OLN - Earnings call transcript Q4 2019

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Operator

Good morning, and welcome to the Olin Corporation Fourth Quarter 2019 Earnings Conference Call. [Operator Instructions]. Please note, this event is being recorded. I'd now like to turn the conference over to Logan Bonacorsi, Olin's Director of Investor Relations. Please go ahead, Miss.

Logan Bonacorsi

thank joining and today. everyone, morning, you us for Good

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

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

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

will We our and remarks we'll happy with to questions. your prepared be take thereafter, begin

the now call John will to turn I John? Fischer. over

John Fischer

conclude Olin by outlooks good participate. some I long-term morning, we and you, markets Then Thank and comments Logan, full and will reviewing begin on the near-term for year will an with everyone. our in overview segments of business today provide Olin's our I results. XXXX and which of each

With that, X. Slide to let's turn

The reflects of weakness challenging year full year developed customers. industrial $XXX In quarter. EBITDA customers. approximately urethane, demand worsened from Olin pulp macroeconomic business adjusted during broad-based demand from during of in laminate refrigerant, environment in million, of the business million. the and also adjusted $XXX that which of XXXX, quarter coatings resulted adjusted Products fourth EBITDA electrical reported a automotive, and weaker Chlor alumina Vinyls the This paper and level and Epoxy faced particular, agricultural, the During Alkali XXXX experienced and fourth the EBITDA

chart, put during product year-over-year was Alkali driver was demand As million. can XXXX in The pressure Vinyls pricing levels Products our of our of from see pricing, in from the and was business you Chlor approximately $XXX $XXX on Epoxy the the deterioration the XXXX lower adjusted which lower the EBITDA. approximately downward and million deterioration business

raw primarily electricity in There the lower number ongoing Epoxy were factors chlor XXXX material of a improve and our these lower that $XXX in partially alkali approximately related to accelerated costs. Lower million were to XXXX $XX price and costs ethylene We its million, help efficiency. Olin segment, administrative vinyl activities of and offset million material our $XXX realized business declines. costs approximately costs products cost structure and propylene. our than approximately levels. benzene and lower lower in to primarily Operating raw of

and approximately point As contractor of to since and was XXXX, employee total additional reduced Olin's a reference, reduction in incur is by X% approximately X% late of an headcount XXXX.

more Chlor and detailed XX% adjusted XXXX a Fourth for our for starting each and $XXX.X segments, business year-over-year a chlor Alkali EBITDA look take to quarterly the X. quarter with representing segment is decline. like which we'd Now alkali Slide on Vinyls, products million, was results shown Products of vinyl

by chiefly As previously pricing. in discussed, this the decline declines product was driven

power dichloride material improved declined performance cost, the caustic as and discussed. fourth year-over-year XX% Olin lower approximately just pricing, was hydrochloric quarter, XX%, acid system, declined I this time, as approximately year-over-year raw pricing the pressure that -- At pricing approximately compared XX%. of ethylene Partially offsetting well in soda experienced For to of pricing lower the same the XXXX. fourth quarter when the

X. Slide at look is closer a take let's soda Now on which caustic pricing,

levels have quarter fourth A sector into of time, October of lower has steady imbalance the Domestic has persisted. caustic operating while the At the in XXXX. the strength decline been beginning as Export XX down per the rates has due more end indices in ton the soda prices months. in same of more past be relatively of of XXXX, experienced declined through and chlorine a manufacturing for since months which January XXXX. support much quarter environment $XXX existed in price soda due to continued cost-to-service resilient our XXXX. demand in soda in the demand was overall portion since remained January pricing, weakness pricing and and sector, The export move relatively caustic primarily During system that the the vinyl approximately, lower, the than the the to ton were $XX last early pricing declines particularly increased the caustic to fourth where from domestic supply-demand and seen as progress market. price pronounced will stronger market indices we per to

a the adjusted the of the last full period. were the decrease year raw business That The trend by $XXX lower market for efforts. from Olin that conditions -- margin primarily Let's now Epoxy segment is which material shown in XX% Olin's resulting prior quarter Partially of million compression decline in further as driven the year-over-year to Slide generated pricing demand in our ongoing year. the our the raw costs resin EBITDA reflects XXXX. X. in year outpaced -- and in Epoxy lower period declines for offsetting Epoxy's and primarily of close generated talk our we on achieved Epoxy EBITDA key $XX.X for has XX costs, lower million The operating during fourth due which said, lower price XXXX, the about these productivity level markets, material benzene months. propylene, adjusted an segment, business lower represented challenged costs,

of landscape, a chlorine business's -- potential we this integration the our that was strength believe a earnings originally in we business. market the the potential continue improvement face and -- in Epoxy strong challenging year-over-year and not for power the to part While was it and anticipated, that the of performance of

