OLN - Earnings call transcript Q3 2019

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Operator

Good morning and welcome to the Olin Corporation Third Quarter 2019 Earnings Conference Call. All participants will be in a listen-only mode. [Operator Instructions]. After today’s presentation, there will be an opportunity to ask questions. [Operator Instructions]. is event this note being recorded. Please now Logan Bonacorsi, would like Relations. to to over conference the Olin's turn I Director Investor of Please go ahead Miss.

Logan Bonacorsi

and joining everyone you today. morning Good thank us for

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

Events. to data will available results Factors cause copy from could available Investors most website Releases. on that The release. factors the limitations today's yesterday's and under Risk of are projections release Press the our recent in Past without press the earnings section other differ and information described and A press quarter of are financial slides and Some our be in under our transcript earnings third Form section in XX-K of

President Fischer, Vice President President With of Chief Vice Executive and International; Varilek, me Operating and this Jim Officer; Chairman, Epoxy President John morning Financial President & Olin's and Dawson, and Vice Executive Officer. are and Executive Slater, Todd Officer; Pat Chief Chief

your we call our will now will will Fischer. and to We to John? take begin John prepared the remarks, questions. over be with thereafter, I happy turn

John E. Fischer

the X. that let's for a Winchester With the for Thank with and to you conclude outlook from points key detailed the long-term discussing of begin Logan Slide our epoxy the third by updated and good followed segments, our view remarks on overview morning each chlor-alkali will everyone. XXXX, Today my quarter market by dynamics business of I of Olin's remainder segment. turn and

quarter adjusted approximately XXXX of million. EBITDA During of reported third the $XXX Olin

challenging a represents backdrop. a economic XX% While the despite results improved year-over-year for sequentially quarter this decline,

higher as of second results onetime epoxy as the well during quarter costs, segments. business that the business operating across maintenance quarter, lower our affected volumes events turnaround planned from seasonally resolution strong the benefited Third the performance,

However these worked that to several during offset challenges period positives.

significant we spectrum of customers. quarter chemical Beginning electrical a in the pulp a the in refrigerant, middle coatings expected from demand demand and agricultural, than laminate, third paper, automotive, saw industrial experienced and slowdown customers. lower We from urethane, alumina, of broad

In negatively and volumes We caustic experienced several lower customer chlorinated lower addition prices epoxy acid, soda, for resins. organics, to pricing affected dichloride, demand lower hydrochloric products. ethylene for

$X.XXX This lower year to adjusted be EBITDA factors primarily EBITDA expect now soda outlook year-over-year The offset in we adjusted by million of billion. decline updated EBITDA caustic impact $XXX three approximately the XXXX XXXX is XXXX turnaround resin million full epoxy our year which from between pricing partially lower be Moving to attributed lower maintenance pricing, for on can adjusted full costs. Slide and compares year to to $XXX million. $XXX full and X,

ahead Looking persist expect the chemical underlying through we in weak remainder to businesses at this the year. demand of our fundamentals least

due destocking hydrochloric and epoxy, coupled dichloride, and in quarter lower pricing, alkaline operating ethylene of the in levels demand soda, chlor the chemical fourth forecast XXXX. a the lower quarter quarter may chlorinated seasonal EBITDA inventory key quarter lowest epoxy lower this with the The organics, behind we decline to represent fourth and quarter volume year. are acid, our anticipate compared business rates seasonally when resin of fourth As to turnarounds. result to weaker earnings third The assumptions adjusted caustic

customers broad agricultural, alkali segments demand is and from Slide to at including more vinyls customers. pulp we'd business take X. with refrigerant, The our of urethane, on which lower and and chlor paste and look of spectrum products vinyls chlor alkali starting a each Now a like detailed products alumina, business experienced

beginning buy demand in any a and example chlorine negatively an both pricing. week impacted did not period September. major over Slower four customer As chlorine volumes a

quarter Third in the million year-over-year soda was million and XX% XX% or This XXXX. vinyl and when approximately representing for declined has driven third was year-over-year. compared decline acid $XX $XXX.X pricing products Olin EBITDA Chlorinated System hydrochloric than the a Caustic alkali soda quarter organics decline. pricing pricing. segment more chlor by declined XXXX adjusted of lower also caustic to

