Good morning, and welcome to Olin Corporation's Third Quarter 2021 Earnings Conference Call. All participants will be in a listen-only mode. Following today’s brief opening comments, there will be an opportunity to ask questions. Please note this event is being recorded. I would now like to turn the conference over to Steve Keenan, Olin's Director of Investor Relations. Please go ahead, Steve.

Thank you, Tom. Good morning, everyone, and thank you for joining us today. Before we begin, let me remind you that this discussion, along with the associated slides and the question-and-answer session that follows, will include statements regarding estimates or expectations of future performance. Please note that these are forward-looking statements and that actual results could differ materially from those projected. Some of the factors that could cause actual results to differ from our projections are described without limitations in the Risk Factors section of our most recent Form 10-K and in the third quarter earnings press release. A copy of today's transcript and slides will be available on our website in the Investors section under Past Events. Our earnings press release and other financial data and information are available under Press Releases. With me this morning are Scott Sutton, Olin's CEO; Pat Dawson, President Epoxy; Damian Gumpel, President, Chlor Alkali Products and Vinyls; Brett Flaugher, President, Winchester; Jim Varilek, Olin's COO; and Todd Slater, Olin's CFO. Scott will begin with some brief remarks, after which we will be happy to take your questions. I'll now turn the call over to Scott Sutton.

Yes. Thanks, Steve, and hello to everybody. I'm pleased to report the Olin team has once again proved to be the most unique and agile in the industry in meeting the clear expectation of our shareholders. Again, I just have to say that the solid performance by the complete team sets me up to be able to focus on the items that drive our future, which are enhancing our contrarian value model, turning our focus on undervalued products, parlaying to grow, accretive capital allocation, building out our interlink matrix of activation knobs, growing shooting sports participation, and lifting all Olin people. This is a company that is focused on continuing to grow adjusted EBITDA and coupling that with balanced capital management to deliver more than $10 of earnings per share in the near future. So I'll make some brief commentary on a few slides and get to the Q&A quickly. 2021 is expected to be a solid result for Olin for the reasons shown on Slide #3. While the longer-term fundamentals of demand that grows faster than supply are starting to be exposed here in 2021, our leading actions to get a higher value for our scarce resources is proving to be successful. Current highlights of that success are that we continue to exit business that was based on non-negotiated pricing, align our product chain mix with the intended impact from purposeful settings of our interlinked matrix of activation nodes, start accelerating the value capture of epichlorohydrin, and driving expansion in shooting sports participation with our Shoot United movement. While there may be some end-of-year holiday slowdowns, which are really supply-driven, not demand-driven, and some seasonality that results in a sequentially flattish fourth-quarter result, we still expect 2022 to exceed 2021. The reason thematic for better results in 2022 is shown on Slide #4. The minor reason in our thematic is that the previously mentioned demand growth versus supply growth dynamic just gets better and better across all our businesses. More people are enjoying shooting sports, demanding clean wind energy, and expanding their home stats. The major reason in our thematic is that all of Olin's activities are designed around a foundational, cultural principle of only selling into value. We know who we are. In October, we took the decision to close some more undervalued assets and simultaneously used other existing global asset and product liquidity to grow Olin's value. As our own ECU assets are getting rightsized, we are a global buyer of ECUs to satisfy our higher-value products demand. Even though we have grown earnings for five consecutive quarters and delivered a levered free cash flow that is approaching 20%, we still must show that our performance will continue to improve. But maybe more importantly, we must demonstrate our ability to manage uncertainty and volatility. Slide #5 is an illustration. Olin has three substantial businesses, each with a meaningful contribution to segment earnings. For reasons that we previously discussed, Winchester, which is shown in red on the slide, consumer and defense business offers solid and sustainable growth. For reasons we will discuss in just a moment, the Epoxy, which is shown in green on the slide, engineered materials offer differentiated growth as we expand margins in that business. The Chlor Alkali Products and Vinyls Industrial Essentials are our largest organic and inorganic growth opportunity. We expect the Chlor Alkali segment results to be slightly volatile across a brief transitional window when we have a model profile shift between the relative strengths on the two sides of the ECU. We think of the net company volatility as ripples on a deep ocean, not waves on a shallow lagoon. We should control our destiny here. Continuing with the theme of good fundamentals on Slide #6, our perceived old-world chemistry has new world application and value. I won't read all these megatrend multipliers as I'm sure they're familiar to you, but instead jump to Slide #7 and hit on the differentiated growth profile of epoxy. Epoxy sets itself apart from other engineered materials by offering nearly non-substitutable performance. Almost every end-use category is growing faster than global GDP. Consider the outlook for more and larger wind turbines for clean energy, consider the outlook for electrical laminates for the new mobility trends and broad electrification trends, consider the outlook for infrastructure expansion and replacement, and so on. Even though we recognized the value of this business in epoxy resin sales and in epoxy systems sales, the value driver is really epichlorohydrin. And we will be expounding on our globally leading epichlorohydrin position in future earnings calls. We expect it won't be long before our Epoxy business delivers greater than $1 billion of EBITDA and carries the same enterprise value that all of Olin carries today, more representative of a highly engineered materials company. Finally, I will close on Slide #8. We're going to start talking more about EPS in conjunction with EBITDA and segment earnings. We are advancing in our evolution and expect our activities and debt reduction, refinancing, share repurchases, and M&A to be big contributors of forward value and that value shows in EPS. No doubt that a majority of our forward discussion will center on leadership, our linchpin products, great supply-demand fundamentals, parlaying, and lifted Olin people. However, new ways to create shareholder returns are evolving for Olin and help us earn above $10 of earnings per share. So that concludes my opening comments. And Tom, we're now ready to take questions.

