CLAYTON, Mo., July 21, 2016 /PRNewswire/ -- 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.
NON-GAAP FINANCIAL MEASURES
Olin's definition of "adjusted EBITDA" (Earnings before
interest, taxes, depreciation, and amortization) is net (loss)
income plus an add-back for depreciation and amortization, interest
expense (income), income tax expense (benefit), other expense
(income), restructuring charges, acquisition-related costs, fair
value inventory purchase accounting adjustment and other certain
non-recurring items. Adjusted EBITDA is a non-GAAP financial
measure. Management believes that this measure is meaningful
to investors as a supplemental financial measure to assess the
financial performance of our assets without regard to financing
methods, capital structures, taxes, or historical cost basis.
The use of non-GAAP financial measures is not intended to replace
any measures of performance determined in accordance with GAAP and
adjusted EBITDA presented may not be comparable to similarly titled
measures of other companies. Reconciliation of
forward-looking non-GAAP financial measures to the most directly
comparable GAAP financial measures are omitted from this release
because Olin is unable to provide such reconciliations without the
use of unreasonable efforts. This inability results from the
inherent difficulty in forecasting generally and quantifying
certain projected amounts that are necessary for such
reconciliations. In particular, sufficient information is not
available to calculate certain adjustments required for such
reconciliations, including interest expense (income), income tax
expense (benefit), other expense (income), restructuring charges,
and acquisition-related costs. We expect these adjustments to
have a potentially significant impact on our future GAAP financial
results.
COMPANY DESCRIPTION
Olin Corporation is a leading vertically-integrated global
manufacturer and distributor of chemical products and a leading
U.S. manufacturer of ammunition. The chemical products
produced include chlorine and caustic soda, vinyls, epoxies,
chlorinated organics, bleach and hydrochloric acid.
Winchester's principal manufacturing facilities produce and
distribute sporting ammunition, law enforcement ammunition,
reloading components, small caliber military ammunition and
components, and industrial cartridges.
Visit www.olin.com for more information on Olin.
FORWARD-LOOKING STATEMENTS
This communication includes forward-looking statements.
These statements relate to analyses and other information
that are based on management's beliefs, certain assumptions made by
management, forecasts of future results, and current expectations,
estimates and projections about the markets and economy in which we
and our various segments operate. These statements may
include statements regarding the recent acquisition of the Acquired
Business from The Dow Chemical Company (TDCC), the expected
benefits and synergies of the transaction, and future opportunities
for the combined company following the transaction. The
statements contained in this communication that are not statements
of historical fact may include forward-looking statements that
involve a number of risks and uncertainties.
We have used the words "anticipate," "intend," "may," "expect,"
"believe," "should," "plan," "project," "estimate," "forecast,"
"optimistic," and variations of such words and similar expressions
in this communication to identify such forward-looking statements.
These statements are not guarantees of future performance and
involve certain risks, uncertainties and assumptions, which are
difficult to predict and many of which are beyond our control.
Therefore, actual outcomes and results may differ materially
from those matters expressed or implied in such forward-looking
statements. We undertake no obligation to update publicly any
forward-looking statements, whether as a result of future events,
new information or otherwise. Relative to the dividend, the
payment of cash dividends is subject to the discretion of our board
of directors and will be determined in light of then-current
conditions, including our earnings, our operations, our financial
conditions, our capital requirements and other factors deemed
relevant by our board of directors. In the future, our board
of directors may change our dividend policy, including the
frequency or amount of any dividend, in light of then-existing
conditions.
The risks, uncertainties and assumptions involved in our
forward-looking statements, many of which are discussed in more
detail in our filings with the SEC, including without limitation
the "Risk Factors" section of our Annual Report on Form 10-K for
the year ended December 31, 2015,
include, but are not limited to, the following:
- sensitivity to economic, business and market conditions in
the United States and overseas,
including economic instability or a downturn in the sectors served
by us, such as ammunition, vinyls, urethanes, and pulp and paper,
and the migration by United States
customers to low-cost foreign locations;
- the cyclical nature of our operating results, particularly
declines in average selling prices in the chlor alkali industry and
the supply/demand balance for our products, including the impact of
excess industry capacity or an imbalance in demand for our chlor
alkali products;
- our substantial amount of indebtedness and significant debt
service obligations;
- weak industry conditions could affect our ability to comply
with the financial maintenance covenants in our senior credit
facilities;
- the integration of the Acquired Business being more difficult,
time-consuming or costly than expected;
- higher-than-expected raw material and energy, transportation,
and/or logistics costs;
- our reliance on a limited number of suppliers for specified
feedstock and services and our reliance on third-party
transportation;
- economic and industry downturns that result in diminished
product demand and excess manufacturing capacity in any of our
segments and that, in many cases, result in lower selling prices
and profits;
- new regulations or public policy changes regarding the
transportation of hazardous chemicals and the security of chemical
manufacturing facilities;
- changes in legislation or government regulations or
policies;
- failure to control costs or to achieve targeted cost
reductions;
- adverse conditions in the credit and capital markets, limiting
or preventing our ability to borrow or raise capital;
- costs and other expenditures in excess of those projected for
environmental investigation and remediation or other legal
proceedings;
- unexpected litigation outcomes;
- complications resulting from our multiple enterprise resource
planning (ERP) systems;
- the failure or an interruption of our information technology
systems;
- the occurrence of unexpected manufacturing interruptions and
outages, including those occurring as a result of labor disruptions
and production hazards;
- the effects of any declines in global equity markets on asset
values and any declines in interest rates used to value the
liabilities in our pension plan;
- future funding obligations to our qualified defined benefit
pension plan attributable to assumed pension liabilities;
- fluctuations in foreign currency exchange rates;
- failure to attract, retain and motivate key employees;
- our ability to provide the same types and levels of benefits,
services and resources to the Acquired Business that historically
have been provided by TDCC at the same cost;
- differences between the historical financial information of
Olin and the Acquired Business and our future operating
performance;
- the effect of any changes resulting from the transaction with
TDCC in customer, supplier and other business relationships;
and
- the effects of restrictions imposed on our business following
the transaction with TDCC in order to avoid significant tax-related
liabilities.
All of our forward-looking statements should be considered in
light of these factors. In addition, other risks and
uncertainties not presently known to us or that we consider
immaterial could affect the accuracy of our forward-looking
statements.
2016-13
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SOURCE Olin Corporation