Volume raw all pricing were organics, Offsetting chlorinated material levels this for acid and pressure year-over-year. of year-over-year caustic operating hydrochloric lower volume soda, and chlorine, and declined costs. some

environment to and vinyl earnings XXXX likely given and expect lowest alkali at fourth lower quarter the sequentially the to the Looking of demand XXXX. represent and for results we the quarter products of current segment chlor be

quarter. on let's a soda in in caustic pronounced pricing Caustic third market particularly soda where was declined caustic soda were the export Now Olin The look the Slide more closer in indices down per additionally price ton ton take pricing is quarter stronger resilient a at relatively pricing in support in to in the $XX Domestic decline X. system and cost that and third quarter the $XX third U.S. October. market. was to lower per in and due economy October while serve from the which pricing

the weakness in into and quarter soda we potentially expect caustic fourth ahead XXXX. in current the Looking continue demand to

now us segment X. Slide to our performance Let is move epoxy the which of on

the generated from the X% quarter third a Olin's $XX.X achieved EBITDA During decline the of of adjusted quarter business third level XXXX XXXX. in of epoxy million,

represent power. XXXX. in longer-term our of XXXX segment businesses fell in strength as the integration The of first results acquisition of month this earnings Chlorine Products the these and the Dow's results expectations, highlight trend potential quarters of improving short strongest nine Olin's for the the business since epoxy three gradually While chlorine period

results. XXXX be lower offset unfavorable pricing lower levels We Looking results by costs. maintenance raw lower fourth expect anticipate to volume quarterly lower the results. XXXX segment seasonally to of quarter ahead than material epoxy levels, we Sequentially segment than fourth lower and stable margins due to trends affect we EBITDA XXXX to adjusted be will costs, last epoxy quarter believe turnaround year's now partially the

on prices now shown the a epoxy Looking exhibit X. resin global at in Slide which are

liquid demand are during bright months nine third move to been energy from resin regions. of weakness During declined spot price A resin to and business to XXXX. all lower epoxy The been average first primarily quarter the The epoxy epoxy wind continued global forecast the which driven pricing compared in has approximately declines the have industrial sector laminate, in the pricing has electrical automotive, coating increase in global in by XXXX sales XXXX. XX% customers. XX% approximately

soda as emphasize epoxy been in levels from and fundamentals producers. Before in weaker epoxy flat supported the of XXXX. has near-term for oil supply would pulp alumina Demand and organics, chemicals resin gas market declined. products outlook X. fundamentals. end resins be businesses moving due demand been will these is Europe for to ethylene to for and such like hydrochloric for dichloride, acid soda, we chlor and demand declined Winchester weaker have paper, largest than epoxy chlorine, believe has Demand two key have Olin's on In segment in demand Production alkali, to markets long-term America for vinyl, dynamics by North spite the market for chlorinated to caustic products XXXX which continue epoxy long-term Olin's caustic and key and our Slide I use and favorable

as alkali on for be the We well sides Both caustic growth continue chlor of to both that believe demand as sector there chlorine ECU. chlorine the will soda. derivatives and

momentum announcements demand additions. investments. additions minimal alkali U.S. there over world. chlor upward been Ultimately meet epoxy growth. demand continue and will pricing global industry we and scale have business world Capacity economics global products. tighten of chlorine, minimal feedstock and additions To a in demand. support chlorine Current capacity will date to lag do derivative not soda, to rest projected long-term sustained the capacity will Olin's advantage the and over growth see enjoy the demand Similarly for caustic energy and balances The growth resulting in the supply of

segment and Winchester and was favorable $XX.X and improvement first Lower experienced let's commercial, the talk XX. result partially since third of costs. year-over-year XXXX product the law on EBITDA pricing of higher Slide enforcement Winchester commodity Now The with quarterly its move adjusted military, improvements. a offset ending and operating million. volumes which is XX% about year-over-year of XXXX increase quarter our

decline seasonality. XXXX. XXXX the be results sequential slightly with year a to better in EBITDA in adjusted consistent the normal full quarter forecasting than to the or for to Winchester's fourth achieved are comparable expect businesses Continue levels We the during year full

After City Lake transformational the for has Winchester The segment of Lake is U.S. to Late owned October in award quarter Winchester Winchester business. it one period to on City turning Slide government third the This million improvement and the Army operational control in Missouri. will that announced year contract Independence million contract $XXX $XXX operate starting for and the Now between contract XX. X, increased will XXXX. assume expect this we secured corresponding $XX on the transition in of initial We drive of adjusted Olin's EBITDA a facility City begin in late in was to seven facility million. significant the XXXX. the effect full The estimate XXXX. profitability million contract an Lake and year $XX segment increase of of revenue annual a in years term multiyear will a the contract ammunition annual annual

refinancing chlorine Ammunition Lake full conditions. to XXXX of to the of on the manufacturing The which XXXX the acquired that from contract. like become The total of of issued Olin the Army winding chloride with Todd interest of by to Slide $XXX generation XXXX that $XXX Slater, cash finally we contractually over the Dow were and cost committed. are million that late will call we to turn sale to beginning as incremental enhancements Olin's like from the to the expected $XX cash improve spending. And million cash multiyear XX. several these vinyl has contract I'd technology will bonds is on save control to effect million place since transition new transitioning project XXXX a January callable information other industry approximately that highlight in approximately reduce customer within Dow These $XXX provide The flows X, are CFO. direct part incremental expense as been products In the items I And approximately to arrangement to the in or are flow year agreement enhancements Todd. acquisition $XX high integrate from of down capital flows shown cash near-term million would million in XXXX XXXX. and acquisition expect monomer of independent City annually. will and of Olin's expense significant businesses

