Olin Corporation (NYSE:OLN) Q4 2023 Earnings Call Transcript

Olin Corporation (NYSE:OLN) Q4 2023 Earnings Call Transcript January 26, 2024

Olin Corporation isn’t one of the 30 most popular stocks among hedge funds at the end of the third quarter (see the details here).

Aleksey Yefremov – KeyBanc Capital Markets:

Steve Byrne – Bank of America:

Chris Perrella – UBS:

Frank Mitsch – Fermium Research:

Kevin McCarthy – Vertical Research Partners: David Begleiter – Deutsche Bank

Mike Leithead – Barclays:

Mike Sison – Wells Fargo:

Jeff Zekauskas – JPMorgan: Vincent Anderson – Stifel

Matthew Blair – TPH:

Vincent Andrews – Morgan Stanley: John Roberts – Mizuho

Roger Spitz – Bank of America:

Operator: Good morning, and welcome to Olin Corporation’s Fourth Quarter 2023 Earnings Conference Call. All participants will be in listen-only mode. [Operator Instructions] 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 Keenan: Thank you, Andria. 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 yesterday’s fourth quarter’s earnings press release. A copy of today’s transcription 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; and Todd Slater, Olin’s CFO. I’ll now turn the call over to Scott Sutton to make some brief remarks, after which, we will be happy to take your questions.

Scott Sutton: Thanks Steve, and good morning to all. In the fourth quarter, the Olin team delivered the four items that were promised, which were $210 million of adjusted EBITDA overcoming a negative $100 million EBITDA impact from our purposeful value accelerator initiative. Stopping the decline of ECU values as a result of our value accelerator initiative, completing the remaining purchase of 10% of our outstanding equity in 2023, and setting the company up for a 2024 that is better than 2023. We start that set up by making the first quarter of the New Year better than the fourth quarter of the past year. We are also very pleased that outside of the minor purchase price for the White Flyer acquisition, Olin’s net debt at the end of 2023 was essentially the same as the net debt at the beginning of 2023.

Since this could well be my last Olin earnings call. I wanted to remind everyone that Olin has a very unique value creation equation of lifting people to a higher level of fulfillment, delivering value on a contemporary basis through a novel idea pipeline and practicing absolute leadership in commerce. This unique value equation opens a long runway to a very positive future and our leadership team will take Olin there. The earnings and cash flow power of Olin is huge. So Andrea, that concludes my opening remarks. And now we can proceed to questions.

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Q&A Session

Operator: [Operator Instructions] And our first question comes from Arun Viswanathan of RBC Capital Markets.

Arun Viswanathan: So I guess, I just wanted to ask first on the guidance. So, it looks like you’re expecting some growth in ’24. How do you see that proceeding? Looks like your Q1 guidance is a little bit below where we were expecting. So, I know that you’re implementing the value accelerator initiative. So, maybe you can just kind of walk us through some of the growth you expect, as you move through the quarters in ’24?

Scott Sutton: Good morning, Arun. Happy to do that. I mean, we’re really forecasting some profit growth, right. And if you just walk through the three businesses, and I’ll just start with Winchester. I mean, we are right in the middle of doubling our military business and that is on-track both domestically and internationally. In the commercial side of that business, demand stays rather high. And on top of that, we have the White Flyer acquisition for a full year. And on top of that, there’s going to be a shortage of propellant across the industry this year and Winchester is well-positioned to take advantage of that. So, we feel really good about the profit growth in Winchester. Look, in Epoxy, it’s much more a self-help story.

We’re not necessarily anticipating demand growth, but clearly the restructuring work that we did is applicable for a whole year. Our focus on systems is working. We don’t have to clean up inventory as much as we did in 2023. And we’re going to work on the illegal flow of products coming from Asia as well. So, then Arun, you really get to the biggest business CAPV, which I’ll just remind you has super fundamentals as you look out in the future. But it’s all about turning around the value of the ECU. And that’s the initiative we’re running now. We have a Slide number 4 that gives some indications that we’re having some success. I would say even on top of that, there’s less volume entering global trade flows today. Some customers are restarting assets that have been down.

So, even in that business, we expect Q1 to be larger than Q4, and we expect Q2 to be better than Q1 as well.

Arun Viswanathan: And then if I could just ask, is there any update on the search for new CEO [indiscernible]?

Scott Sutton: Look, Arun, I mean, I really don’t have an update on that. And I’m really sorry for that, because look, our shareholders and our Olin women and men, who have really built this value for those shareholders, they deserve a lot better than that from me. But I’m out of the process. That process is 100% run buy our independent board members only. What I can say is to the best of my knowledge, I’m not aware of any offer being extended out there yet to any candidate.

Operator: The next question comes from Hassan Ahmed of Alembic Capital.

Hassan Ahmed : Question just wanted to sort of go back to the value accelerator initiative. I mean, you were very specific in talking about limiting your market participation till February 2024. What gives you the confidence with regards to that sort of a timeline that you’ll start sort of potentially seeing a positive inflection there on after, particularly keeping in mind the macro housing the way it is and the like?

Scott Sutton: Look, we think that’s about the right time to make sure that this gets substantially turned around. I mean, already and again, I’m kind of referring back to the Slide number 4 right? We’ve seen the indicators of success. Certainly, in our business, we are having caustic price increases effective January 1st and even a bit before that already EDC export pricing has lift it significantly, but for the — some of the public trade indices, that’s still just projection, though it’s their projection, on our projection now, but we do need to make sure that materializes. So look, I mean, this as a real game of momentum and third derivatives and second derivatives. And we’re just going to make sure that we deliver a bit more behind that momentum and that’s why we’re extending it a bit into the first quarter.

Hassan Ahmed : And just wanted to get a bit more sort of quantitatively specific about the 2024 guidance that you gave. I mean, you’re sort of alluding to north of $1.3 billion in EBITDA in 2024. And if I were to just use sort of Q4 as a starting point, you did $210 million in EBITDA in Q4. So I annualized that and you’re at $840 million right? And to get to north of $1.3 billion, you need an incremental call it $460 million in EBITDA right? So I’m just trying to understand where that increment really comes from. I mean, I know that in the slides that you guys presented, you referred to the sort of — I mean, the value sort of enhancement initiative being call it a $100 million a quarter worth of a penalty. So is it primarily you guys sort of stopping to partake in that initiative post February, and most of that EBITDA coming from there? Or are you sort of looking for some margin help from the market as well?