Slide resin Epoxy which is prices, Global at now X. shown on Looking

During the fourth to the global weakness global Epoxy over The continued of automotive, laminate erosion. XX% average industrial all Ongoing coatings price regions. resin from pricing course global declined and liquid quarter, has demand to electrical resin decline pricing XXXX. Global epoxy led customers in

We during led by also believe has in inventory behavior economic the geographic regions cautious managements deceleration multiple to customers buying period.

marked Slide This year-over-year XX% business of consecutive driven reduction and trend, which million, EBITDA quarterly commercial, result the by let's XXXX, increase partially military XXXX X. offset higher commodity a of in Winchester to cost improvement a the segment and was Lower which turn and efforts Fourth its EBITDA This increase. $XX.X lower business. the of was the enforcement primarily year last positive in operating are since reduction pricing XXXX on volumes on adjusted a adjusted second these result in annual in Winchester posting was quarter law The continued Now year-over-year buying also industry. of a was The our improvement. costs. and costs represents favorable operating a year-over-year first improvements. ongoing commodity surge operating costs.

Slide our for the which X. to full outlook on now is XXXX, Moving year

to As pricing limited you chemical producer large all ability global a with in Olin know, influence primarily commodity markets. commodity is

will uncertainty and EBITDA can changes products impact longer Olin rapid alkali the that have significant the price our and Given provide pricing surrounding Epoxy earnings, annual for on guidance. our no and chlor adjusted

of sensitivities We slide the are provide presentation. continue in will commodity pricing other included maintenance key our planned cost which turnaround section products appendix to our schedule, for and certain metrics,

least We do expect demand chemical the XXXX. first through of fundamentals at underlying in our weak the persist to quarter businesses

We epoxy results XXXX soda, are on of these year dichloride are resins would throughout be in XXXX are XXXX, as below pricing XXXX range. challenged chemical full the the averages. for and pricing If $XXX as lower ethylene chlorine of impact entering to other pricing. well derivatives year compared the million levels XXXX by prices January maintained caustic

During January, consistent portfolio across seen chemicals have fourth we levels. demand quarter with our

raw XXXX electricity, costs the segments and lower to are The our benzene both Vinyls to be XXXX. lower materials Products Alkali in ethylene, expect propylene. in related compared Chlor and and Epoxy to We

We in them operational and to the continue XXXX. on working control costs reduce by decline to administrative expect our focus compared will variables to XXXX to within and

also segment, driven primarily by fourth uplift contribution this of quarter are increased the Army Winchester anticipating from U.S. City from ammunition year. an in the Lake our the We beginning contract,

X-year we have operate a to As Winchester discussed, $XX increase expect transition million. business Winchester, of Lake drive the plant in the million a year. multiyear EBITDA in between secured quarter annual our ammunition U.S. $XXX for million $XX to the Upon previously we this of increase contract the annual estimate and million and will $XXX period, in of adjusted contract starting completion Army army profitability Independence, of corresponding Missouri. revenue City multiyear increased this significant with We fourth annual

like long-term of weaknesses now like I supply believe to fundamentals In and that would would on chemical we're by our in to spite -- be the chlor underscore market underscore forces long-term will long-term demand. the experiencing, outlook supported XX. currently the bolstered which continue the to Slide and businesses, is we alkali for out structural

alkali the there The announcements in balances products. long chlor meet and growth. chlor that been not caustic projected sides pricing over chlorine minimal energy investments. as reminder, demand U.S. the of tighten, support continue will products there industry continue reductions. of for and world. a soda, will And economics on Today capacity to a additions demand of will the Olin to sustained additions ECU. resulting rest the capacity we and Current chlor announced growth and feedstock alkali demand alkali fact, capital In for global in do the sector upward over be believe enjoy December, to have chlorine-derivative supply this momentum both advantage Olin's term, ultimately, world-scale And

