Olin Corp. (NYSE:OLN) Q1 2018 Earnings Conference Call - Final Transcript

May 02, 2018 • 10:00 am ET


Olin Corp. (NYSE:OLN) Q1 2018 Earnings Conference Call - Final Transcript


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John E. Fischer

soda contract price indices increased $55 per ton, while caustic soda export price indices fully recovered from the January decline that we discussed in early February.

The April domestic contract pricing indices increased in additional $35 per ton, while spot export prices decreased $40 per ton at the low end, but increased $10 at the high end of the range. These index pricing changes will be reflected in our pricing on a 30 to 90 day lag. During the first quarter export volumes accounted for approximately 24% of caustic soda sales. In addition to caustic soda price increases, we realized first quarter price increases in chlorine and most chlorine derivative products. While chlorine indices did not increase during the first quarter, the April chlorine price indices increased $15 per ton, which will be realized in our pricing primarily on a one quarter lag.

Hydrochloric acid prices have more than doubled from this time last year, and increased approximately 25% in the first quarter, sequentially on strong demand. Ethylene dichloride pricing was lower than the first quarter of 2017, but improved sequentially and exceeded our expectations for the first quarter. Pricing for liquid Epoxy resin also improved both year-over-year and sequentially, published liquid Epoxy resin price indices increased 21% from $1.32 to $1.60 per pound in North America, and 27% to EUR2,800 per metric ton in Europe during the quarter.

Trade publications also reported that April liquid Epoxy resin prices have been improved additional $0.09 per pound in North America and EUR150 per metric ton in Europe. Demand remains strong for Epoxy products. In the Winchester business, we experienced lower commercial demand and a less favorable product mix than we had anticipated, a difficult pricing environment and a higher commodity material cost. Given these factors which have continued early into the second quarter, we no longer believe that the Winchester 2018 segment earnings will improve over full year 2017 results.

Finally, during April Olin's Board of Directors approved the share repurchase program for up to $500 million of common stock. Because of the Dow Corning products acquisition and the rules governing a reverse Mars trust transaction, Olin was effectively prohibited from repurchasing stock to October 2017. As some of you may recall, Olin had an active share repurchase program from 2011 to 2014. While debt reduction remains our top priority for free cash flow generation, we expect to begin to opportunistically repurchase shares with the goal of offsetting delusion.

Before going into more detail on the business segments, I would like to update you on our outlook for 2018, which is on slide four. We continue to remain encouraged by the supply and demand dynamics, for both the Chlor Alkali products and Vinyls business and the Epoxy business. We continue to expect both Chlor Alkali products and Vinyls and Epoxy earnings to improve significantly in 2018 compared to 2017.

As I mentioned earlier, we no longer believe Winchester results will improve during 2018. We are reiterating our full year 2018 forecast