Earnings Call Transcript - OLN Q4 2024

Operator, Operator

Good morning, and welcome to Olin Corporation's Fourth Quarter 2024 Earnings Conference Call. All participants will be in 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.

Steve Keenan, Director of Investor Relations

Thank you, operator. Good morning, everyone. We appreciate you joining us today to review Olin's fourth quarter results. Before we begin, I'll remind you that this discussion, together 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 Olin's 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 fourth 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 Ken Lane, Olin's President and CEO; and Todd Slater, Olin's CFO. We'll start with our prepared remarks, then we look forward to taking your questions. I'll note though that in order to give each analyst an opportunity, we will limit participants to one question with no follow-ups. I'll now turn the call over to Ken Lane and kick us off.

Ken Lane, President and CEO

Thanks, Steve, and thank you all for joining us today. Starting with Slide 3, I hope everyone was able to participate in our December Investor Day, whether in person or virtually. We laid out our Value Creation Strategy that optimizes our core businesses by maintaining our focus on a value-first commercial approach and streamlining our assets to achieve greater than $250 million in cost reductions by 2028. We expect to achieve $20 million to $30 million of these savings in 2025. We also explained how we will grow our core by focusing on adjacent high-return options, all while being disciplined with our capital allocation framework. Olin has a great legacy, a leading set of businesses and assets, and a bright future. During our Investor Day, we guided the fourth quarter adjusted EBITDA at the low end of our range. However, as we closed the quarter, the downward pressure on our share price created an unexpected benefit to adjusted EBITDA and Hurricane Beryl costs came in lower than we expected. In Epoxy, seasonally lower demand was a headwind during the fourth quarter. However, this was partially offset by continued price improvement. In Winchester, domestic and international military demand remains strong. However, near-term commercial headwinds persist as commercial retailers continue to trim inventories, and consumer disposable income remains challenged. Now let's take a closer look at our Chlor Alkali Products and Vinyls results on Slide 4. CAPV sales were up 9% sequentially on higher volume in the absence of Hurricane Beryl and improved pricing. Our CAPV results also benefited as final Hurricane Beryl spending came in approximately $8 million below expectation during the quarter. Although we are in the midst of a prolonged industry trough, Olin continues to realize higher value than experienced previously. We continue to be disciplined with our operating rates as we navigate this challenging environment. Global caustic soda remains tight as European variable costs rise, Asian demand shows improvement, and we are coming up on the turnaround season. Combined with seasonally lower merchant chlorine demand, we expect tightness to continue through the first quarter. At Investor Day, we announced our intention to enter the US PVC market via a tolling partnership. This has key strategic benefits, including upgrading a portion of our significant EDC capacity and unlocking incremental caustic soda volume. Longer-term, this will facilitate our strategic assessment of the PVC market and how we will deploy our industry-leading cost position to create higher value. We have received initial shipments and will realize first sales in the first quarter. Our Gulf Coast plants recently weathered Winter Storm Enzo with no material interruptions. However, many of our customers were not as fortunate, which will present a slight headwind in the first quarter. Moving to Slide 5, we'll take a look at our fourth quarter and full year Epoxy results. Olin's Epoxy sales were roughly flat sequentially with improved resin pricing offset by seasonally weaker demand in both the US and Europe seeing weaker demand from the building and construction, automotive, and consumer electronics markets. Notably, during the third and fourth quarters, our team successfully completed the planned turnaround at our Stade, Germany facility. It was completed safely on time and on budget. Fourth quarter Epoxy adjusted EBITDA increased by more than 50% sequentially, largely in the absence of Hurricane Beryl impacts. During the first quarter, we expect improving demand as limited restocking begins and we see some seasonal improvement in our formulated solutions business. US Hydrocarbon feedstock costs remained favorable versus the rest of the world. However, Asian Epoxy producers facing higher feedstock and freight costs continue to increase the flow of unfairly subsidized Epoxy resin into the US and Europe. We expect both a final US and provisional EU anti-dumping decision during the first half of the year. Slide 6 provides an update on our Winchester business. Fourth quarter Winchester sales were flat sequentially as the growth of lower margin domestic and international military demand and military project spending was offset by lower commercial ammunition sales. Commercial ammunition demand continues to be weak as retailers continue destocking. As a reminder, US ammunition retailers built significant inventories during the first half of 2024 ahead of looming propellant shortages and the US presidential election. Retailers continued reducing their inventories as consumer spending slowed, resulting in lower Winchester sales. We expect this trend to continue in the first half of 2025. The weak near-term commercial demand has been partially offset by strong domestic and international military demand. Demand for White Flyer clay targets is robust and will soon benefit from the launch of our ECO FLYER line, the next evolution of clay targets. After one year since closing, we're excited to see the continued exceedance of our expectations of this acquisition. And now let's take a look at Winchester's announced acquisition of AMMO, Inc.'s assets on Slide 7. As we announced on January 21st, Winchester entered into a definitive agreement with AMMO, Inc. to acquire its small caliber ammunition manufacturing assets. This bolt-on acquisition should be immediately accretive to adjusted EBITDA, which is directly in line with our acquisition strategy for Winchester that we discussed during our December Investor Day. The acquisition includes a state-of-the-art production facility in Manitowoc, Wisconsin with a talented group of skilled employees, which will enable greater specialization and participation across high-margin specialty calibers. At the same time, Winchester's near-full integration across the ammunition value chain will provide economy of scale and synergies across safety, manufacturing, and procurement. Our plants will immediately share best practices and rebalance our system to optimize the new assets. We anticipate a fully realized synergy benefit of $40 million within three years after closing. As a result, we expect to achieve a multiple of less than two times once the assets are fully integrated, which meets our criteria that any investment must offer better returns than buying back a share of Olin stock. We expect to close the transaction during the second quarter. Let me now turn the call over to Todd Slater to walk us through some financial highlights.

