OLIN Corp (OLN) Q3 2026 Earnings Call Transcript

Good morning, and welcome to Olin Corporation's third quarter, 2026, Earnings Conference Call. All participants will be in a listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. Following today's brief opening comments, there will be an opportunity to ask questions. To ask a question, you may press star, then one on your touch-tone phone. To withdraw your question, please press star, then two. 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, Operator. Good morning, everyone. We appreciate you joining us today to review Olin's third quarter 2026 results. Please keep in mind that today's discussion, together with the associated slides, as well as the question and answer session that follows, will include statements regarding estimates or expectations Please note 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 yesterday's 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 related financial data and information are available under press releases. This morning are Ken Lane, Olin's President and CEO, and Todd Slater, Olin's CFO. We'll start with some prepared remarks, then we look forward to taking your questions. Let me now turn the call over to Olin's President and CEO, Ken Lane.

Everyone joining us today, we appreciate your interest in Olin. We've collected much of what we discussed on our last call. Each business remained focused. Reducing structure will continue to be. Our team made progress. Returning our VCM assets to normal operations in mid-September. Team maximized. Continues to benefit from ourselves. Military business continues to gain. Not Rodino. Immediate priority. Using integration planning to align with the first quarter. Confident in our ability to deliver more than $400 million of cost. I think it's important to understand how we're approaching integration. We're building a new company with an industry-leading, globally-advantaged asset base. This design will be data-driven with clear lines of accountability, and it's sharing more about Olin Huntsman in the coming weeks. In the meantime, we're announcing today that, as expected, we resume normal operations at our Freeport BCM facility. Reduced operating rates resulted in approximately $30 million of negative impact. In BC during the quarter, EDC values have moderated from second quarter, but remain above pre-conflict levels in similar volumes with significantly pressure to come to the end of the year. The epoxy business continues to improve. We see significant interest in what we can control. We continue to leverage Olin's position as a reliable, vertically integrated local supplier. The epoxy team has acted quickly. We've also been implemented across all composites value chain from subsidized Asians. We will benefit a broad group of composites, including epoxy resins and related systems. The European Union act decisively to seize this momentum. Now let's take a look at Winchester on slide 7. Special ammunition demand continued to improve on a year-over-year basis. Year-to-date, September NICS background checks for firearm purchases were up year-over-year for the first time since 2020. The order backlog continues to grow year-over-year as we remain very disciplined around value chain inventories, continuing our make-to-demand actions happier today than it was this time. Our military business continues to perform manufacturing facilities. These are the first rounds produced on U.S. government-owned assets that meet the full requirements of the new 6.8-millimeter rounds, demonstrating the industry-leading design, engineering, and manufacturing capabilities of our Winchester team. The Army also renewed our five-year second-source supply contract with an initial delivery valued at $50 million over the next 12 months. This contract covers ammunition we produce for the military from our Oxford, Mississippi, and East Alton, Illinois plants. These actions reinforce in Winchester. Look at our financial highlights.

Turning to slide eight, I'll review our working capital, liquidity, and financial position. Earlier this week, Olin executed a new credit agreement to support the combined company following our merger with Huntsman. Backed by strong commitments from our combined relationship bank group, the agreement will expand liquidity and financial flexibility for Olin Huntsman at closing. Working capital increased during the first nine months of 2026, reflecting our normal seasonal build and payments against previously accrued legacy litigation reserves. During 2026, Olin paid approximately $114 million to Shintech related to legacy litigation obligations. We do not expect further payments this year. We expect a seasonal reduction in working capital in the fourth quarter, supported by continued inventory and receivables management, We expect year-end net debt to be higher than year-end 2025, reflecting legacy litigation payments and merger-related costs. We expect year-end leverage to be approximately five times or slightly higher, the end of the quarter with $1.3 billion of available liquidity with no restrictions on the undrawn portion of our revolving credit facility. Priorities remain unchanged. We continue to target 2026 capital spending of approximately $200 million, with investments focused on safe, reliable, and efficient operation of our assets. To continue our long history of uninterrupted quarterly dividend payments, with our next dividend marking 100 years of consecutive quarterly dividend payments, we remain committed to preserving liquidity and maintaining financial flexibility, with excess cash flow to be used to reduce our outstanding debt. Beyond 250 continues to generate strong momentum as we remain on track to deliver in the range of $110 to $120 million of incremental structural cost reductions in 2026. Annual savings expected to surpass our original $250 million target by 2028. You have clearly seen the benefits from structural cost reductions in our epoxy business. However, in our color alkali business, market and operating headwinds have offset the earnings benefit of these structural cost reductions. Structural cost reductions, and disciplined capital allocation as we prepare for our merger with Huntsman. With that, Ken, I'll turn the call back to you.