The first question comes from Hassan Ahmed with Alembic Global.

Scott, I wanted to touch on some of these natural gas price escalations that we've seen, not just in the U.S. but globally as well. So on the U.S. side of it, if you could sort of talk through how you guys have dealt in what was a pretty tricky quarter and continues to be a tricky fourth quarter in terms of the hikes we've seen in natural gas prices? And if you could also talk about what you guys are seeing in terms of cost curve impact with natural gas price escalation in Europe and the power curtailments we're seeing in China as well?

Yes. I mean, sure. For us, we have a couple of strategies to manage the local issue. I mean, one is, we have a pretty strong hedging program, where we have some amount of it hedged out into the future, which helps protect those. The rest of it is absolutely 100% covered in product pricing. And every day, we get more ability to recover that on an instantaneous basis as we get out of some of these contracts that keep us in handcuffs. I think the more important one is maybe your second one, I mean rising global energy costs, it's actually a plus for Olin and that's because trade flows get more expensive and trade movements get more volatile. And that just fits right into our model of lifting the value of these Olin scarce resources.

Very helpful. And as a follow-up, Scott, obviously, now you're guiding to net debt to EBITDA being around 1x by the end of the year. And it was very helpful talking about $10-plus in EPS, and you touched on sort of share buybacks and M&A and the like as being meaningful contributors. As we look at 2022, with the balance sheet now as clean as it is, how should we be thinking about capital allocation, particularly if you could dig a bit deeper into the thought process with regards to sort of meaningful share buybacks as well as M&A?

Yes. I mean, sure, look, I'll cover one element of it and then Todd will cover most of it, but a good bit of that is going to go toward our growth programs. And I suspect maybe there'll be some other questions through the call, and we're happy to talk about how we go out and grow the company. So that's certainly a part of it, Hassan. I mean Todd, do you want to cover the rest?

You're right in the side as we've delevered the balance sheet that does provide a lot of financial flexibility to accomplish the structuring and parlaying that we've been talking about, as Scott just referenced. Going forward, we would expect to target in that 40% range of our levered free cash flow as shareholder rewards, that includes dividends and opportunistic share buybacks as we go forward.

The next question comes from Mike Sison with Wells Fargo.

Scott, I’m curious about your results this year. It seems like you’re nearing the end of your transformation, yet you mentioned several areas for further improvement. I’d like to know where you think the company stands, especially since you’ve only been in your role for a year and it's been a successful one. What additional steps do you believe can be taken to enhance the company further?