Todd Slater, CFO

Thanks, Ken. On Slide 8, we've added a sequential quarterly adjusted EBITDA bridge. The comparison from third quarter to fourth quarter 2024 is highlighted by business. At a high level, we experienced an approximately $93 million overall sequential benefit from the lower Hurricane Beryl impact. Our chemical businesses experienced favorable pricing momentum but were offset by higher raw material costs and higher expenses, including penalties from unabsorbed fixed manufacturing costs related to our planned Freeport, Texas chlorinated organics plant maintenance turnaround. As expected, Winchester experienced lower commercial demand as retailers continued their inventory destocking efforts. At corporate, we benefited from lower stock-based compensation, primarily due to mark-to-market adjustments, partially offset by higher environmental remediation expenses and legal and legal-related costs. Now let's turn to Slide 9, quarterly and full-year highlights. The continued challenging industry environment reinforces the importance of Olin's investment-grade balance sheet and our strong cash flow generation. We have minimal bond maturities in the next few years with opportunities to refinance our long-term debt, such as the expansion and refinancing of our $500 million accounts receivable securitization facility completed during the fourth quarter, from the previous $425 million facility. With this refinancing, we had approximately $63 million of off-balance sheet accounts receivable factoring return to balance sheet debt as our factoring program was discontinued. Our strong financial foundation enables Olin to continue running our value-first commercial approach while maintaining our disciplined capital allocation priorities. During 2024, Olin returned approximately 78% of operating cash flow to shareholders through quarterly dividends and share repurchases. As a result, we repurchased approximately 5% of our outstanding shares. Our net debt has increased by approximately $167 million from year-end 2023, while remaining approximately flat during the fourth quarter. After taking into consideration the impact of Hurricane Beryl, our year-end net debt to adjusted EBITDA ratio was approximately 2.7 times. We ended the year with $175.6 million of cash and approximately $1.2 billion of available liquidity. Let's take a moment and discuss our outlook for expected uses of cash generated in 2025, which is very consistent with our disciplined capital allocation approach we reviewed at our December Investor Day. First, cash taxes in 2025 should be higher than our normalized 25% to 30% rate, as our previously discussed international tax payment of approximately $80 million that's been deferred for the last two years should be paid in the first half of 2025. We expect our capital spending in 2025 to be in the range of $225 million to $250 million, as we begin to spend capital toward our optimize the core asset strategy, which is designed to achieve greater than $250 million of structural cost reductions by 2028. We expect to continue our nearly 100-year history of uninterrupted quarterly dividend payments. We expect to fund our acquisition of the ammunition assets of AMMO, Inc. from operating cash flows during 2025, which is consistent with our strategy to utilize excess cash flow to fund growth initiatives that offer a higher return than share repurchases. Any remaining excess cash flow after the preceding capital allocation priorities would be available for share repurchases or incremental high-return growth initiatives. We expect net debt to increase during the first part of 2025, due to normal seasonality of working capital and the timing of cash requirements we just discussed. However, by year-end 2025, we are targeting net debt to be flat with year-end 2024 levels. Our teams continue to focus on cash generation, maintaining cost discipline and exploring additional cost savings opportunities. We remain committed to a prudent capital structure with a strong balance sheet and investment-grade credit ratings. Now, I'll hand the call back to you, Ken.

