there'll registration government registration that is Jim. as frankly it's will be period kind because import caustic. be don't flows take expect

Neel Kumar

you. Thank

Operator

Please Partners. comes McCarthy Our question Research of next from ahead. go Kevin Vertical

Matthew DeYoe

Matt morning. Good It's Kevin. on for

by I've like of ethane least seems it to this a particularly, guidance So, that to that ethylene component number? throughout has on price. to And conservative most I baked your kind continue We're mean, the that upside be push year, the recovered on I shouldn't mean, question going feedstock into what EDC the guidance. of relates better prices? that. EDC to fairly the cost been is of

little confused a size a I'm XQ. of why coming as negative into discrepancy to So, there's that

Todd A. Slater

what's plus a $XX bridge ethane, said or Todd $XX second said X%. compares to guidance. this and associated make guidance, million our $X.XX what We a minus let's gallon – with caustic, we've $XX We've our with said a go what's before, with and range, billion million million gave Winchester. in going back associated to We and plus in of is – mid-$X.XX or we've as said that I $X.X think X%. minus associated we're the embedded billion, to just

that So, right on we if billion, guidance you the of that of given August off prior puts our had add top at $X.XX the you X. end that

as as well John chlorine-derivatives, for chlorine, mentioned yes, the as So, were all EDC. offsets there

Matthew DeYoe

on kind starting better away Okay. to And move down. just you think return have to of relief you volume that copper the receive material of any or a benefits price raw prices moving to prices relates end to or lower we most expect basis, Thanks. lead that then, market? as until Winchester, it, do it Do competed okay, year-over-year on

John E. Fischer

that latter. me tells gut that the the to is answer My

get I see volumes, when commercial think you in decline I away. competed XX% it a think normally would

think commodity impacted year-over-year that is will higher costs. hearing is you I negatively year next what stop the by

Matthew DeYoe

inventories it's on you side So, historic to number be tricky probably have and commercial work versus to might how how elevated much we've here? a the on this, but put on through end, about do and the idea any consumer they and

John E. Fischer

almost lying at be and in would idea. said if had go back XXXX – if end other very North than, at look I to through compared America XX% I look at and level, ammunition of the higher can you the end any I years. mean you period, they an from historic of XX% and them seven to the XXXX, I look for were purchases

Matthew DeYoe

Thank That's helpful. Okay. you.

Operator

from comes go JPMorgan. question Zekauskas next ahead. Our Jeff of Please

Jeffrey J. Zekauskas

a say very cyclical might fears. your EBITDA of potential, a in the you be? businesses, have normal time, near-term much. has adjusted come down, And $X.X billion. about really And your and of period over think businesses value Thanks what you EBITDA kinds people recession, of because Olin countercyclical economic both I all is have your potential shorter In potential

John E. Fischer

I the we through Well, think cycle thing what happens chlor if say you as a typically, first enter would back in a alkali Jeff, is, recession...

Jeffrey J. Zekauskas

Yeah.

John E. Fischer

a significant drop off in demand ...you'd chlorine see caustic. for before a for drop see you demand significant in off

up So, XXXX at saw near-term of run caustic. this early-XXXX, and – in end front in in get the in you and recession we any spades a

Jeffrey J. Zekauskas

That's right.

bet. You

John E. Fischer

a get you then, rollover. And

the first levered than be they we would So, And caustic. be – in the a highly today. results very think for – the forecasting of are obviously step but side the positive more don't recessions, would not on we're we're Olin recession, in to business I caustic

Jeffrey J. Zekauskas

pricing you and positive can where how – of they are? And behind sustainable think Okay. about chlorine talk some dynamics you the

John E. Fischer

time, and XX most merchant back I the span over because the shrunk what's chlorine for dramatically XX happened years primarily Jeff, years, producers integrated I have or can of their over of backward and vinyls supplier. the become North market XX has chlorine in own the long is America go think last

the market rates has a of around in itself top On significant delivery that, there's merchant increase chlorine bit. So, rail. been of quite freight shrunk by

itself the as I an a in has that growth were because and handled is environment think chlorine shrinking to chlorine-derivatives We're in putting actually chlorine X% of at shrunk of it's supply. has the market some guys. And supply, being chain where on are and year growing pressure by merchant the vinyls So, vinyls available itself. is available chlorine that for the actually market shrinking and the amount merchant upward the X%

Jeffrey J. Zekauskas

so Thank much. great. Okay, you

Operator

Please next comes Barclays. Mike go of Our from ahead. question Leithead

Michael Leithead

morning, Good guys.