Slide nine in our outlook, adjusted EBITDA to be in the range of $80 to $100 million for a full year 2026 adjusted EBITDA of approximately $550 to $570 million. In our CAPV business, we expect sequentially higher maintenance turnaround costs of approximately $25 million, We will

now begin the question and answer session. To ask a question, you may press star. Then one on your touchtone phone. If you are using a speakerphone, please pick up your handset before pressing the keys. Withdraw your question, please press star, then two. At this time, we'll pause momentarily to assemble our roster. The first question will come from Frank Misch with Firmium Research. Please go ahead.

Hey, good morning. I wanted to drill into caustic soda. I think you indicated in the press release that you saw higher pricing. I believe that was domestic, but you saw lower export pricing, and then as your slide 15, you indicated that caustic pricing was actually down. Can you tell us what's been going on with caustic soda pricing within your system and what your expectations are?

For caustic soda, it really is a global story. Domestically, we have seen, but you know the challenges in the export market are related to not as much demand as it is related to China this year. You know, they've really, the full year, they've stepped up the amount of China, and that has continued. Now, we're starting to see some challenges with that because of freight costs in that advantage for you. And I think if I can watch what's going to happen in the freight market, demand is usually...

Next question will come from Josh Spector with UBS. Please go ahead.

Yeah, hi. Good morning. I was wondering if you could talk about your latest thoughts around how you deal with the Shintak contract in 2030. Just assuming if you might need to build some PVC capacity, you might need to start that in the next year or so, or at least get partners lined up. So any latest thoughts there would be appreciated. Thank you.

Listen, our strategy around vinyls has not changed. We have said I believe that the best path for us to continue to work together. If that doesn't turn out to be the case, then we do have other options that we're looking at. That includes selling VCM, you know, potentially doing something in PVC. But we are not at a point now where we're ready to make any decision or any announcements. I'd say that the chess pieces on the table are the same as they were even a year ago. I would expect that we will be making some sort of a more firm decision middle of next year to, you know, by the end of the third quarter. I think I'll be able to give you a better update. That's it.

Next question will come from Hassan Ahmed with Alembic Global. Please go ahead.

Morning, Ken and Todd. You know, a question around synergies. I know you guys said that you'd give more details later on, but, I mean, it just seems that the $400 million target that you guys gave, you know, I mean, you're talking about increased confidence around that. So I'm just trying to sort of figure out what's driving that. Have you seen more opportunities? Can we actually exceed that $400 million target as well?

Yeah, as you can imagine, you know, there's only so much that we can do. We're able to do a little bit more through clean teams in terms of looking at the cost structures and where we see opportunities for streamlining and making the organization more efficient after closing. But one thing we have not really looked at at all still is any opportunities around revenue synergy. What I can tell you is that what we see is in terms of just the fit improvements that we have a very high level. Remember, there was 100 million that's related to chlorine supply that kicks in. You know, to me, that's going to be there. It's just a matter of the cost structure. I have a very high level of cost. We will certainly details just and we see that phase.