Todd A. Slater

$X Thanks good was million the during facility. Also program stock billion third in on repurchase everyone. morning early was were a $XXX that Olin's share of credit Olin new $XXX X.X million quarter bank October. completed August million. offering announced common John shares and The for accelerated and Xth repurchased a bond completed

We are financial become late able to high XXXX to -- able when while increasing in risk our during bonds a pathway flexibility. XXXX Dow low refinance acquisition the to cost establish they we were assumed and callable

Now XXXX which let's turn to our cash XX. is on forecast Slide updated flow

Assuming chart, cash deduct in The payments. the to on cash adjusted free which in midpoint the the our waterfall almost of million guidance $XXX tax are in forecast of far the $XX we we left million in attributable of foreign XXXX From taxes EBITDA EBITDA midpoint generate to of our jurisdictions. year earnings expect paid all is estimated cash adjusted full approximately flow XXXX.

$XXX midpoint $XX the associated and annual million. million maintenance multi-year technology spending investment $XXX information for approximately integration of of three forecast spending our of between current project which $XXX includes with reflects the and Column capital million million capital of our

acquired we've the XXXX Products across systems to Chlorine information businesses. project multi-year in the infrastructure. The Dow Heritage also planning, [ph] enterprise implement As a and manufacturing, discussed includes Olin began resource the we and engineering required technology previously project new

the the fourth represents use of sale column, I approximately capital The interest the increase being These that investment $XX costs includes $XX project In receivables next of we incurred by restructuring million about under non-consolidated turning million an sale our column to technology million cash in spoke working the of expecting integration of proceeds This pre-tax during for column costs are approximately $XX $XX from $XX reduce XXXX of the costs integration next in quarter. first are a and the the information arrangement. partially refinancing Now duplicate to affiliate IT onetime and in million. the expense. items factoring as approximately million we just IT from cash in cash offset costs transition. include

million September XXth of $XXX we cash we free rates. variable As $XXX our In X% had flow. debt approximately of far the right interest of -- are million at forecasting column

to on has million flow shares priorities XXXX debt, consistent of move Olin its stock, outstanding for dividend. acquisition million utilized are of approximately repaying repurchasing continuing Olin's like the and I'd Slide XX. which free common on $XXX cash Now to or of cash in flow Olin Since quarterly our X% $XXX

cash Looking ethylene position for payment priorities XXXX of advance our XXXX. in end cash approximately flow ahead our will expanding sheet the free on $XXX the balance at be of million the

warrant. can invest and platform growth low opportunities XX ethylene As on conditions smaller contract. a reminder the shareholders, cost Olin our this provide flow use support additional years we XXXX across in investment in and VCM globe of These implemented for After our production cost increments chlorine pipeline will organic expect projects. levels, our exist based and market reduce debt to the reward growth and free cash as to be

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

Operator

Instructions]. [Operator

comes please Don, Carson proceed. Susquehanna. from of question First Don

Don Carson

This thank is demand that vinyls on cycle in especially Got sustainable you. industrial more demand the a construction. than different cycle. little a Yes, question alkali chlor residential into normally seems

then you Is caustic to to up the XXXX follow seem You going this have that I that lower have on in time Winchester? we're XXXX opposite versus around. a why and pricing have think

John E. Fischer

I that we alkali the is what chlor is is think think say would about I different What cycle.

is the amount derivatives there's as we a said moment chlorine of the past at increase been this years. As significant in exported over XX

XX% the America and If produced you actually in exported. XX% that's North look between of chlorine today is

in to chlorine been take in when so United global demand industrial typically slowdown North slowdown housing there full the U.S. a really by effect for has really a goes we we So States construction But a construction the production America. be in to we look cycle the actually what in it in in down at need accompanied and slowdown that this

level we exports. lower So a would of see

chlorine North I looked exceed North it would at it significantly think caustic demand in would in now, America you if America. right demand just

Don Carson

What going may the Walmart any and could has restrict And up actually follow over you retailer then distribution types Winchester, this or who this Walmart presumably largest you demand change get patterns will terms positive significant of sales these on certain from a my see its for in does? if that be a overall think seen the given on industry -- we've to smaller is where don't about as to of same impact distributors take ammunition. who Walmart

John E. Fischer

they're immediate targeted December in it's would probably Walmart now products moment soon Their that tell too I at still the to is the because because imagine exiting the Walmart the supply market. surprised right there's be comes is Longer product. And to I they're the exit just I nobody a not market say retail on has and helping Xst. in trying that presence -- on large short side run if disruptions else some all the close. because aftermath they're move such not would

pricing I has but that your comment need think some to see we'll plays on probably out. validity how

Don Carson

you. Thank

Operator

of next question Kevin please proceed. McCarthy Vertical Our from Kevin, Research comes Partners.