Just to billion Jeff's a bit number. $X.X on question EBITDA the on piggyback

that longer a be mid-cycle number? what would And a Just considered is clear new if to fair here, no be mid-cycle target? so,

John E. Fischer

the changes that that the really alkali going cycles structural on in you long-term in is, considered to a like Epoxy is think longer business think we've and what way such are a I have I seen we we're not the And in say point past. curve. target, we business would yes, a mid-cycle answer the the chlorine-derivatives to is chlor improvement is see that it and no would occurred it

a Therefore, levels looking think of don't I and and really a around up we see supply changes because but to will broader changes not I at whipsaw we're going the cycle call have here. We want price to economic activity, past. don't down mid-cycle, in we're demand and like

Michael Leithead

you about to trend Okay. fourth here it And line just your soda caustic a in soda dynamics into then, comment, far can how price. upon But you're talked quarter in today's if seeing we expand heading caustic maybe XXXX so expect bit you XXXX? the flat you and guys how

James A. Varilek

Mike, Yeah. is Jim. Yeah. this

since soda export as the particular, in in spiked his they you limited we've And mentioned supply Alunorte. mercury that shutdowns, in individual far can caustic the or the is – and whether market And the on hurricane, the events, honestly. seeing a demand, the a whether spike we've specifically any demand As demand, of past to had be of we're back freeze John as be go that been time, the has event what now, those they market. plant number quite have things market that's outages of that comments beneficiaries the

is, seeing out a in you're amount that have you're flows was export on done the impacted would XX,XXX amount what exact Coast for So, an ongoing export Alunorte seeing enough interestingly of the example, basis. about of from is export, of September, the market. trade readjustment the you tons, exact Gulf spot that was the And expect which

market same which on up, you've demand that is of So, comes a to past seeing you're period time. pressure the minor seen on that that when taking market in in that the is that past we'll the balanced why domestic believe place. like the And upward seeing thing we then the and downside, in readjustment got more pulls that event on the of is approach a we're back, the upside, movement there over over, was indexes there the some domestic some caustic move – on the start the see And we've positive side things. just

So, and rates, the really there. market that are right place also now. The should out. pull in operating We slowdown seasonal taking chlorine that's do expect help dynamics the what's on

Michael Leithead

Got it. guys. Thanks,

Operator

Our next Nomura go question comes Yefremov from Instinet. of ahead. Please Aleksey

Aleksey Yefremov

Hi. Good you. everyone. Thank morning,

really in of think about sequential mentioned realized pricing in back price the expected decline going this quarter? Is $XX decline your caustic should versus as QX? that a guidance, soda – million. to QX Just this we fourth Is your lower you really

John E. Fischer

was full end of quarter, quarter billion, the $X.X the provided designed the between which difference describe No. the That third and guidance was year. we at we to guidance the provided second the the of end for at the

impact than that gave that realized we we've caustic from So, X. you on expected guidance full August would lower have is when we year the pricing

Aleksey Yefremov

right. All

representative say second change in of the of price your really half a expectations? sort year the it's So, of

John E. Fischer

Yes.

So, also of that true on ethane is the on of comment comment the Winchester. and true

Aleksey Yefremov

customer commitments, benchmark, you. of renegotiate Thank do – have of the pricing export will the those as the level contract, negotiations those so? any you concluded expect then, relative In if your soda cetera? And to of contracts you Understood. any et as caustic to you far

James A. Varilek

Those are...

Aleksey Yefremov

And about I'm XXXX, really talking sorry.