We've given you some for day one to hit the ground running.

The next question will come from Alexey Yeframov with Barclays. Please go ahead.

Thanks. Good morning, everyone. Could you provide a year-over-year bridge for your EBITDA and chlorovinyls? It looks like your profit index is up, your maintenance is a little bit up as well, but are there any other major factors that explain what's happening year-over-year?

Yeah. Hi, Alexi. Welcome back. Good to see you, or good to hear you, I should say. You know, if you look at chlorovinyl, one of the things that we had last year that's not recurring benefit in the third quarter of 2025, we don't have that again this year. Sorry, go ahead, Don.

Yeah, no problem. I mean, Alexi, you know, the 45, the change in the hydrogen tax credit, you know, was, you know, roughly a little over $25 million year-over-year penalty, and you knew last year was a cumulative benefit. The other thing is, you do know we had the BCM issue where we had reduced rates really during almost all of the third quarter this year. So that was roughly a $32 million headwind. You know, more of a couple one-timers.

The next question will come from Jeff Sikaskis with J.P. Morgan. Please go ahead.

Thanks very much. Do you expect your chlorovinyl utilization rates to change very much from the third quarter to the fourth quarter?

I would not expect the change significantly. We've got some downtime coming up in the fourth quarter. We continue to operate below the industry. Part of that is related.

It's also related to- This question will come from Salvatore Tiano with KeyBank Capital Yes, thank you very much.

I want to ask a couple of things. Number one is, as we think about the VCM outage, if I understood correctly, you said that the plan was still out most of Q3 and was still over 30 million impacts. So is it fair to assume that this becomes kind of a 30 million tailwind in Q4, perhaps adjusted for seasonality with additional upside in Q1? And secondly, you know, in your outlook, I think you're the only company so far talking about, you know, a more intense than usual de-stocking in Q4. Every other company has gone out of their way to say the expected calcetonality. And I wonder, is this conservatism on your end, or is it simply that you are actually seeing some of your chemical chains more severe de-stocking and you have line of sight to that?

Good morning, Sal. Listen, I'm going to start with the de-stocking question, then I'll let Todd take the first part of your question there on the VCM. You know, our view is what we have seen as we've gone through this trough, and you can really look at some of the data, Q4 seasonality is more accentuated. You can call it de-stocking, you can call it seasonality, call it whatever you want. I think the reality is that the volatility in the fourth quarter We're not going to ignore that. I'm prudent to make sure we reflect that.

As you think about the VCM, you talked about it coming up mid-September, so yes, it was really at reduced rates for virtually the whole quarter. So that $32 million, yeah, that's a tailwind in Q4. But as you see through our slides, chloralkali does have a roughly $25 million headwind going the other way on higher turnaround costs between Q3 and Q4. And just as a note, we would expect first quarter to be high.

Next question will come from Patrick Cunningham with the City. Please go ahead.

Hi, good morning. Just maybe a couple questions on Winchester. It seems like you've seen some positive leading indicators. You talked about better channel health and commercial. As we look to the next 12 months, are there any other demand signals you're seeing? Do you expect to have a better platform for price? And if you layer on the continued robust military growth, I guess, what sort of earnings outlook do you have over the next 12 months or so?

Good morning, Patrick. Yeah, listen, the Winchester team has really done dealing with some really, mainly this year, mainly not as much this year, but metals has been a real headwind, and it's not just that they buy, and they have been steady where copper is going, anything in the short rating of that facility.

The next question will come from Kevin McCarthy with Vertical Research. Please go ahead.

Yes, thank you, and good morning. Ken, I welcome your comments on the subject of freight cost inflation and whether that is a net benefit or a headwind to Olin as a whole. It sounds like as it relates to caustic, maybe it's helpful to the extent that it would insulate you from competition, but I'm not sure about the impact on other parts of the company. So we would certainly welcome your broader view there.