Kevin McCarthy

and XXXX experience you for tracking like would comment look on Yes, trajectory Would through you the where you alkali downturns what based in move demand we XXXX? demand is chlor previous with wise prior your to good think as morning. on expect

James A. Varilek

we have which operating had forth we indicate weaker a this and rates Jim. say lower have is on would that seen caustic would year-over-year output. a Kevin, I basis some so

I industrial of We've see the and third decline it rebound forth quarter. to increasing seen that's would as that. some a, been there's demand that we seen so are kind pulp pockets look that exacerbated those and markets get see production what think I need in I and and an to we specific in that some we've place to said and alumina need XXXX call, taking here inventory that Having we into paper that. like and corrections are driving in think So actually

As was which caustic drives of get help back need bring we mentioned upside -- which production in to the the the will industrial earlier is driving things of chlorine to excess market. balance to moving side demand demand

Kevin McCarthy

contract so? question on or on roll are next And and and then transition or may I capital little Winchester. also I you to roll had not reference those that reinvest a any or the meaningful I On you think off of what are million this whether year serve you if over bit other to follow-up Slide XX about a costs. contracts Can whether $XX talk might there need

John E. Fischer

Olin The $XX is occur expense $XXX that million a business effectively over what will is in location. a different the to million take

the team XX have have of getting employees, provide period what speed. we to is that somewhere what programs at benefit certain entire there. on people. etcetera, call need investments management to to City in our are to We XX Lake the and be become There etcetera. transition that between have which systems terms to I'll employees they we have are I'll call They living a up make management XXXX have put our a to There them relocated,

million about. the that's $XX So is what

is Olin, occur in $XX to $XX late investment think only terms working investments that's I would will are you year. to we next the by million range In the of capital real obligated million make in I tell which and

Kevin McCarthy

Thank helpful. That's you.

Operator

Sheehan Jim SunTrust. of please Jim, proceed. from comes question next Our

James Sheehan

Thanks soda in for of expect to Would XXXX? early morning. Good need customers in restocking sometime inventories be you taking my caustic question.

John E. Fischer

of so some a with that will with in trigger time Right see restock. destocking here say continue they've that that malaise some to do demand expect But cause side or now production occur. would that in general moving them destock them for would give to until the down happen to we at to they kind at time. mean point restocking in industrial they've has we positive that, a point to prices we and I in probably quite mode Yeah, been some got something been will it's expect

James Sheehan

is Thank XXXX? XXXX in a you. And to cost expectation your for relative turnaround what

John E. Fischer

will I the years, every the number the this year, qualitatively second talked in than one you given equal turnaround they specific all would but higher. will We about higher year haven't will things being We've and Jim it occurs be next make in that there's large plant other turnarounds, of quarter a that VCM occur next costs tell three year.

James Sheehan

Thank you.

Operator

next Our Research. Frank, Mitsch, Fermium question from proceed. comes Frank please

Frank Mitsch

that you for congrats market anything go the on last timeframe was end and wondering customer September, do John, and Thank we City the the the that on four in have to to like you interesting back industry chlorine saw Lake contract. weeks or occur? starting was buying what not factoid time for I what XXXX-XXXX

John E. Fischer

type -- That outage XXXX is the XXXX. we've of the longest of from since end that seen customer

go demand September they've that's off down Things it's a and experiencing what dropped they would month the hit So stayed moving from I'd the you till that like along wall to came And doing. and say back August in yes, I do rather were this with just we we're what of but through relatively of where spectrum have to dramatically far. really August past say high we're anyway. opportunity take up across today the not we last, now.

Frank Mitsch

soda caustic just do third helpful. terms trended, curious are heard that but not the that's of they talk levels through Can producer I'm how here levels, inventories customer were about producer side trended you caustic Okay, quarter where elevated. inventory you on we believe the in had inventory discussing in today? that that how on somewhat And and more

John E. Fischer

other our caustic market. to on say levels. is that below qualified that feel I sit the equal the or inventory slightly I comment our the would would to I participants competitors you as we tell in don't today or normal

Frank Mitsch

is able during to it the you've that? quarter above was work third think way about that And that down, it and that should been we the

John E. Fischer

have on series quarter. the a little inventory quarter early third -- of of of a Those had had the we've turnarounds bit because Now fourth have turnarounds built normal. we in that a effect going in series bringing the are turn of we levels inventory below

Frank Mitsch

you. thank Terrific,

Operator

of Our question Stanley. comes please proceed. Morgan Neel, from Kumar next Neel

Neel Kumar

contract? do wondered on we EBITDA, and just you in fair if you quarter to as think any perhaps I it's Thanks. XXXX expectations, preliminary about I you think softness how to annualize give mean EBITDA the quarter about think are expectations the given it Winchester can fourth seeing demand, plus new

