On Wednesday, KeyBanc Capital Markets maintained its Overweight rating on shares of Olin Corporation (NYSE: NYSE:OLN) with a steady price target of $56.00. The affirmation follows news that The Chemours Company (NYSE: NYSE:CC) and The PCC Group plan to construct a new chlor-alkali facility in DeLisle, Mississippi, at Chemours' existing titanium dioxide (TiO2) site.
According to InvestingPro data, Chemours operates with a significant debt burden, with a debt-to-equity ratio of 6.53, which could impact the financing of this major project. The facility, expected to start construction in 2026, will have a capacity of 340 kilotons, amounting to roughly 2% of North America's total capacity.
The new plant is set to produce an estimated 10-15% of the U.S. merchant chlorine market. The agreement between Chemours and PCC is considered final and not a memorandum of understanding (MOU). As part of the deal, Chemours will buy chlorine at a cost-plus basis with a price ceiling, which is anticipated to keep their costs significantly below the current market rates.
InvestingPro analysis reveals that Chemours has been quickly burning through cash, with negative free cash flow of $675 million in the last twelve months, making cost management crucial for the company's future operations. PCC will be responsible for marketing the caustic soda produced at the site.
Olin Corporation is believed to be the primary chlorine supplier to Chemours' DeLisle facility, providing over 75% of its needs, while Westlake Chemical Corporation (NYSE:WLK) serves as a secondary supplier. According to KeyBanc's analysis, the new chlor-alkali facility could create an EBITDA headwind for Olin Corporation exceeding $100 million, likely impacting the company by 2029.
The price target for Olin Corporation is derived from an 8.5 times multiple of the firm's estimated EBITDA for 2025. Olin's shares are currently trading at multiples of 8.4 times and 3.7 times KeyBanc's projected EBITDA for 2024 and at mid-cycle, respectively. These figures are compared to the historical five-year median forward EV/EBITDA multiple of 6.0 times.
The financial firm's outlook on Olin Corporation remains positive despite potential future headwinds from the new facility's operation. For deeper insights into Chemours' financial health and valuation metrics, investors can access comprehensive analysis through InvestingPro, which offers exclusive access to over 10 additional ProTips and detailed financial metrics in their Pro Research Report.
In other recent news, The Chemours Company announced plans to construct a chlor-alkali production facility, managed by the PCC Group, at its site in DeLisle, Mississippi. The facility, expected to be fully operational by 2028, will produce chlorine and caustic soda. This development could increase competition in the chlor-alkali market, as suggested by an analyst from Keybanc.
Simultaneously, Chemours has set the pricing for its $600 million offering of senior notes due in 2033, intending to redeem its outstanding euro-denominated senior notes due in 2026. The company has also reported a 1% year-over-year increase in consolidated net sales to $1.5 billion in its Third Quarter 2024 Earnings Call, despite a net loss of $27 million.
These recent developments indicate Chemours' strategic focus on capacity expansion, targeting a 40% increase in Corpus Christi, Texas, by 2025. The company also anticipates double-digit growth in Opteon Refrigerants and aims for a revenue compound annual growth rate of over 5% from 2024 to 2027.
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