business, Similarly, demand additions. global in and capacity Epoxy we the minimal growth see

flows discuss. to Todd, emphasize the full assumes the positive the to solid year like cost over that generate of to Olin after normal quarterly XXXX, no expects and I'd Before And the In current pricing in product Olin I dividend no will very negative cash impact one-time financial payment and the of turn this on call positive footing. investments, offsets. remains before Todd the that change

it And with that, I'll to turn Todd. over

Todd Slater

morning, John, Thanks, everyone. and good

year Slide on detail, Let's XXXX turn our which is cash flow full XX. to

million, of which are of of attributable our X spending approximately far reflects cash generated in annual of almost jurisdictions. and with spending in with We XXXX. the million. $XXX tax waterfall is in the $XX of Starting $XX includes Column our earnings deduct information left project million associated multiyear to EBITDA all technology integration capital $XXX $XXX million, approximately investment cash which foreign capital chart, payments, the our free we flow adjusted million which in maintenance

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

turning were IT $XX pretax This of approximately, million information items $XX quarter. of restructuring costs $XX just nonconsolidated the $XXX about, of fourth costs, and includes duplicate cash spoke incurred million a proceeds I from investment during project of transition. costs during One-time costs million partially an to IT and of approximately the that in offset by integration the Now column. affiliate include technology million. sale integration first These being costs the approximately

The our cash XXXX. interest expense column next represents for

offset quarter fourth under by million level we of in column, accounts lower XX, of the program. to in As million far-right as flow. debt our the result primarily lower in XXXX, interest cash of a next In column, was the decrease reduction factoring $XX sale XXXX, capital X% of receivables of receivable in had we of an $XXX we attributed rates. had at had December sales approximately free our which a In variable the of working

will to at that like to cash $XXX of several to slide. to in Olin, which project the $XXX million new of producer-based Now were XXXX. are By on supply which ethylene new VCM integration approximately during the beginning capital, total approximately at project. converted project cost approximately XXXX XX. at year-end, In ethylene for we'll This being on information to the commence technology of cost review to investments for the down. Olin's incurred investment move successfully flow will and improve users systems. this A chemical outlined I'd multiyear provide duplicate economics Olin's IT order million XX% The of the XXXX, XXXX, end contract, our final initiatives needed will Slide of payment requirements complete the tranche long-term is include of transition this winding

the acquisition remaining XXXX of premium million. most callable Dow with fourth the XXXX, which the users quarter expects and a be the Olin during the approximately will chemical high-cost refinance converted were new of assumed During call become to will in systems. bonds of $XX to XXXX

for City When these regardless investments incur necessary on Army The required and and cash costs and Olin in investments fully cash of contract. environment. catalyst the and new XX. will flow Lake generation capital working ammunition U.S. value-creating for XXXX the late in Slide XXXX be improved transition Finally, benefits will finalized, a highlighted are beginning beyond, market

of X, we most just interest in a and and not million is with X The results. ammunition the in the bonds Alkali Products expect initiative Olin's its Vinyls' generation Texas. and completed is operations the closures closures discussed. to of approximately finally, between million the the plant, contract, place production facility will annual approximately in acquisition, impact monomer and $XX are contract. operating project before to expense. X our Freeport, $XX That December I toll-manufacturing these slide, discussed $XXX structure from announced agreement a permanent Freeport, operations expected a save by on XXXX. at not cost that's allow sale was the January $XX one Texas. chlor XXXX. previous expense capital XXXX, that of incremental -- since costs to on Army U.S. end of transitioning million, be capacity year to reduction of of significant down which facility direct-customer the XXX,XXX $XX million These on will shutdown Chloride expected has $XX alkali Vinylidene The And from a to Lake high-cost the are VCM initiatives In arrangement, new the the alkali cash in technology The million. is optimize Winding been from reduce million of vinyl The refinancing million that of annually. full chloride beginning multiyear Olin chlor tons, in City information expected effect $XXX Chlor

provide flow cash approximately flow Olin, of to million enhancements independent cash conditions. $XXX of industry These significant incremental