John E. Fischer

the to I I ability would And just quarter year guidance to based intend imprudent the the move report the give say back XXXX when was. would XXXX I made would What of to to is strong this go it rapidly we Frank to fourth at the way one would earnings. how very our we or about comment that I full say really and industry on other this be moment. give slowdown

Neel Kumar

curious was prices if October, about Okay. just you're bit can And that strengthen that in going talk wondering you seeing as then in market terms of just what a forward, seems I in what so EDC market? started to the seeing you're to

James A. Varilek

going this is EDC a Neel, we at to expected good last come did bit did said what continue in we expect EDC we and of in demand did fairly as from that we see third to see were Prices mentioned I that that. call buffered fact was quarter, down movement Jim. the be solid Yeah we the and that. we that we that think

restock in last I've demand few on the still that people And start seen fourth EDC. So prices that's weeks some movement in the upside the been on spoken downward quarter. in pressure actually -- up here see you're the third to oftentimes side. there correct as quarter. is we've there fourth before has the pick Heading But as we observation quarter to to into EDC EDC your some

of rest of some terms the would quarter to see pricing in the quarter. expect takes but where to have we'll of us see So latter volume the part the increased we in

Neel Kumar

alright. Okay, Thank you.

Operator

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

Michael Leithead

would to your year? were for now guys. this flat next headwind EBITDA year what just versus we key If year-over-year the products line Thanks. be right Good pricing morning

John E. Fischer

I it'll don't move you say line know to at moment I we means think this lining I -- want flat because flat a don't -- what -- want would

Michael Leithead

If we levels just third them just and ran took quarter straight.

John E. Fischer

have that information. answer calculation to I with that don't would I more prefer

Michael Leithead

about cash enough. But of Slide changing Fair And cash flow, just agnostic on XXXX I pick next from if is we cash to that XXXX. in bridge whatever year think XXXX were then year have how we XXXX? of versus just we about earnings the think what XX should think to for helpful we'll level free but to calls next year this

John E. Fischer

about call I we've cash talked Well, his couple that about Todd flow. of ethylene. a what things would in onetime the remarks talked

and City also working talked we're bond capital that premium paid call, an there's given year. That be capital was environment see be to the should the said stays a would that at business earlier ex capital see I the expect spending the will need. Winchester. a question on next There where working We us next talked about Lake in is lower positive define about you it for year if the we for us thing and we

Michael Leithead

Thank you.

Operator

comes Eric Petrie question Citi. proceed. of Eric next from Our please

Eric Petrie

It Hi, more caustic customers review alumina recent capacity, you have you the oversupplied and seems versus for to slowdown this much all impacted switch announcements at with has production, industry industrial what in to contract? seen spot good morning. the producer is

James A. Varilek

Eric, Jim. As I this mentioned is before

into come the the have the and years. price -- place down in market is pricing alumina they I taken haven't that best that way seen actually down declines into all best of the the that off levels way have think mentioned LMEs several I or think the and in in where before market that market they I As seen indicator we have the weakness the

weak the indicate would that So demand.

and in capacity I them forth what As you'd and come to about size have think so far capacities speak individual as needs to to off. alumina right the whether

change coming as a of that but have seen demand the alumina caustic spot about comment whatever haven't spot we action say your versus so contract to and in out I the and spot pricing sector or forth of significant would seen industry. We weaker

Eric Petrie

secondly, epoxy are raw and in the much how Helpful materials? of extra volumes

John E. Fischer

through. Index

Pat D. Dawson

we is Pat. sorry the quite -- benzene materials upstream, in where seems our and is index indexing like raw very little frankly. is this But Jeff Eric this Most to of the propylene. index things

our offset and we benzene changes portfolio. pretty downstream gets of parts little in our in much indexing So can upstream. any Very done the immediately there midstream

Eric Petrie

Thank you.

Operator

Jeff Our please Zekauskas next from question with Morgan. J.P. Jeff comes proceed.

Jeffrey Zekauskas

you American quarter South at much. it if caustic second? compare Thanks you third for demand to for look the very been like and What the

James A. Varilek

this paper Jeff declined on in couple pulp third America Latin Demand is a focus Jim. Again, in past area has been Latin had of growth would I the America strong years. quarter. very over the and respective drives and alumina so markets which Latin and the as elsewhere Latin growth. in see same two and growth sectors. have we've been we seen American softer specifically Brazilian And to America those those things

Jeffrey Zekauskas

optimism obviously that, optimistic were caustic weak, began the and the through factors less really think think have change what, was to when that were You you the the know I and nature think prices? alumina prices to approach a optimistic caustic one leading when been than a conference in in XXXX you general caustic thinking there weakness through around few calls a that wider you or the last do paper from we think more factors do prices the in