Yes. Hi, Mike, and thanks. Yes. I mean, look, I would say the team here at Olin has a long runway in front of it. I mean, all we've done so far has put a bit of a disruptive model in place, which is highly complementary to the fact that for the foreseeable future that demand growth actually grows faster than supply growth. There's a lot more to come beyond that. I would say, if you think about business by business, a little bit, here we are in Winchester about to embark on our Shoot United program to go out and increase the number of people doing sport shooting immensely, and Brett will get an opportunity to talk about that hopefully later in the call. In Epoxy, some of the systems and some of the high-growth areas like mobility that we provide are starting to take off. Maybe more importantly, we've set ourselves to the point where we're a buyer of ECUs out there. And there is global product and asset liquidity available and we're just getting started on that program of accessing that to go out and grow our business. And then, of course, we'll complement that with inorganic acquisitions. So that's sort of how the runway shakes out.

Got it. As a follow-up, in the first half, you're just above $500 million in EBITDA, and in the second half, you’re in the $700 million range. Considering the volatility or the difference between the quarters, can you maintain EBITDA within that $500 million to $700 million range? Is that also the potential for next year as we look to improve?

I believe the differences you're observing, Mike, stem from our improving ability to implement our model. Each day, we gain more control over certain factors, particularly regarding our materials, which are becoming more open to negotiation rather than being linked to trade indices. The early volatility we've seen, which has predominantly been upward, is a result of our advancements and the expansion of our model. Looking ahead, we anticipate that 2022 will outperform 2021, though there might be times when we need to adjust our market participation strategy since the weaker side still incurs costs.

The next question comes from Alex Yefremov with KeyBanc.

Scott, you mentioned epi renegotiations in the slides. Can you provide any details on what percent of your merchant business is out for renegotiations but also maybe size up the merchant epi business as a percent of revenue or percent of your capacity?

Yes. So I think I heard your question. I mean, at least on the chlorine side, we continue to make progress getting that opened up. And we expect at least by 2023, that that's essentially opened up. But we'll have to see how discussions go over the next quarter for us. We haven't really shared just how big our epi business is in relation to the rest of it because it's not that important, the size of the epi business. What is important is that it is the linchpin that sets value across our whole epoxy chain. And Olin is focused every day on lifting the value of that scarce resource. Pat, would you have anything else to add about epichlorohydrin?

Yes. I think the other thing to keep in mind about epi is, we have a lot of flexibility between the merchant market and our captive production. We have multiple knobs on epi that we can activate to bring more value to that whole epoxy value chain.

Could you discuss parlaying activity for EDC as well? What is involved here? And how would you describe this opportunity?

Yes. Yes. I mean Damian will make some comments on parlaying of EDC. Just on the broader topic, I would just say we're continuing to be successful developing that program. And if you think about many of our products, chlorine, caustic, bleach, EDC, epoxy, and epichlorohydrin, in the third quarter, we had success at parlaying activities around all those. Damian, do you want to talk about EDC?

Sure thing, Scott. From an EDC standpoint, at Olin, we have a large presence in merchant EDC. Of course, we can reach customers all over the world with our positions in the U.S. Gulf. And we have expanded our parlaying network there as well because we have customer demand now in Europe, Africa, obviously, India, Southeast Asia, Northeast Asia, and Latin America. And our ability to complement our own supply with supply that happens to be available at certain opportunistic times in the world just allows us to bring that product closer to the customer and realize some value there from the ability to help them turn that material into their PVC end-use products that serve the other growing markets. So our ability to get closer to customers with our parlaying network translates into value for Olin here that we've realized going forward.

The next question comes from Kevin McCarthy with Vertical Research Partners.

Scott, you've talked about in the Epoxy segment margin goal of 30% in the past and this morning, I think you threw out $1 billion as an EBITDA goal for the segment. What do you need to do in that business to get there from here? What are the two or three sources of incremental improvement, recognizing that the business has already come a long way? What additional runway do you see in '22 and beyond for upside in Epoxy?

Yes. I mean we just need to keep the activities going that we've already started. But Pat can expand on those a little bit.

Yes, Kevin. Epoxy is truly in a favorable position right now. The demand for Epoxy across various segments aligns perfectly with current megatrends. For instance, in composites and lightweighting, Epoxy plays a crucial role. It is also vital for blended wind systems and decarbonization, as well as electrical laminates, e-mobility, and adhesives used in e-batteries. We have the necessary infrastructure and commercial organization to operate globally in these applications, maximizing value where it's most beneficial. I believe we are well-positioned to enhance what we have been doing and continue to generate value around these significant trends that align with how Epoxy contributes to the market.

Okay. So it sounds like it's less strategic and more just riding the sources of demand improvement that you outlined, Pat.