Now I'd Slide XX. cash for is free like priorities on to conclude Olin's with which flow,

investments businesses During capital the the dividend, free our reviewed. quarterly XXXX, our XXXX we high-cost cash funding debt in just essential our required priorities and will for returning refinancing shareholders to late our be that through to flow enhance

Olin Finally, XX, shareholders of the on payable XXXX. common the Olin's by a XXXX, XX, the dividend business The $X.XX Directors dividend is January share Board of quarterly stock. March of declared on XXXrd This of at Friday, close each February XX, is to dividend on of paid on record consecutive to be company.

questions. now Operator, we to take are ready

Operator

[Operator from Kumar Instructions]. question come And our first Morgan Neel Stanley. of will

Neel Kumar

the know I of EBITDA of you price. translate January XX% you below give are January me to, prices prices levels? assuming and mentioned approximately average costs at that Can the XXXX sense type just headwind EDC remain could what that

John Fischer

at comment $XXX We resins year, approximately that the remained levels would million". in current all that negative a made epoxy EDC, just HCl comment prices the made impact and and "If said, be a we -- which the caustic, was discussed, then remarks throughout

Neel Kumar

talked cost a productivity in cost offset you And the pricing And to and initiatives of some should to reduce this? plant some then just Can that about sense million? examples have give your in closure for initiatives. you by what containment of initiatives place the $XX XXXX addition in cost XXXX, us of you

John Fischer

in XXXX. expect, there's not the benzene in that you, that to in both costs, headcount employee costs, in XXXX, contractor the XXXX. was And that lower raw And well benzene added material we sector about about as lower reduce from I all ethylene occurred reduction tell and side material head also headcount place X% year to we ethylene on because we Epoxy from talked propylene. our and raw as that additional and from significantly an would we Well and X% in the just talked And -- also a expect alkali in electricity and and and electricity from pretty benefit an benefit both and again, sector chlor propylene. in

Operator

Kevin will Research our question And McCarthy next of from Partners. come Vertical

Kevin McCarthy

ethylene. My XX, procure payment expected you $XXX you do that an Slide is recollection option of On to to had more so. show million an

if so that out or that the my defer Would question for December impractical? fast whatever have to low it are that ability to be and quite And forward is, we prices reason, do turns ethylene payment? feasible you

John Fischer

that impractical. is we've I ethylene matches access It totally think allows to us cost-based up new years. It with negotiated. for contract, already the XX vinyls

of our system, vinyls as to remarks, do the jeopardize X -- to would important mentioned I Todd that in not say plants plant and X that is going anything X and that. of his -- is So the we're X most in

not So that's, practical. mind, our in

Kevin McCarthy

Understood.

Second, ask you were relatively Can in balance that we about the $XX look of receivable, did the declines up. accounts I context change capital. like the Todd, not those to prepared in payables line looks there? or if speak year-over-year million more about items of at declined working It sheet, large we example, wanted X%. price remarks, see to a the you why for quantified

Todd Slater

question. good sold. our factor some Kevin, we -- Yes, are receivables, do In so receivables

So you're looking year-end to about at $XX less sold. directionally, million year-end, in receivables

So the accounts sales fairly consistent is see actually more in are and inventory equation, much when receivables down with Those as factor payable the and you that well. in in was you line. change to down

Operator

of our next question Susquehanna Financial. And will Carson from come Don

Donald Carson

demand. demand John, seems it a in situation is kind stronger of you're where caustic than chlorine

in quarters, industry boosting operating year-over-year So with see rates alkali how first a in rates Olin the domestically, and basis? PVC, chlor for second operating chlorine not demand, early restocking do you and

John Fischer

slightly Olin's XXXX, do to that We I'd through time industry. we believe the In made like actually the answer the believe than the we What operating acquisition reversed. from rates historically. of that better XXXX, is were end Dow

both to do significantly we propylene a urethanes oxide vinyls and than larger producers, have the chain, the exposure We MDI to chain.

in I rate our far January, believe, XXXX. I little a was in that and lower So what on seen we've the would industry, early suggest bit XXXX, so probably operating in continue based that than will

Donald Carson

And Okay. just then to switching Epoxy.