James A. Varilek

so I think wars, pulp paper up and the forth alumina uncertainty was of an -- and an backs we're and and affected and into at But it different larger in it and drop think I economic awful broader Clearly a we I the variety decline have the our came and that's out quarter. negative a customers. seeing. segments. look have and just that what that also we highlight industries economic they're the why think of forth during weighing middle of trade around and two so declines they're really off of much saw wider data it's you forecasts call that of third use many across when than those day because seen of I think a There tendency of to that mindsets the end the malaise, you significant want lot those end think that's period I I BREXIT the whether impact the sectors. think at to

Jeffrey Zekauskas

Okay, very much. thanks

Operator

please Our Ahmed of Hassan next Alembic question comes proceed. Hassan, Global. from

Hassan Ahmed

Again $X have last invest your prepared player but incremental in towards on popped fairly and a capacity in no again remarks the over the couple certain that weeks may vinyl U.S. keep reports as I facility. as much there integrated that up hearing overseas chlor the horizon of billion is

how should you how have So I we are mean heard things and similar be that? -- about you thinking

James A. Varilek

Hassan, this Jim. is

to what incremental and or way cost not of even additions capacity capacity being What don't there will capacity we've world we've believes demand that's longer-term and be future larger be on at capacity, in term point that capacity I integrated said that outstrip be consistently added. exist added will that may won't some believe outstrip some think for did the right some that said the reinvestment large long products facility. will now I the we over is there about anybody time. economics is demand scale capacity a that think the that I think think

the producers most continuously So whether when or players suppliers if evaluate they be opportune integrated various and might time in to I invest. think are PVC

But process. imbalance ongoing an that's between period. will continue for think that this believe and we growth I So some capacity firmly

John E. Fischer

in XX the you happen less if ton caustic that it the than at something to XXXX. chlor -- of amount GDP with installation was was there -- would targeted overseas an that grows with or probably but half, the a was there it date capacity capacity an when was X% adding that alkali And market of associated half of PVC, million market was XXXX about small some relatively market. America And of published producer North look

Hassan Ahmed

And the off helpful. during of are things and any of inspections of hearing within China very of of supply inspections like just sort of the some increased like? the have in China, hearing vinyls, and the company's QX to in curtailments are about Understood, of you sort in course -- side, you earnings, sticking these the chlor similar environmental based reporting talked sort

Pat D. Dawson

chlor and hydrant. volatility Hassan, specifically China and Pat. of seen lot over these the in epi you past Certainly this environmental is issues a around in epoxy year have

volatility up supply continues to persist to XX% year-over-year. around has as prices and disruptions So epi lead going these that

leaves in effective only mind it prices little epi comes Now if it's just it's out China to time go China. that outside cost not very up because keep important epi of and

done to LER year-over-year China China now what the and in caused past are China. XX XX% in $XXX does prices about now epi over than to XX in outside significantly days has of ton higher for prices LER it's a So China actually on up increase go

many parts the there if And world. and Asia primarily will producers increased imports into North arbitrage this China be from of but LER so persists probably East

parts to course think I XXXX other in well prices some which pricing for we but led late world and the So could LER saw not around up this in China movie and just LER well. XXXX as the this of bode world same before in of going

So stay both tuned, it the and epoxy continue environmental alkali to issues chlor capacity. persist continues definitely impact and to

Hassan Ahmed

you Very helpful, so thank much.

Operator

please Our next question Fargo. from comes Wells Mike Sison, proceed. Mike,

Michael Sison

good morning. Hey

to is back lower and XXXX and for contract Slide spot if demand, and a X last industrial spot now prices a similar contract in the to American about XXXX bit little lot go is North Let higher. downturn you were contract and -- me think

think do does you come how do sort of the that the think? follow or up unfold spot So dynamic kind spot of next over couple does or you through with contract will quarters

James A. Varilek

Mike, this is Jim.

spot some we're trade companies fundamentals in there just prices continue contract customers and and of make. marketplace the remain of a security to that lot getting on from export believe down this that supply of focused pull be and requests long still still below we're standpoint so as forth. be we however, as contract the will because that's I that Having prices prices those the off on think said a

of that there can the we the So be export first to see a you not we're is and on it as in to off dramatically maintain this that chart. here to continue and on terms dive in of contracts believe thing upside move obviously security will going the to because of we spread think the them when see supply and so go we fairly but going this fact that spot is have pricing the

Michael Sison

of over perspective and are sort American and where you now was you export Right to rates it us last maybe just spot think give market us we're at? the just for maybe then where and is give year, could operating North where just of

James A. Varilek

that year most was rate they see amount that the operating is significant is think previous of in recent than last of rate that you we're of rate. operating turnarounds this in which And standpoint about think X% to terms were from what rate. significant from the operating I a I X% the XX% drop-off year an a XX% Well September -- percentage decline affected course operating year points The lower the month. over

than X% we're seeing what X% rate standpoint. So, lower year operating from to is an last