Ken Lane, President and CEO

Thanks, Todd. Let's turn to Slide 10 and our outlook for the first quarter. In general, we don't see significant short-term improvement in the macro demand environment and we will maintain our disciplined operating rates. As a result of our value-first strategy, we expect our first quarter 2025 ECU values to be comparable with the fourth quarter. At the same time and aligned with our optimizing the core strategy, we are staying focused on productivity, cost improvements and the variables within our control. With near-term, lower-planned CAPV volumes and pricing headwinds in EDC, combined with continued customer destocking and lower consumer demand in the Winchester commercial business, we expect our first quarter 2025 adjusted EBITDA to be in the range of $150 million to $170 million. As we continue leading through this challenging market environment, we will stay focused on our value creation strategy and the capital allocation framework we laid out during our Investor Day in December. We are committed to maintaining our investment-grade balance sheet, ample liquidity and superior cash flow generation. As all cycles do, this extended industrial trough will end and we look forward to demonstrating our significant leverage into that recovery. Operator, we're now ready to take questions.

Operator, Operator

The first question comes from Aleksey Yefremov with KeyBanc Capital Markets. Please go ahead.

Aleksey Yefremov, Analyst

Thank you, and good morning, everyone. Ken, can you provide as much detail as possible about your volume outlook for chlorovinyls in the first quarter? And also, if you could comment whether you've lost any chlorine or other Chlor Alkali business in Q1 for the rest of the year on a contract basis where that step-down in volume is more temporary and tactical, and we should expect volumes to rebound in coming quarters in '25.

Ken Lane, President and CEO

Good morning, Aleksey. Appreciate you joining us. So listen, on the volume side of things, Q4, we saw very good volume. Some of that was rebound volume, of course, from Hurricane Beryl. And then coming into the beginning of the year, obviously, we've got very low inventories as we were pulling inventory towards the end of the year just working on working capital, and as that rebound volume was very strong in Q4. What we see happening in the first quarter, we do have a turnaround going on. So that's impacting volume because we don't have the inventory to offset some of that. We've also had some of our customers in the first quarter. While we weathered the Winter Storm Enzo very well with our assets, some of our customers did not. So that's going to have some impact on volumes, and then we're going to continue to be disciplined with our operating rates and meet the demand at the value that we like. So in the first quarter, we will see lower volumes, but most of that is related to things that are not, let's say, overall market in terms of demand. We do see good demand for caustic. We think caustic demand is going to continue to be strong, relatively strong relative to the rest of the portfolio. We see good demand in pulp and paper. In the export markets, we see good demand for alumina and aluminum still. So that's going to continue. And as long as we see continued weak demand on the vinyl side or the chlorine side of the chain, that's going to make caustic tighter. So we expect that to be supportive for pricing as well. But in general, there's a lot of uncertainty out there. We still expect to see strength in caustic, more weakness on the chlorine side of the ECU. But overall, like I said in my comments, ECU values should be relatively flat in the first quarter versus fourth quarter.

Operator, Operator

The next question comes from Mike Leithead with Barclays. Please go ahead.

Mike Leithead, Analyst

Great. Thanks, and good morning, guys. Just two around guidance. First, on the fourth quarter, I think in mid-December, you said you'd be closer to $170 million and then you ended up about $20 million higher. So, what happened in the last two weeks of the year? And then second, as we look through 2025 beyond the first quarter, I appreciate there's limited demand visibility, but are there Olin's specific earnings contributors we should think about as the year goes on to sort of build a bridge off of that 1Q? Thank you.