Well, I'd say strategically, make no mistake that epichlorohydrin and the scarcity of epichlorohydrin and the multiple knobs we have there is much more strategic going forward than it has been in the past. And I would say that we even have opportunities in aromatics in what we do in phenol and acetone and cumene to bring this contrarian model into play. So that could be very strategic to our future as well.

Understood. And then secondly, if I may, Scott, I just wanted to ask about Slide 8. This is something you've talked about in the past, breaking the cycle pattern. Just was wondering if you could put a finer point on it. I appreciate the analogy you used, the waves on a lagoon ripples on an ocean and so forth. But even specialty chemical companies sometimes suffer a down year. If you were to look out over the medium term, 3 to 5 years, what would it take to cause a down year in your mind for Olin? Is it a shift from weaker side to stronger side of the ECU or an economic recession or something else that would precipitate a cyclical change for the company?

Yes. I mean even just going back to your first question where you had kind of said are you just riding the wave. I mean I would make no mistake about it. I mean, we're heavily focused on value over volume. And if there's any wave, it's a wave that Olin is creating. So you're exactly right on Slide #8 there. We're trying to represent that this is no longer a cyclic business. It was a cyclic business because Olin made it a cyclic business, and we've completely changed how we're doing business now. This is structural work that is going on. And not only that, there are structural dynamics that have changed in the marketplace, but we have a reasonable view out 5 years, right? And every single place we look, demand growth exceeds supply growth. So could there be down quarters? That is not impossible, but I do want to reiterate that if we have to shift which side of the ECU is setting our market participation, that's a relatively short-term item that you may or may not see. That is not a year-long type of shift. We've taken the business from being a little bit slower to being very nimble to go out and make sure that we do what we need to do to make sure that we get significant value from Olin's scarce resources.

The next question comes from Frank Mitsch with Fermium Research.

You made an announcement yesterday about severing some capacity in Alabama. Could you just talk about the decisions behind that? And where you think this leaves the chlor alkali market and the supply and demand balance?

Yes. Thank you, Frank. And we won't comment on the market. The decision was strictly driven by the fact that we're still undervalued there. And we're just not going to sell into low-value markets. I mean I can tell you where it leaves Olin's supply-demand balance. And that is in a place where we're positioned to go out and buy ECUs at the right time to support growth in our downstream derivatives and will likely be a smaller participant in the merchant market going forward, particularly in those places where we're going to be compelled to continue to supply through next year on trade indices that actually don't reflect the market value of the product.

Okay. Got you. And as I look at Slide 12, the ECU profitability contribution index, that is an investment banker's dream. I mean, just an absolute hockey stick. Where do you see that going in 4Q and in 2022?

Well, every day, we're focused on value, and that is the one measurement that ties everybody in the company together. So we're focused on continuing to move it up. Again, I want to reiterate that there may be a quarter or two where we have to draw a flat spot in it to make sure we're positioned right to continue to lift Olin's value. But yes, we'll continue to move it up. I mean, Damian, in your business, what do you think about the fourth quarter here?

Sure. We can definitely see a continuation of the trend where the chlorine segment remains relatively stronger. As Scott mentioned, we converted some contracts away, and we highlighted in our first slide that we shifted more contracts from index to negotiated agreements. This has resulted in a value increase that we're achieving. We continue to see that momentum as chlorine remains strong. The rest of the chlorine portfolio in my division, as Pat noted regarding the Epoxy side, also continues to generate value. Additionally, the caustic segment has improved, and we are observing some tightening in that area, alongside the energy issues affecting trade flows. We are seeing growth in caustic as well. Overall, the ECU continues to rise, as shown in the PCI, and we anticipate that trend to continue. However, chlorine is certainly driving the stronger side of our model.

The next question comes from Jeff Zekauskas with JPMorgan.

I was looking at your cost of goods sold, which I think was $1.68 billion. And in the second quarter, it was $1.71 billion, why did cost of goods sold go down sequentially? I would have thought your raw materials would have been higher. Did you simply ship lower volume? Is that the effect? Or can you explain that?

Yes, Jeff, definitely. In one of our businesses, we experienced a decrease in volumes. As you may recall, towards the end of the third quarter, various logistics challenges affected our volumes somewhat. So that's likely the primary reason. Todd, does that sound accurate?