James A. Varilek

contracts contracts, given of up of the renegotiation amount in we that we caustic, a have significant and the two Yeah, and time. is years, has have we're is – the come contracted There The the that that constant increased moved understood. amount volume in tightness caustic in of towards over last supply state industry is all a the contracted.

there's yes, continue answer and always to that contract the contracts. we'll discussions those is, So, price in

Aleksey Yefremov

Thank you.

Operator

comes UBS. question of go ahead. John Please from Roberts next Our

John Roberts

Thanks.

think particular soda West dynamics Coast Has to I U.S. the China of part the caustic been to the in market? any change exports that of the there

John E. Fischer

No. early mid-summer in well-known, the part that of changed. movements but dramatically than the this, impacts pricing there are were and were haven't there Other of the some late-summer, dynamics and

John Roberts

Okay.

we through do year? think So it be will as stable the you end here go the of

John E. Fischer

there's won't it West continued over you movement change less, demand pickup Coast. China has the much that time. to think see if to a less and China, I export in may

John Roberts

with then, to on that? hasn't Winchester. destruction give just end-demand look the of some us give yourself metrics any you update And comfort been in there you Okay. really indicated at Could you an that

John E. Fischer

ranges, looks the consumption source. first, National primary at shooting and our that's Well, Sports data Shooting around et Foundation cetera,

what there predominance which going ranges, So finding of are ammunition at shooting where is consumed. activity of out actual out the the and that is levels activity different is

John Roberts

you. Thank Okay.

Operator

from go Eric Please Our Citi. comes next of Petrie question ahead.

Eric B. Petrie

last capacity to in see closures this year your are and China as during in for do up What ramp similar into November? morning. a expectations we did prices expect winter you Good alumina Hi.

James A. Varilek

this I have are the for visibility Chinese into what going to particular really don't good season. do

side, the as of taken demand then place increased impacted impacted that which the side seen pricing, couple years, obviously have Over by the being that the we've shutdowns seen or also curtailments and we've supply last have well. curtailments

I visibility what have real So to a year. don't good into expect this

Eric B. Petrie

Okay. U.S. continue lower prices export. contract contract function do or pressure you that for Is prices to premium soda have compared decline? a prices caustic increased exports greater Alunorte expect as to just to on purely of to export

James A. Varilek

And going you're U.S. pricing above an there's As to and be either going the see see prices a that have once pull; amount crosses then on the start downward bottomed you'll equivalent create you're has either yes, then been going is to to moves I value, if export it market pressure over it to But volatility think to out direction. upward upside, If of direction. mentioned the pulls in does down, pull. before, see I export The significant. it's export upward when in some pressure. probably pricing, it

Eric B. Petrie

Great. Thank you.

Operator

Matthew next of Pickering, Tudor, Blair question from go Please comes ahead. Our Holt.

Matthew Blair

Hey. Good morning.

reduction in seasonal think at QX slowdown opening compared average doesn't look When QX you demand Chlorine to operate normal Institute much mentioned really of I your operate. it average remarks. data, that show in a The a I

just So, of quantify hoping terms what EBITDA? kind in or volume you of should I was maybe in could impact perhaps have whether QX, seasonality

Todd A. Slater

guess, we declined rates Todd. X% the and if look third is operating this I X% between you historically, between quarter. industry the say Matthew, would alkali chlor and fourth quarter

So we compared QX. would to expect a similar QX decline in

Matthew Blair

versus Thanks. housing side, six chlorine-derivatives XX% on then, perhaps talk can helpful. maybe you're is chlorine demand. any you and ago? about month there? seeing seeing today demand and think, Very any the of softness chlorine of Are construction you And I sort trends

James A. Varilek

as has see EDC, chlorine-derivatives, to side over equation Actually, or whether see the ECU upward the years move opposite movement times, actually of Jim. you you're both pricing pressure. is sides in up, moving year, caustic seen of HCL chlorine of last the year be the the is the it equation. very we've two on the the whether interesting over on typical merchant last has, chlorine, you chlorine it been the side oftentimes be be when seeing it in of ECU What the that aggressively year-and-a-half under as This side that, the

of ECU that we both to move, change So which is industry. structural the in the place taking seeing the sides believe speaks we're

expect do the continue that we of years. So to over course the several next

Matthew Blair

you. Thank

Operator

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

Stephen Byrne

Hi.

