Olin Corporation (NYSE: NYSE:OLN) reported an adjusted EBITDA of $315 million for Q3 2023, with no sequential reduction in chlorine pricing. The company also revealed plans to address declining ECU (ethylene dichloride) values and announced the acquisition of the White Flyer Clay Targets Business. These strategic actions, which include idling assets and reducing market participation, are expected to incur a $100 million penalty to adjusted EBITDA in Q4 but are projected to improve the EBITDA in 2024.
Key takeaways from the earnings call include:
- Olin Corporation plans to significantly alter its approach to declining ECU values by idling assets and reducing participation in weak markets.
- The company expects these measures to result in a $100 million incremental penalty to adjusted EBITDA in Q4 2023 but projects an improvement in EBITDA for 2024.
- Olin Corporation has acquired the White Flyer Clay Targets Business, further diversifying its portfolio.
- Executive Scott Sutton expressed confidence in the company's value accelerator initiative and future demand growth for chlor alkali.
- The company aims to buy back 10% of outstanding shares this year and will consider acquisitions that offer better returns than buying shares.
During the earnings call, Scott Sutton, an executive at Olin Corporation, discussed the company's performance and future plans. Sutton expressed confidence in the company's value accelerator initiative, which has been running for three years and has successfully turned around the value equation in the past. He also discussed the potential improvement in earnings in 2024 compared to 2023, citing initiatives in the Epoxy, Winchester, and chlor alkali businesses.
Sutton also discussed the company's capacity reductions in Freeport and St. Gabriel, which he said would significantly impact the market, potentially reducing the US market's utilization to 50% or below. He did not disclose the exact capacity reduction but stated that it was significant enough to take their whole system down to a utilization of 50% or below.
Sutton also addressed questions about the company's estimated trough EBITDA for the year, confirming a figure of around $1.3 billion, higher than any prior cycle. He explained that while they no longer have a $50 million penalty from the third quarter, other factors, such as drops in public trade indices, are impacting their business.
The company's strategy does not rely on competitors' actions, according to Todd Slater. Instead, it focuses on the tightening of supply and demand. The company also confirmed plans to buy back 10% of its outstanding shares this year and stated it would consider acquisitions offering better returns than share buybacks. The call concluded with a closing remark from the company.
InvestingPro Insights
Drawing from real-time data from InvestingPro, Olin Corporation (NYSE: OLN) has a market capitalization of $5370M. The company's P/E ratio stands at 6.97, and the adjusted P/E ratio for the last twelve months as of Q3 2023 is 8.59. Revenue for the same period is $7195.4M, reflecting a decline of 26.8%.
InvestingPro Tips highlight that Olin Corporation has high earnings quality, with free cash flow exceeding net income. Management's aggressive strategy of buying back shares is also noteworthy. Despite a few analysts revising their earnings downwards for the upcoming period, the company's strong earnings should allow management to continue dividend payments.
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