Yes, that's exactly right. In our presentation, we mentioned that the volume of Chlor-Alkali Products and Vinyls decreased sequentially. This decrease in volume was the primary reason for the lower cost of goods sold.

Great. In your third slide, you mentioned that you shifted another 10% of merchant chlorine to freely negotiated contracts, and now less than one-third of the volume remains under indexed contracts. If all the remaining volume that was under index is now at market contracts, what is the annual economic effect of that?

Jeff, I would just say, without trying to itemize product by product that the impact of getting more of our merchant chlorine out from index is important. The more important part is that it lifts our whole portfolio of chlorine derivatives. Now if we were to get the remaining 1/3 out from under index, it would have a fair economic impact to Olin. But I'll just say we don't expect to hold on to that complete 1/3 of volume that remains under indexed because some of those customer segments aren't going to be receiving chlorine from Olin because we're stuck with having to supply for one more year at some value that isn't representative of the market. So we'll lose some of that volume.

The next question comes from Josh Silverstein with Wolfe Search.

Just wanted to go back to the capital allocation discussion from before. Obviously, this year was a big year for debt reduction. Can you just talk about maybe the capacity for buybacks next year? What you're thinking about for a minimum amount of cash on hand versus debt reduction? And then what could be left over for potential M&A versus buybacks?

Yes. I mean, Todd will expand on this a little bit. I mean what I would say to set the stage for his explanation is that right now, buying back stock represents an immediate return of about 20%. So you can expect to be a significant part of our forward program. Todd?

That's right. Really, if you think about 2021, our first priority has really been to pay down debt, and we're targeting $1.1 billion of debt reduction this year. So far, it's about $850 million through the first three quarters. We've taken a lot of that high-cost debt out of our system now, and we will plan to reduce debt further here in the fourth quarter. So that will get us down to about 1x range. Ultimately, we're probably targeting gross debt in the $2.5 billion range. To answer part of your question, Josh, where we're really targeting gross debt is in that $2.5 billion range. And as we said earlier, we're going to focus on our financial flexibility to enable us to do structuring activities, which would include M&A as well as parlaying, and we're targeting 40%, right in that 40% range of our levered free cash flow towards shareholder rewards, including the dividend and buybacks.

That's helpful. And then just on the $2.5 billion EBITDA level. I mean this was previously suggested it could be done in a few years from now. Is that the new floor to think of? And where do you think, given the portfolio and asset base right now, what could that new number be to the upside?

Well, I mean, we'll keep working to move EBITDA up. I mean, this year, we'll get pretty close to that, pretty obvious. I think next year, we've absolutely said that we’ll lift EBITDA over this year. We're evolving to also setting targets based around EPS. And so we have a fairly short-term goal of $10 a share, and we'll look at where we go from there.

The next question comes from John Roberts with UBS.

It seems like the Dow contract is still one of the largest opportunities going forward. Does that contract all open up at once? Or does it open up in phases over time? And if it's the latter, could you talk about how far out the longest part of that contract goes?

Well, I won't give too many specifics on arrangements with a particular supplier or customer. But what I will say, because it's in the public domain already, and it is a material item is that our major ECU supply that we're doing at cost ends in 2025. And so there'll be options and each and every option will be cash accretive to Olin.

Okay. And then Hassan mentioned production earlier. And again, there were issues related to Chinese caustic.

Yes. I'm sorry, I missed the question. It just went quiet. I don't know if it's on our end or your end. If anybody is still there? Hey, Tom, can you hear us?

Yes, I can hear you. Would you like to go to the next question?

Yes. For some reason, we just lost it.

The next question comes from Arun Viswanathan with RBC.

I wanted to follow up on your statement that 2022 will be better than 2021. Your Slide 13 indicates positive price momentum across nearly all of your businesses. If this trend continues and considering your focus on value, do you anticipate each segment will show higher EBITDA? How should we interpret that statement in relation to the segments?

Yes. No, I think that's fair. Each and every segment should show better results in 2022 relative to 2021.

And then just another question on the cost curve. You obviously moved up the values here on the ECU. How much of your capacity would you say is still kind of not up to your standards on value? And is there anything that you could do to change that? I mean, is there any debottlenecking? I know you have the $100 million in productivity but anything that you'd focus on to think about changing that situation? And again, how much of your capacity would you say is still maybe could be ready for shutdown?