equimolar? the Your longer-term is caustic derivatives. production And does robust for chlorine how question forecast growth is differential my more that industry is, balance given for you demand than the the

John E. Fischer

gets way and a soda by long-term. is balanced on outlook us normal bullish pricing that to pricing, The that leads caustic

Stephen Byrne

make there market to chlorine? switching But than than chlorine adjustment some more – alternative materials production will does for given the demand will of the other more caustic be be in caustic end there raw

John E. Fischer

ton a – an there not convert from to the margin, ash, that but to caustic is ability to would that shortfall. million think soda XX not plug I on is soda it be sufficient

Stephen Byrne

seen soda you increase And switching that have in over year? ash to this any in

John E. Fischer

decision not they not they a That's done, that and that historically, It's the money it, And process than change. often you the at a look expensive justifiable. it because makes reversal No. spend an did not people time get that you every they day. prices caustic in make when see you did it it, regret more

we are concerned not that. So, about

Stephen Byrne

new increase demand are that technologies there chlorine-derivatives? development for in any would And potentially

John E. Fischer

out point. that Nothing No. at jumps this

Stephen Byrne

you. Thank Okay.

Operator

next Our RBC Arun Viswanathan go Please question from Capital. ahead. of comes

Arun Viswanathan

Great. Thanks. morning. Good

years? the still of caustic light if Winchester you as you moderation $X.X mid-cycle how of that and over billion a wondering couple still would trajectory Just in of breakout And the if in next kind recently? of see different kind Thanks. towards businesses, some so, pullback this the EBITDA

John E. Fischer

earlier, the next the at said we as penalty, we getting you adjust if obviously, at mid-cycle, bit clearly it penalty a think it improvement back And caustic businesses looked that and path months. to basis add ethane a the see in and on QX you for said point we we it a that and the and no a are in there. $X.X we the slope a think EBITDA, longer can our it's XX as look achievable I at little longer that on, term on billion look quarterly

talked as dynamics across core since very about. play seen also the liquid to of in going out We've same real Our portfolio, to both Epoxy in consistently alkali bisphenol caustic the the expect resin and view phenol, are the we're are in improved Jim the which is A. XXXX, the just see Epoxy, side epoxy to growth And see we starting we and pricing precursors also tightness continued that on epichlorohydrin, side demand and chlorine chain. chloride,

force up as prices going longer term. which, get to epoxy they're resin liquid of All those tighter,

mid-cycle a $X.X point trend... a the billion as a view in don't we term longer So, now, as we just improvement view it

Arun Viswanathan

Okay.

John E. Fischer

come businesses. trend improvement that chemical will from ...and the

Arun Viswanathan

on the lot Thanks. And flow, next cash cash the you're of obviously, years. a generating couple then for

be generous a your level, and do cash manageable guess, prioritize you, in I or given investments, think, would so. buybacks X relatively other Your flow? leverage How leverage, where times will your be and Thanks. I

Todd A. Slater

is Todd. this Arun,

cash with free a continue consistently returned higher as percentage to shareholders. I to to going said expect be we look the we call, would what we we think percentage and in as of of expect the to flow forward the cash on have have delever, fourth shareholders, higher flow free quarter, we to

Arun Viswanathan

Thanks.