EBITDA see is and So level quarter as upside? each or quarter good do potential we given you XXXX roughly go that of through for rate fourth of $XX the million, is of are, where the raws demand -- a kind any run

John Fischer

in seasonally, I weaker I Well, we the looked run we influenced schedule, a turnaround you're the that's in you QX see is be And suggest, And QX. heavily then would if say, the turnaround on stronger. to level schedules. based see by forecast that XXXX, at rate going would we saw good pattern. typically a pattern

Donald Carson

final just on Winchester. And Okay. question,

You've in talked where are final where the do point a past you the shipments you caliber inventory can about of industry inventory, that and Is actually equal demand? ultimate do we're in lot channel at now? right small we the think customer -- think

John Fischer

I we move developing through saw think that as XXXX. we

withdrawal I categories, Walmart the of exited business has that think specifically wildcard sold and which faced certain the one and X their pistol the hunter's out sporting entire rifle the December from is ammunition industry ammunition, essentially inventory. industry by they

saw of excess replenishment, it's the of think what not we but end Walmart. going year actually in I to see. So some the we're inventory purchasing at we would And see at normally

is, at is the the what I'll the -- little a So moment. muddled say view

Operator

come will our question Research. of And Fermium Frank next Mitsch from

Frank Mitsch

end And about yourselves the alkali am so assuming shutdowns, Do might it. of cost chlor the competition? the behind you curve. Listen, anticipate process little hoping higher was in talk shutdown on I, bit by again, or the more I your a that was by announced regarding either other December, thought you

John Fischer

to shutdown alkali us it a the shut where And are where just we manage action. I'm concert we've as site our from get to that the I run gave plant the it people if make that We're sense want costs. a -- that announced optimize perspective, or which do. point to of no down demand we place take a sense we in Frank, demand. it chlor going doesn't to an derivative, seen less in to the feeds chlorine plant declining will not comment to plant actually creates sure our opportunity what on Well, on and going to just makes the economic with system other part the

Frank Mitsch

with et everywhere. a Got And it's the very but to purchasing you. coronavirus, my early be up terms that gut might the seeing to respect comes be I And just you. Got due beneficiary I to change that coronavirus? Olin Are to in just cetera. it topic know would a -- days you suggest respect disinfectants, any curious, patterns in seems with mean, of

Pat Dawson

it'll and this represents that exposure back of Listen, do have less mainly Frank, of an it this very China Yes, epoxy than start first downstream Pat. very, our is plant Olin serves We the to our is all, is up think small. important overall currently X% down this facility as of as it's our markets, I remember year, that is over in China normally next time week. and revenues.

on to it we could haven't So us as if really, at to watching evolves. monitoring question, really back this the the it we're to our your side see that and moment, impact seen benefit But very chlorine businesses. direct any closely

Frank Mitsch

I would too and up. seen to you that anticipated sales make this at that early it's No, have sales Yes. call? point, would chlorine bleach But move have

Pat Dawson

Yes.

Operator

next will Our Fargo. of Sison come Mike Wells question from

Michael Sison

at first, front-end hit quarter? pricing $XXX fourth quarter XXXX, you thoughts that through? more if second how prices levels, negative the you the million on loaded? When remain in talked Any for it that flushes is primarily in about Does

John Fischer

in something. for not on based saw -- Let January, that pricing quarter. the is me the That's based we on clarify the million $XXX

Michael Sison

it. Got

John Fischer

And year. as at the we GAAP move obviously, year-over-year the looking if you're comparisons, narrows through

Michael Sison

unfolds? Great. what needs prices know and And in you do predict, I -- it's to year to some just tough as think get caustic but Okay. the happen momentum to forecast

James Varilek

automotive really is in obviously caustic pickup aircraft-s, if also that of forth. chlorine and aerospace, the we start to see between to markets aluminum the to market, rebalance side And -- love aircraft-s so things like What of side. would some -- and We'd up, we things we saw commercial pick Jim. the those need production grow. need that the is industrial this Mike, a