Great question, Kevin. Thanks, and good morning. Listen, freight costs definitely helped us in the second quarter because I think we've now seen that. That is in the market to things like cost. Those freight rates are also backing up, and they will start, you know, it's just a matter of time. If you think about other areas, I mentioned this with diesel costs up, if you're shipping anything by rail, your costs are up there as well. So net-nets, freight costs, we've got to stay onto the market either through a mechanism to be able to recover.

Next question will come from Abigail Ebers with Wells Fargo. Please go ahead.

Thanks for taking my question. Another one on caustic soda, just your assumptions underpinning guidance. You're expecting higher caustic soda prices. It looks like CMA said caustic soda up $5 in October, And they're saying it could go up as much as another $10 in November. Is this realistic? Is this like around what you see underpinning guidance, or would that imply some incremental upside?

Yeah, we see the same thing. We do see the market firming, and we see spot pricing moving up, and you will see some domestic pricing following that. With the lag that you see in the market, we'll start to see more of that benefit in the first quarter than we're going to see in the quarter. But that's just how it's going to flow. I think what you're reading would support that in terms of what we do.

Next question will come from Matthew Dayo with Bank of America. Please go ahead. Good morning.

I wanted to talk a little bit about cash and cash flow, because

leverage is obviously ticking up here a bit into the close. And I think there was the prior comments like $150 million to $200 million in cash costs to achieve the synergies. So, as you think about, like, pace at which you can do this, and I know, Ken, you kind of made a comment, hopefully you can talk more about this, but would you dip more, and would you dip into the liquidity available to do this and take on a little bit more net debt to get at the synergies, or is cash flow a governor on pace of synergy capture? And then, related, unrelated, I know you made the comment that you paid $100 million to Shintech this year. Was that in 3Q, or did that drop in October and would be a 4Q cash flow consideration?

Good morning, Matt. Listen, when you think about the synergies and timing, the spend to get synergies is really going to be more later in the process in terms of the spend for that to get synergies. The synergies that we can get early on are not going to require significant spend to achieve. And then as we get into, as an integrated company, we'll start to see the other opportunities that might require. And if the business case justifies it and the return is there, and the return is usually on synergies, the return is usually very fast. It's like months. And if we start to see business cases, then, yes, we will go.

Regarding your question on cash flow and the legacy litigation payments of $114 million, $114 million was spent through the end of the third quarter. We had spent, you know, through the end of the first half, you know, just under $100,000, and we had talked earlier on prior to $90, $195 million was going to be. What we've communicated on this call, and to be clear, we would only expect to spend $114 million this year, and that remaining liability, we do not expect to be paid.

This question will come from John Roberts with Mizuho. Please go ahead.

Thank you. How much do you think global caustic soda capacity increased in 2026, and how much do you think it might increase in 2027?

Good morning, John. Listen, we have talked about this before. If you look at the chloroalkali markets, they are set up structurally very well. There's been a little bit of increase in capacity, but net of a few hundred thousand tons, that's a rounding error in my mind. So, you know, structural supply side, we are sitting in a very good, you know, it's no different than what we have said, even going back to our investor day, we're looking for the industry. What we need to see is some demand coming back. And that will be the biggest driver. As we start to see the global economy recover and growth options, China's seeing better domestic growth. Those things are going to...

Next question will come from Matthew Blair with TPH. Please go ahead.

Hey, good morning, and congrats on the billion in new ammo contracts. Do you have any details on the timing of when those contracts will roll through? And then also, is there any update on the application to take over, I believe it's the Radford ammo plant? Thank you.

Yeah, those contracts, the second source contract, you'll start to see that rolling through. We already had that contract, so this is sort of a continuation. We're really happy to have that because, you know, don't underestimate. I said this in the prepared remarks. Winchester is the industry lead to develop. In terms of the equipping phase for the 6.8 millimeter facility at Lake City, that's going to start to show up really more next year. We've got to place the orders for the equipment now that we've gotten the funding awarded from the government. And, you know, as that spend happens, you'll see that revenue come in. But what you're going to see is you're not going to see that incrementally higher. It's probably going to be more stable. The project, that's complete. Oh, sorry. Let me, that process.

