Olin Q2 Earnings Call Highlights

Key Points

• Freeport outage weighed on chemicals: An equipment issue at Olin’s Texas VCM facility reduced Q2 adjusted EBITDA by $40 million, with another $20 million impact expected in Q3. Repairs are expected to restore full capacity in Q4.
• Epoxy and Winchester improved: Epoxy returned to positive earnings after pricing actions and structural cost reductions exceeding $50 million annually. Winchester benefited from stronger commercial ammunition demand, pricing increases and tariffs that reduced import competition.
• Merger and guidance remain on track: Olin is advancing its planned Huntsman merger, targeting a first-half 2027 close and $400 million in synergies. Q3 adjusted EBITDA guidance is $160 million to $200 million, while the company expects continued cost savings and plans to prioritize debt reduction.

Olin NYSE: OLN said its second-quarter performance was shaped by supply-chain disruptions tied to the conflict involving Iran, improved epoxy pricing, a recovery in commercial ammunition demand and an unplanned outage at its Freeport, Texas, vinyl chloride monomer facility.

President and CEO Ken Lane said the company’s Chlor-Alkali and Vinyls business benefited early in the quarter as disruptions lifted chemical prices and raised feedstock and energy costs globally. Export prices for caustic soda and ethylene dichloride, or EDC, later declined as supply chains rebalanced, though they remained above pre-conflict levels.

“Caustic soda and EDC export pricing was a second quarter bright spot,” Lane said, adding that the favorable pricing was partially offset by the Freeport VCM outage.

Freeport Outage and Chemicals Outlook

The Freeport VCM plant experienced an isolated equipment issue in early May and restarted by mid-month, Lane said. However, the facility will operate at reduced rates through the third quarter while Olin completes repairs.

The outage reduced second-quarter adjusted EBITDA by $40 million, with an additional estimated $20 million impact expected in the third quarter. Lane said Olin expects to recover that impact in the fourth quarter once the asset returns to full capacity, assuming repairs continue as planned.

For the third quarter, Olin expects stronger domestic caustic soda pricing and higher export volumes for caustic soda and EDC. Those benefits are expected to be largely offset by lower export prices. The company also expects planned industry shutdowns and persistently higher feedstock and energy costs to tighten product availability in the fourth quarter.

Lane said demand in end markets including housing and automotive remains stable, though it has not yet recovered. He also cited lower operating rates in China and expected North American outages as potentially constructive for market balances later in the year.

Merchant chlorine sales improved seasonally in the second quarter, helped by demand from water treatment, refrigerant and other derivative markets. Several planned customer shutdowns are expected to reduce chlorine volumes in the third quarter, while chlorine pricing is expected to remain stable.

Epoxy Returns to Positive Earnings

Olin’s epoxy business posted what Lane described as its best results in more than three years. The company raised prices during the quarter to address rising raw-material and transportation costs as hydrocarbon feedstocks became more expensive and less available.

U.S. epoxy resin demand experienced moderate seasonal improvement, particularly in construction-related applications such as coatings, while European demand remained flat. Lane said Europe did not see its normal seasonal improvement and faces continued pressure from higher energy costs and weak housing and industrial activity.

Olin said its new supply agreements in Stade, Germany, and the closure of its Guarujá, Brazil, facility have reduced annual epoxy structural costs by more than $50 million. Combined with the company’s commercial strategy, those actions returned the business to positive earnings.

Chief Financial Officer Todd Slater said epoxy is expected to generate positive EBITDA again in the third quarter, though results should be slightly lower than the second quarter because of higher European first-in, first-out raw-material costs. Olin has announced price increases intended to address elevated hydrocarbon and raw-material expenses.

Winchester Demand and Cost Actions

Winchester’s commercial ammunition business continued to improve year over year as consumer demand strengthened, Lane said. The company has been raising prices to offset higher costs for copper and brass, while domestic and international military ammunition and project sales remained strong.

Olin expects Winchester’s third-quarter earnings to improve sequentially, supported by the fall hunting season, higher commercial volumes and pricing. Rising metals costs are expected to partially offset those gains.

Lane said imported ammunition has become less competitive because of tariffs that are now generally 20% and, in some cases, higher. He said this should remain a tailwind for Winchester’s commercial business.

The company also said it has already realized a significant portion of its previously identified $30 million of Winchester cost reductions through efficiency actions and workforce-sizing efforts. Olin recently began additional Beyond 250 work at Winchester’s Lake City, Missouri, facility and said it could exceed its $30 million cost-reduction target for the business.

Huntsman Merger, Cash Flow and Third-Quarter Guidance

Olin is moving forward with its planned merger with Huntsman, announced June 16. Lane said the combination would create a vertically integrated, North America-focused chemical company with more than $12 billion in sales.

The company filed its definitive proxy on July 13, with a special shareholder meeting scheduled for Aug. 25. Olin expects to begin pre-closing integration planning in the third quarter and continues to target $400 million of synergies following an anticipated first-half 2027 closing.

Slater said Olin ended the quarter with $1.2 billion of available liquidity, including unused revolving-credit capacity, and has no bond maturities before 2029. Working capital increased $183 million in the first half, reflecting normal seasonal needs and $93 million in payments tied to legacy Shintech litigation matters.

Olin expects to pay the remaining $100 million related to those litigation matters during the second half of 2026. The company expects year-end leverage of about 4.5 times and said excess cash flow would be directed toward debt reduction. It continues to target approximately $200 million in 2026 capital spending and expects 2026 to be a cash-free-tax year, plus or minus $20 million.

For the third quarter, Olin expects Chemicals adjusted EBITDA to be relatively flat, modest improvement at Winchester and a sequential headwind from corporate costs. Overall adjusted EBITDA is expected to be between $160 million and $200 million.

Slater said Olin remains on track to deliver more than $100 million of incremental structural savings in 2026 under its Beyond 250 initiative and is increasingly confident it will exceed its $250 million savings target by 2028.

About Olin (NYSE:OLN)

Olin Corporation is a diversified manufacturer specializing in chemical products and ammunition. The company's core business activities encompass the production and distribution of chlor-alkali products, epoxy resins and derivatives, and small-caliber ammunition under the Winchester brand. Olin's chemical operations supply chlorine, caustic soda and related co-products to a wide range of end markets, including water treatment, pulp and paper, pharmaceuticals and general industrial applications.

In its Chlor Alkali Products & Vinyls segment, Olin operates multiple manufacturing facilities that produce chlorine and sodium hydroxide, along with vinyl chloride monomer and polyvinyl chloride (PVC) compounds.

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