Olin Corp. (NYSE:OLN) Q1 2018 Earnings Conference Call - Final Transcript
May 02, 2018 • 10:00 am ET
couple years. So, if we take 50% of that, maybe there's a 150 implied increase on your margins. Have you seen that kind of improvement in your ECU per ton margin or is there something else that is holding that back?
James A. Varilek
This is Jim Varilek. From a contractual standpoint, we continue to make improvements on that. You should assume that we now have improved the percentage of realization in the index movement. It's now in the 50% to 70% range. And so, we continue to improve contract, so we're seeing an acceleration of the impact on prices versus a year ago.
John E. Fischer
Arun, I would also just caution you, when you look at Q1, we talked about at one point during the quarter 40% of our Chlor Alkali capacity was offline due to planned maintenance. So from a volume perspective, this is going -- Q1 will be the weakest quarter as we've said earlier, the entire quarter will be the weakest of the year, this will be the weakest for Chlor Alkali.
Great. And just lastly on that point then, given that there were some outages in Q1 and you guys are ramping back up here in Q2 and typically, chlorine alkaline rates will go up anyway. Do you expect prices to kind of moderate as we go through the year? And if not, what would be the drivers for continued support of higher pricing?
James A. Varilek
Arun, this is Jim again. I would say that the fundamentals of the market haven't changed. We still see very good industrial production; we still see GDPs that are looking good; we still see and anticipate as John said, record exports out of the Gulf Coast. So what you're seeing through the first quarter and you see in the first month of the second quarter is the momentum stemming from those fundamentals. So we continue to see that, and we would expect that to continue for the next, actually for the next several years with those trends being positive.
Our next question comes from Don Carson of Susquehanna. Please go ahead.
Good morning, this is Emily Wagner on for Don. I guess following up on the guidance aspect. Why only show an upside bias to guidance when caustic, chlorine and EDC and Epoxy price trends have been so much better than the initial guidance given in fourth quarter?
Larry P. Kromidas
Emily, we would agree with what you said about the pricing trends. There is downside as we mentioned in Winchester, and we're always cautious about raw material costs, especially in the Epoxy business with benzene and propylene, which have been very volatile as you know over the last 24 to 30 months, as well as EDC pricing. And if you remember what happened last year in the second half of the year, EDC pricing essentially collapsed. So at this moment, I would say we feel more comfortable saying we believe there is more upside than downside, rather than just raising our guidance.
Understood, okay. And then