Ken Lane, President and CEO

Thank you, Mike. Good morning. Things changed rapidly after Investor Day. We didn’t expect to benefit from the lower share price, which was unfortunate and resulted in a $10 million tailwind for us. Additionally, we experienced a pleasant surprise with Hurricane Beryl's expenses coming in about $8 million less. This accounts for almost all of the $20 million difference. Without these adjustments, we would have aligned with our initial expectations. As I mentioned earlier, we want to avoid the common pitfall of suggesting that the second half of the year will be significantly better than the first half due to ongoing uncertainty and poor visibility. However, we anticipate that by the latter half of the year, Winchester should see the conclusion of the destocking, and hopefully, there will be a resurgence in consumer demand. Managing that inventory has taken longer than our commercial customers anticipated. In Winchester, military demand is expected to strengthen as the year progresses. Currently, the Lake City project is slightly delayed because of the cold weather, impacting construction progress. We expect that to pick up in the spring, leading to improvements in Winchester during the latter half of the year. For the rest of the business, I foresee more typical seasonal patterns. As we transition into Q2 and warmer months, chlorine demand will begin to rise with increased bleach demand, which should benefit Olin. This should provide a competitive advantage for us. In Epoxy, we can expect ongoing seasonal improvements as construction activity picks up. However, the automotive sector remains relatively weak in Europe, and we hope to see improvements there. There is some concern about anti-dumping duties, but we are not incorporating any of that into our current forecasts until those matters are resolved. Nonetheless, this could provide a potential boost for Epoxy.

Operator, Operator

The next question comes from Hassan Ahmed with Alembic Global. Please go ahead.

Hassan Ahmed, Analyst

Morning, Ken and Todd. A quick question around supply. And I brought this up at the Analyst Day as well. I mean, look, one of the virtues obviously of the Chlor Alkali story historically had been the dirt of capacity additions. But it just seems that between certain TiO2 producers sort of announcing chlorine capacity additions, certain polyurethane producers out there sort of investing in infrastructure to potentially sort of source chlorine from other vendors. There seems to be a creep in terms of supply. So, could you sort of give us your near- and medium-term sort of outlook on maybe even numerically of what you think the supply picture looks like for Chlor Alkali?

Ken Lane, President and CEO

Hi. Good morning, Hassan. So, look, on supply-demand, we talked about this at the Investor Day and our view is this, that you do see capacity coming out as well as being added in the future. And in fact, the capacity coming out is coming out sooner than the capacity that's being added. So, we don't think that that is anything more than a normal level of supply addition and capacity that's coming out with less competitive assets and less competitive regions. So, we think net-net, it's going to be relatively balanced in the mid-term. There's not anything there that we see that's concerning for our outlook and what we laid out at the Investor Day. But I will tell you when we look at it, we do not see the economics to make an investment pencil where we are today and we're very far away from that. There's a lot of risk in building these assets. So people are going to do what they want to do, but that doesn't mean that it's going to happen in the time that is stated and doesn't mean that it's going to happen at all necessarily. Let's see. But even if everything happens as it's been announced, we think net-net, it's going to be fairly neutral on the supply side.

Operator, Operator

The next question comes from Jeff Zekauskas with JPMorgan. Please go ahead.

Jeff Zekauskas, Analyst

Thanks very much. So, Ken, you've been CEO of Olin now for almost a year. When you look back on the year and you compare your actions or your leadership direction to Scott Sutton, have there been any changes? Or do you see your tenure over the past year as a continuation of what Scott did?

Ken Lane, President and CEO

Good morning, Jeff. Thank you for your question. We shared our vision for the company during the Investor Day. Looking ahead, we recognize that we hold a strong position in both our CAPV business and the Epoxy and Winchester areas, providing us with ample opportunities to make improvements within our control. We discussed our plan to reduce costs by $250 million, which involves streamlining our asset footprint by removing certain assets and enhancing site efficiency to lower both fixed and variable costs. These are aspects we can manage and are committed to achieving. Additionally, we will remain focused on maintaining our leadership position in the industry, which means staying disciplined and monitoring our operating rates while concentrating on value. We do not feel the need to pursue aggressive volume increases. Currently, we’re not in a position that supports reinvestment economics, so maintaining flat value compared to last year is achievable if we continue to be disciplined. As the market recovers, we are well-positioned to capitalize on substantial value as we emerge from the downturn. Our future looks promising as we work on optimizing our core business. We're also exploring growth options, such as entering the PVC resin market in the first quarter, which will allow us to gather insights about that market while positioning ourselves for a robust array of assets for Vinyl production at Freeport. This offers a significant opportunity. We are also looking to strengthen our bleach and Winchester positions while leveraging our chemical expertise to enter attractive markets that promise strong growth and returns over the long term. Our vision for the future is centered on optimizing and growing, and I’m excited about pursuing this strategy.

Operator, Operator

The next question comes from Bhavesh Lodaya with BMO Capital Markets. Please go ahead.