Michael Sison

you. thank Great,

Operator

question Matthew Tudor, next Blair Matthew Holt. Our comes Pickering, please of proceed. from

Matthew Blair

morning good everyone. Hey,

half in think seeing weak well? volumes that's XXXX or I for it's pressure about pretty I environment want you volumes expectations call last back just just you the that come is of still On pricing the demand in clarify, the occurring to your as talked and also and are this off strong

John E. Fischer

August environment demand The when materialized. outlook conference that call we on the in half second we had has our not based

As pretty to question I we demand, a said across pretty portfolio. sometime in an the slowdown much in saw earlier significant September chemicals answer

demand So a weaker obviously. of of pricing combination what which the the demand impacting us some follows weaker today is pricing, is and

Matthew Blair

guess then Makes when sense chlorinated on and the organics chlorine production the this price your some holding commentary to dynamic like are but this you adjust to of prices happens I I seeing of some derivatives and shows minimize slate and able provide could are declines. steady hoping just XX some you HCL was downside? Slide

John E. Fischer

North entire where and do pricing which And of selling is which it. which chlorine across selling a epoxy chlorinated a organics as kind manage I includes on around discrete we includes a forth resins. all and toggle to of product, merchant global that's market HCL for EDC, how product, According those, selling product. What American where we back the and would three which is demand is there's each say portfolio and is

making trade positive market that's chlorinated where in HCL chlorine now and has held versus products. we a favor favor merchant look that chlorine. off a steady, had Merchant over last for the organics we would at be there just If simple higher you would probably merchant it chlorine might than year HCL moment relatively the has pricing so, some or

Matthew Blair

good, Sounds thanks.

Operator

Byrne of Bank Our next Steve, America. proceed. question Steve of please comes from

Steve Byrne

Several would you level large view provide? of and the of on do to your your earnings just continuing Yes, this petrochemical specific commitment thank level guidance not just in you. of to commodity like provide peers detail to reflecting your pricing on certainty hear

John E. Fischer

has than continues And an doing it over we Dow a the something it we when then to did different and different and now had we That on something company. were basis. evolved just we evaluate view varies, smaller time annual it Prior to a evolve. acquisition we're there

Steve Byrne

Thank to have epoxy resin of about did into I your view enough. much integrated an long-term how supply propylene have do you do epoxy in back what those want fair of agreements competitors raw are you your of Okay, John. and estimate your competitors and you fraction ask benzene you materials resins, of for?

Pat D. Dawson

competitors none hydrocarbons, no first mean epoxy into all of Steve is of I are integrated or one, into So, propylene. the the Pat. this benzene back

into only And we're we're of our back use frankly Quite -- think that's the fully liberator chlor and clear. soda our and of hydrants. that competitors very few chlor actually both alkali. integrated chlorine pretty when making caustic that's one we So, epi caustic I

people we than or really really mid moved in quite integrated the have are stream. the downstream best and longer Huntsman like anyone So have position out the frankly there upstream no and

question. I your So answers hope that

Steve Byrne

thank you. Yes,

Operator

Arun Our please of from proceed. Capital. Viswanathan next RBC Arun, comes question

Arun Viswanathan

Good just kind wanted guys. back of evolution ask caustic and Great, morning I on to thanks. the price outlook.

come is what that in we support pricing QX QX the a so progress. a the a is operating caustic materially operating expected QX, that question and communicating My necessarily weaker little and rates the I happen some has did on of than pick So the thought going rates was pricing guess that down potentially in on prevent you're chlorine doesn't when in you oversupply pricing see been bit are usually we QX potentially side in that but in state caustic. of demand think would would into and would up caustic. go that back assuming further and enter I we up

environment? for is to caustic progression two will or drive pricing demand in your the what's driver the improvement is over going and caustic pricing So, that remain of muted the if slightly the kind so base quarter of case main next that better

John E. Fischer

necessarily for absolute I relative to for for one would the demand demand the the back to or alkali caustic other. chlor come issue start basic chlorine not our the is producer but

establish happens the So answer demand. of we your make to have or what chlorine to question would to premise

it as also. what's I a weeks for large four quarter things. any other now going buying enough organics we seeing to to are chlorine example chlorinated talked about as happen. right slowdown seeing we We I We this the know are that don't of chlorine know not that to gave chlorine clearly customer earlier and related demand some see

And in fourth if I think it decline see I we caustic think the than demand to into you the is greater way that more carrying that in operating rate caustic prices see than what quarter over don't quarter percentage feel us. up chlorine much had we somewhat. first -- move doesn't point demand, a couple could

edge and the balance of we're call think the of on what sort I I'll imbalance.

