Close

Olin Corp. (OLN) Reduces FY16 Guidance

July 22, 2016 7:44 AM EDT

Olin Corporation (NYSE: OLN) today announced updated guidance for the second quarter and full year 2016.

For the second quarter 2016, Olin now expects net income to be approximately breakeven and adjusted EBITDA to be approximately $180 million. This revision to prior expectations was driven primarily by weaker than expected domestic caustic soda demand during May and June, which led to export sales comprising a higher percentage of total caustic soda volumes. As a result, the average caustic soda pricing was lower than expected. These factors resulted in an impact of approximately $20 million to adjusted EBITDA. In the new Olin system following the acquisition from Dow, we typically experience a 3 to 6 month lag in the realization of price indices increases.

Additional factors impacting second quarter adjusted EBITDA include:

  • Higher raw material costs, primarily due to an increase in ethylene and natural gas pricing, of approximately $15 million;
  • Lower chlorinated organic results of approximately $8 million, reflecting soft demand from refrigerant, packaging, and agriculture customers; and
  • Non-cash mark-to-market expenses and other timing items totaling approximately $10 million.

The expected net income and adjusted EBITDA for the second quarter 2016 are preliminary estimates and are subject to change upon completion of quarter-end financial reporting procedures.

Based on second quarter performance, Olin now expects full year 2016 adjusted EBITDA to be in the range of $840 million to $900 million. Olin believes that second half 2016 performance will benefit from higher domestic and export caustic soda pricing, with the third quarter 2016 pricing expected to exceed first quarter 2016 levels, followed by sequential improvement in fourth quarter 2016. Olin also continues to expect second half results to benefit from improved profitability in the Epoxy business, reflecting increased volumes, improved productivity, and the absence of any significant planned maintenance outages, which lowered the business' first half 2016 performance. Olin continues to expect Winchester results for the full year 2016 to exceed 2015 levels.

This revision to full year 2016 adjusted EBITDA also reflects:

  • Continued weakness in chlorinated organic sales, reflecting ongoing softness in demand from refrigerant, packaging, and agriculture customers;
  • Lower than expected export pricing for ethylene dichloride; and
  • Increased raw material costs reflecting second quarter levels.

John E. Fischer, President and Chief Executive Officer, said, "We faced several unexpected headwinds that impacted our expected second quarter results, but the fundamentals of the business are unchanged. Over the next several years, we expect continuing benefits from favorable trends developing in the caustic soda market, evidenced by lower exports from China, European mercury cell chlor alkali capacity rationalizations, and a lack of new capacity being brought on line.

"Our integration process remains on track, and there are significant cost and operational synergy savings to be realized over the next 18 months. The company expects procurement and maintenance related cost and operational savings of $125 million to $150 million over the next four to six quarters, as well as an additional $20 million of savings from the optimization of administrative activities that were outsourced or covered by transition service agreements at the time of the transaction with Dow.

"Finally, we continue to believe that these businesses have the opportunity to earn, in mid-cycle economic conditions, in excess of $1.5 billion of annual adjusted EBITDA through the continued improvement in the Epoxy business, the achievement of synergies and with favorable market dynamics in chlor alkali products and ethylene dichloride pricing. We believe Olin is well-positioned to seize these opportunities."

CONFERENCE CALL INFORMATION

Olin management will host a conference call to discuss this update at 8:30 A.M. Eastern Time on Friday, July 22, 2016. The call will be webcast live on our corporate website www.olin.com and will be accessible under the Conference Call icon. Listeners should log on to the website at least 15 minutes prior to the call. The webcast will remain available for play back on our website following the earnings call for 90 days. You may choose to listen to the conference call by dialing (877) 883-0383 (Canadian callers, please dial (877) 885-0477; International callers, please dial (412) 902-6506), pass code 5245783. A telephonic replay of this conference call will be available beginning at noon (ET) for 30 days by calling (877) 344-7529 (Canadian callers, please dial (855) 669-9658; International callers, please dial (412) 317-0088), using a pass code of 10090355.

Olin management will also host a conference call to discuss second quarter 2016 earnings at 10:00 A.M. Eastern Time on Tuesday, August 2, 2016. A press release, including financial statements and segment information, will be released after the market closes on Monday, August 1, 2016.



Serious News for Serious Traders! Try StreetInsider.com Premium Free!

You May Also Be Interested In





Related Categories

Corporate News, Guidance, Hot Corp. News, Hot Guidance

Related Entities

Dividend, Earnings, Definitive Agreement