Operator

come Sheehan will of Our from next SunTrust. question Jim

James Sheehan

million EDC when prices back net a question dropped you up cost then, prices natural to synergies $X index to have and $X revenue you $X.XX. been billion and $X.X but XXXX, soda on consider synergies at $X.X top are billion should sensitivities. EBITDA down, If of did have $XXX And look tailwind. A chlorine EBITDA should forma able million around in XXXX, about given That But your Since based that's your about $XXX we power. you $XX generate that, and gas on caustic you earnings pro million XXXX, bit of below over or from not your have the explain EBITDA level of you pro XXXX billion. a forma pro five being the forma? on years of grow ago. How EBITDA do to then was prices able in are

John Fischer

of I there. things of prefer And get would back you've write us thrown to down and we're at I'm what saying said. would wrong, sure lot you you exactly and differences I I'm say, the said not on you're the a -- to and I veracity that to going forma think pound through point because all pro not the everything of you not

James Sheehan

enough. Fair Okay.

which is like your erode, tripping pricing XXXX in debt-to-EBITDA are Now If year? current rising. of you might the this net it looks in declining ratio your continues debt to any covenants be at price danger EBITDA means levels,

Todd Slater

a of level agreements we that to X.X our should know, compliance. to you leverage years ensure the for our redid bank enable in December, ratio as expands -- us next Jim, which

agreements. we of is don't bank starts outflows we $XXX bore investment our forget that And with flow in that the so expect in compliant, XXXX including will 'XX in million fully XXXX. would about cash be full incremental and late And the

Operator

Pickering from Blair Tudor, Holt. And our Matthew come of next question will and

Matthew Blair

just pretty overall just you volumes you the a environment as compared the stronger Could trends commentary you John, progressed demand either just on say October? some weaker that in you standpoint quarter? was December clearly volume and overall to pricing from or mentioned tough was QX. provide Would throughout

John Fischer

generally, quite that we Well, December, a in so products. fourth of in was we what in I some that saw the had a across that's comparison. what quarter, bit the October, weaker the and quarter, chemical would saw say we not spectrum in valid turnarounds, third was than

Matthew Blair

EDC's South progress project then demand? What looks do EDC that several this And capacity global might raise there Korea in through and weaken as And supply-demand? for thoughts like it. Got X%. by the China EDC is It any year? plants you on you year new a over concern could

John Fischer

to would and January I not I at little in seen do. what pricing. tends in pick and is we've of of say up What bit March, forecast going and to don't know in to going it's terms demand EDC as February a -- actually pick up I'm look we terms

Operator

Petrie question of Our will next come from Eric Citi.

Eric Petrie

on for prices to talk declined export still U.S. arbitrage for talk So have are the windows seeing just caustic transport ton. you? Can about And soda you to $XXX $XXX how existent you're per that develop? costs

John Fischer

you are sold look the that straight And at. I when best those prices, not at Olin would the Obviously, stay those export of arbitrage for Olin say out market. is to prices

export, we what significantly system situation out see market. the to and best you where a export in to continue Latin than prices is America, you into distribution continue to where if build get Our will, we higher

Eric Petrie

Okay.

recently competitor could question, earnings pocket you Have target more downstream price For the same? And change million done you strategy announced second support then to broadly, of go to initiatives. a my that $XXX near-term your EBITDA?

Pat Dawson

just couple Eric, a of Yes, comments.

around We and we businesses February out And products, We we January. around increases with wind had have that. continue well. your point, formulated very do areas. few modest other to there increases build all, of our do a there last out downstream First success as in had for

So well. strategic that is our of part as thrust a

John Fischer

That's are we're is, which to trying chlor chain. to But I means leverage. the epoxy want our we what where to that's the a emphasize, going and stay alkali we are, of upstream producer, at in our strength core,

Operator

Our from Mike next Barclays. question will of Leithead come

Michael Leithead

quick the side of ones the Just on two input equation.

noticed added chlor your your you there might little to the inputs. alkali on a for because mentioned sensitivity where be you sensitivity some impact First, table. I EBITDA asterisk of hedging activities

it's So probably prices expect given sense input the today. of realize give sensitivity us in Since level what gas natural would to cost benefit less guess the guess, of where imply, just you XXXX? is I are can you a my than

Todd Slater

Todd. is This Yes.

hedger. on for If gas and X-quarter you call basis. rolling a -- knows, everyone ethane the a as needs hedge on ethylene we're We do

at number at hedge current range. position as in a 'XX, today is where well versus gas million -- the look you $XX-plus If for probably ethane good news year-over-year for you're 'XX our looking XXXX and for futures' natural as XXXX, ethylene

Michael Leithead

Got it.