Next question will come from Arun Viswanathan with RBC. Please go ahead.

Thanks for taking my question. I hope you guys are well. I guess I just wanted to ask about, you know, some of your markets and if you've experienced increased production of China in the June through September period, and did it really pick up in, say, maybe some of the coal-based chlorine applications? And is that making, you know, and caustic soda, and is that resulting in extra supply that's impacting pricing? And do you expect that to continue? Maybe you can just talk about supply and demand and chloroquine products. Thanks.

Good morning, Arun. Yeah, what we saw back when the conflict in the Middle East broke out of prices for PVC spines, And that included, and then what has happened was produced, working its way through the ethylene-based TV. What we have seen over the past couple of months, though, is even the coal-based, carbide-based. I think that you're starting to see things normal. An announcement about a European is starting to trickle through.

Next question will come from Peter Osterland with Truist. Please go ahead.

Hi, this is Alec on for Pete. I wanted to ask about sort of what's left as far as cost reductions next year as we get into Beyond 250 and that $60 to $80 million target. How do you see that as far as being allocated between the segments?

Good morning, Alex. So we have done a really good job on Beyond 250. Todd talked about this in his prepared remarks. You can see that coming through in the epoxy business. Next year, we're going to have another increment, and this is in the appendix slides. $60 million to $80 million is what we would expect for next year. This year, we're going to be $110 million to $120 million. If I look at that year over year, even though in the prepared remarks, we had said you really can't see that yet in the The bottom line in CAPV, if you look at our manufacturing costs, they are down mid-single digits, but you can't see that because of a lot of the other noise that's coming through. That gives me a whole lot of confidence that structurally those costs are. Teams in manufacturing have done a great job adjusting to new processes, new work processes. We've improved things like.

If you think about beyond 250, you know, and Ken mentioned and I mentioned earlier about epoxy, that structural cost reduction really underpins one of the key pillars of the epoxy change year over year. And that structural cost, you know, and we had talked about this early on, $40 to $50 million improvement, you know, in that year over year in beyond 250 in epoxy. So, alkali clearly is the remaining big piece for this year in that structural cost improvement. And you heard Ken's comments about our underlying manufacturing costs, you know, really being lower. Again, we talked about the VCM issue this year. Between the second and third quarter of the operating at lower rates for that time period, that's a little over $70 million of headwind that we've incurred this year, but those structural costs are temporary headwind.

Question will come from David Begleiter with Deutsche Bank. Please go ahead.

Thank you. Good morning. Ken, looking at some consultant China caustic export data, they're showing a modest increase in exports, only in the last one this year, from about 4.1 to 4.2 million tons, but then a sharp decline next year by about 25 percent. So is that data just either lagging or missing some ingredients? And would you concur that we should see a sharp reduction in China's caustic exports next year? Thank you.

Good morning, Dave. So listen, I think you've got to go back a couple of years, too, to look at that caustic export, because if you go back to 2024, it's stepped up a lot. And so it has stayed live, and then we saw another increment in 2026. And that has been disruptive in the market. You know, and I will just say, call a spade a spade, you know, they're paying people to take, you know, they're selling chlorine at negative values to subsidize that this year. So I hope that that report is right, but I will be a skeptic because I think that that has not been what we are focused on right now is what we do. Great job with that. Strengthening our position, continuing to tour.

As there are no further questions, this concludes our question and answer session. I would like to turn the conference back over to Ken Lane for closing comments.

Nick, and thank you, everyone, for joining us. We do look forward to shakes and months. It's an exciting time for Olin. Thank you, and have a great week.

Thank you for attending today's presentation. You may now disconnect.