Bhavesh Lodaya, Analyst

Hi, good morning, Ken. So a question on your Chlor Alkali strategy. So industrial consultants are expecting higher operating rates sequentially in the first quarter. Now expectations were that when the market improves, when operating rates increase industry-wide, volume gets a higher share of those volumes. It appears that you are not seeing that sort of a market or that sort of margins and are actually restricting your participation because you expect lower volumes in the first quarter. So I guess the question is what needs to change for this trend to not continue as we go ahead into the year.

Ken Lane, President and CEO

Good morning, Bhavesh. Listen, I think in the short-term, in the first quarter, if you go back to what I had said earlier, what you see in terms of the lower volumes in Q1 is more related to the bounce-back that we saw in volumes in Q4. We don't see that repeating in Q1 and that bounce-back was our bounce-back from Hurricane Beryl. We also have got a turnaround occurring here in the first quarter. And we've got, like I said before, some of our customers were impacted from the winter freeze or winter storm, Enzo. So, it's more related to transient things. I hate to use that word, but that's the way that we see it. We do continue to see strength in caustic in the caustic market, a little more challenging in the Vinyls. As construction returns, that's going to change. But right now, as you know, housing is still challenged. Hopefully, that's going to start to change in the coming months, but we don't have visibility of that just yet. But I don't see anything where we're differential in the marketplace, but what we will do is continue to be disciplined that we're not going to push volume into weak markets just to get the volume. So we're going to stay focused on holding our position until we see the values that we like and then we'll start to operate harder. But right now, the focus is on being disciplined.

Operator, Operator

The next question comes from Patrick Cunningham with Citi. Please go ahead.

Patrick Cunningham, Analyst

Hi, good morning. Just on the recent AMMO acquisition, can you provide some more color on the $40 million in synergies that you expect to achieve through economies of scale and if there's anything from a commercial standpoint that's baked into that number? Thank you.

Ken Lane, President and CEO

Yeah, good morning, Patrick. Listen, on those synergies, part of the synergies is SG&A, obviously, that's going to be a smaller part. The bigger part is going to be, as we talked about at the Investor Day, Winchester is the largest small-caliber ammunition producer. So we're a very big buyer in the market for raw materials and different components for ammunition. That's going to be a big lever for us with these assets relative to the past. So that is going to be a very positive thing for us. Just right off the bat, those are things that are going to be able to be leveraged from day one. The other part of this is more unique to Winchester and that we've got these already three sites that we have and they're very large-scale sites that produce very large-scale volumes. And what we're going to get with this asset is the ability to produce niche high-margin caliber products that we currently have to make in these larger-scale assets which is less efficient. We have more changeovers. That's the sort of thing that we can move into this asset, we can make more of those calibers and we can make them more efficiently. So those three things are really going to drive that $40 million of synergies. So I have a very high level of confidence that we're going to get those. And the procurement and the SG&A, we're going to get very quickly.

Operator, Operator

The next question comes from Duffy Fischer with Goldman Sachs. Please go ahead.

Duffy Fischer, Analyst

Hey, good morning, guys. Just a question around the potential change in trade flows from the tariffs and anti-dumpings around Epoxy. What have you seen so far? Obviously, some of your customers are calling out higher Epoxy prices already. But what do you think is going to happen if the ask that you guys have put forward happens, what do you think that will do to trade flows and what do you think that will do from incremental pricing from here forward?

Ken Lane, President and CEO

Good morning, Duffy. Great question. Listen, it's a little bit different for Epoxy. Europe is a very large Epoxy market. So once the duties go up there, that's going to be a good thing for the European market and our position in Europe. It's not like some other markets that you may think about where there are other large sinks of volume. I do think that between Europe and the US, once you put duties there, it is going to drive prices higher in the short term. And when you look at the cost structure around Chinese producers, they were already dumping product and frankly not making money. The situation is getting worse there. So if their costs continue to rise, you may actually just see the production slow down or even shut down. I'm not predicting anything is going to happen for sure, but certainly, the economics are not favorable for them to continue to operate where they are and they've added a lot of capacity. So I don't know that it's as much about product just shifting around and flowing into different regions, because the largest consuming regions are really US and Europe. I think it's going to be more about rationalization over the mid-term of capacity that's not competitive. And you've already seen some of that in Asia. So, you saw some capacity announced being shut down just in the past couple of weeks. So that's how the cycle works. The strong are going to survive and the weak aren't. I think it's going to be more that story than it is going to be just things are going to move to different regions in Epoxy.