Yes. When considering our capacity for 2025, it's clear that 30% of it is currently yielding no return, which is a significant portion. Even if we address that, we still have some challenges ahead. This isn’t purely a cost issue; our manufacturing and supply chain teams have excelled in improving productivity and flexibility. The primary concern remains the market value. While many of our derivatives are nearing a point of reinvestment economics, particularly in the merchant market for ECU elemental chlorine and caustic, we still need to enhance those values to approach reinvestment economics.

The next question comes from Eric Petrie with Citi.

You closed roughly 850,000 tons of ECU capacity this year. Just a question on strategy. Do you expect the parlaying to close 1 amount? Or how do you see that going forward?

Yes. I think I’ll let maybe Damian answer this question.

Sure. We still see that it's important to pull the available volume and liquidity from the market. We believe there are still global pools we can leverage. As trade flows become disruptive and costs affect other areas, we'll take advantage of our capital position. Additionally, looking at megatrends and the increasing demand for our Ecus and derivatives, parlaying Ecus will play a larger role in how we integrate them into our system. This will allow us greater flexibility in how we derive our chlorine in areas such as epoxy, vinyl, intermediates, organics, and even elemental chlorine. There are opportunities to flex our merchant chlorine and derive other Ecus into the system, all aimed at listing them and enhancing their value for the customers we serve.

Helpful. And then on the 1/3 of volume in chlorine that remains under indexed, how much of that is related to TiO2 on the market? And how does that step change at the end of next year?

Well, I mean, I would just say part of it goes into TiO2. And that's part of the market. We're not going to be serving out in 2023. And so part of the volumes that go down are related to this shutdown that we just announced in McIntosh, Alabama.

The next question comes from Steve Byrne with Bank of America Merrill Lynch.

Yes. You have this slide that illustrates the relative value between chlorine and caustic. And I appreciate the concept that your business is still complex. It's clear that, that chlorine value is not a data point on here, but likely a very wide range. Epi, for example, perhaps a year ago might have been at the bottom end of that range and value to you of chlorine. Is it fair to say that it is now among the highest value end markets for chlorine for you? The reason I ask is, is it getting to the point where you think there is risk of capacity expansions of epi in the market, either competitors or customers’ backed entities?

Yes, thanks. I mean, look, a lot of chlorine and chlorine derivatives have moved up. I would say we have a long way to move epi because it's certainly not at the high end of that range today. Could it move up to a point where it supports reinvestment economics? It's certainly not impossible. Do we expect to see expansions out in the future, whether it's in epi or even on the ECU side of the business? Yes, we expect to see some things get announced because otherwise the world is not going to have enough of those scarce products. Once those expansions are announced, I'd keep in mind that there's still likely a 4-year gap where demand continues to grow faster than supply. So the only way that changes is if there are just multiple announcements of multiple expansions that continue over the next 10 years.

And then when we look at pricing on some of these chlorine derivatives like PVC versus EDC, both of them have ripped but you got about maybe at $0.60 a pound difference between them. Is that fair to you that downstream PVC garners that much of a margin versus EDC? Or is that compelling to you to want to move in that direction?

Well, we are the largest merchant supplier of EDC, a material that has increased in value. Over the past six to nine months, PVC prices went up, and there was some concern they might decline. During that time, we implemented several strategies around EDC to ensure that Olin's portfolio remained stable. However, PVC prices rose again. I believe there is still potential for growth there. The long-term fundamentals for PVC appear strong, and it tends to provide a margin advantage over EDC. I think we are well positioned to capitalize on that opportunity.

The next question comes from Matthew Blair with Tudor Pickering Holt.

I wanted to circle back to capital allocation. So based on your 2022 EBITDA guidance, it seems like you should be able to generate at least $1.6 billion of free cash flow next year. And you mentioned 40% to shareholders. That would be about $600 million. That remaining $1 billion, should we think of that as dry powder for M&A, either like transformational M&A or bolt-on M&A because it seems like a pretty significant amount.

So, I mean, look, your numbers certainly aren't that far off. So I mean, you're exactly right. I mean we'll have options for that. Part of it is in acquisitions. Part of it is also to support our parlaying activities where we go out and use global product and asset liquidity because we will have some needs for various logistics capabilities as we do that. That's really low capital. It's a very light touch in terms of capital, but I just wanted to complete the picture.