Operator

Our Sachs. next from comes go Goldman question Karl ahead. of Blunden Please

Karl Blunden

morning, Good guys. Hi.

detail that but balance epoxy think last supporting the business? clearly I we pushing started all and XXXX, wanted for thoughts now the are how tight business? question. what on you to get your the pricing for more do resin mentioned for outlook on feedstocks touching in on I are and out And Epoxy puts takes margin just your prices,

Pat D. Dawson

up of we've Yeah. Epoxy Karl, I on indices XX epoxy market Pat. almost months. resin last XXXX, the the a up liquid is here this beginning seen is run mean, over pretty indices, dramatic Listen, the in since XX%.

on the XX% you XX%, third is quarter a market up year-over-year look just indices, up at up resin If epoxy quarter-on-quarter XX%, is bisphenol basis. EPI A liquid

coming last a seen the saw chlorohydrin higher of favorable see comes that there's a out about that we we China based of which out EPI any to supply/demand little – in because that comes appear see than China, on at in in ton China. big fundamentals change very EPI the glycerin of to very to epichlorohydrin here time ton we a is this lot that is would It outside and be year, EPI, $XXX has So, EPI. out, EPI continue $XXX China, a been we've what

in structural potentially that think is the change past. a seen I So, that we've not

robust, EPI BPA seen recent hasn't mentioned, EPI to been phenol market any Phenol, liquid the in fundamentals polycarbonate resin. high. John in any stay industry I lot built see capacity driven in strong on capacity capacity on on significant built for times, as nor of there been The have of been additional a decreases that that there's that's tightened and pressure BPA epoxy we've significance any out prices some So, has up. with And market. continuing has or

and think in China in I some around QX. changing you're the And bodes stable been right So, supply/demand now. at things here well dynamics stability prices epoxy that very due Olin's going prices the resin the on good fundamentals seeing of have for to

Europe has X% demand. So, for X%. and the or cautious one calls takes, optimisms there been at that or like X%. more like ongoing looks puts of growing also I out think Europe, it X% the It is

oil this On past side mainly market and by stronger the year the of flip has U.S. years, been driven than gas. it,

up like So, the bodes the unplanned the saw And stable additions price been there year, events. think run either resin the you made input we hasn't costs, would margins. on here would I or or well market any could overall, the again few precursors if a fact say I for in input you supply/demand see fundamentals, capacity the the that have a in costs earlier in

Karl Blunden

appreciate That's of I a it. detail. lot

on some at a balance there's for too when at you at to reduction place you to give the where consider just or one the point of guidance? things we is are XXXX quick to Just a sheet, give many kind early would that goal intent it too look or a equity,

Todd A. Slater

I think area. our sense when – early in results on provide we a to to better what quarter in able Karl, are Todd, this – as expectations that is I our XXXX give early-February, think for fourth be we'll

Karl Blunden

Appreciate Okay, great. Thanks a lot. it.

Operator

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

Roger N. Spitz

or And it impact statement? to should of happened XXXX? you half-month having it will a for Thanks of very in that think missed spike income how apologize much in see delay I we it the QX of or which about explanation. your some one-month goes Dow's capacity ethylene we of before of XXXX, was much a QX if price some all and this ethane it or had I But the

John E. Fischer

we QX. no, second that covered it was answer on essentially results, XXXX month. to for of market gave impact is, our so QX The your And question price half both and the ethane for average we pay an the the second

James A. Varilek

ethane. For

John E. Fischer

ethane. For

Roger N. Spitz

Okay.

happens your that to So, you're going it, up in income statement going month? in to see that it show month, if

John E. Fischer

correct. That's

Roger N. Spitz

QX, up. could your you whether out side, were were the your I the spreads down comment on – year-over-year? Epoxy then, Epoxy or Perfect. mean, And flat if in prices

mentioned I expanded. margin the want to want assuming what propylene I'm to You just up. have the I hear were just but that also to costs spread the benzene, – say. or expanded, you

John E. Fischer

on not Yeah. Europe. we I and versus propylene is that Listen, specifically QX America mean up in was saw here think spread, commenting in the X% XX% North in I I'm QX was up Rodger, what propylene

no the question is expansion there headwinds So, margin curtailed hydrocarbon QX. that in our

Roger N. Spitz

Thank you very much. right. All

Operator

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

John E. Fischer

fourth to joining we at look to to Thank our speaking end you. forward Yes. for the you of Thank everyone us quarter. and again today you

Operator

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

now disconnect. You may

Olin (OLN) 30 Oct 182018 Q3 Earnings call transcript