Operator, Operator

The next question comes from Mike Sison with Wells Fargo. Please go ahead.

Mike Sison, Analyst

Good morning. Many companies have mentioned that the demand outlook for 2025 isn't significantly better than for 2024. If that situation unfortunately comes to pass, how do you plan to enhance EBITDA? I understand you don't provide annual guidance, but how do you aim to improve EBITDA on a year-over-year basis this year? Considering the first quarter as a potential low point, what factors could drive the improvement sequentially into the following quarters?

Ken Lane, President and CEO

Hi, Mike. Thanks for the question. Yeah, listen, we're going to focus as you always have to do in the trough on what we can control. So we're going to focus on our costs, controlling our costs, making sure that our cash flow is strong. Financially, we are in very good shape as a company in a very deep and long trough that we've been in now for a while. So continuing to focus on the things that we can control, being disciplined around our operating rates, those are the things that are going to help us really hold the value that we see in our positions that we've got. But we do expect to see some improvement, as I had said earlier, as we go through the year. We do expect to see some improvement with the Winchester business. We're going to see some recovery as we get the seasonality with warmer temperatures coming and the bleach business is going to come back. We should see continued momentum with Epoxy pricing. Now, Epoxy is in a pretty deep hole. So in terms of material improvements, I don't know that we're going to get there this year, but we certainly expect to see some improvement in Epoxy as we go through the year.

Operator, Operator

The next question comes from Steve Byrne with Bank of America. Please go ahead.

Steve Byrne, Analyst

Yes, thank you. Just a little bit about your new tolling agreement to convert some EDC into PVC. How would you compare the variable margins that you make on your current sales of EDC versus what you expect to get on this PVC post the tolling and shipping costs? And I'm curious who are you going to be selling to? Are you developing your new customers with the new commercial organization such as selling direct to like pipe producers? Or are you selling to your existing, say, EDC customers who then would use their own commercial organization? Just curious on your outlook for this business.

Ken Lane, President and CEO

Good morning, Steve. Listen, this is a really important part of our strategy as we think longer-term. This is not a short-term move for us. So, the idea here is for us to get into selling PVC resin directly to customers and doing it ourselves. That's how we're going to learn who the customers are, learn more about creating higher value from our market position that we think we can build over time. And, this is, obviously, when you look at the economics, over the mid-to-long term, this is an upgrade for us of our EDC compared to selling EDC. So it is higher-value for us. As we go through developing the market, it's going to be smaller scale. So the economics are not going to be great. But relative to selling EDC, I can tell you, it's not any worse. So this is going to be a benefit for us not just in terms of moving volume. It's going to be benefiting us when we think about potentially a million tons of PVC resin that we could be looking at bringing into the market in the next few years. That really is why we're doing this.

Operator, Operator

The next question comes from Arun Viswanathan with RBC Capital Markets. Please go ahead.

Arun Viswanathan, Analyst

Thanks for taking my question. Good morning. So I guess, I wanted to get your thoughts, if I could, on maybe some preliminary thoughts on '25. So obviously, you're guiding to that $150 million to $170 million for Q1. And if we look at '24 without the Hurricane Beryl impacts are in the $1 billion or so range. Assuming some synergies and growth in Winchester and maybe some recovery in the other segments, should you be above that $1 billion range, maybe in the $1.1 billion to $1.2 billion range for the full year, or how should we think about what you see in the cards for '25 EBITDA?

Ken Lane, President and CEO

Good morning, Arun. When we consider the first quarter and the guidance we've provided, one significant change compared to last year is Winchester, which is performing much lower than in the first quarter of the previous year. However, it's worth noting that we are seeing stable CAPV performance, which is encouraging. The business environment around CAPV remains strong, as we experienced last year. Although Hurricane Beryl posed a challenge, CAPV continues to show resilience, and we expect improvements as we move past the current low point. Regarding Epoxy, the key factors for our improvement will be capacity rationalization and a rebound in market growth. While duties could provide a benefit, we are not relying solely on them. Ultimately, Winchester will likely be a challenge in the first quarter, and we won't see a recovery in that segment until the latter half of the year when the existing inventory is depleted.

Operator, Operator

The next question comes from David Begleiter with Deutsche Bank. Please go ahead.