Sounds good. And then previously, I think it was hard to either sell or spin Winchester just due to either like valuation or taxes or maybe a mix of both? In today's environment, it seems like ESG is just a bigger part of the picture. So has anything changed? And I guess could you just provide an update of how you see Winchester fitting in the portfolio over the long term?

Yes, this is a great business for us with many opportunities. I will have Brett discuss our Shoot United movement shortly. If we break down the business, there are currently 55 million to 60 million individuals participating in sports shooting, which is the fastest-growing youth sport in the country. We have a program ready to launch that aims to expand our reach. Brett, would you like to share more about Shoot United?

Yes. And just to add a little bit to what Scott said. The 60 million people that participate now really participate for the main reasons to be with family and friends. The addressable market is over 200 million people of all demographics and ages. What Shoot United is, is a sophisticated communication strategy to introduce all those fun facts and great things about the recreational shooting sports to those 200-plus million people.

The next question comes from Roger Spitz with Bank of America.

Following yesterday's announcement, how much diaphragm capacity do you have left in shutdown ECUs?

Yes. Yes. I mean we probably won't quote an exact number, but what I will say is almost half of our capacity used to be diaphragm based. And with that announcement, we've totally taken out about 885,000, something like that ECU tons. So we took out a good chunk of it, but we still had a lot.

Okay. And can you comment on chlorine value and volumes into bleach? Is it starting to fall versus other derivatives as we move out of the pandemic? Or is, people still reaching all services they can touch?

This is Damian. I'll address that question, and I appreciate it. We have noticed an increase in bleach values that align with the overall trends seen across the ECUs. Bleach remains a limited product. As the leading merchant bleach producer, we have observed these dynamics in action. Both chlorine and ECU values have risen in relation to bleach. However, there is still significant potential for growth since bleach is increasingly utilized in disinfectants and wastewater treatment. We are well-positioned with ample opportunity ahead of us to capitalize on the value of this specialty product in various markets.

The next question comes from Mike Leithead with Barclays.

I would like to start with the topic of inorganic or acquisition opportunities. Can you provide more details on what you're looking for? Specifically, could you share information regarding the size you're targeting? Are you focused on geographic expansion or introducing new products? Please give us an idea of your objectives in this area.

Yes, sure. I mean if I had to sum it up, I would say we're looking for assets that really complement our model. So I mean that opens up a lot of possibilities. You could imagine that we're able to acquire ECU capability, although that may not be necessarily North American focus. There is a lot of opportunity for us to expand into other geographies. Another complement to our model would be derivatives, just like we have a chlorinated organics derivative chain and we have an epoxy chain and we go part of the way down vinyls. There’s other chains that certainly feed off elemental chlorine and those would be great complements to our model, whereby we did a lot more knobs to turn across our matrix and get value back to ton one that we have today. The other thing I would say, it's also not impossible that we discovered that some of those things that have a direct complement to our model that actually our commercial attitude might apply to other businesses as well that we might acquire. So we're thinking about all of those possibilities.

That's great. And then maybe just for a follow-up, just digging into the Epoxy strategy a bit. If I look at Slide 7, there's a lot of talk or discussion around engineered solutions. Is it fair to say that you're trying to kind of ultimately sell less of the volume, more commodities, liquid epoxies and try to push it more downstream with the kind of hardeners, epoxy dispersions, things like that? If you could just flesh out kind of where the strategy for Epoxy, that'd be great?

Yes, Mike, this is Pat. And when you look at the Epoxy value chain, we make money across that whole chain and it's very interlinked as to how we make our money there. So with our epichlorohydrin, like I say, we have multiple knobs on how we monetize that epi, whether it's selling it into the merchant market. If we get value there or we back out of the merchant market and we take that epi and convert it more to liquid epoxy resin to monetize it or we can take that liquid epoxy resin and further convert it to a solid epoxy resin or other converted resins or we can take that liquid epoxy resin and systematize it into things like wind systems or formulated products or blends. So Mike, we need that strategically, we need that whole chain to be able to have the maximum value over volume choices. That's really what we've been doing and we'll continue to do in the future.

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

No, I would just say thanks a lot to everybody for joining today. Appreciate it.

The conference has now concluded. Thank you for attending today’s presentation. You may now disconnect.