Okay. January cost if purely And of pricing, benefit then of headwind this rate gross mentioned or run just rough earlier That's we is numbers. on reduction that million from that, in to tie you run net $XXX the with rating Is helpful. number pricing? kind that

John Fischer

rating pricing. is That run gross

Operator

next Bank from our of America. of come And Steven will Byrne question

Steve Byrne

Is for favorable You comments of fragmented that about capacity imbalance view lower very supply derivatives the chlor on are and this it pricing to market on leading alkali that's the caustic, not either. industry the yet pricing the chain chlorine is up made but some alkali there chlor in and to demand up? to be idling drive tighten your too pricing any the

John Fischer

all. don't believe I that No, at

think the the they're rates, operating industry in looked I at if mid-XXs. you

less the chlorine from -- demand caustic So X we're overall than of suffering and we're imbalance just capacity from between lack levels. at We're suffering optimal things. and then

Steve Byrne

that would do went the Epoxy of by push of declining to volumes extension more an a this. the environment? tighten that back weak and rates? in Or yet maybe about the some commented on your have cutting Is -- production you price to markets side, end Well, Then volume on ability being you up. logical

John Fischer

States. at would had Yes. in that in significant XX-day The at plant our point XXXX, very plant X out is we one I our Europe, in United the turnarounds, one thing

been So all expected the have would XXXX under volume circumstances. increase

Steve Byrne

you headcount you synergies in if from your you mentioned the a to is XXXX the like trimmed it go years one more the Dow, to has driving And of that expense perhaps, acquisition? earlier. that It XXXX. And few then looks reduction have up back What SG&A I But post expense. been lower. from that acquisition offset a question than that the reflection versus on was SG&A cost

Todd Slater

is this Steve, Todd.

that and from, with million number say, One up $XX levels, integration XXXX, was IT in through of SG&A has I'll costs associated that runs gone are big early this about items the project, the XXXX XXXX. that

So 'XX down of integration it from ago. the of I legal, that's was consulting, was million generally stock-based year-over-year. 'XX $XX years today, was lower But what several IT incentive, across you referenced, mean It in the spite big board. cost SG&A costs in higher compensation. versus driver

John Fischer

of And of split that we capital is to emphasizing, the G&A. again, between part end expense in about piece the we spending project of at expense. that The XXXX, is talked conclude scheduled keep $XXX million less XXXX. of and And

Operator

Hassan of our And Alembic question Global. will next come from Ahmed

Hassan Ahmed

million to with You market pricing mark at were be a would hit. to around to it if us guys were levels, EBITDA enough we kind January that $XXX share

Now obviously, sort sort we've down seen similar come dynamics crude oil prices the of raw happen bit. things. of We've seen and prices side on of a fair nat crude-linked material gas

of that wise EBITDA would account mark-to-market you taking hedging benefit what if are sort mentioned. activities into number look they January? and So likes the Obviously, like you raws where currently were to the in

John Fischer

in to that. costs And I side, are we Epoxy remarks, similar that, can a million and qualitatively, be expected there coming $XX alkali both chlor ethane benefits $XX with you gas associated gave to and the we some Todd the on million. material number other from tell down. said Epoxy to a just number natural raw of it's Well, in and

Hassan Ahmed

Understood. Understood. helpful. Very

moving destocking continue pricing call, that in sliding Now of mean in the talked QX during sort through sort imagine with as I caustic. on, well. continued sort I would guys conference you more, of of QX, destocking about

now? levels right you So inventory where do industry see of sort

James Varilek

This is Jim.

down, customer you're standpoint, third as environment, started it's quarter the correct. a the run I within that for From year. through as of inventories moved and price declining natural the early end to think and them a

producer that I they we can't that customer is down. were really inventories say moved year All quarter. I can Olin's inventories. speak the to have lower the third end believe the are than of in So inventories at

Operator

from And Instructions]. our next JP of question [Operator come Zekauskas Morgan. Jeff will