David Begleiter, Analyst

Thank you. Good morning. Ken, just on natural gas, can you discuss your hedging strategies for this year? And how should we think about the impact from higher natural gas prices on your earnings for the year? Thank you.

Ken Lane, President and CEO

Todd, do you want to take that one?

Todd Slater, CFO

No, thanks, Ken. Thanks for the question on natural gas. As you know, we do have a very disciplined approach on hedging our natural gas. Yeah, we generally use a rolling four-quarter basis where we are heavily hedged a quarter out and the sliding scale the remaining quarters. If you think about Q1 versus Q4, directionally, we would think about our natural gas and power costs being relatively flattish sequentially in Q1 versus Q4 and probably not nearly as big a headwind as you might see at the spot market.

Operator, Operator

The next question comes from Peter Osterland with Truist Securities. Please go ahead.

Peter Osterland, Analyst

Good morning. Thanks for taking the questions. Within Winchester, is there an extensive pipeline of opportunities out there that you are considering or would consider for additional bolt-on M&A? And at the current valuation, how do you weigh that option as a priority versus share repurchases? Thank you.

Ken Lane, President and CEO

Hi. Good morning, Peter. Thank you for joining us and welcome. Listen, we talked about this at the Investor Day. We are going to be focused on highly-accretive, high-return bolt-on investments around Winchester. Obviously, we're not going to talk about anything specific at this point. But with the scale that we've got in the industry, there could be other options, but they will be small. We're not looking for something transformational at this point. But when you can do deals like the White Flyer deal that we did at the end of 2023, the deal that's proposed here for the AMMO, Inc. assets and hopefully closing here in the second quarter. As those things come up, if you can buy assets or businesses at a multiple like two times, obviously, we're going to look really hard at that. And we're going to watch that marketplace to see if other things come on. But at this point, I don't have any more specifics to share with you than that. We did talk a little bit though about the potential to backward integrate with Winchester into the Radford facility that would be bid here in the next couple of years. That's the only other thing that we've talked about publicly, so we'll keep watching the space. And as we see things, we will be disciplined and we're going to watch value relative to us buying back a share of Olin stock and looking at the share of Olin stock today, as you can tell, it's a very good value. So it's got to be a high hurdle.

Operator, Operator

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

Kevin McCarthy, Analyst

Yeah. Thank you, and good morning. Ken, I'd appreciate your updated thoughts on the dynamics in the caustic soda export market coming out of the US Gulf Coast. I think you made a comment earlier on the call that you expect ECU values to trend flat sequentially into the first quarter. And I'm just wondering in that context, what you're thinking about directionally for spot export prices for caustic soda? Do you think we're at a bottom here? And do we need any sequential improvement over the next couple of months to achieve that flat level? Maybe you could just provide a little bit of context for us in that regard? Thanks.

Ken Lane, President and CEO

Good morning, Kevin. Thank you for your question. What I mentioned earlier still applies. We are observing strong demand. Additionally, we see that pricing in the Asian market is getting better. I believe we have reached a low point in export pricing, which should help establish a minimum for domestic pricing as well. Although we are facing challenges in the EDC market, we see that companies are having to reduce production because they are not profitable at the current price levels. This will contribute to a tighter caustic market. Therefore, I am confident that we will see stability in ECU values, including in the export market.

Operator, Operator

The next question comes from John Roberts with Mizuho. Please go ahead.

John Roberts, Analyst

Thank you. Sometimes in the past, Olin has idled EDC because the margin was too low and I don't think you're allowed to resell the ethylene. Will the new PVC strategy require you to keep EDC running even if margins on the rest of the merchant EDC market are unacceptable?

Ken Lane, President and CEO

Good morning, John. We will not treat EDC any differently from our other operations. We will optimize our operating rate based on the market demand and the value we seek. I don’t expect us to lead the industry in cost positions, nor do I foresee a scenario where we would idle our capacity. While we are not running at full rates, we will operate at a level that maximizes value for Olin.

Operator, Operator

The next question comes from Frank Mitsch with Fermium Research. Please go ahead.

Frank Mitsch, Analyst

Good morning, Todd. Could you discuss the plans for addressing the $110 million due in June and the $80 million deferred international tax payment, bringing us close to $200 million in total? What is your strategy for managing this? Will refinancing be part of the solution? Additionally, Ken, you mentioned that the ECU value is expected to remain steady in the first quarter compared to the fourth quarter. Should we interpret that to mean the PCI index will also be essentially flat from the first to the fourth quarter? Thank you.