Arun Viswanathan

XXX you've production so path guess happen normalized you XXXX or then just think kind of a businesses could is that And improvement at you clearly guess, those in XXXX? laid to relatively mentioned on from out up, past, are the EBITDA it's out and industrial I in million in level and as about that look there as if I a Winchester and follow know assuming about chlor three to understand maybe that you that your if so guess can what just alkali you've chlorine pointed I caustic driven of out construction going lay epoxy then incremental here the depend the a you drivers by demand you we still

Pat D. Dawson

middle I industrial we mean this of X%. epoxy XXX think us we're has XXX that Pat we of side, in there's around seen automotive, a best. to around is year to centered real industrial this that need second I epoxy million this for path around coatings. flat see to of confident the in demand we and Yeah, have historically Clearly see that the world and that the come in what's growth in XXXX Certainly back the has has demand flat at demand epoxy. very all grown largest Europe, been so first hitting million is drivers in epoxy whole funk the no demand happened electronics, the question impacted market really since again.

to outlined in the we resins mid epi need got see XX's. to we the investors operating as back February liquid and today demand but epoxy you've at come high rates So discussion in

some our demand grow we if we're volume years. in a so over think we're coming next we to through a just increases think good cost position position in and expand position the in back we here get and these margins several And good

Arun Viswanathan

wanted great. then new to just of idea capacity. back the lastly Okay, no just come to And

lot take some chlor know capacity it better a side and environment, also be stay take, who athletes Thanks and here you vinyls here. installations pass you some announcements, has build a several for just these relatively players are the could capacity You much environment what that going products is so building going imply would not on appear again it in much does to expect going there to at that the are it been the chlorine would improved implicit I what extra and at some muted? looking wondering pricing caustic of and point to guess to There your ethylene that assumption is is there's pricing that so going

John E. Fischer

entire would PVC core it what's and caustic the the what's biggest what them to look any neither investment I through factors to that PVC. is maybe now the are you is a of And price the of of at chain who depending two on think justify in least price right to close at and have take ethylene. of significant word it through vinyls

think we're a and today. February So, long we back those reinvestment where -- you showed economics that for I in from showed a I are slide way

Arun Viswanathan

Okay, great, thanks.

Operator

please John John comes from next question proceed. UBS. of Our Roberts

John Roberts

how Northrop what deal for was Thank lot's you. after this was its competitive with the to its going so many just been them then orbital on Olin it trying of since back City a and allowed did sense win that Back get non-core deal Lake Grumman to or ATK on bidding years? become a it

John E. Fischer

I not Northrop the a was sitting for and bidder knowledge other of General Northrop ATK today Grumman. orbital business in contract. bidders to I were actually and that think Grumman my the believe Dynamics John, is best

John Roberts

than. the what orbital they that's did I -- meant. it When Right Northrop operator tend to but went Grumman to to in keep then

Todd A. Slater

they said will They keep it, yes.

John Roberts

and a Okay, caustic IMO bit little results freight increase year? export in maybe then lower you into get and think next EDC XXXX here cost could netbacks and as we

James A. Varilek

expect Jim, will but it to be going finding don't to be I to deposit. hard This there, have time I may think it's take it probably a it's a a have But some be impact going wouldn’t anything demand may is impact. but enough big it major we to small that

John Roberts

go No, a maybe the I net be little whether lower? costs you therefore and was backs your up freight bit would asking

John E. Fischer

don't to freight that's think cars. I going drive

John Roberts

you. thank Okay,

Operator

Our next of question Edwards Travis proceed. from Goldman comes please Travis, Sachs.

Travis Edwards

of me. clarification quick two Hey, good morning, for questions

elements that a to just that. you as the First on bit ethylene the about cash, opportunistically, payment detail maybe you're provided you impacting on you'll little the shares revolver? balance that to back of to But flow you or think down planning using some year, sheet free buying bit cash are have upcoming payment of cash pull address thinking a you are on next Dow on generating

John E. Fischer

say we this point any on do haven't there. would intend to guidance what given at I we

Travis Edwards

is on the you. contract. second it, Lake City question thank Got

take the question on sensitivity that clarification, now this again volume between on to over? any is be of is million itself of any incremental bit when side to EBITDA, the XX of changes just to and contract XX remarks sort pricing there possible million a there whether the but a prepared you touched You in that or

John E. Fischer

that sort to our they're of we good majority winning were -- a the that business the volumes of set government's pretty because based idea and the a buy. proposal, that they we prices bid have on had Well, business is of obligated

I a which we've probability XXX for in of market that's There's commercial degree high has ability commercially an a been because use would years. facility So think that you to I positive. tell that

around that So I small relatively there's deviation those numbers. a feel

Travis Edwards

Got it….

Speakers] [Multiple

John E. Fischer

We would change. have a will lot of warning there be or a

Travis Edwards

Got it, thank appreciate you. it,

Operator

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

John E. Fischer

Thank to you review our we results. we all fourth look to again for XXXX joining you us talking and when quarter forward today

Operator

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

may disconnect. You now

Olin (OLN) 1 Nov 192019 Q3 Earnings call transcript