Jeffrey Zekauskas

you're by VDC plant down down. talk being maybe you're running shutting some plant, plant, You're high VDC maybe plants caustic plant XXX,XXX a soda. you And shut the going a not the chlor-alkali another the at rate to of about tonnes chlor-alkali

net shutting the or second And for half capacity in the of down half? the to and shut them the those plan what's do down you first really So industry units? closure the

John Fischer

these in and as caustic soda, down half around plan shut capacity The of the we stated, to We XXX,XXX chlorine tons. year. second the

side that's then be We out, shutting have down. on we'll BDC and to them run contracts the

Jeffrey Zekauskas

million additional Lake terms totaled capital would Okay. in of $XXX And think Would Or and costs capital? you your when it's for working we up there building in XXXX. I in -- in be transition city and XXXX done? be more

John Fischer

level, Lake be we at the from at a constant level business Army City done. would the remains that Assuming

Operator

question next Viswanathan Capital will Markets. from come of Arun our RBC And

Arun Viswanathan

the thought $XXX the over when delineated year, not, could uplift on we you I And Last in around guess, look if $XXX something that volume and just million QX curious that side. had in guys guidance You price materialize? QX, that to million, provided is when second half. forward did recover? the you impact but markets volumes provided

John Fischer

We year for weakness that fourth and climate weakened materialize. the said the not the that in did economic us quarter. accelerated That throughout

especially So at hope would side, urethanes, some a on uptick the a perspective. potential and on I think volume price XXXX very a we perspective, much look we if from you our of in serve chains that the chlorine there's

Arun Viswanathan

Great.

been amount with $X would So of of walk guess, It EBITDA. mid-cycle billion what of past, $X.X realm range a $X.X to additions billion through take? really in capacity guess, billion just provided going that, alkali. large annual like a within chlor different possibility? that, of in Is you've seems EBITDA still not I the in And I the there's it

Especially are down been of shutting at that still products? the since there and You in you're obviously -- resulting that's guess, tight facility pricing been able has if right is to than but supply weak, some know potentially now, I weak and guys that this so pricing, surprised many price difficult realizing on I you other or are weak a achieve anything has not is are. or demand demand factor? all

John Fischer

is From we weak that our down. is prices it driving believe the perspective, demand

take in we XXXX things We XXXX's equal, actually about that billion. versus billion we other XXXX, being soda, resin the of talked All EBITDA. You I add $X if to or not, $X.X up the back plus caustic obviously, on negative epoxy the asked they're into back chain And price XXXX. what the but... exceeded EBITDA get it to would experienced $XXX of million

Arun Viswanathan

caustic the could that? players that in industry wouldn't there structure Do then any you look more would you may or then an Right. just be in want I a I further space? When be the from guess, because attractive base, there consolidation And mid-XXs drive a whatever at American it and consolidation. relatively standpoint be add to potential seem why in transactions? just lastly, production North international question. to operating more is this the would back for going it in to some expect rates, I And position the guess,

John Fischer

is, share could consolidation. it highly given current perspective, think in participate North Olin, I the its unlikely that from our market America, in

Operator

UBS. our And question next come Roberts will John from of

John Roberts

Back to guess a Frank's and much original capacity caustic below China. now? of capacity operating question is Would right as normal hazard at the on in how rates to you Epoxy China

James Varilek

would a traditionally just I they good they about down. have that Year, would to you plants number you're shutdown in make. This I plants -- they there's can't the call John. do, is Jim. there their tough I winter did the -- that as say Chinese But there's and though more do a New That's a That's that. that even than obviously say can I pretty extended as extend is, time on period. give

John Roberts

here, Okay. Todd. And then just an accounting question

straight million it expected put VCM $XXX the do take the just XX to revenue line ethylene against depreciation change, What's much VCM the consolidating that the change get. you're contract million? margin On that's over for that I the years. assume $XX on the associated Can the how going with primarily going to And we sales? $XX we million and

Todd Slater

$XXX my and than net forward. right. be higher revenue $XX on will not the with way amortization, effect start a million. but XX The will divided is given clearly revenue, guide Yes. a the I'll work the number. That that's by back the be We've

Operator

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

John Fischer

the like you to and call our the at first all you thank you. Thank in talking I'd to we participating of for to forward end look quarter. today,

Operator

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

You may disconnect. now

Olin (OLN) 5 Feb 202019 Q4 Earnings call transcript