Todd Slater, CFO

Okay. I'll start. Hi, Frank. Yeah, the cash taxes and the $80 million international tax payment that we've preferred for the last couple of years, we really are going to make it. It will be made in the first half of 2025. And regarding the roughly $100 million of debt that comes due, we would expect just to pay that with our revolver and it will be neutral from a debt perspective on our balance sheet.

Ken Lane, President and CEO

And, Frank, with respect to your second question, the PCI, remember, is an amalgamation of a lot of things. It's not just the ECU. It includes derivatives as well. So you can't say that if ECU values are flat, that the PCI is going to be flat. So...

Todd Slater, CFO

Frank, as we commented, we do see headwinds pricing of EDC. So that would be a little bit of a negative on the PCI.

Operator, Operator

The next question comes from Matthew Blair with TPH. Please go ahead.

Matthew Blair, Analyst

Thank you and good morning. Is there any update regarding your thinking on potential growth projects? I think at the Investor Day, you talked about some opportunities with the bleach plant in California, the Radford, AMMO bid and the expansion of the Quebec captive plant. As you stand today, could you rank those projects and what's most attractive and what would be least attractive? Thanks.

Ken Lane, President and CEO

Good morning, Matthew. Well, listen, I would say that, obviously, the Radford opportunity is one that's going to come in a couple of years, doesn't really require any capital. So I'd say that that is a priority for us. We see that as a very good move for Olin, for Winchester, and that is one that would be a priority for us. I think between the other two, it's going to come down really to economics and timing. So we are studying both of those very hard at the moment. But we will, given the current environment that we're in, we're going to stay true to what we've talked about around our capital allocation priorities and we will have to phase those projects accordingly, but they're both attractive projects and we want to keep them on the books and we'll make a decision at the right time based on our cash flow availability and when it meets the hurdle that we laid out in December at the Investor Day, if we can achieve those two things, which is, meeting the commitments around capital allocation and meeting the return criteria that we laid out, then we'll move forward. But we're not in a position here today to really give you any clear view on those two projects in terms of priority, that both are attractive.

Operator, Operator

The next question comes from Josh Spector with UBS. Please go ahead.

Chris Perrella, Analyst

Hi, good morning. It's Chris Perrella on for Josh. As I think about the Winchester business over the course of the year, I know sequentially weaker in the first quarter here. You have higher input costs on propellant and the metal. When do you think you outpace those costs with price increases? And does the second half for Winchester, does that look like the first half of 2024, or does it have to build up over a longer timeframe?

Ken Lane, President and CEO

Good morning, Chris. Obviously, we've talked a lot in the last year about the cost of propellant and metals and different materials going into ammunition as being a headwind. And we've been working to move that through in pricing in the market. But obviously, that's difficult to do when our customers have built a tremendous amount of inventory and they're working that off. So that's going to take a little bit more time to be able to work down and pass through into the marketplace. So like I said before, I expect to see Winchester's performance improve in the back half of the year. So that's going to be a combination of improved demand and not just from our commercial customers buying more to refill their inventory, but we're hoping to see improved consumer demand out the door at our commercial customers.

Operator, Operator

The next question comes from Vincent Andrews with Morgan Stanley. Please go ahead.

Vincent Andrews, Analyst

Thank you. Ken, I have a follow-up to your last point. Do you have any data on retail sales compared to your sales into retail? I'm trying to understand if you have a clear view of the situation. Your customers are destocking, but have your customers' customers also been destocking? Are there any shifts in those trends that provide you with confidence about the second half of the year?

Ken Lane, President and CEO

Right. Yeah, good morning, Vincent. Thank you. And yeah, listen, we do collect different data and it's from a number of different sources where we look at things that are reported, whether it's gun registrations, gun sales, and those sorts of things. But the point of things. But the point-of-sale data that we look at gives us an idea, but obviously, we are very close with our customers. And so, we get some nice intelligence from them in terms of what their sales are looking like and we're able to estimate inventories. And so, we factor all of that into our outlook and that's why we see the challenging environment here around the inventory continuing into the first half of the year, not just the first quarter.

Operator, Operator

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 any closing remarks.

Ken Lane, President and CEO

Thank you, Michael. And listen, we appreciate all of you joining us today. We appreciate your interest in Olin, and we look forward to discussing our first quarter earnings with you here in a few months. We wish you all a great weekend. Stay safe and be healthy.

Operator, Operator

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